The Joint Civilian Orientation Conference is a Department of Defense program designed to give a few dozen non-military members a deeperunderstanding of the U.S. Armed Forces. In this week'sRule Breaker Investingpodcast, David Gardner is ready to reflect on the lessons of his trip.Concerning the Middle East, where a large fraction of our the world's most troubled areas reside, the military brass doesn't even use the word "peace." And the idea of risk -- which investors love because it's linked to the possibility of profit -- has a wildly different meaning to them.
A transcript follows the video.
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This video was recorded on Aug. 31, 2016.
The next one up -- and I mentioned this earlier -- the goal in the Middle East is not peace. That came from Gen. Votel, who's in charge of Central Command. He said, "We don't really use that word. In our lifetimes, that's probably not achievable." It's a little bit Pollyanna-like, I might say (not Gen. Votel). He said, "The phrase that we use is stability and cooperation. That's really what we're aiming for in the Middle East. It's the most realistic thing we can achieve and it's a better way, sometimes, of thinking about what we want from that area of the world than the concept of so-called peace."
For the next one I have a couple of terms I want to define that I learned about last week, one of which is (because this is the military, after all) an acronym. I'll cover that second. The first one is a term near and dear to us, here, for rule breakers and Rule Breaker Investing and anybody who's an investor (lots of us, here, at The Motley Fool), and that's the word risk.
Risk, in the military sense, is fundamentally different from how you and I use the word when we think about everything from investing to life. When I think about investing, I like to take risk. Risk is a good thing. I like that there's uncertainty about whether Netflix [would ever], back in the day, be bigger than Blockbuster. Or whether Google, back in the day, [would] ever make money as a free search engine. Those kinds of early questions.
And we see questions still like that today for a lot of the companies that we're looking at going forward. I like the risk that's inherent there, where it might not work out. Our conception of whether Chipotle may or may not pull itself out of its operational and public-relations snafus of the last year. Those are really interesting. And when I believe, and I put my money down, you and I become investors in those companies, we're taking risk, and risk often equates with reward. So I can say more about risk. We've talked about it before here. I know we'll talk about it in the future.
But from a military standpoint, this was really interesting to me. The concept of risk is fundamentally different, because after all, if you come from the military, your goal is to protect [us]. Your citizens. Your homeland. If you take a risk and fail, it really hurts. You and I as investors -- the worst we can ever do is lose 100% of our money, and that's if we didn't do something silly like borrow money beyond that and take the crazy risk of leveraging and then losing it all.
Really, we can't lose much more than 100% of whatever that investment is. And if you're a capital "F" Foolish investor, then you probably have, I hope, at least 15-plus different stocks and/or funds. You're diversified (I hope not over-diversified), but if you're diversified, you can afford to lose. When you're operating at a national level, and you work in the military, you really can't afford to lose. So that concept of risk is much more about protecting downside and ensuring the ultimate downside never happens than any kind of real sense of upside to risk.
In fact, the way that I heard the Marines (I think it was the Marines) talk about how they train enlisted people is they're looking for "the ability to anticipate, communicate, and mitigate risk." The ability to anticipate it, to communicate it, share it out, and then to reduce it and mitigate it as much as possible. So any time I heard risk that week, I realized this is a fundamentally different concept than the one that I think about the other 51 weeks of the year.
And then one other term I want to define, and that's just this military acronym AOR. That's for area of responsibility. This is a pretty simple concept. You hear people use acronyms all the time. Occasionally we, as civilians, would say, "Let me stop you there. Could you just say what AOR means, because you just used it?" That was a frequent interchange that I and my fellow JCOC civilians had with military at all levels -- just asking them to stop for a second and explain the acronym they just laid out in front of us.
But area of responsibility. This is what you think it is. It might be a geographical area where somebody (a general or a battalion) has a responsibility. Or it might be an operational kind of responsibility. A more philosophical level. An abstract area of responsibility. I'm mentioning this one because I think it's kind of great. I saw the military make sure that any area of responsibility was owned -- that it was clear who had ownership of that responsibility in that area.
And when I think about business, this is something I think we, as businesspeople, can learn from the military, as I mentioned earlier in the teaser to the show. I think that you should be asking yourself, your organization, for-profit, not-for-profit, [whether] all the areas of responsibility are owned. Do you have clarity within your organization in terms of who's basically on task for making sure that happens, or for making sure nothing bad happens?
Maybe it's that I grew up in an internet company. We're in our 23rd year and still building the plane as we fly it, but I think we, at The Motley Fool, sometimes (and even today, no doubt) have blind spots where we don't realize that that should have been an AOR, and so we need to designate the AOR. Maybe I'm speaking to you in your own organization. Do you know your AORs, and do you know who owns them? It's very impressive to see it at the military level.
Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool's board of directors.The Motley Fool owns shares of and recommends Alphabet (A shares), Chipotle Mexican Grill, and Netflix. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.