Why it's crucial to tick off your inner scorecard to find financial balance

I recently read a great article by best-selling author Morgan Housel about the value of finding a balance between your internal and external benchmarks.

In 1968, The Sunday Times offered £5,000 ($6,042) to whoever could sail solo, non-stop around the world the fastest. Nine men joined the race and only one man finished, 312 days and 43,452 kilometres later.

Despite this, neither of the two men who generated the most news actually completed the race. One ended up dead and the other found a kind of happiness he’d never known before. Both, from decisions made at sea, but nothing to do with sailing.

Housel believes that these two men, Donald Crowhurst and Bernard Moitessier are "astounding examples of how the quality of your life is shaped by whom you want to impress".

"Their stories are extreme, but what they dealt with was just a magnified version of what ordinary people face all the time, and [is] likely something you’re facing right now,” Housel said.

First, let me explain about how these two men approached the race.

Crowhurst was a tinkerer who came up with his own boat modifications and was sure it would propel him to victory. However, he was broke and ended up striking a deal with an English businessman to cover the costs ... but only if he won.

Two weeks into the race, his boat started leaking. This small leak posed little threat and could be bailed with a bucket. But continuing into the treacherous Southern Ocean would bring certain catastrophe.

On the face of it, Crowhurst had two options: continue the race and potentially become stranded at sea, or finish the race, face bankruptcy and humiliation.

However, he chose a third option: sending fake co-ordinates to appear as if he was on track. He went nowhere for months and, by mid-summer, enough time had passed to give the impression he’d circled the globe.

He had to get his timing right. He didn’t want to win the race and draw too much attention to himself. But he didn’t want to be the runner-up either.

Crowhurst timed his return so that he’d finish in third place, enough to maintain dignity, yet low enough to avoid suspicion.

But, in a twist of fate, the second-placed boat sank and a further miscalculation meant Crowhurst was now on track to win.

Crowhurst wrote in his diary: “I have no need to prolong the game … it has been a good game that must be ended … it is the end of my game. The truth has been revealed. It is finished. IT IS THE MERCY.”

Soon after, he sent his last fake co-ordinates to his team and shut off his radio. His boat was found 11 days later. There was no major damage, no sign of an accident — and no sign of Crowhurst. He had presumably thrown himself into the sea.

Moitessier was an expert sailor, although he despised the commercialisation and sports side of sailing.

You could say he was a loner, fine with spending months alone at sea and against sailing for anyone else’s pleasure but his own. Midway through his voyage, he’d had enough.

Moitessier wrote in his diary: “I really feel sick at the thought of getting back to Europe, back to the snakepit … I am really fed up with false gods, always lying in wait, spider-like, eating our liver, sucking our marrow ...”

He’d enjoyed “so many beautiful days” on his boat that he began to look at the world differently and feel more alive than he ever had. He ended up changing course, off the race’s path and headed to Tahiti.

Moitessier wrote: “Now it is a story ... between me and the sky; a story just for us, a great story that does not concern the others any more … To have the time, to have the choice, not knowing what you are heading for and just going there anyway, without a care, without asking any more questions.”

He remained in Tahiti for years, where he built a house on the beach, foraged and wrote a book about sailing.

“You can’t understand how happy I am,” he wrote.

The irony is that Tahiti was so far away and needed so much backtracking that he ended up circling the globe and setting a world record for the longest non-stop solo voyage under sail, despite dropping out of the race.

Why am I sharing this story? Because it highlights the importance of internal and external measures of success.

Crowhurst’s outcome seemed to centre on the fact that he was addicted to the opinions of others, while Moitessier held little regard for them.

One lived for external benchmarks, the other cared only about internal measures of happiness.

Of course, these examples are extreme. But their stories are important. Every day, people like you and me struggle to find the balance between external and internal measures of success.

In today’s world, there’s a strong pull towards external measures and comparing yourself with others and their accomplishments. But as human beings, we also have strong natural desires for internal measures ... being independent and having freedom in life.

Moitessier’s act of disregarding external validation for his work is testimony to what Warren Buffett calls living with an “inner scorecard”.

As he told his biographer, Alice Schroeder: “The big question about how people behave is whether they have got an inner scorecard or an outer scorecard. It helps if you can be satisfied with an inner scorecard.”

Think about this. Would you want to be the world’s greatest investor, but have everyone think you’re the world’s worst? Or would you rather be the world’s worst investor, but have everyone think you’re the world’s greatest?

Most of us often want both. Not only do we want to be good at what we do, but we also want people to think we are and see us that way.

In fact, we often place greater emphasis on others thinking we are doing well than on actually doing well.

So, when it comes to personal finance, what’s your sole benchmark?

Sam Instone is co-chief executive of wealth management company AES