January 8, 2025

Having recently watched the rock climbing documentary Free Solo, I was struck by the sheer astonishment of how anyone could possibly do what Alex Honnold did. Naturally, I began to think of the similarities between the risks that a “free solo” climber might take, and how that relates to investing.

Free solo climbing is an endeavor that exists at the very edge of human capability and reason, an exhilarating mix of athleticism and mental discipline that seems al-most impossible to comprehend from the outside. To watch a climber scale a sheer rock face with-out ropes, harnesses, or any safety equipment is to witness a person defy the natural laws that govern us. The drama of the sport is in its simplicity—one wrong move and the consequences are permanent. For those who take it on, it is the ultimate expression of personal mastery and freedom, yet it's also a precarious balancing act be-tween courage and recklessness.

Consider Alex Honnold, the climber featured in Free Solo. Alex is a world-renowned free soloist who became famous for his 2017 climb of El Capitan, one of the most intimidating rock faces in the world. What was once thought of as an impossible feat became a reality because of his obsessive preparation, extraordinary focus, and an almost unnatural calm under pressure. It’s a breathtaking achievement—he scaled 3,000 feet of vertical granite with only his hands and feet for protection, without the usual safety precautions that climbers rely on.

Honnold, renowned for his minimalist approach to climbing, had meticulously prepared for this feat. He spent years prac-ticing on the route, carefully analyzing every move, every handhold, every foothold. He focused on identifying and mitigating any potential points of failure, such as altering his route to avoid particularly dangerous sections of the rock face.

The route Alex chose presented a variety of technical challenges. Smooth, featureless rock demanded precise footwork and delicate balance on the slab sections. Climbing through wide cracks, often using unconventional techniques and contorting his body, tested his strength and flexibility. Overhanging sections required significant upper body strength and endurance. The key, though, was in the planning and being able to adapt as needed.

The weather on that day played a crucial role. Calm winds and stable temperatures provided ideal conditions for the climb. Had the weather been inclement, with high winds or rain, the climb would have been significantly more dangerous and potentially impossible. Again, it’s all about the preparation and being able to control what is controllable.

Free soloing, at its core, is about pushing the boundaries of human endurance and willpower. It’s about feeling the weight of every decision and every movement, where a simple slip or misjudgment could result in death. The climber is forced to reckon with the risks in real-time, understanding that each step carries the potential for disaster. In that way, free solo climbing mirrors many aspects of life—whether in the pursuit of greatness, personal goals, or even in how we engage with the world around us. There is a constant balancing act between pushing limits and respecting the forces that may work against us.

This relationship between risk and reward is one of the most compelling aspects of free solo climbing. The reward—the accomplishment of doing something most people would consider unthinkable—makes the climb worthwhile. It’s not about the physical exertion alone, but the satisfaction that comes from knowing that the climber has conquered not just the rock, but their own fear, doubt, and limits. However, the price of failure in free soloing can be catastrophic. A fall, a slip, or even an unexpected gust of wind can be fatal, making it one of the most extreme and dangerous sports in the world.

In both free soloing and investing, it’s not just about the preparation, it’s about managing the unknown. Despite the years of practice and study, there are always factors outside of one’s control. For climbers, it’s the weather, the condition of the rock, or the inability to control emotion. For investors, it’s the unpredictability of market fluctuations or the emergence of unforeseen global events. In both scenarios, it’s not enough to rely solely on preparation; success often hinges on the ability to manage the unknown.

Climbing and investing are ultimately defined by risk tolerance. Free solo climbers like Alex Honnold don’t operate in a world where safety nets are available. They take on the challenge with full awareness of the potential for disaster. Similarly, in the investment world, high-stakes moves are often driven by an individual's risk tolerance. Those who invest in speculative ventures, like tech startups or cryptocurrency, are often willing to put their resources on the line for the chance at a large return. But just like a solo climber’s every movement carries the risk of failure, every dollar invested carries the risk of loss. There are no guarantees, only calculated risks, and the rewards can be substantial or non-existent, depending on how well the individual understands the landscape.

When thinking about free solo climbing through the lens of investing, it’s hard to ignore the similarities between the two. Investing, much like free solo climbing, is about balancing risk with potential reward. Whether you’re taking the plunge into the stock market or into the unknowns of cryptocurrencies, the thrill of high-risk investing is not far removed from the exhilaration a climber feels when taking on a seemingly impossible route. Both pursuits require a deep understanding of risk, preparation, and the ability to act decisively without subjectiveness, or human emotion – something we understand very well here at Q3, even if we do spend most of our time behind computers and not on the face of a rock.

The article above is an excerpt from the Q3 Quarterly Market Commentary. Here is a link to the most recent issue. Complete the form below if you would like to get this emailed to you each quarter.