In the investing world, there’s a fun smoke-and-mirrors trick called a stock split.
On the surface, it does something unremarkable. A public company issues new shares of stock to increase the existing count in multiples. So, for example, if ownership is divided into one million shares, now two million more are added. Where once there was one share, now there are three.
There’s no change whatsoever in the underlying business: its revenues, people, technology, the capacity to generate profits, and literally everything else remains exactly the same. In theory, stock splits are designed exclusively to make shares more affordable. If one share is traded for $300 and we do a 1:3 split, the result is three shares worth exactly $100. No more, no less.
In other words, if you have one pie, no matter how many pieces you hack it into, the sum is still one pie.
However, in a stock split, there’s a lot going on under the hood. What company managers often shoot for is that the new sum will magically be worth more than it used to. So when they divide a $300 piece in three, they very much hope the new shares will be worth $110 or $120 rather than $100. Wouldn’t it be neat, huh?
But how do they hope to make it happen?
Merely announcing a stock split usually generates A LOT of publicity. Not only do you make your stock look like a bargain now that it’s much cheaper, but also you presumably demonstrate the management’s confidence that the company is set to grow and the stock price is on the way to the moon. The expected reaction:
Potential investors who weren’t willing to shell out $300, can now get in for just $100 and… OMG, what if it’s time to buy?!
Some existing investors also embrace the buzz and hopefully become more confident they made the right choice. Maybe they’ll buy more of the stock to beef up their holdings and benefit from the seemingly impending rally.
People who don’t normally invest might be seduced into joining the frenzy now that the company they love in real life (e.g., for their product) created a nice “window of opportunity”. The fear of missing out is a potent weapon. Get in now before it costs $300 again!🤑
So, the thinking goes, all this new buying pressure might tilt the balance and the company’s overall capitalization will rise.
If the plan pans out, the mission’s accomplished: new money out of nowhere! Everyone’s happy.
Yet, sometimes the whole thing falls flat or backfires spectacularly. Market conditions turn out wrong. Investors prove to be anything but fools, seeing right through the trick and selling instead. Or the onslaught of new quick-buck-minded speculators, who don’t give a damn about the underlying business, might generate some short-term spike at first, but the rally fizzles out once the dust settles.
Eventually, the price always catches up with the business. And if the company just doesn't churn out enough profits to justify the price, retribution inevitably comes.
Now, what does it have to do with you?
Your attention is your stock
Attention is one of those things we heavily rely on and are all too eager to split. The trick is older than its stock counterpart — boosting your short-term productivity by engaging in more than one task at a time is mighty enticing. Who doesn’t want to get more done in the same amount of time?
Online “productivity gurus,” who ostensibly have time and energy to work non-stop because they know the “secret” to obliterating to-dos, only exacerbate this dangerous attitude.
In other words, it’s surprisingly easy to become convinced you can cut this pie of yours in two, and end up with two whole pies instead of two halves.
When you really think about it, the very idea sounds ridiculous, doesn’t it?
But unlike stocks, our attention isn’t designed to split, no matter your multitasking prowess. As a result, this trick with your attention always backfires.
When you hack your attention pizza in two, the result isn’t even close to two halves, it’s more like two thirds or maybe even two fifths. The exact number is unimportant as only one thing is certain — once your attention gets split, the sum of the new pieces never ever equals one.
The rest is lost in your switching cost, a tax you can’t evade.
Sure, in the immediate term you might feel more productive. To-dos flying around, busyness at its peak. But just like the short-term buzz around stock splits eventually dies off, gimmicks inevitably catch up with you. Major goals and complex tasks requiring your full focus will elude you. Whatever requires intense concentration simply can’t get done at half-strength.
Imagine if any company wishing to do a stock split were liable for, say, a 30% immediately payable tax. No sane manager would even so much as think about it. Yet, we pay the same multitasking levy without a second thought.
So don’t try to fool yourself, dividing your attention is a dead end. Can you really afford smoke and mirrors in your own life and work?
The antidote?