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How miserable would the following three years be?

The portfolio on the left was up a little in 2012 but lagged VBAIX, on the right, that year by almost 400 basis points. 

But the long term result in meaningfully better and less volatile than VBAIX. 
 

Admittedly, enduring that long of a period with a meaningful lag like that would be very difficult to do but if you don't think you could sit through that, maybe your portfolio could be constructed in such a way that when it does lag, I promise you anything that you or I could possibly come up with will lag at times, you don't throw in the towel after what you think is a bad year.

If orthogonality plays any role in your investment process, then there will absolutely be periods where you lag. Ditto if you're trying to smooth out your ride versus the broad market.
 

If we extrapolate Portfolio 1 out over the next 20 years, and there were to be a similar result, that would be great, but there would be quite a few years where Portfolio 1 got completely dusted.

If you have a valid and reasonably diversified portfolio, let the ergodicity of that portfolio work for you. 

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