3 mins read

The Freefall of Bad Decisions

Learning to stop the slide…

The first decision wasn’t awful – perhaps not completely thought through – but it wasn’t the end of the world.

Then circumstances conspired against me and the second decision – worse than the first – was the beginning of the end.

In hindsight, the smart thing would have been to sidestep and possibly let things run their course. Instead I felt I needed to “fix” things and just managed to compound a bad situation.

Why is it that we fail to get out of the track and stop making bad decisions?

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Risky choices

We’re all guilty of taking some risk at certain points in our lives.  The intent is that through our talent, skill or perhaps even luck we’ll come out ahead.

Lot’s of categories for this – gambling, sports, the stock market, and perhaps even dating.

We’re usually good at understanding all of the factors – what’s at risk, what factors affect the outcome, and what’s the payoff.

When things work as expected, we’re ready to accept the outcome.

The unplanned risk

But every so often a situation comes up that doesn’t quite match our experiences.

Driving down the road, a barrel falls off the car directly in front of you…

Taking down a tree, the twist of the trunk and weight of the tree pulls it in an unexpected direction…

You hear reports that the completely safe investment that you made four months ago has lost half its value…

The next decision

And this is the place where decisions start to go awry.

Deciding to swerve severely, attempting to keep the tree from falling, putting more money in the bad investment…

When examined in the clear light of day, these second decisions attempt to limit the loss but magnify the risk.  If they were to work perfectly, everything could be “all right”.  The consequence of failure though becomes catastrophic.

Familiar territory

It’s easy to take these sorts of chances when you’re an expert in the subject.

Professional drivers, seasoned lumberjacks, investment advisers – they’ve seen it before, can evaluate responses, and pick the best alternative.

Unfamiliar ground

But you and I – perhaps less so…

Twice in our lives we’ve been faced with an obstacle thrown across the road – and we hit it both times.

We took down a tree ourselves once, and watched three others brought to the ground.

Though we’ve invested for twenty years, we don’t spend everyday making trades, and may only shift money around a couple of times in a year.

And we just haven’t had this come up before…

Break out of the cycle

And here’s where we have to learn how to respond – by not necessarily responding.

If we know there’s going to be an impact of some kind – physical, financial, emotional – be prepared to accept it as the consequence of a risk taken.

And think about the heightened impact of any response.

Does it turn from a minor crash into a major wreck?

From a broken car to a crushed limb?

From a minor monetary setback to financial ruin?

And then assess the likely success of this new response.

In a blink

And referencing the article from April – when this is all happening fast it’s easy to let yourself go and take the risk – to  “not think”.  But don’t let that happen.

That’s when it’s most important to buy time – to get additional seconds to think.

And get out of the freefall.

steve