Thomas: Today I would like to educate you on a special topic – one on which I consider myself an expert. And that is losing.
Garret: Honestly, you look like a pro. I personally prefer winning.
Thomas: Why is losing so important to me? Because in order for you to win, you must first of all survive. Then, what does not kill you makes you stronger. Losing and suffering train your body, mind, and soul.
As 99% of all creative activities fail, so it is with 98% of all new businesses. To succeed in such a game, you’d better be prepared for a lot of trials and errors. Trial and error is freedom, my friend. The more trial and error you engage in, the greater the possibility you will eventually succeed.
The world is changing. Most of us are no longer farmers or production-line workers. If you were to look at most of the successful people in the world, you would find they have experienced a lot of failures before eventually succeeding.
Failures are all around us; recovering from them is vital to our survival. It may be a good idea to learn how to fail. Here are five killer steps for mastering losing:
1. Set big goals.
2. Break down your big goals into smaller assumptions or actions.
3. Limit your losses.
4. Evaluate your losses, then refocus and/or redefine your big goals. Look for what you have gained in the process of losing.
5. Go out and fail (a)gain.
To be prepared for and to maximize your benefits from engaging in a lot of trial and error, you must learn to mitigate the problems of losing, mentally and financially.
Mentally, losing is really hard. Every loss damages the ego, and nobody likes losers. Our brains are wired by evolution to avoid losing and strive toward winning. Modernity exploits this strategy, even though it was a favorable one for hundreds of years. Most of our decisions seek an emotional balance between losses and wins, rather than the best overall outcome. This can have significant negative effects on our finances, accomplishments, even health.
Sarah: I see! But, is it possible to have more wins than losses, but still have a negative final or overall outcome?
Thomas: Of course. It can turn out both ways. As the stakes are different from one event to another, you can have a lot of small wins and then a fatal loss – or a lot of small losses and a final, huge win.
You could achieve an emotional balance between efforts and results by planning for and going after small but relatively constant and easy wins. That is why people prefer predictable work for a salary to being entrepreneurs.
Studies have found that one loss is equal to approximately 2.5 wins on our emotional scale. This explains why gamblers aiming for emotional balance rather than focusing on outcome probabilities lose money in the long run.
If you can manage to set aside your emotional fear of losing (which you can only do to a limited extent; we are only human, after all) taking financial losses is far easier. It is all about numbers, and the only question you have to answer is, “How much money can I afford to lose?” (Thinking in percentages can help here.)
Adopting a financial strategy that allows you to take a lot of small losses with little harm may be a smart thing to do.
What about following a life strategy where you make a lot of small mistakes with little harm?
Some questions for you:
Which is a better way of learning – through success stories, or through stories of failure?
Do you know any people who feel comfortable losing?