Have you ever felt paralyzed when trying to make a decision because you don’t have ALL the information? You’ve researched ad nauseum and still feel anxious because of the uncertainty of the future?
If you’re like me, this probably happens fairly often, but we can’t just sit still and do nothing – we have to act even in the absence of 100% perfect information or a crystal ball.
The question is: How do you respond when events unfold in a way that makes your decision look wrong? Or, when events unfold in a way that makes your decision look right?
This was the issue addressed in one of Howard Marks’ recent memos to Oaktree clients entitled You Bet!
This blog post is inspired by his memo.
You can’t tell the quality of the decision from the outcome
We all like to give ourselves a pat on the back when we choose a course of action that turns out well, and, more detrimentally, berate ourselves when we make a decision that turns out poorly.
However, because we don’t have all the relevant information at the time of making the decision and because of luck and randomness, as Marks wrote, “…well-thought-out decisions may fail, and poor decisions may succeed.”
Humility and a good process
We can increase our chance of having more successes than failures through diligent, intelligent effort and a good decision-making process, but in order to do this we have to admit vulnerability and realize our own limitations.
We have to be humble and admit that we can’t know everything in advance and that sometimes things will happen randomly that will impact our decisions. This willingness to be unsure will make us better decision makers because we will be more likely to question our assumptions and conclusions, thus leading to a better process.
“If you choose not to decide, you still have made a choice.” (Rush, Free Will)
We recently lost one of the greatest drummers and lyricists of all time, Neil Peart of Rush. This line from their song, Free Will, is one of their many pithy phrases that will stick with us forever.
Sadly, many in our line of business (money management) do exactly that: They freeze in the face of the unknown future and abdicate their responsibility to give timely advice to their clients because they are afraid of being wrong. Unfortunately for their clients, taking no action is often the riskiest thing you can do when managing investments, and it shouldn’t be sufficient to simply apologize after the fact and point the blame at something or someone else.
What to do?
So how do you make better decisions and learn to live peacefully regardless of the outcomes? Well, as we say above, the first step is to develop a good process and constantly refine that process based on experience. The next step is to execute that process with humility and vulnerability. The final step is to let go of the outcome.
That last step is the tricky part. For that, you may want to polish up your meditation practice and learn to live more fully in the present moment!
Don’t sit on the fence!
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DISCLAIMER: Northern Lights Capital is a tradename of Aligned Capital Partners Inc. (ACPI). Arpad Komjathy is an agent of ACPI and he is registered to advise clients resident in the provinces of Ontario and British Columbia.
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