How To Decrease Downside
Margin of Safety
The worst outcomes in history were unimaginable until they happened. You can spend your time, money and attention preparing for another covid only to be completely unprepared for the natural disaster that hits instead. We should be prepared for the things we can’t predict by keeping a margin of safety.
Margin of safety: increase the number of possible outcomes that don’t ruin you in any key measure of life
We can’t predict them all but we need to account for them to protect ourselves. Since we can’t predict them, we need to change our mindset to properly deal with the unexpected.
“its that preparation mindset – as opposed to a prediction mindset – that saves you in the [not best case] scenario” (Parrish, 196)
One way we can test our decisions is by conducting low-risk experiments before going all in. See the decision play out before you commit to it. We do this in real life when we date. The eventual decision is whether to marry the other person or not. Instead of deciding the moment you meet them, you date for months or years before you decide.
You “soft-decide” to be with them, you live with that, and then decide whether or not to marry them based on the dating experience. We can look for ways to do this with most big decisions, to create a margin of safety.
Another example of a small experiment could be working on a passion project part-time before quitting your job to pursue it full-time. Or renting a home in a city you’re considering moving to before buying a home.
Finding ways to lower the stakes and test a big decision is a great way to lower the impact of being wrong.
Question of The Day
Where can you make a margin of safety to protect yourself?
Have a great day. Or at least avoid having a bad one.
Your Friend,
Noah “BigNerd” Sochaczevski
PS. Tonight, I’ll be announcing the Big Nerds first book of 2024!!!