Why You Should Save Like A Pessimist, But Not Invest Like One - Deepstash

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Why You Should Save Like A Pessimist, But Not Invest Like One

https://www.forbes.com/sites/ryanderousseau/2020/09/16/why-you-should-save-like-a-pessimist-but-dont-invest-like-one/#7b0124f57cf6

forbes.com

Why You Should Save Like A Pessimist, But Not Invest Like One

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Expecting miracles and disasters

Expecting miracles and disasters

Mathematician John Littlewood explained the presence of miracles through statistics. Littlewood's Law says we can expect a miracle every month. On the flip side, we can expect a disaster also as often.

We're currently experiencing a series of sequencing risk more often than usual, such as a pandemic, floods, earthquakes, and political meltdowns. Next year, a pandemic might have a 1% chance of occurrence, as could floods or political problems. But the idea stands that both bad and good things will happen this year and the years after that. It is not just current problem.

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Saving Like A Pessimist

If you are aware that 'black swan' events are not so unusual, you can plan if such an event happens. That is the benefit of a high savings rate - it is easier to overcome an unexpected obstacle.

But there are limits. If you lose a house to a wildfire, then you're not relying on short-term savings to recover but on the insurance company providing you with the coverage you paid for. However, pessimism gives you an awareness that bad things happen.

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Avoid Investing Like A Pessimist

Pessimism has its limits. When it comes to investing in your future, you should be an optimist. If people try to get better at solving the recessions, panics, and wars, the long-term odds are in an economy's favor.

For investing, it means that as long as you're moving forward by seeking solutions, your initial investment will grow as well as the other investments you continue to put into the market.

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Deciding how to make good choices

Leaders should choose a decision-making model before moving into problem-solving.

Good choices at defining moments on important matters make all the difference for people, organizations, and societies. Every time you are in front of a defining and complex problem, you have a pivotal choice to make in how to find solutions and execute decisions.

Two decision-making models for tough challenges

  • The hub-and-spoke decision-making model. It's likely you don't have enough experience, brainpower, or time to succeed. The way forward is using a small group of elite talent, traditional experts, or a consulting team and having them set the course. This model uses interviews and read-outs to provide all the information and perspectives required to draw solutions. The process can take a long period of time.
  • Many-to-many decision-making model. You are engaging the talent in and around your organization. Whatever they are missing can readily be filled by external experts. The way to proceed is to ensure interactions between many specialized people in ways that combine their knowledge and talent to create unique recommendations. This model generates a high-volume of high-quality conversations. Speed to execution and change is the norm.

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Getting Your Voice Heard

Getting Your Voice Heard

In the corporate world, employees need to communicate effectively for pitching ideas, and even to get one’s point across in meetings.

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Speaking With Conviction

When we use words and phrases like:

  • ‘I Think..’
  • ‘This is just a suggestion/idea, but..’
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... we end up downplaying our own ideas. We need to be more assertive and speak with conviction.

Speaking With Intention

By speaking clearly and maintaining eye contact, we can use words to hypnotize the audience.

Even our pauses in between our words can be used to gather our thoughts and make the listeners reflect on what you have just said.

Steps To Happiness At Work

Steps To Happiness At Work
  • Avoid "good" and "bad" labels. 
  • Practice "extreme resilience": the ability to recover fast from adversity.
  • Let go of grudges.
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