When risks turn into disasters - Deepstash

When risks turn into disasters

What turn events into disasters is that few discussed them even moments before they occurred. They were surprises. People affected did not prepare, either mentally or with actions. They could only react, often surrounded by panic.

Two things happen with surprises:

  • You become vulnerable.
  • Surprises shake the beliefs that leave you paranoid and pessimistic.

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MORE IDEAS FROM THEARTICLE

The biggest economic risk is what no one’s talking about. If no one is talking about it, no one will be prepared, and the damage will be amplified when it arrives.

In recent years, people cited the trade wars and election as risks. It is the same risks, repeated over and over. People may be worried, but no one is surprised. A business may be concerned, but many have prepared. Compare that to what, in hindsight, have actually been the biggest risks.

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Risk is more than something bad happening. How risky something is, depends on whether you're prepared for it. A small thing out of the blue can be deadly.

We should also remember this when thinking about the economy and our investments.

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  • Expect that risk will arrive when you don't expect it. Don't rely exclusively on forecasts – almost all of which are either nonsense or about things that are well known.
  • Give yourself a wide berth. If you think recessions will reduce your wealth by 20%, design your allocation to withstand a decline of 40% or more taking into account that the powerful downturn will be the one you didn't expect.

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RELATED IDEAS

John T. Reed, a real estate investor, looked into the accuracy of Kiyosaki's best-selling book and found it inaccurate:

  • The Rich Dad is most likely an invention. It's unlikely for an entrepreneur to succeed in construction, restaurants, and convenience stores. Authors history also doesn't match up.
  • Previously Kiyosaki named at least 2 other people as "the best teacher I ever had", making the same claim about the "Rich Dad" sound false.

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There are two kinds of historical events to learn from
  • Specific events. Their usefulness is limited to particular events that will not be repeated in the exact same way. What did this person do right, or wrong? What ideas worked? What strategies failed?
  • Broad behaviours that repeatedly surface in many fields and eras. These behaviours are often ignored. How do people think about risk? How do they react to surprise? What motivates them, cause them to be overconfident, or unsure?

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Polymaths

Polymaths, geniuses with diverse skillsets and varied interests, are the source of some of history's greatest contributions.

Giants like Aristotle, Galileo, and Leonardo da Vinci were specialized in not one, but several domains, and handled a problem with a diverse inventory of mental knowledge and understanding.

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