WEBVTT

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Now I want to talk about an aspect of decision making

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that's fascinating and profound that can work against

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us or for us. And that is what I would call

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the mental gymnastics that you will

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do and go through great lengths mentally

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to prove yourself that you were right,

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even if you initially made some wrong decision.

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But you have a psychological

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defense mechanism that doesn't want

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you to believe that you made a wrong decision. So let's say somebody

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cuts you off while you're driving instead

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of thinking, oh, maybe I was a little fast or I was

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maybe doing something wrong myself,

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your immediate processing will go something like,

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they did something wrong, they were too quick,

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or they didn't signal, or what did they do wrong first?

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Always looking for what somebody else did wrong.

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And that's the same in short term decisions and

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long term decisions. Like if you, let's say, make some bad

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business decision, you'll go through great mental

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gymnastics to prove to yourself,

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oh, by some unwritten rules,

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by some cultural nuances, you were still right and

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the other person was wrong or the situation was wrong.

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But it's a lot. It's very valuable

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to be flexible and have less ego and

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always think, okay, perhaps I did. There could

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be a chance that I made a wrong decision. If I reverse it

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now, it won't be that expensive. Because if you go through the mental gymnastics

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and say, I made a right

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decision, even though it's not working out now, I'm going to move

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forward with it and keep trying in the same direction.

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That's very common. That's a very common phenomenon you might see in the stock market.

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People make a bad investment, they think something

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will happen to a stock. The stock, instead of going up,

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it goes down. People think, oh, it's the macroeconomics or

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the CEO did something wrong. Or is this decision, it's never,

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oh, I made a mistake, let's get out while it's not too late.

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Because that usually saves people money.

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Like, they already lost some, it prevents them from

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losing more. That's what that

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lack of ego does, is when,

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when you already are in the wrong decision,

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you want to prevent going further

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down that road. And that's through noticing,

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oh, okay, little humility.

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I'm the one who made the wrong decision. It happens.

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It happens to all of us. Now, how do I get out

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of this? Maybe I lost 25% of

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my money, but at least I'm going to prevent myself from losing 50% of my

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money. So you're already kind of ending up with two bad options. You're going to

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maybe as an example, in the stock market, Instead of losing 50% of

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your money, you might only lose 25% of your money. It's two bad options.

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That second option to switch

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course and sell your stocks doesn't seem that appealing,

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but it's going to be certainly much better than losing 50%

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of your money. Mentally, it feels worse

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because so much of the feeling worse

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is that admitting to yourself that you were wrong. But long

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term, you'll be so grateful for yourself that you don't

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proceed in your bad decisions long term. Because,

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you know, you never get that time back.

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Sometimes some decisions are not so reversible. You can go

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back, but you can certainly change what happens from today

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on. And that's a big part of decision making.

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Minimizing the damage from wrong decisions.