In this lesson, we will explore a fascinating and profound aspect of decision making that can either work against us or for us. This concept is often referred to as mental gymnastics. It involves the lengths we go to mentally prove to ourselves that we were right, even if we initially made a wrong decision. This psychological defense mechanism prevents us from acknowledging our mistakes.

The Psychological Defense Mechanism

When faced with a situation where we might be wrong, our immediate processing often involves shifting the blame to external factors. For example, if someone cuts you off while driving, instead of considering that you might have been driving too fast or made an error, you are more likely to think that the other person did something wrong. This tendency is prevalent in both short-term and long-term decisions.

Examples of Mental Gymnastics

1. Driving Incident: When someone cuts you off, you might think they were too quick or didn't signal, rather than considering your own driving behavior.
2. Business Decisions: If you make a bad business decision, you might justify it by citing unwritten rules or cultural nuances, rather than admitting your mistake.
3. Stock Market: Investors often blame macroeconomics or company leadership for a stock's poor performance, rather than acknowledging their own poor investment choice.

The Value of Flexibility and Humility

It is crucial to be flexible and have less ego in decision making. Admitting that you might have made a wrong decision can save you from further losses. For instance, in the stock market, recognizing a bad investment early and selling the stock can prevent more significant losses. This approach requires humility and the willingness to accept that you were wrong.

Minimizing Damage from Wrong Decisions

When you realize you are on the wrong path, it is essential to minimize the damage. For example, if you have already lost 25% of your investment, it is better to sell and prevent losing 50%. Although this option may not seem appealing, it is certainly better than the alternative. Admitting to yourself that you were wrong may feel worse in the short term, but in the long term, you will be grateful for not continuing down a bad path.

Conclusion

Decision making involves recognizing and minimizing the damage from wrong decisions. While some decisions may not be reversible, you can always change your course from today onwards. Embracing humility and flexibility in your decision-making process will help you avoid prolonged negative outcomes and make better choices in the future.