How Risk Management Can Help Minimize Regrets

by Tommy Leung on May 30th, 2018

I’ve always looked at regrets in terms of things I hadn’t done but wish I had.

Move to a different city. Ask a girl on a date. Start a business.

Rarely do I regret things that I’ve done that turned out poorly. I might feel embarrassed or disappointed but not regretful.

The important thing is that I tried. Now I know how to do it better next time.

So I was taken aback recently when I heard a perspective of regret in terms of failed attempts.

“You regret the things you failed at.”

It was so different from my perspective that I had nothing to say. I simply flagged it as something to consider later and moved on.

"If you don't learn from your mistakes, then they become regrets."

- John Cena

There are studies on regret that look at the regret of inaction vs the regret of action.

Regretting a failure is the regret of action.

Regretting not starting a business is the regret of inaction.

I can’t think of any examples of regrets of action in my own life.

I’ve lived through fairly dark lows. I’ve tried and failed at many things. Yet I can’t say I regret any of them.

There was a time when I was practically drowning in debt. Nearly $100,000 in combined student loans and credit card debt.

Nothing I’ve done in my career requires my college degree. It is easily the most expensive thing I’ve ever paid for and it hasn’t proved particularly useful, yet.

My first credit card arrived in the mail for me at the age of 17. I was irresponsible and proceeded to accumulate over ten thousand dollars in debt. While not making enough to pay those bills.

I tried starting an eBay business. I used my newfound credit cards to fund it. The business didn’t work. That added to my credit card problems.

It is possible that because my life has worked itself out that I don’t regret those hardships and failures.

But I also didn’t regret them while I was in the midst of recovering from them.

It goes without saying that in hindsight I could have made better decisions and be in an even better place today.

But that’s a fallacy.

I couldn’t have made decisions any differently given what I knew at the time. I can only make smarter decisions today because of what I learned from the decisions that led to failures.

"You can always say, 'I wish I had landed that triple flip better, or I wish I didn't fall.' They're not regrets, just mistakes."

- Michelle Kwan

Perhaps we lean towards regrets of action or regrets of inaction depending on our levels of loss aversion. Or levels of pessimism versus optimism.

I don't know if one perspective is better than the other but most people look to live a life of minimal regrets.

We only get one chance to live our one life as best as we can.

Jeff Bezos has talked about the concept of a “regret minimization framework”. That’s how he decided to leave his well-paid job to start

The framework is to envision yourself at age 80. Look back at your life and try to have as few regrets as possible.

Bezos felt that he wouldn’t have regret failing but he would have regret not trying.

Of course, we can’t know if he would have regret failing in a different life. We can only know the perspective from a Bezos who became wildly successful by starting

There's another way to minimize regrets.

And that's to look at the risks. Some decisions are wildly irresponsible because the amount at-risk is greater than the amount to be gained.

That doesn't mean irresponsible decisions can never succeed. They sometimes do. But thats not something you bank on. It is just gravy when that does happen.

What you can bank on is what you put at risk.

Let's say you have $100,000 to invest in a stock. The company trades for $100 a share and, after some research, you believe it can double in the next year. Do you invest all $100,000?

That is the right move for some people. For those who are willing to lose everything on one shot. I don't know who those people are.

For the rest of us, risking everything is an irresponsible decision. Maybe you risk $10,000. You won't make as much if the stock does double but you also won't lose as much if it falls by 50% instead.

Most importantly you won't be ruined if things don't go your way

For me, this is the best way to make decisions that also minimizes regrets.

Risk only what you are willing to lose to achieve something that is worth many times more.

"Most people die of a sort of creeping common sense, and discover when it is too late that the only things one never regrets are one's mistakes."

- Oscar Wilde