Risks and regrets.

The last word of actor David Cassidy was "I've wasted too much time in my life."

Realizing it is too late in life is a terrifying thing. With many of us mindlessly playing with our phones all day, the situation of wasting time is becoming more common.

Regrets are a dangerous liability because their ultimate costs often remain hidden for years or even decades. Decisions that are easy to make in the short term often come at a higher cost in the long run.

Daniel Kahneman once said that one important quality of being an excellent investor is having an accurate understanding of your future regrets. If things unfold differently from what you expected, you need to accurately grasp and understand the direction.

Regrets are the best definition of risk.

Risk is not about how much money you might lose. It is not even about how you feel when you lose it - over time, many painful experiences turn into valuable lessons. The real risk is the possibility of regret even years or decades later.

Jeff Bezos once described his decision to start Amazon, the online bookstore, in the mid-1990s: "The framework that makes decisions exceptionally easy is the framework for minimizing regrets. Imagine yourself at 80 years old, looking back on your life, and try to minimize regrets. It will be very important to not regret not trying to get involved in this thing called the internet when you're 80."

"But I know what I'll really regret is if I never try from start to finish. I know that will definitely bother me every day. So when I think about it this way, it's a very easy decision."

Most people probably don't have the kind of character that allows them to quickly move on from a project they spent their whole life working on but failed. But Jeff Bezos does. The important thing is that he knows if Amazon fails, he will be very disappointed; but when he is 80 years old, he will smile contentedly with no regrets, because he tried.

On the other hand, most ordinary people have the ability to become an investor who is not so great, but people are unwilling to become a bad investor. Warren Buffett once commented on the failed hedge fund Long Term Capital Management and said, "It's foolish to take risks for something you don't need." I agree with this view. 'YOLO' You Only Live Once is also a good reason not to do something.

When the purpose is just to figure out whether you will regret it or not, we have spent a lot of time trying to quantify the risks. An anonymous Twitter account FedSpeak wrote, "The purpose of life is to experience things you will later reminisce about." That's the definition of no regrets.

Morgan Housel Feb 9, 2023