Regret > Risk
If I were to provide you with two options right now, what would you choose?
A) Being 80 years old, having a good family and house, but a lot of regrets about how you led your life and the risks you didn't take?
OR
B) Being 80 years old right now, having a decent house, a good family, and a smile on your face while thinking about how stupid some of the risks were that you took but have no regrets for?
If you are anything like me, you will always take option B over option A. And you are not going to be wrong for choosing option A either. In fact, who wouldn't want a great house and a great family to live with while they are 80 years old? As far as the feeling of regret. I am certain that two shots would take care of that.
But for someone like me, who will always opt for option B, the feeling of regret over not doing certain things is usually so strong that it cannot be gulped down. And the equation I keep asking myself before making a decision is: Will I regret those decisions X years from now?
Forget about the word risk for the moment. Let's say that the only thing on which you have to base your decision on is the amount of regret it will cause you in the future.
What would you do?
Ask yourself a question, You're 60, and you haven't saved enough for your retirement? Would you regret that?
Would you think, if given the chance to do it all over again, you would save more?
This is how Jeff Bezos' regret minimization framework works.
Now there is a ton of writing out there explaining the framework, so I am not going to explain it in detail, but rather you can read about it here. Although I do want to talk about how it can be applied to most aspects of your life, let me start with a few simple questions you can ask yourself.
Would you regret not taking that vacation you dreamt of taking with your loved one?
Would you regret not spending enough time with your family and kids?
Would you regret not taking that chance on yourself to start your own business?
While taking decisions like this, I think the regreto-meter may be a better gauge than the risko-meter that we see when choosing any investment, or as Morgan Housel states:
"Maybe regret is the best definition of risk."
Risk is not just about how much money you will lose or how you will feel if you fail. Most of the time, our failures turn into lessons as life moves on. But, the risk of regret that comes along decades later due to the lack of risk is something that lives with us for life.
We spend so much time trying to quantify risk when the answer is just figuring out what you will or won’t regret. The anonymous Twitter account FedSpeak wrote, "The purpose of life is to experience things for which you will later experience nostalgia." The opposite of regret
Until Next time…
I am on a mission to change the way people think about their money and Investments.