#018: Opportunity, Risk and Regret
Don’t overestimate risk while underestimating opportunity.
People are generally bad at estimating risk.
We tend to categorize risk in a binary way.
Either there is a risk, then we try to avoid it.
I assume the reason is evolutionary.
Or there is no risk. But then there is usually no opportunity.
Yet, people who get better at estimating risk have fewer regrets in life.
In the old days (think about the stone age or the days of cave men) if you were out in the forest and you’d hear a swoosh in the bushes you’d better run.
No matter if there’s a tiger behind the bush or a mouse.
But nowadays, we can differentiate between different risks.
But it is difficult because a risk often still triggers an emotional reaction of fear inside ourselves.
That’s why we usually overestimate risk.
The flip side is that we underestimate opportunity.
This can have dramatic effects on our lives since a great opportunity can be life-changing — if you take it.
So you better don’t miss it.
If it all boils down at accurately estimating risk, how can we get better at doing so?
A good framework is to estimate the “depth“ of potential future regret if the opportunity (or risk) is not taken.
Here it is important to notice:
Humans tend to regret much more things they have not done than things they have done.
So when facing a new risk, think for yourself: how deeply would I regret later not having taken the opportunity that comes with it?
Answering this question can lead to surprisingly clear risk estimates.
A few examples:
- Choosing not to fly to the Caribbean for your next summer holidays even though you love beach vacations. The potential future regret is low because you can simply catch up on this another year.
- Choosing not to do a student exchange year in another country in high school or college. The potential future regret can be high as this opportunity is usually offered to you once or maybe twice and then never again.
- Choosing not having applied for this one job that had a very attractive description. The potential future regret again can be very high.
- Choosing not having learned to play that instrument when still in high school: high potential for future regret.
- Choosing not having taken a 3 months break after studying to travel the world (instead chose to do a well-paid 3-months internship at a wall-street bank). Very high potential for future regret.
A common pattern that can be observed is that when the underlying risk is financnial but the potential opportunity is (awesome) experience, when minimizing for future regret it turns out that the risk is marginal or even negligible.
But the opportunity may offer potential unlimited upside.
Key takeaways
- People tend to regret things they have not done.
- Minimize future potential regrets when estimating risk.
- Don’t overestimate risk while underestimating opportunity.
Don’t miss the next newsletter if you want to get more actionable insights on how I optimize my life.
