Strategic planning and decision making are best done in unfamiliar, challenging and uncomfortable environments. Some of the greatest strategic moves in battle were made under conditions of extreme austerity and challenge. When the chips are down, our minds become focussed. On the other hand, danger lurks, when we are feeling comfy, like a floating frog enjoying the warmth of a slowly heating pot of water or the happy turkey who enjoys three corn-fed meals each day, right up until the day before Thanksgiving dinner. Familiar and benevolent surroundings lull us into a false sense of security.
The closer we are to a problem, the harder it becomes to see it. We see the world with rose coloured glasses. As a result, the probability of things that we can’t see going really bad is much higher than we’d ever expected. Conversely, the probability of things we can’t see offering us a nice payoff can also be better than we’d expect.
ACTIVITY: Come up with a dual strategy. A strategy that mitigates against all significant losses and also offers the chance of a big win. This could be as simple as placing 90% of your investments in medium to long-term fixed term bank deposits (to ensure no loss of money) and investing 10% in risky investments that could deliver a huge upside (to have a chance of winning big as well). Sir John Templeton’s investment formula, appeared risky to onlookers. Templeton looked for shares that were selling well below their asset values and suffering from maximum depression, due to temporary circumstances. He would usually hold such shares for five years or more until they reached what he considered to be their real worth.
Are you the sort of person who provides for the best and hopes the worst will take care of itself? Or are you the other way around? Create your own dual strategies. Make sure you provide for the worst and allow for the best to take care of itself.