Andrew McCulloch is an adviser, investor and Non-Executive Director, based in London. 

Entrepreneurial Spirit was created as a creative outlet to share stories and lessons learnt from over a decade in investments and working with entrepreneurs. 

Decisions, decisions - Why you might be overthinking it

Decisions, decisions - Why you might be overthinking it

Things we do all the time become second nature and require very little attention or decision making to undertake. Have you ever been driving a car and realised you have been driving for miles almost on autopilot? No, me neither....

Making decisions is something that we do every day. Some are big and some are small.

The small ones are often made without any conscious thought. This is because we use assumptions all the time to speed up the process of making a decision. Our experience, knowledge and feelings are driving these decisions and they are often made in the blink of an eye. The outcome of these small decisions should, in general, have very little impact on your life.

Things we do all the time become second nature and require very little attention or decision making to undertake. 

The challenge comes when we undertake a task enter an area we are not familiar with. A good example is clay pigeon shooting - not something you do everyday and seems relatively simple, but if you've ever tried it, you'll know that it can be difficult to hit the target until you have tried it a few times. In theory it is simple, aim the gun and pull the trigger when the target is in sight. However, thinking about my own experience shooting the first time, it was definitely not simple. I found I was overthinking the process and tried too hard to aim perfectly. Of course, I didn't hit anything and that in turn made me frustrated that I wasn't making any progress. Trying to rush something and always get it right first time is a mistake and can result in your quitting before you have given it time.  

An experienced shot will tell you that you need to be relaxed to shoot well and with experience, you'll know when the right time to pull the trigger is. 

What about the big decisions?

Big decisions can come in many forms and can be made over a long period or sprung upon us with no warning. Questions like "shall I propose?" or "should I start my own business" are often considered over a long period of time. Its the ones we don't have long to consider that give us the most problems. 

One of the key factors is risk and our perception of that risk. I talk to clients on a daily basis about markets, political and economic events, as well as what this might mean for their money. We talk about our views, those of our investment team and how what might happen based on our current knowledge of the situation. 

One of the key things that often happens is that it can be easy to forget that what we were worrying about last week, last year or even 10 years ago, is not the same as what might be coming around the corner.

Investing is the same, as risk comes in many different forms and the landscape will change over many years. However, often clients can focus on the very short term visible risks and prioritise these risks over the long term, which could cause them to make bad decisions.

We think, each of us, that we’re much more rational than we are. And we think that we make our decisions because we have good reasons to make them. Even when it’s the other way around. We believe in the reasons, because we’ve already made the decision.
— Daniel Kahneman

Your goal is the most important risk to consider

The fear of loss can often be the biggest driver for an investor. This can often lead to simply protecting what you have, rather than thinking about the long term and what you need to achieve.

"Your goals, minus your doubts, equal your reality." - Ralph Marston

"Your goals, minus your doubts, equal your reality." - Ralph Marston

Goals risk (what would happen if you don't achieve your goal) is not talked about very often, particularly when it comes to investments. However, it is probably the most important risk to consider, as surely achieving your goal is the priority and therefore all of the other factors are just part of the equation. As long as the goal is really what you want and is realistically achievable, you should consider the other risks as being part of the process. 

There is never a magic bullet and therefore it is important to have a process for dealing with these situations:

  • do your own research and seek advice from people who have done what you are trying to do
  • look to outsource the elements you know you cannot do well, or simply can save time by delegating
  • identify key milestones that you need to achieve along the way
  • ensure that whenever investing any money, that you can afford to lose some or all of it and that it won't impact your standard of living if that happened
  • bring in professionals where they can add value
  • review your progress regularly and ensure your plan is flexible enough that you can adapt if necessary

The key is not to spend so much time thinking about doing something, that the opportunity passes you by. Focus on the goal and put a robust plan in place so that you take an acceptable level of risk and can change things if necessary.

There are a couple of interesting books on decision making which I can recommend, Thinking Fast And Slow by Daniel Kahneman and The Art of Thinking Clearly by Rolf Dobelli

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