Playing to lose

(I was the tiny black dot on top of that mountain)

1 trong những quyển sách mình thích nhất về strategy là "Playing to Win" (highly recommended nếu ai chưa đọc), nhưng bài này thì mình lại muốn nói về điều ngược lại (thực ra chẳng liên quan tới nhau lắm ngoại trừ cái tên).

Từ trước đến giờ, mọi người hay thắc mắc tại sao mình hay engage vào high-risk activities và thường chịu khá nhiều thiệt hại.

Nhưng thực ra là mình có aware và (có vẻ) cố tình để nhận những điều đó. I guess when you take losses and damages, the coolest (or dumbest, or both) thing you can do is to say you did it intentionally.

Humans have a skewed bias for anticipated rewards, underestimating associated risks and costs. And when they kick in, the poor preparation coupled with the innate risk aversion catches us off guard, leading to a disproportionate downward spiral. Hence an uninformed (and unwise) Risk : Reward ratio.

Been there done that, and I decided not to fall victim to this mortal weakness anymore.

First, let's watch this from Rocky.

One POV I have on life is it's like trading. Both rely on our prediction of outcomes and require commitment and actions in order to deliver maximum results. And the foundational basis is Risk : Reward ratio, which necessitates a balanced view on what you can get and lose. The playbook is not to win everytime, but to survive as long as you can until you have more wins than losses (which is inevitable) and let the compounding do its job.

So my approach is to (1) get the realistic expectation for reward, and (2) be accustomed to the feeling of loss, as soon as possible.

(1) Having too high or too low a target can both undermine your returns, by motivating far-fetched actions or paralyzing them. My learning is that the more you experience, the less diverged your expectation is from the achievable line.

(2) The amplified perception of loss/ risk also stalls us from accurate calculations. Being exposed to recoverable (chance of) losses helps our minds gradually become comfortable with the idea and calibrate the mental assessment for decisions.

And why “as soon as possible”? Cos as any second passes, our life runway (or years to death) gets shortened, making any future physical, mental, or financial direct cost (since 1% of what you have now is a lot more than 10 years ago) and opportunity cost (your mortality funds getting exhausted vs the expected gain getting bigger) more expensive.

So what are the takeaways? You may have a new view on life approach, and I have a sound excuse for my deemed reckless and irresponsible activities.

Plus, always remember to take calculated risks and put your stop-loss (what is the maximum you can afford to lose). Don’t be like this bird either.

But I’m also a terrible trader.