We make decisions every day. Some are easy to make, some significantly tougher, as the consequences of poor outcome due to a wrong decision can have greater impact in comparison to just some built-up plaque.
Then it’s even tougher to figure out what to do next after a decision has gone south, especially since most business decisions that do turn out to be bad one usually result in financial loss.
However, just because a decision didn’t result in the ideal outcome, it doesn’t automatically mean that it was a terrible choice. Imagine you were the CEO of a property and development company who purchased an apartment, renovated it and then sold it for a huge profit. This would be considered a good decision right? Maybe it will, but what if you did everything exactly the same way and then something unforeseen happened, like house prices declined shortly after the initial purchase and continued to drop throughout the long renovation period? Or, unforeseen overheads that caused you to dump more cash into the project and make a loss instead, as the investment has now you cost more than the return. Would this still be a good decision? Or is it now a bad one due to the different outcome?
The Right Choice
According to an article published by Catherine Robson for The Age, it’s actually the same decision. “Separately assessing the quality of the decision-making process from the outcome helps avoid outcome bias and forms the basis of a replicable formula for investing success,” she writes. What she’s suggesting is that you should carefully reflect on what this decision you’re about to make could mean for you or could have meant for you had it worked out.
No investment either personal or business comes without risk. However, even though it’s possible to minimize risk with extensive research, it’s usually impossible to completely eliminate risk. Again, imagine not taking the risk and a downturn was not to happen; you could have missed out on a massive opportunity.
This applies for any business deal or investment you may make. And when the worst does happens, which everyone will experience at some point, the lessons you learn can sometimes outweigh the financial losses. “Success is a lousy teacher. It seduces smart people into thinking they can’t lose,” Bill Gates once famously said.
Remember, it’s also possible that the decision you made was the correct one all along but your timing was the issue. This is an important thing to look into for any business owner, as choosing to try again could allow you to have a very different result due to better timing.
Going back to the previous example of the apartment, buying an investment property just before a downturn could result in major losses if you were to sell it during troubled times.
However, buying that same property during the midst of a downturn could be an amazing opportunity, as it’s essentially the same place for a discounted price.
Your first mistake is usually the hardest. However, it’s the people who bounce back from these mistakes and evaluate why a decision went south, as well as how to best prevent that from occurring again, are the ones who have a better chance of success going forward. “Strength does not come from winning. Your struggles develop your strengths. When you go through hardships and decide not to surrender, that is strength.” – Arnold Schwarzenegger.
Article originally posted by entrepreneur.