As a trader and investor in the financial space, it was hard for me to accept that I am wrong more often than I am right – and that is still a winning strategy. I realized that it takes a certain level of maturity to accept this. And boy is it a hard pill to swallow. After attending countless seminars with gurus who provide information and access to so-called high probability strategies and entries, I noticed that people tend to find appealing the strategies from someone who is right 80% or 90% of the time. Yet statistics show that over 95% of traders lose money. Why is it then that people flock like moths to a flame when you can show them a strategy that will likely involve them being right?
How important is it for you to be right? Is an attachment to being right stopping you from being an entrepreneur?
Let’s say that I could guarantee that you would make money by the end of the year – lots of money – but you would probably lose money on 90% of your endeavors. Could you tolerate that? Would you accept and proceed with these terms? For most people, the answer would probably be “no”. If you are one of these who fall into the “no” category, you are probably denying yourself the opportunity to be successful simply because being right is more important to you.
What I have learned as a trader and investor is that I can be wrong 90% of the time and still make money.
Let’s say you make nine losses of $100 each. Then you score one opportunity that adds $2000 of value into your organization. Your nine losses sum to a total of $900. When you subtract that from your single $2,000 profit, you get a net profit of $1,100. You only made money from one out of ten opportunities that you pursued.
My guess is that 99% of aspiring entrepreneurs could not be involved in a system that would produce 90% losses, irrespective whether the end result is profit or not. The reason is because they do not get to be right enough. They can experience too many losing streaks, often more than five losing streaks in a row. Most people cannot tolerate long losing streaks. When these setbacks occur, they abandon what they are doing. In such a system you could easily have 25 consecutive misses. At that point you begin to convince yourself that your system is broken, and you try something else.
On the other end, suppose that you got to be right 90% of the time, where every time you are right you win $100 while your average loss was $2,000. You make money on 90 attempts, giving you a total of $9,000 in winnings, while you lose money in ten opportunities, giving you a total loss of $20,000. Overall, you would lose $11,000. Would people choose this system? Yes, they would. And if the system only made four or five opportunities each year, they would probably go for it for several years until they go bankrupt. Why? Because they get to be right most of the time and that feels very rewarding.
Are you attached to the feeling of not being wrong on an endeavor, opportunity, or human investment that you are waiting forever to be right?
As entrepreneurs, while we can make financial investments, we can also invest in ourselves and in others. We must recognize that the cost of having losing investments is major. Firstly, it ties up valuable capital to a nonproductive system. Secondly, it causes us to miss other great opportunities.
We have a bias to “being right” from the conditioning of our school system. We were taught in school that there are right answers and wrong answers. You get marks for scoring well and you fail for scoring poorly. We have engrained in us the idea of failure into our psyches to a point that we are trained to be deeply afraid of the ostracization, shame, and low self-worth of experiencing whatever constitutes a failure in our minds. We learned that being “right” was how to survive the system. Even going home with a score of 93% would only elicit our parents from questioning, “Why didn’t you get 100%?”.
It is no wonder that we are fearful of being wrong, which can be equivalent to the idea of failing.
An attachment to being right can cost us dearly. The first bottleneck to any entrepreneur is risk management and success related issues such as self-sabotage. To survive as an entrepreneur, we must learn the concept of expectancy. On every endeavor made, you need to know where our exit point is – the point at which you decide you are wrong and get out. You can be wrong 90% of the time and still have a positive expectancy. The bigger your expectancy and the more opportunities you generate, the better results you’ll have over a large number of opportunities.
Entrepreneurship has infinite ideas, so many different ways to grow, and different ways to invest in yourself and others. Everyone has a different style and vision for their endeavor. Eventually over time, the more time you put into it the more you’ll develop the skills and evolve in this journey. After continuous setbacks, if you’re still willing to learn and invest in yourself, you are already ahead of 90% of people who would have just given up.