‘No regrets’ – with its soundtrack provided by the likes of The Walker Brothers and Robbie Williams, hip-hop artist Dappy and, in translation, Edith Piaf – is a life ambition with great resonance for many people.
Investors are no exception and, as it happens, the hope – and, more importantly, how one might attain it – has cropped up in two very different books we have been reading, here on The Value Perspective.
The first is Man’s Search for Meaning by Austrian neurologist and psychiatrist Victor Frankl. Published with a different title shortly after the Second World War, the last three years of which he spent in Nazi concentration camps, Frankl advised: “Live as if you were living already for the second time and as if you had acted the first time as wrongly as you are about to act now!”
He continued: “It seems to me that there is nothing which would stimulate a man’s sense of responsibility more than this maxim, which invites him to imagine first that the present is past and, second, that the past may yet be changed and amended.
Such a precept confronts him with life’s finiteness as well as the finality of what he makes out of both his life and himself.”
This call to imagine living your life for a second time in order to avoid making regrettable mistakes in the only lifetime we actually have is of course thought-provoking advice from someone who survived hell.
Nobody knows what's around the corner
One problem we face in trying to follow it, though, is nobody knows what the future holds – and so how might we best set about ensuring the choices we make today are not ones we end up regretting tomorrow?
On this, the advice of professional poker player turned business consultant Annie Duke is also the title of her rather more light-hearted read Thinking in Bets: Making Smarter Decisions when You Don’t Have All the Facts.
In essence, accept – as gamblers do and, here on The Value Perspective, we maintain investors try to – that the future is unknowable and thus very few decisions are 100% guaranteed to be right or to be wrong.
Duke offers the example of weighing up whether to move to another town, given there are so many variables that could leave you concluding you had made the best or the worst decision of your life.
The way to avoid stressing yourself unduly on that front, she continues, is to think not in terms of black and white or right and wrong but in terms of probabilities, which is what we try and do, here on The Value Perspective.
In contrast, many investors will conclude a particular scenario will play out in the future, which can also translate as ‘This will happen with 100% certainty”.
The issue here is the human brain is hardwired to look out for evidence confirming that view – in the new town, to return to Duke’s example, the schools are better, the people friendlier and the weather better.
By the same token, our brains tend to ignore conflicting evidence.
Take a probabilistic view
A better way of looking at the world is more probabilistically – so that, while you might be 85% sure the town you are planning to move to is an improvement on where you live now, should you discover in the course of your researching that the crime rate is higher, then you adjust that probability.
If ultimately you decide you are now 80% sure that moving is the better choice, then that is what you should do.
Then, if something happens that causes you to regret your decision, do not blame yourself – you made your choice based on the best available evidence, which you may not be wholly surprised to learn is what we try to do as investors, here on The Value Perspective.
Sometimes, inevitably, our investment choices can leave us feeling a little as if we have been mugged but, providing we can tell ourselves that, given the same set of circumstances, we would make the same decision all over again, then we will have no regrets.