The Peril of Second-Guessing Decisions

If you follow us on Twitter, you may have noticed that this week has been a massive cluster of travel delays for me. A lengthy diversion one day, a string of cancelled flights the next. In all, I was booked on eight different flights, only three of which went mostly as planned, and I got home 26 hours after I had planned. I will spare you all the boring details, but there’s one part of it that provides a good reminder that applies just as well to travel as it does to finances and life.

Today: the peril of second-guessing your decisions, and why it’s better to look forward than back.

 

Making the Call

After my work meetings had wrapped up, and I was about to head to the airport to go home, I got a notice that my first flight was delayed, meaning I wouldn’t make my connection, and I’d be stuck in that hub city overnight. I quickly called the airline to discuss options, and decided to switch to a different flight out of a different airport in the region so that I’d at least spend the night in a hub city that offers more flights to my home airport, putting me home earlier the next day. That meant a mad dash and an long, expensive taxi ride to the alternate airport, a few hours of uncertainty, and eventually a cancelled flight. I ended up spending the night in some bland suburban hotel in the eastern half of the country, and not making it to the western half hub I intended to overnight in. I eventually got home the next day (actually very late the next night), so not a big deal in the scheme of things.

Except.

It turns out that if I had stayed with my original itinerary, I would have gotten home the same day. My first leg was still delayed in the end, but my original connecting flight ended up being delayed too. I could have made it. But I was off at a different airport, not able to hop on that flight, and so I lost a day at home in the name of bad luck.

Feeling the Blame

If I had stuck with my original itinerary and not made it home, I wouldn’t have felt that that was “my fault,” even if other possible flight options would have gotten me home. I would have happily blamed the weather and the airline like everyone does for travel delays. But because I actively took action and switched to a different flight — meaning an affirmative decision instead of a passive non-decision — it felt like I did the wrong thing. I became seemingly culpable.

But really, it was just dumb luck. The airport I switched to ended up being right under a massive thunderstorm system, but it just as easily could have moved in over the original airport. It was no better than a dice roll, but because I made that choice to switch, I sat in my bland hotel room and kicked myself for making what felt like a bad decision.

Recognizing the Difference Between Luck and Skill

I’m pretty good at travel. I do it a lot, and I know how things work. I know that getting stuck at a non-hub airport is an unfortunate thing, because you have way fewer flight options to choose from, and I know which airports have the most flights that will get me home. All of that means that, in any given situation, I know my odds, and I play the odds to try to get the best outcome. Most of the time, that approach works — I can count on one hand the number of times I’ve ever been stranded overnight somewhere. But it’s still ultimately luck whether the flights fly as planned.

Mr. ONL would use a poker analogy to describe the same circumstances. You can know all the odds, know how many outs there are, but it’s ultimately luck which cards you get. Knowing how it works, knowing how to read opponents’ tells — these things help you make decisions with the best odds, but even the most skilled player can still get beat by a rookie on a hot streak.

Some travelers and gamblers may fool themselves into thinking they’ve mastered it all and they’re in control, but they are kidding themselves.

The Illusion of Control — Especially in Finances

The same thing is true in finances, especially when the markets are involved: there is an element of skill and knowledge involved (for example, knowing not to buy high and sell low, or having a general strategy like investing in index funds or dividend stocks), but there is a whole heckuva lot of luck. The timing of when you retire relative to the markets can make a big difference in whether all your hard-earned planning succeeds in the end. People who do everything right and follow all the best advice can still end up losing money. And plenty of people have made money off nothing more than dumb luck.

Even things that seem fully within our control, like how much we save, aren’t entirely. We may be able to save X amount, but that’s because we have a job, and that’s not fully within our control either. An employer could hit a rough patch and lay us off. Even if we owned the company, the ability to make money would be hugely impacted by the overall economy and whether customers have money to spend on what we offer. CEOs get ousted by capricious boards of directors all the time. What we earn and save both have a massive element of luck, just like investing in the markets.Of course we want to control all of it. That makes total sense! It’s a deeply uncomfortable position to be in so much of the time, to know that we don’t completely control our own destiny. It’s why we create things like emergency funds and retirement planning spreadsheets with many different rate scenarios, to try to account for that uncertainty. But then we continue talking about our financial plans as though they’re totally up to us, even though they’re not. The best we can do — just as with travel — is to make the best decisions given the information we have, and to give ourselves the best odds of success, and then leave the rest up to chance.

It’s Skill When We’re Right, Luck When We’re Wrong

One of the psychological biases that we definitely fall into sometimes is this belief that it was all our own skill and good decision-making if something goes well, but that it was just bad luck if it doesn’t. Obviously it can’t be both, but we want to pat ourselves on the back for making good choices, while applying a completely different set of logic that says it was out of our hands if things don’t go our way. Logically, it makes no sense, but I know we’re not alone in thinking this way.

Cutting Yourself Some Slack

Of course the flipside also happens, when we blame ourselves for making the wrong choice when it was really all just luck, like my flight snafu that kept me away from home an extra day. Or, as we’ve heard other bloggers lament, when an investment goes bad, we get bad financial advice, or we get a late start on the path toward financial security — all of these things have a heavy dose of chance involved, and yet they’re easy things to blame ourselves for.

But what if instead of blaming ourselves, we cut ourselves some slack? Or we go even farther and recognize the role that chance played in all of it, and acknowledge that a lot of what happened was entirely out of our hands? It may not feel comfortable to feel like we’re letting go of control, but it’s actually super empowering to acknowledge that we never really had all that control in the first place.

Looking Forward, Not Backward

In the end, I kicked myself for missing that flight, and then I moved on. I enjoyed the free cable TV in my hotel room the night I’d planned to be home, I indulged in my first-ever mall walk the next morning (it was soooo hot out and there was a big suburban mall right there), and I made the best of it. Just as when some of our pre-index fund days investments lost money — we don’t sweat that stuff anymore. What’s done is done, and beating ourselves up about our choices would accomplish exactly nothing. Instead, we figure out what we can learn from it (in the case of travel: no lesson to be learned, it was all luck; with investing: don’t pick individual stocks), and we move forward with a heavy dose of humility about how much of our success is out of our hands.

If we spend our time looking backward, we’re ultimately wasting time and energy lamenting what amounts to essentially a coin flip, something we could never control under any circumstances. But by looking forward, we can acknowledge the bits we can’t control and focus on putting ourselves in the best position to thrive given the odds.

Share Your Thoughts

Do you tend to second-guess yourself a lot, or are you more of a “Moving on!” type? Have you realized that something you often lamented was actually chance and never in your control in the first place? Any tales of travel woe you’d care to get off your chest? Spill it all in the comments!