“You have to keep reminding yourself: We don’t know what’s going to happen with anything, ever, over any period. And so it’s inevitable that a certain percentage of our decisions will be wrong. There’s just no way we can always make the right decision.
That doesn’t mean you’re an idiot. But it does mean you must focus on how serious the consequences could be if you turn out to be wrong: Suppose this doesn’t do what I expected it to do—not just because it goes bad, but even if it just doesn’t go up enough. What’s gonna be the impact on me? If it goes wrong, how wrong could it go and how much will it matter?
[This] doesn’t mean that you have to be convinced beyond doubt that you are right. But you have to think about the consequences of what you’re doing and establish that you can survive them if you’re wrong. Consequences are more important than probabilities. This isn’t just a paradigm for always coming out with conservative decisions. It’s really how you should make decisions, period.”
Source: A (Long) Chat with Peter L. Bernstein
That doesn’t mean you’re an idiot. But it does mean you must focus on how serious the consequences could be if you turn out to be wrong: Suppose this doesn’t do what I expected it to do—not just because it goes bad, but even if it just doesn’t go up enough. What’s gonna be the impact on me? If it goes wrong, how wrong could it go and how much will it matter?
[This] doesn’t mean that you have to be convinced beyond doubt that you are right. But you have to think about the consequences of what you’re doing and establish that you can survive them if you’re wrong. Consequences are more important than probabilities. This isn’t just a paradigm for always coming out with conservative decisions. It’s really how you should make decisions, period.”
Source: A (Long) Chat with Peter L. Bernstein
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