Decisions and Fear Of Missing Out (FOMO)

People make decisions all the time. Most will be imperfect or even wrong. People know that in the beginning and they adopt methods to minimize the cost of wrong decisions. They periodically check and decide to continue or to not.

That is the adult process. Recognize fallibility and adjust.

Strangely, some people don’t make decisions very well because they try to fix them before they make them. The need to be perfect.

The missing step

Some people have an innate blind spot. They fail to notice, every decision is a two part thing. You decide on Option A but that choice automatically precludes accepting any of Options B through ZZ. The poor decision makers become overwhelmed by the options and end up with no decision or a guess. Or the revisit the decision and blame themselves for not having chosen some then obscure course.

They are focusing on “opportunity cost.”  Per Google, “the loss of potential gain from other alternatives when one alternative is chosen.”

What if I am wrong and Option BX turns out better? The emotion that runs with opportunity cost is fear of missing out (FOMO) and no one likes missing out.

Everyone misses out most of the time. How many of you bought Microsoft at $21.00 on 13 March 1986? For those who did $10,000 invested then is now worth about $40 million.

The defense

Every decision is in the present and its outcome is in the future. The future will be different from what we have seen so far and so sometimes the context of the future would have worked in favour of some decision you did not make. Under that circumstance, how realistic is it to blame yourself for making a weak decision?

People can make it work, but they have to give up on the idea of being right. They need to focus on being right enough and they need to retain the right to change their mind. Decisions that cannot be changed or are very costly to change are very risky and deserve special attention.

People exercise their option to change their mind with a simple process – the 3Rs

  1. Record – Keep track of what you considered and how you weighted the input variables, the time line, and the expectations of your decision
  2. Review – Sometime after, when the results are becoming obvious, revisit the variables and the outcomes and see what is happening. Examine how well the context you imagined for the future played out. What happened that you did not expect?
  3. Revise – Adjust your choice to the new reality and record why you changed. Now you have a new decision to keep track of into the future.

The value in the process is objective assessment of the ability to change.

The takeaway

Every decision has opportunity costs and if you let FOMO alter your thinking, you will magnify them. No decision is a decision, too. Usually one that introduces all of the opportunity costs.

Like Microsoft. You didn’t buy it in 1986 but you could have revisited it in 1989. If you bought in March 1989, you would have done less well, but $10,000 would have become more than $6 million. Not bad.

There is little risk in a decision that can be inexpensively modified, so people should make the best decision they can, recognize it might be imperfect, and move on to other decisions. Some of those “other” decisions will be those that arise from the review process.

Seeking perfect decisions is a losing process.

I help people understand and manage risk and other financial issues. To help them achieve and exceed their goals, I use tax efficiencies and design advantages. The result: more security, more efficient income, larger and more liquid estates. Please be in touch if I can help you. 705-927-4770

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