Weekly Spark #179: The Hedging Trap
Why hedge? Hedging is a helpful risk management strategy to protect yourself against overexposure and ultimately reduce potential losses. It provides a sense of security, comfort, and peace of mind that if things don’t go according to plan, you’ve minimized your exposure and losses. Hedging is great in finance. Not in life.
Forget finances and robotic numbers, let’s talk life. When you hedge, yes you limit your potential exposure (i.e. pain, disappointment, narrowing in on the wrong thing), but you rob yourself of a potentially unlimited amount of upside (happiness, joy, meaningful relationships, transformative experiences); that’s a lot of upside that you might not even know that you’re missing out on, simply because you’re hedged.
To illustrate, I’ll highlight a few examples. Hedging looks like not giving your all, because if you give it your all and fail, that’s a bruise to the ego. So you hedge by giving 50%. If you fail in that instance, you’ll always have the excuse that “I wasn’t trying.” Preserve your ego; rob yourself of upside. It looks like spreading yourself 33% among 3 different things. If you give 33% of yourself to 3 different things, maybe, just maybe, you’ll get lucky with one of them and produce a win. More times than not, you’ll lose at all 3, but you’ll be able to feel good about it because you didn’t all out attack all 3, instead you were “close at all 3, but if you focused on just one, you would’ve won.” Makes sense 🤡
Think about relationships. Why do people encourage others to “protect themselves?” Let’s say you meet someone that you find yourself interested in and gravitating towards, but you follow the “protect yourself” advice. What does that really mean? That means not becoming fully invested in that person, so that you don’t have to feel the full pain of becoming fully immersed, interested, and engaged with someone, in the chance that it doesn’t work out and you end up hurt. Sure, by protecting yourself, you greatly decrease the risk of pain that you might feel if things don’t work out. But you’ll also never know how amazing that relationship could’ve been because you were too focused on protecting yourself. Upside robbed. In 26 years, I’ve never seen that lead to happiness or fulfillment.
Speaking from experience, I think it’s best to take the time to really size up your opportunities, and go all in on the ones that you have serious conviction. All your chips. Go all in and see what happens. Maybe you’ll fail. Maybe you’ll be disappointed. Maybe you’ll expose yourself to a level of pain or hurt that you’ve never felt before. Maybe you’ll leave with no chips. But you know, as you continue to approach it this way, you’ll succeed. You’ll be pleased and content with certain outcomes. You’ll feel a level of fulfillment, happiness, meaning, and connection that you’ve never felt before. And you’ll leave with more chips than you could have ever imagined. You don’t get those outcomes by living a hedged life. You get those outcomes by stepping up, believing, and going all in (in a tactful and educated way) on the opportunities that have the most upside. By living that way, I think you minimize the potential for future regret, minimize the “what ifs,” and regardless of outcome, you learn the most, both about yourself and the world around you. Sounds like all positive outcomes to me.
My buddy Albert (Einstein) eloquently stated: “insanity is doing the same thing over and over again and expecting different results.” Hedging is that insane idea. Whether it’s personally, professionally, or other areas of life (except some instances financially), hedging is a waste of life. Pain. Disappointment. Failure. These are all taxes that we pay for waking up and swinging the bat. You can’t go all in on everything. You have to take the time to know yourself and the world around you, and decide what is worth your all in mentality. Educated and tactical all in investments are what generate the highest returns. Don’t hedge. Unless you’re scared 🤡
Mental Diet
Quote of the Week:
“Insanity is doing the same thing over and over again and expecting different results.” - Albert Einstein
I hope you enjoyed reading as much as I enjoyed writing. Until next time… Take care of yourself and take care of each other. 🙏
Nathan