Daniel Kahneman and Amos Tversky won a Nobel Prize for their research on why we are so averse to failure. What they found is the pain of failure is twice as great as the joy from a win. This conclusion showcases the lasting negative impact of loss and explains why we go to great lengths to avoid a loss or failure.
As a rookie advisor, I encouraged my clients to be more aggressive with their investment portfolios. After all, higher risk equals higher return, right? Although technically true, this does not factor in the emotional aspect of investing. While money has no emotion, the people who own it sure as heck do. I quickly realized I was being blamed (directly or indirectly) for the losses and barely given credit for what, at times, amounted to huge returns. It left me mentally exhausted and drained. I was spending less time building relationships with my clients and more time explaining how the stock and bond markets worked. I became an expert in explaining why my clients had to remain invested even though they just took a 20% haircut over the previous twelve months. Showcasing my “value” on higher rates of return only served to condition my clients to focus on returns. Ultimately, it meant lost clients. Not because their long-term rates of return weren’t good, but because they wanted off the rollercoaster. Don’t get me wrong, I was not placing my clients in anything that would be considered high risk. But having a higher correlation with the stock market meant they would experience higher fluctuations than they were comfortable. This was a valuable lesson at the time, but it was only after reading Kahneman and Tversky’s research that it all made sense to me. My clients were twice as upset at being down 10% than they were happy at being up 10%.
By reducing their exposure to flashy investments and increasing their exposure to boring vanilla-type investments, I created a book of happy clients who focused on what was important: financial planning. The irony is that their returns were not that much different.
But this article is not about your clients, it’s about you. Contrary to what some people thought of advisors after the 2008 banking crises and subsequent market collapse, financial advisors are people too. We are just as susceptible to avoid loss or failure as anyone.
Jack Ma and Jeff Bezos, both of whom are worth billions of dollars, have a very different mindset to failure. They both believe strongly that it is okay to fail, and that failure is part of their process. Ma has always been very vocal about his failures and in fact openly embraces it. Some of his failures include not getting a job at KFC when 24 people applied and he was the only one to get rejected. He applied to be a server and they hired his cousin instead. He even applied to Harvard ten times and was rejected all ten times. Instead of quitting or pulling back on his goals, he explains that all of these failures prepared him for the path he took on as the CEO of Alibaba.
Planswell CEO Eric Arnold is cut from the same cloth. Right at the top of Eric's bio page, he shares that he failed out of college, got fired from two companies, failed at nine startups, and lost everything on a bad investment. Eric wants the world to know that he is better for the adversity he has overcome. When he faces a struggle he reminds himself, "I am lucky to have this experiences. Not everyone gets to have this opportunity for growth."
There is a Chinese proverb that says: “Everyone falls. Those who refuse to pick themselves back up, no matter if it’s after two days or two years, are the true failures.”
The valuable life lesson in this proverb is that you only truly fail when you give up. If you fail but continue to try, then you are still on your journey to success.
We need to embrace failure because failure is part of the process of being successful. Instead of looking at failure as catastrophic, we need to understand what it really means. It means that we have discovered a way that doesn’t work for us, so let’s get our creative minds working and find a different way that will get us to success.
As a mentor to many advisors over the years, I would often get the question, “Which prospecting activity works best? I only want to prospect that way.” That is no different than your clients asking you, “Which investment is the best? I only want my money to be in the best investment.” A 20% rate of return with zero risk? Sign me up!
I still remember all the times I would get the quizzical look of disbelief from my rookies. The line of questions would go something like this:
“I don’t want to waste my time on prospecting activities that don’t work. Does cold calling work?”
I would answer, “Yes.”
“How about seminars?” “Yes.”
“Trade shows?” “Yes.”
The reality is that all forms of prospecting work. The question is, do they work for you? I was adamant that cold-calling didn’t work and tried to convince some of my advisors to switch to other forms of prospecting. It turns out I was wrong. I realized cold calling didn’t work FOR ME, but it worked amazingly well for some advisors. Some of the top advisors in my office cold-called and they were consistently among the top producers in the compony.
Once I removed my personal biases from my training, I had a happier, more successful team of advisors who found their own way to prospect effectively. My training began encouraging advisors to try many different prospecting methods to find the right one for them. But this meant failure because it wasn’t likely that they would find the right prospecting method on their first try, much less be good at it out of the gate. And that’s okay, because they needed to learn to fail as part of the process of finding success.
“Do not judge me by my successes, judge me by how many times I fell down and got back up again.” -Nelson Mandela
Nelson Mandela learned that the path to success is full of setbacks. His determination, however, led him to make amazing changes all around the world. Today I live by "a setback is simply a setup for my comeback." Not only do setbacks not get me down, I believe know they make me stronger. The year 2020 was full of devastating setbacks for me, and even though I went through tough times, I came out of it better, stronger, and happier than ever.
When you focus on what you need to succeed, are you focusing on winning, or are you focusing on not failing? Trying not to fail means you are taking the safe route. An example would be wanting to grow your financial practice exponentially but not being willing to try new forms of prospecting because you fear failure. You are achieving moderate success, so you stick to it, even though you know it’s never going to get you to your desired goal. You will never level up this way. Alternatively, leaving the safe harbor and sailing out into unchartered water comes with the risk of failure, but it’s where you will find your greatest success. But, if you embrace failure and accept it as part of your process, you will realize the more you fail, the more you succeed.
Now that we have established that failure is a good thing, let’s get into some strategies to help you fail. Yes, I want you to fail. Not only do I want you to fail, but I also want you to fail often, fail fast, and fail hard. If we know that failure is a necessary step to success, then bring it on! Let’s rip the band-aid off and fail our way to success. No dipping our toes in the water. We’re better than that. We’re diving headfirst into the deep end. Not just an ordinary dive, but a double somersault with a twist pike.
Using a baseball analogy, we know if we want more hits, we need more at bats. Even though at bats are limited in the game of baseball, we have the advantage of unlimited at bats in our business. That’s the advantage of this strategy. It’s not over until YOU WIN. Write this down and post it somewhere so you can see it every single day. Tattoo it on your arm if you must, but make sure it’s tattooed on the inside of your brain: IT’S NOT OVER UNTIL I WIN.
- I wish I didn’t wait to “start it tomorrow.” Excuses are plentiful because they’re so easy to make. The things you want to do tomorrow can effortlessly turn into things you wish you did 50 years ago.
- I wish I’d taken more chances. The fear of failure dissipates in the face of death. The prospecting method you never started, the ideas you had that were never executed, or the business you believed in but didn’t start will weigh heavier on your shoulders than falling flat on your face and learning.
- I wish I would have kept going. Even if you are brave enough to take the chance, failure happens. Where this failure can turn into major regret is when you quit. When you let the pressure of falling short overcome your love for your endeavor, you lost. Keep going. Embrace failure.
When you fail, you will be in good company. Thomas Edison’s teachers said he was “too stupid to learn anything.” He was fired from his first two jobs for being “non-productive.” As an inventor, Edison made 1,000 unsuccessful attempts at inventing the light bulb. When a reporter asked, “How did it feel to fail 1,000 times?” Edison replied, “I didn’t fail 1,000 times. The light bulb was an invention with 1,000 steps.” In other words, Edison needed to fail 1,000 times to eventually succeed.
Oprah Winfrey had a rocky start to her life. She had a rough childhood that resulted in her being abused at age nine. With a teen pregnancy and a subsequent miscarriage, Oprah learned to embrace failure at a young age. She eventually landed a television gig in Baltimore where a producer told her she was unfit for television. That failure didn’t stop her, and she landed a role on another television show called People Are Talking. That show ended up becoming a huge success. This eventually led to Oprah becoming the host of her own show, which aired for 25 years. And today, she owns her own television network. Her net worth is four billion dollars.
Famous failures like Oprah’s teach you that it doesn’t matter where you start. As long as you work hard and don’t give up, you can continue to achieve bigger success. You don’t have to be great to start, but you do have to start to be great.
We must be able to envision success before we can build it, and at first, we don’t know how to do that, so failure is inevitable. Wear your failures as a badge of honor. I fail all the time. Every day. By trying new challenges, I expand and hone my skills. There’s a LOT I don’t know, but here’s one thing I do know: once I commit to achieving my goal, it’s only a matter of time before I succeed. Because IT’S NOT OVER UNTIL I WIN.
Failure is wonderful thing and I wish you many happy, productive failures.