Regret Minimization: Fly High, Try not to Die

Sometimes a video is etched into your head. For me, an example of that was Jeff Bezos talking about the regret minimization framework.

This video is amazing on multiple levels.

  1. Bezos almost didn’t start Amazon
  2. Bezos was a total nerd
  3. Regret minimization framework is a great mental model for making decisions

Simply put, the regret minimization framework is favoring the decision that you will regret the least.

Regret Minimzation vs Optionality

In many ways, this is similar to optionality. Regret minimization and optionality are both making many low-cost, high upside bets, but in my opinion regret minimization raises the risk threshold to bring in higher costs. Quitting your high-paying banking job isn’t low risk, but I can guarantee you Bezos would have regretted not starting Amazon. He likely looked at his situation and realized that he could always find another job if he failed at Amazon, but he would regret never attempting to start Amazon. Regret minimization is shifting perspective to the future to imagine what you will regret the most.

Examples of Regret Minimization

Here are some ways I use regret minimization:

  1. When selling a stock?
    • I try to shift my thought process from in the moment to 20 years from now. Will I regret selling the stock? If I am selling the stock to buy another, which will I regret owning more?
  2. When making fantasy football trades?
    • In most leagues, winning is about maximizing upside. The team who wins generally has an amazing team. When I’m making a trade, I try to think of futures where the players I trade go off. For instance – I just offered a trade of Deebo Samuel + Kadarius Toney for Calvin Ridley. I need to understand the regrets I could have if Deebo continues his massive tear or Kadarius turns out to be the real deal.
  3. When choosing a house?
    • I was interested in a house in an amazing area, with a huge yard, room to expand and a rich history. It was beautifuly unique, but a potential nightmare. The house needed work all over the place. I like to think of myself as somewhat handy, but this was beyond my skill levels. I’m ready to learn and build my skills. This would be my project and my baby. As I was considering what a future in this house would bring, I could see a future where I was in over my head. I could see what I thought needed to be fixed, but then I imagined everything my novice eyes couldn’t see. I saw a future where I massively regretted buying that house. Regret minimization is more than just about upside.

Fly High, Try not to Die

To me, regret minimization is a simple thing. It keeps you from taking on way too much risk, but also enables you to have significant upside possibilities.

Author: fatbabyfunds