Everyone feels scared from time to time. Fear is a natural instinct to threatening situations, but we have to ensure that fear doesn’t overcome us. The greatest rewards in life go to those who are willing to overcome their fears – especially their fear of failure.
Failing is a natural part of growth. Along your investing journey, you’ll make plenty of mistakes. Those mistakes will cost you time, focus, and money.
It can be easy to shy away from making mistakes:
“What’s the benefit in trying if we’re just going to fail at it?”
“Failure hurts, and it costs a lot to fail. Why should we try anything new, when we can simply live a life of comfort instead?”
The answer is simple: a life of comfort and avoidance of failure is the most insidious form of failure. It allows entropy and inflation to destroy your health and wealth. It prevents you from rising above your circumstances. And it teaches you that your problems can be solved by simple sense gratification – feeding into the consumerist rhetoric that gets people into this situation in the first place.
Trying new things allows you to change your life. As our world seems to change faster and faster, it’s the most important aspect of modern day life. As skills are made redundant and technology continues to improve, we must be constantly committed to understanding and learning new things. In order to do this and take advantage of these opportunities, we must overcome our fear of failure.
Welcome to the Investing Series – my thoughts on how our emotions, habits, and desires affect both how we invest, and our responses to their outcomes.
Why Are We Afraid to Fail?
Failure hurts. Knowing that something has gone wrong and left you worse off is a terrible feeling. And it feels as though we’re being pushed towards a life where we can’t afford to fail. We’re encouraged to take similar paths through life – a path that I fear lead us down a road of slow-burning failure.
Failure in the short term is the most painful and noticeable. But why does failure hurt so much? And why have we created a fear of failure for ourselves?
Looking Foolish
When we fail, we often feel foolish. As if we should’ve known better, or known that this outcome was to happen.
Being rejected by a love interest or posting content online that nobody reads can make us feel foolish if it doesn’t get the outcome we were looking for. It can be embarrassing putting yourself out for everyone to see, only for nothing to happen.
To many, this embarrassment stops them taking action in the first place. It’s easier to do nothing than risk looking silly in front of others.
Discomfort & Catastrophe
Failure brings discomfort and pain. Whether we look silly or we get ourselves hurt, there are genuine downsides to trying new things. Failure brings with it a varying scale of negative outcomes, many of which can be devastating or life-ending.
Media outlets across the world are reporting massive percentages of the population with no savings. Failure of an investment, business, or job can lead to destitution, and almost half of Australian workers teeter on the brink. A failure of this level would be a catastrophe that must be avoided.
As humans, preservation of the status quo matters a lot to us. Most humans are hard-wired to resist change. Change means new things, which means potential threats, which could mean failure. This inference creates a fear of failure, and can hold us back from trying new things.
That fear stops us from committing to something when the perceived downsides outweigh the rewards. And in many cases, those fears are overblown due to a lack of knowledge.
Wasting Resources
When we fail at something, we lose the resources we committed to that result. If you fail to bake a cake (perhaps by mixing the wrong ingredient ratios or by burning it), you lose the time spent baking it, as well as the cost of the ingredients. If a financial investment goes bad and you sell for a loss, you lose some of your money.
Failure results in loss of time, money, and attention. And for many people, failure isn’t an option – they simply don’t have the ability to waste these resources.
At its extreme, this protectiveness of resources can lead to a deep fear of anything that can result in loss. This leads to a life where you don’t try anything new, you keep your money in the bank (or under the mattress), and you continue doing the same things you’ve always done. After all, failure is not an option; you can’t fail if you do nothing.
Or can you?
Fear of Failure in Modern Life
Fear of failure comes from an avoidance of things we don’t know. It’s seen as “safe” to get a full-time job and work our way up to a successful position. From there, we can continue climbing the ranks and assuming more lucrative positions, so that we can buy more expensive things. Alternative lifestyles are pushed aside in favour of the one we think we want, all the while dancing on the line of insolvency if our job is taken away.
Living like this is simply untenable.
It’s easy to take a consistent salary and assume you’ll be able to work for long enough to make things work. But this approach simply outsources failure to the whims of the market.
If the company you work for faces hardship, your job – and your income – is at risk. Understanding how to separate your income from your job becomes vital as a result.
Approaching your investments – the things you commit yourself to – with this attitude becomes problematic. We can’t assume that the good times will continue forever. Working full-time to earn an income, spending it, then waiting for your next payment takes away your agency to make a better life for yourself.
Avoiding investing your time and money into things that improve your ability to make money will lead to pain later. The laws of compounding suggest that we need to start as soon as possible in order to maximise the benefits of our investments.
Fearing committing to an investment because it may fail or go down leads to inaction. And inaction leads to stagnation – another type of failure.
Stagnation is Failure
Doing nothing (or the same thing) over a long enough time horizon leads to inaction. Inaction means you aren’t moving forward. If you aren’t moving forward, you are stagnating.
At times, it makes sense to do nothing. But do it for too long and your health and wealth will be dragged down by entropy and inflation. As a result, stagnation leaves you worse off than when you started.
Staying still sometimes makes sense. You wouldn’t commit yourself to hanging your washing out to dry if you know a storm is rolling in. Volatility in the market doesn’t cause a seasoned investor to close their positions. In many cases, inaction may be the correct course of action.
Stagnation occurs when we continue along the same path without learning or doing anything new. Even things that appear to be action can be a form of inaction. A job where you can’t save money, aren’t learning new skills, and aren’t building your network is a form of inaction.
Jobs like this are necessary at times, but they aren’t providing the action necessary to move your life forward in the long-term. Ideally, the job simply covers expenses while you take action elsewhere in your life. This is especially effective if you maximise the value of your time.
Not earning enough to cover living expenses is a genuine fear for many. In this scenario, the stagnation is much more severe if your future needs and expenses aren’t also considered. Avoiding this type of failure is a non-negotiable. For that reason alone, we should fear stagnating in our careers and lives as a whole.
How to Overcome Fear of Failure in Investing
A fear of failure only serves to hold us back from trying new things. We shouldn’t ignore our fears, but we need to learn when that fear is reasonable. This allows us to take control of that fear and overcome it.
Our investments are the methods by which we transform our lives – financially or otherwise. We need to become mighty enough to conquer our fears in order to invest successfully. Inaction, in this sense, serves only to hold us back and prevent us from achieving our potential.
Be Willing to Try
Our fears trap us in a life that we want to break free from. The things we want lie on the other side of the barriers this fear places on us. The only way to it is to break through it.
You have to be willing to appear the fool, until the time comes that your decisions and conviction make your dreams manifest. Things will go wrong, and you may lose time or money in the process. But being prepared to put those things on the line is what gives you the focus you need to commit to something and see it through.
Make Failing Safer
My Saving Series discusses the importance of reducing consumption and increasing your savings. These savings are not only what allows you to try new things, but they also provide cushioning if you do fail.
A healthy savings buffer allows you to take more risks. If you take advantage of your ability to take those risks, you gain access to skills, networks, and financial rewards that you didn’t before. Saving is what makes you more likely to be lucky.
Saving doesn’t solve every problem. But the combination of reducing your savings and increasing the relative worth of your savings through reduced consumption lets you reduce the impact of almost every financial challenge you can face.
Understand that You Don’t Always Win
You will be wrong sometimes. A commitment or investment you thought was a “sure thing” will turn out to be a failure.
Not everything you do will be a winner. But there’s likely a lesson in everything you do.
You can continue doing things you know you’ll win, but they won’t provide any meaningful benefit to you. Committing to new things forces you to learn and grow. It’s dangerous to let a fear of failure stop you from doing something you’d otherwise want to do.
I’m sure the “winners” you see in everyday life – celebrities, sports stars, and people you see on social media – didn’t succeed at everything they did. They embraced failure and rejection, and used it as fuel to drive their way to success.
Remember: you don’t lose unless you’re behind when the game stops. If you are the master of the game, you control when it ends.
Be Conscious
When you work towards something, pursue it with conscious effort.
The worst that can happen is that your unsatisfactory everyday life becomes the norm for the rest of your life.
It’s only through conscious effort and a willingness to make drastic change do you gain the ability to change your life.
If you’re pursuing Financial Independence, the act of investing towards that goal is intentional. It’s a continuous effort to make that dream come true.
It doesn’t matter what you’re working on, as long it’s making you better. Learning new skills, meeting new people, or improving your health, wealth, relationships, or spirituality are never bad things.
Yes, you can do badly at those things. But a bad interaction with a new person or an injury during a workout won’t stop a conscious and focused person. Instead, they find a way to move forward in spite of their failures. The fear of failure is ineffective against continuous, conscious effort to improve your life.
Closing
There is no virtue in a life of directionless busyness.
Taking targeted action, and being prepared to fail, is the ultimate way to improve your circumstances. If you desire a simple life, the pursuit of learning and failure is what gets you closer to that life sooner.
Feeling the fear of failure lets you know you’re on the right path. But you must overcome that fear in order to move forward.
Yes, you will get some things wrong. Sometimes, you’ll get them very wrong, and it may cost you a lot of time and money.
This doesn’t mean you shouldn’t commit yourself to anything. In fact, the opposite is true.
Your commitment is what allows you to learn new skills, grow as a person, and discover what you always wanted to do.
Thank you for reading.
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