What’s your greatest fear?

Losing all your money?
Losing your house?
Losing family?
Losing status?

The other night, I was enjoying cigars with a private equity entrepreneur.

He shared his story with me, which was crazy and inspiring.

He lost everything.

During the financial crisis, the markets went in the opposite direction, which was catastrophic for him.

He lost his business and filed for bankruptcy.

Poof. Gone.

I received an audio message last week from another entrepreneur…

“Chris, it didn’t work out, and I must file bankruptcy.”

I could hear the fear, shame, and sadness in his voice.

As entrepreneurs, we play a game of risk and reward.

Sometimes we lose.

Today, I want to discuss some practical wisdom on how to avoid ruin or significant losses. If not, at least minimize the losses.

If you’ve been reading this newsletter for a while, you already know about the losses I’ve experienced. I’d be ecstatic if you learned from my mistakes.

And if you’re reading this, congrats for being in this game. You’re built differently.

Practical Advice for Avoiding Ruin

Create Decision-Making Models

Everything, good or bad, starts with the decisions we make.

Bad decisions (many times) can be traced to a lack of disciplined thinking.

Do you have a disciplined approach to making decisions?

Consider installing your mental models for decision-making.

One that I appreciate is “Multiple Order Consequences.”

Example: I eat a bowl of ice cream every night.
Order 1: It tastes so good, and I get a dopamine rush.
Order 2: I gain 10 pounds.
Order 3: I feel awful and can’t fit into my jeans, so I gotta wabble around in sweatpants.

Consider all the possible outcomes and write them down. Positive and negative.

Example: Run non-compliant ads
Order 1: Get lower costs leads and clients
Order 2: Get the FTC’s attention
Order 3: Get sued by the FTC

Humans have biases.

Installing mental models helps us remove these biases to make disciplined decisions.

Others to consider:
Inversion
Incentives
First principles
All biases

If you have time, this interesting YouTube playlist discusses Charlie Munger’s thoughts on mental models.

The idea is to create your lattice of decision-making models.

Set Predetermined Rules

We’re biased individuals. We’re also emotional creatures.

Those two components can lead to irrational decisions and, therefore, outcomes.

If you want to make rational decisions, then set parameters for yourself.

The more pre-determined rules you’ve set for yourself, the more likely you are to avoid catastrophe.

Example: I invest at most 20% of my portfolio in one investment.
Example: I never make a $10,000 buying decision in 24 hours.
Example: I don’t hire a husband and wife team.
Example: I don’t go below three months of operating expenses in the account.
Example: I scale ads unless I have between a 6 and 8 ROAS.

The point here?

Pre-thought-out processes to keep yourself from running off the rails. Get awareness of where you’re not strong or lack experience, and create rules to govern your decision-making.

When making these decisions, create accountability measures with your board (or mentor).

This leads to the following practical advice…

Create a Multitude of Counselors

As the proverbs say, “There is wisdom in a multitude of counselors.”

Wisdom. That’s what we’re chasing.

If you haven’t appointed a group of people to help you, start now.

• They must be willing to tell you what you don’t want to hear.

• They need to have your best interest at heart.

• They need to be aligned with your values.

• They need to have experience.

Here’s how you utilize a multitude of wise counsel.

1. Set your values, vision, and mission.

2. Communicate that to your counsel.

3. Communicate the decision you are to make.

4. Get accountability on #1.

5. Ask their perspective and if you’re missing anything important.

Create Margin In Your Life and Business

Operating in a constant state of little margin is dangerous. Yet most entrepreneurs do that.

Why? We think we’re superhuman. We’re not.

Having capacity is essential in avoiding ruin.

Living with margin will put you in the right headspace to make healthy decisions from abundance, not hurry.

Nothing good results from hurry. Slow your role.

Allow time and space to think and ponder appropriately.

If you face “ruin,” there is hope

The new friend I had cigars with told me about all the impactful things he’s now doing due to the devastation he experienced.

The story doesn’t end in the loss.

Maybe you have experienced ruin but something painful.

It’s the beginning.

There is a time to mourn and grieve the losses. Big or small. That’s healthy.

It’s our choice how we handle it. We can allow it to make us stronger, wiser, and better able to impact others. Or not.

Don’t be paralyzed by fear. If you are, get help from a professional to talk it through.

In a time when isolation is at an all-time high, don’t allow yourself to be isolated.

Isolation increases risks.

Do you know someone who should read this? If so, please forward it to them.

Chris