Worst. Investment. Ever.

Silja Litvin on why making bad decisions may be good for you in the long run

I will never forget the sight of my friend - let’s call him Antonio - sitting at my kitchen table, his face white as death and literally pulling his hair in despair. I’m sure we all know a guy like Antonio; a cocky investment banker, highly intelligent, highly overpaid, working hard and playing hard.

Unfortunately however, he had been working for Lehman Brothers…  And like many others, he had invested most of his money in the bank. Being in his late thirties, he just had his first child and recently started to pace down a step or two to enjoy the merits of having worked like a slave for the last 15 years.

So here he was - stranded in my kitchen because he didn’t know how to tell his wife that she no longer was married to a jobholder and most “toys” would have to go.

I am sure every one of you could come up with similar examples of prior unpredictable cases of financial failure as the result of poor investment or poor judgment. And everyone will understand that the stress and consequences involved can dismantle the strongest character, leading to discouragement, depression and – worst case scenario – even suicidal attempts.

What such stress and all its side-effects such as the impairment of the immune system or ones  mental health can do is worth a whole other column (that I will be sure to address soon). What I’m aiming at for now, is to cast a positive light on, believe it or not, the good side of that Worst-Investment-Ever.

The learning system of the brain is like a highly sophisticated “mega-computer”. It is “programmed” (if we stick with the computer metaphors) to learn nearly anything within our individual limits of intelligence. Amazingly enough, we have the capability to “reprogram” our way of learning and what kind of information we pick up faster or slower: by purposely exposing ourselves to certain learning environments such as the schools and universities we choose to visit, the books we decide to read and the people we surround ourselves with.

We can even train ourselves to filter out aversive thought patterns that aren’t useful to us by practicing special thought techniques (see my first column, How to turn your BMW into a Ferrari and “Cognitive Reprogramming”).

Unfortunately, we humans are primarily wired to learn from negative experiences.

Not only do negative experiences get assimilated into our memory system much faster and easier than positive ones, but our brain also actively seeks out negative information to process. To continue the computer analogy: it’s more important for survival to scan for viruses or bugs than to acknowledge all the systems that are working well.

This is one of many reasons why headlines present primarily bad news: the news services are catering to our brain’s eagerness to find and process negative information.

You might believe that this is a pretty gloomy outlook on life and protest the idea since if you’re an optimistic person (good for you!!), but this particular way of information processing actually keeps us out of a lot of trouble, educates us, and strengthens us for that to come…

What Antonio and others in his situation most likely are not aware of – cause yeah, their lives seem to be falling apart – is that:

a) Every devastating situation also brings about a manifold of new possibilities

b) They are force-fed an enormous amount of information that will most likely prevent them from repeating these mistakes

c) They gain insight in procedures and facts they would otherwise never have attained

d) They, like most people, neither like to leave a comfort zone nor change a winning team -  meaning: that heroes or wildly successful people aren’t made by things going smoothly but when things go wrong.

Do you have any idea what Abraham Lincoln, Henry Ford and Walt Disney have in common? They ALL went through bankruptcy and came out of it stronger and more successful than before. 

So if you or a loved one is going through the experience of losing your job and/or your money then please keep in mind, no matter how painful the process is, it can be a growth-process if you let it. Take all the information you’re getting, regroup, reassess your assets and look out for new opportunities. If Antonio, now father of two and one of the CEOs of a fortune 500 company, can make it, so can you!

* Silja Litvin has a a  Masters in Psychology and is currently working on a PhD in Psychology

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Posted by: Daniel Tade

It's funny to read the comments left here, particularly the negative ones, as it tells that either the readers don't understand the message or haven't bothered to digest it. I don't think the article is aimed at ex Lehman bankers and I'm certain that not all ex Lehman bankers were landed on their feet post crisis. The article serves to demonstrate the possibilities of drawing positive thought processes and conclusions from negative experiences, using Antonio as an example. "Antonio" could have worked at any other company.

"Prior unpredictable" in this context I understand to be decisions made in the past that didn't turn out to have favourable outcome. Absolutely fits in with the message in the article. Yes most outcome will possess a degree of unpredictability to an extent, but it can't be denied that the deeper you look into the past, the further you see into the future and using your past experiences to navigate a better future is exactly the message here...as I understand it.

Posted by: Karin Sowa

Perfectly interpretation.

Posted by: ANH

The beginning of the story doesn't stack up. I'm an ex-Lehman banker and most ex-Lehman bankers got fantastic job offers and guarantees either from Nomura (which acquired Lehman Europe/Asia) or Barclays (acquired US), or even other banks. And Lehman investment bankers could not "invest in the bank". Part of our pay was in stock, but most of it was in cash, which we typically invested elsewhere... and if he was in his late 30s and successful in 2008, it means he was getting paid $1m++ per year, again most of it in cash... something doesn't add up...

Posted by: Jezinho

I was rather hoping for an in depth article on actual poor investments rather than this nonsense.

The statement early on "I am sure every one of you could come up with similar examples of prior unpredictable cases of financial failure as the result of poor investment or poor judgment" does not make sense. What does "prior unpredictable" mean? And if an outcome was unpredictable (which it pretty much was for Lehman employees that took advantage of employee investment programmes), then how can it be be considered to be poor judgement?

Posted by: Sara Saboonchi

I read your article and liked it. Trading my own portfolio the mistakes I made sure enlightened me.

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