How the “Thinking Distortions” Cost Us Money
I was having lunch with my old boss a few weeks ago. This guy is one of my heroes; a private investor who made more than $30 million for himself through a series of disciplined investments.
The interesting thing is that he’s not even that smart, or uniquely skilled. He’s not even a brilliant leader.
It’s simple: he’s able to invest without emotion.
When he looks at opportunities, he is able to focus on one thing, and one thing only: return on investment. He somehow manages to subordinate his own feelings and zone in on the thing that matters.
At first, this sounded crazy to me. After all, emotions are a part of life.
This is true. But we don’t need to let emotions control our behavior. If we do, they’ll end up taking control of our wallets as well…
This also applies in business. You want to make the decisions that are best for you and your company, not the ones that simply make you feel good in the moment. This is the only surefire path to making the money that you deserve.
My boss then told me something interesting. Every time he feels some emotions, he checks to see if it falls under one of the “Thinking Distortions.”
Thinking Distortions are basically mind tricks. Our brain tries to confuse us by playing to our emotional side.
But if you are aware of them, you can become more objective. Here are some of the biggies:
“It’s my way or the highway” Sometimes we see things only in black and white, when there are shades of grey. Most situations aren’t all or nothing, and thinking this way can make us overlook the best options. Don’t be afraid to compromise just because you aren’t getting everything you want.
Generalizing Negativity: It’s easy to think negatively when something bad happens. We see one bad event as a precursor or result of another, and before we know it, our whole life looks like a mess. This is often a self-fulfilling prophecy; our negative thoughts lead to more bad events. Don’t let this happen to you. Instead, try to look at situations more holistically, analyzing both the good and bad in every situation.
Ignoring the Positive: It’s easy to take positive things for granted – a great relationship, a good job, a healthy body – but we often dwell on what’s wrong in our life. This is a waste of time and energy and makes us unhappy. It can also lead to some bad decisions. Again, if you find this happening to you, take a little time to honestly evaluate the big picture. Things are rarely as bad as they seem.
Jumping to Conclusions: This is a common mistake. It’s easy to make random assumptions and use these “conclusions” to come to a decision. We make assumptions about everything –what others are thinking about us, how strong we are at a given skill, etc. But this is a trap. You are making a choice without knowing all the important facts. Instead, gather relevant information, define your options, and evaluate all the possible decisions. Then, and only then, take action.
Magnification and Minimization: We frequently exaggerate the importance of things that don’t really matter, instead focusing on the things that aren’t relevant. You can avoid this by taking time to define the things that are most important to you. This will help you zone in on the information and choices that matter most.
Emotional Reasoning: Always remember that emotions are temporary. Therefore, they don’t actually reflect how things are. Don’t try to solve problems when you’re angry, sad, scared, or even excited and enthusiastic. Instead, take some time to get yourself back to neutral. Then, you’ll be in a better mindset to evaluate the situation.
Labeling: It’s very natural to place labels on other people. They help us organize our thoughts about people and situations – for example, if Jenny talks a lot when I first meet her, I’ll label her as an “extrovert.” The problem is we often make assumptions too quickly. First impressions aren’t always correct. Moreover, people and situations change over time. Always be on the lookout for new information and be willing to adapt your labels accordingly.
Personalization: We tend to hold ourselves responsible for the good and bad things in our life. However, there are many events (both good and bad) that we have no control over. If something bad happens that’s out of your hands, don’t sweat it. The flip side is also true – if you win the lottery tomorrow, don’t give yourself credit as a financial genius. It’s dangerous to think that luck isn’t a part of life.
When was the last time you had a thinking distortion? How did you react?