Bad Luck Insurance

Let’s say you found $1,000 one day. Assume you made all appropriate efforts to find its true owner, but it was in an unmarked bag on a remote beach or something and realistically, it’s just yours. Think about what you would do with it.

The average person would spend that money pretty frivolously, enjoying the brief windfall. They would feel no guilt about blowing the money on whatever, because it was “free” money. So it would make a pleasant but brief impact, and then be done.

Now, imagine one day that you lost $1,000. You had taken out a grand in cash for whatever reason, and somewhere in your travels you lost it. Think about what you would do.

For most people, a great number of negative emotions would happen here. First, panic as you look for the money, and desperation as you search. Some mix of sadness and anger as you realize it’s gone for good. Frustration at your derailed plans. Then on top of that, the plans themselves! Maybe you miss a bill, or fail to make a purchase you’d planned for and around, or have to cancel something else important. Maybe you have to be embarrassed when you tell someone else who was involved. Lots of negatives here.

If you really let yourself imagine and live through those hypotheticals, they don’t really seem balanced, do they? The loss of a grand seems to hit much harder in the negative than the sudden windfall boosts you into the positive.

Consider a change in your strategy as a result of this idea.

Good and bad random events are equally likely. Over the course of your life, you’ll have many of each. But instead of coming out in the wash, 100 random good events and 100 random bad events are likely to have a net negative impact for the average person, because the average person responds to them as I described above. You let good events be flashes in the proverbial pan while bad events have a more lasting and brutal impact.

Instead, don’t let the good events be… well, good. Just incorporate them into your plan. When an unexpected boon graces your life, shelter it. Don’t squander your good fortune, whether it takes the form of money, an unexpected opportunity, etc. A person gets an unexpected paid day off from work because of a computer problem, so they spend it all day watching TV. Then, when they have to work unexpected overtime later in the week to make it up, they end up scrambling to get all of their household chores done. Instead, when the unexpected day off happened, they should have used it to get ahead on the household chores – sort of like “bad luck insurance.”

Most people won’t do this, because they think “I don’t want to ‘waste’ my random windfall!” But that’s because they aren’t clearly envisioning how much worse the opposite event will be. If they did, they’d happily sacrifice the small boon to insure against the larger loss.

If you make a habit of doing this – taking lucky breaks as chances to get ahead of unlucky ones – then over the course of your life, you will be far more insulated against disaster. I knew someone once who received an unexpected inheritance of eighty thousand dollars. Instead of using that windfall to insure against future bad luck, she just chose not to work for two years, frittering it away. Lo and behold, the rest of her life has had plenty (though no more than average life’s worth) of strokes of bad luck where money like that could have staved off a far worse outcome.

You will, at points in your life, be both unlucky and lucky. You can choose to have them mostly cancel out – and that stability will make you luckier still.

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