"Invest in yourself!"
It's a common battlecry we hear when someone intends to help us get more of what we want out of life.
It sounds GREAT to our ears, doesn't it? "Yeah! I'm gonna invest in ME for a change!" Our energy picks up, we narrow our eyes to intensify their focus, and we get ready to invest in ourselves.
What next? What does it mean to invest in ourselves? More importantly, how do we do it wisely? As I'm known to do, I'll share some uncommon thoughts.
What does it mean to invest in ourselves?
While the term "invest" is typically used in a financial context, that's not necessarily how we mean it when we want to invest in ourselves. While investing money in ourselves is one way to invest in ourselves, there are other ways to do it. Let's reframe this term. Let's consider "investing" as the act of expending resources with the intention of getting back more resources. We can invest any resources we have - money, time, physical energy, mental energy, emotional energy, dirt from our back yard, snow from our front yard - any resources we have, we can invest. Similarly, we can seek to get back any resource we would deem valuable - money, physical energy mental energy, career progression, family happiness, dirt for our back yard - any resource we want back.
To "invest in ourselves" means to spend some resources we have in order to get back resources that we want.
How do we do it wisely?
There are many ways to invest in ourselves. We can invest our time and energy (physical or mental) for money - this is what we are doing when we work a job. So when someone says, "invest in yourself", we can confidently point to our jobs and say "I am". We can invest our money for expertise - this is what we do when we hire a car mechanic. We can think of several more examples.
These investments, however, aren't typically what people think about when they say "invest". Why? When we think about investing, we typically expect that what we get out of it will be worth more than what we put in to it. While it is a common expectation, it is not an accurate one. When we invest, sometimes we get get more back, sometimes we get less back, and sometimes we get the same back. See? Working a job IS investing in ourselves!
Clearly, we would prefer to get more back. That would be better than getting back the same or less.
Generally, risk and reward are married. If we want a larger return on our investment, we usually must accept larger risk. If we are ok with less return, we don't have to take as large of a risk. Think of being a business owner compared to being an employee. One has higher risk and higher reward while the other has lower risk and lower reward. Each is an investment in oneself, just with varying risk/reward ratios.
So, is this a simple game of choosing one's appetite for risk?
NO! That would be a silly way to invest. "I'm going to choose my risk, and then I guess I'll get whatever reward matches it." or "I'm going to choose my reward, and then I'll accept the risk that comes with it." Those are common investment strategies, but they are not smart ones. This is not how good investors invest.
While there are many strategies available to us, let's look at just one of them today: asymmetric returns. Investments with asymmetric returns are investments where the risk and the reward are not balanced. They are, instead, out of whack. For example, an investment where the risk is very small and the reward is very large. That's the kind of investment we want to make in ourselves! Low risk and high reward for asymmetric returns!
Measuring risk and reward?
Without going into too much detail here, here's a simple way to think about it. Two considerations:
- What is the value of the risk? What is the value of the return? Is it small? Tiny? Medium? Huge? Super huge?
- What is the likelihood of the risk occurring? What is the likelihood of the reward occurring? Is it small? Tiny? Medium? Huge? Super huge?
A perfect example of an investment with asymmetric returns would be one with a tiny value of risk with a tiny chance of the risk actually occurring, along with a super huge value of return with a super huge chance of the reward occurring.
What are some examples?
Let's start with a simple one. Smile. A smile is a perfect example of investing in oneself using asymmetric returns. To be sure of that, however, we must evaluate both the risk of smiling and the reward of smiling. The risk of smiling is very low. In most cases, the worst risk would possibly be someone wondering why we are smiling or maybe to look at us oddly. As long as we don't take things personally, that is a near-zero value of risk. And as long as we don't smile at a horrible time, then the chance of something bad happening when we smile is very low. Let's, then, look at the reward. It's generally accepted that when we smile, we feel better. So at a minimum, we will feel better. It's also generally accepted that if we feel better in a repetitive way, we live a happier life. Furthermore, smiling helps people around you and even improves their perception of you. A smile has a tiny risk value with a tiny chance of it occurring, whereas there is a REALLY good chance we feel better and live a better life and others feel better.
This makes a pretty good case for smiling as one way to invest in ourselves using asymmetric returns!
Let's look at another, slightly more difficult, way to invest in ourselves using asymmetric returns. Take risks! Any kind of risk will do. For starters, smile at strangers! It's a very small risk (with asymmetric returns). Yes, the stranger may look you weird or think you're weird. If we are ok with a little discomfort, that's a very tiny risk. That's a good risk to take. A slightly more challenging risk to take might be to tell a friend something you've wanted to tell them but haven't yet. There's a risk something might go wrong. Another way to take a risk could be to learn a new skill. Maybe you try to learn online marketing or public speaking or sewing and you fail. That's a risk.
Is this a good example of an investment in ourselves with asymmetric returns? Let's test it. What is the likelihood of the risk occurring? It depends on what risk we take. If we take a small risk, the chances are small. What is the value of the risk? Again, it depends on what risk we take. If we take a small risk, the value of the risk is small. So...what are the returns? Depending on the risk, the returns might (or might not) be big. What is the likelihood of the returns occurring? Yup, depends. It all depends. So how is that an asymmetric return?
As it turns out, we didn't measure the returns correctly. In the last paragraph, we measured the returns of each individual risk whereas we should have measured the returns of the act of taking risks. When we take risks, something magical happens. We gain knowledge and experience. When we gain knowledge and experience, we get better at doing whatever we are doing. So if we take a risk, and we thereby gain knowledge and experience about taking risks, we get better at taking risks. That means that we can be better at taking risks in the future:
- We can more easily identify risks with asymmetric returns.
- We can, due to our increased knowledge and experience, increase the likelihood of the reward occurring.
- We can reduce the negative impact of the risk if it does occur.
WOW! So, we can take risks by picking small risks so our risk is low. We will gain knowledge and experience so we can then take a slightly larger risk that, due to our knowledge and experience, will have a higher chance of success. Then we can keep doing that?
That is DEFINITELY investing in ourselves using asymmetric returns!
These are just a few examples. Hopefully they kickstart your thoughts and you will begin looking for more and more ways to invest in yourself! Looking at things this way, why would we waste a second or minute of our day, or waste our physical or mental or emotional energy, in anything that is not an investment in ourselves?
Let's start investing!
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