Moving Past Analysis Paralysis Can Make You Rich!

MichaelBeliefs, Education, Habits, How to, Misc, Personal Development18 Comments

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analysis paralysis

Analysis Paralysis – What is it?

Analysis paralysis is a term used to describe a mental state when you become so focused on the “analysis” of a problem that you begin “spinning your wheels”.  You get so caught up with finding the correct solution that you fail to act or act too slowly.

If you are an “achiever“, then no doubt you have encountered this.

Let’s say for example you want to become a real estate investor, but have no experience.  Where should you begin?

Analysis is Good

It always wise to keep the outcome in mind. You want to become an active real estate investor in order to create passive cash flow.

So, a wise individual may pick up a few quality books on the topic, speak with active investors, attend workshops, and play Rich Dad’s CashFlow Board Game.

This is a solid strategy to bridge the knowledge gap, but where’s the inflection point when you should start to buy properties (i.e. act)?

Too Much Analysis is Bad

How much analysis is too much?  Well, it will be different for each scenario, but I believe you should begin taking action when you’re about 60-70% certain of something.

This means you have a reasonable amount of data to make an educated decision with the odds in your favor.  But, it’s also quite possible you are missing additional information which could lead to the wrong decision.

The inherent danger and tendency are to analyze until we are 85-95% sure of something.  In order to be 25% more certain via additional analysis, it will typically add-on at least double the time required to get to 60-70% certainty.

You may not realize it now, but time is actually your most valuable asset.  Not only that, but while you wait to act, you could be leaving money on the table and underestimating your opportunity costs.

Here’s a real life example of when analysis paralysis kept me on the sidelines, and when I did finally act with 90% certainty, I still failed miserably! 😉

Fail Faster

The better approach is to be okay with 60-70% certainty and to begin acting right then.

Yes, your odds of failure are significantly higher, but here’s the great thing.

When you fail through action, the results will leave you clues.  This process of learning is internalized much deeper than any academic analysis could ever provide.

So, fail fast, fail often, and you will reach your outcome quicker.

Getting Rich from Failure

The other really cool thing about “failure” is that it leaves opportunities.

In my case, my company’s failure was an opportunity to jump out on my own and start my own business.

I could have analyzed until I was blue in the face and likely concluded it was a bad idea statistically, but sometimes you need to jump off the deep end.

Being about to take action and move past my analysis paralysis has directly led to my ability to accumulate a healthy asset base and allowed me to retire early.

Trust Your “Gut”

Want to accelerate your success even faster?  Try acting on 15-20% certainty!

Just don’t do it blindly.

Trust your gut.

Yup, trust your internal voice and see where it takes you.  I think you may just surprise yourself.

Not convinced?  Write down your gut feeling when you’re 25% certain and continue your analysis until you’re 85% certain.  Did your additional analysis actually change your decision?  Or, was your gut instinct correct?

Want some more analysis in this idea?

Check out Blink by Malcolm Gladwell.

Wins Outside of Analysis Paralysis

Well, don’t just take my word for it.  Look at your own life.

What are some situations when you could have acted sooner and benefited?

Some of my best financial wins have come from acting outside of my typical analysis paralysis patterns of behavior.

  • Starting my company
  • Acquiring other companies
  • Purchasing my second investment property
  • Selling my company

Don’t forget, two of the best questions you can ask yourself are:

“What’s the worse that can happen?”

“What’s the cost if I don’t do this?”

Final Thoughts

Like most things in life, balance is good.

I still love to analyze, but I don’t “anal”yze (pun intended) as much!

Life is too short to live in the what ifs.  Only you will know if you’re passing up opportunities in exchange for unnecessary certainty.

So, what do you think?  What’s your approach when it comes to analyzing a financial decision that requires action?

Are there any decisions you’ve been putting off due to analysis paralysis?  What are the potential benefits if you act sooner?

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Michael

Hi, I have been blessed to take an early retirement in my mid-30's so I can focus on becoming a better father, blogger, and investor.

My goal is to help you find your personal path to financial freedom, and to enjoy the entire journey.

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18 Comments on “Moving Past Analysis Paralysis Can Make You Rich!”

  1. I listen to the Bigger Pockets podcasts where they talk often about how some people are too afraid to take the plunge into real estate investing.

    I totally agree with you we shouldn’t spend too much time analyzing something without implementing what we learn. I think the question is: How can one know that they are 60-70% certain of something? In other words, someone might think I’m already 60-70% sure about a deal, but due to fear I think I know 10-20%. I think that’s when mentors come into play. Acting alone is great, but having someone guide us in the right direction can make a huge difference.

    It’s amazing how you’ve started your own business. That’s been my dream for years. I think I might have been caught in analysis paralysis too @_@

    1. Ms. FaF, I think knowing where 60-70% is an internal dialogue we all keep. It may actually vary from person to person, but it’s a personal gauge.

      I definitely agree that mentors are a great way to bridge the gap when you’re uncertain! Great shortcut to speed up the point of taking action.

  2. My gut instinct has gotten me out of quite a few pickles, lemme tell ya. It’s funny because all of the numbers will line up one way, but my gut instinct will pull me another way–that ends up working out in my favor.

  3. Hey Michael!! Good write up bud. I was in analysis paralysis for about a year and a half before I finally pulled the trigger on my first investment property. Fast forward now and I am literally buying investment property #9 right now.

    Best decision I ever made was to pull the trigger! Plus the best way to learn is through experience. Once youre done reading every little bit you can on whatever your subject matter is. 😉

    1. Man, a year and a half!? I was stuck for like 3-4 years! 😉

      Congrats with your continued real estate investing success. I remember when you were on property #3.

  4. Thanks for sharing. I see this all too often. One of my mentors, very early on, taught me to execute at 70% and adjust as you go. The overarching goals remain constants, but the method of getting there can change. Because that’s how life works. Life is dynamic. There’s also the diminishing returns that you’re talking about.

    1. That’s great, Tim! Sounds like your mentor knew a thing or two about pivoting, which I’m sure you now pass on as you mentor others. Let’s keep paying it forward. 🙂

  5. I try not to act unless I have compelling data that says I should. Yes, sometimes “going with your gut” might work out, but I prefer to have a little data to “back up” my gut.

    So far, this process has worked out ok! 😉

    1. Yes, you certainly have some great financial success early on, Mr. Tako! When you say compelling data, what’s your level of certainty before you’re comfortable acting?

  6. So true! I was definitely worried to start my business because I knew so little, but I’ve learned a heckuva lot more by doing and failing than I did by researching.

  7. Hmmm.. I like the topic! I have analysis paralysis all the time, so I set up a RACE to see which outcome wins.

    For example, sell my rental or continue landlording. Race is on between me (leasing agent) and the real estate agent. Last year, I won and got great tenants.

    This year, I’ve LOST after trying HARD for 40 days to find tenants, showing the house to 10 or so groups, advertising online, etc. Therefore, I’m gonna sell. The rental market took a step down, but curiously, housing prices haven’t yet.

    Sam

    1. I don’t envy the hard work you’ve had to do managing your own properties. So, nothing wrong with selling it at a peak! The good thing is you win either way. 🙂

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