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! 😉
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?”
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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