Do you suffer from analysis paralysis?

By gira180 | gira180 | 14 Sep 2020


Are you able to quickly make decisions or do you try to analyse everything first and end up missing out on opportunities?

 

Until recently I had never heard the term analysis paralysis. It sounds like a disease and in a way it is. It is the state where you try to over-analyse a situation and as a result end up doing nothing about it or reacting too late. You basically become paralyzed. As you can imagine this can be dangerous.

Deer in headlights

Imagine you are driving in your car on the highway and you suddenly see an obstacle on the road ahead of you, let’s say a deer. In an instant you have to decide what to do or you are going to crash. At that moment all possible options flash through your mind. Should I change lanes? What if there is a car next to me? Should I hit the brakes? What if there is a car behind me? You have to be able to quickly analyze the situation and act on it because doing nothing or acting too late will cause a disaster. As for the deer, it is just paralyzed and will await the inevitable.

Around June of this year I started investing my savings using options trading on the New York stock exchange. I had literally no experience doing this and had only started learning about options trading in the months prior. I had tried some paper trading and was confident I had at least the basic understanding of what I was doing.  I remember it was difficult to push the button to put on my first trade. This was real money and real risk and I analyzed and re-analyzed it before putting it on. Then I set staring at the screen to see what would happen. Over the next months putting on and managing trades became faster and easier as I became more confident in what I was doing and was better able to quickly judge situations. With trading there are a lot of values on your screen all turning red and green and it can be overwhelming. With practice though I learnt to focus only on the data I needed to make a decision and mentally ignore the rest.

At one point a couple of weeks ago Donald Trump made a remark suggesting world war III was about to start and caused the stock market to react by going down hard instantly. I  saw one of my open positions quickly going bad so I had to act and act fast. At that moment analysis paralysis hit me and I was not able to make a decision fast enough. Although I was able to minimize my loss on the position I could have done much better had I not been paralyzed by the speed the numbers on my screen were changing.

Is there a cure?

Above examples show that sometimes we get paralyzed like a dear in headlights, unable to react. Some situation may be life and death but most will not be but can still have a big impact on your life. Analysis paralysis hits us when there is an information- or choices overload. There are simply too many things going through our minds and we cannot make sense of it. We can train ourselves to get better at handling and even preventing the situations where we are unable to make a decision.

Practice and repetition

When you first learn to drive a car you will find you are focusing on everything all at once. Where to put your hands, which gear you’re in, how to place your feet and how fast you are going. And then there are all of the external impressions like the other cars, traffic signs, your instructor talking to you, etc. This is a lot for your mind to process so you end up driving very slow to make sure you have time to decide should anything happen.  After practicing for a while though most of these things are no longer handled by your conscious brain and you just do them without thinking about it. This means your conscious brain will have less things to keep track of and can focus on the important things. Additionally by repetition you build up a collection of experiences your brain can quickly access and use if a similar situation comes up.

Make a decision!

The only bad decision is indecision

 

It may sound strange but simply making decisions will teach your brain to worry less.  The worst thing you can do is not make a decision so just pick an option! You do not need everything to be perfect and you have to accept that sometimes you will make the wrong decision. Judging a decision after the fact is easy but be careful not to judge yourself. If you are too strict with yourself you are only teaching yourself to think more carefully next time which will just increase the risk of analysis paralysis. In stead, learn from your decisions, think what you would do different next time and just accept you cannot alter your past decisions. Do this and you will become more accustomed to quickly making decisions and better ones at that.

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gira180
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