My latest multi-pod obsession is with the stock markets and I’ve just been introduced to the concept of ‘hedging’.
Hedging means that you don’t guess whether the market is going up or down, you put money on both bets so you’re covered in every eventuality. As my mentor explains, it doesn’t maximize your gains (because although you automatically win, you also automatically lose) but it does minimize your exposure to risk.
This is, without really realizing it, how I’ve designed my whole life. Hedging.
Minimizing Risk Exposure
This is such a doom-and-gloom phrase. It’s like we’re planning contingencies for an incursion into enemy territory. But it’s really a very simply concept: Construct your decision in such a way as to minimize the downside.
When I left academia to drive truck, I knew academia would be right where I left it, and also that getting a commercial license would mean that I would never be unemployed, ever.
When I set out across the country to start a business with my best friend, I knew that I had six months to make a go of it, but if I didn’t, I’d had six months of vacation.
Every ‘risky’ decision I’ve made has always been designed with a built-in hedge. I never ‘waste’ time on a project that ultimately fails. I know that even if I don’t achieve my goals, the time spent has served some other purpose. There’s no way to fail when you set things up like that.
Using Market Cycles to Your Psychological Advantage
I have three businesses. The logistics of running them optimally all at once are possible, but I don’t really try. Each one is designed to run on less than 20 hours of work a week. This means that if it’s really necessary, I could run all three concurrently and still get sleep. But what normally happens is that one is going gangbusters, one is trucking along with minimal interference, and one is backburnered. And then they swap out.
You see, almost every industry and busineess has a boom and bust cycle. It’s really busy for a certain period, and then it dries up to almost nothing. Or it’s level for most of the year, but there are certain times of year when things are stupid busy.
I don’t like being stupid busy. That’s not a quality of life trade-off I’m prepared to make.
I don’t like it when things dry up. It makes me anxious. Anxious people don’t make good decisions.
So I hedge. When one business dries up, there’s always another waiting in the wings. No downside.
You can do this EVERYWHERE in your life.
You don’t need to fear change. You don’t need to worry about things not working out how you want.
Think about something you want to try. Why do you want to try it? That’s probably your upside.
Now think about what would happen if that didn’t work. How can you make your downside into an upside?
When I decided to start my copywriting business, I had already been a fiction writer and a sometime journalist for a number of years. But I was concerned I wouldn’t like writing what other people wanted me to write about. However, I was convinced it was a growth industry. There’s definitely a need for copywriters. In fact, I knew the desire for copywriters would almost certainly outlast my desire to copywrite. So I designed my growth strategy. Then I started to look at the benefits of copywriting:
- It’s completely location independent, it doesn’t even require broadband. Even a crappy dial-up connection will allow me to work, meaning unprecedented freedom of movement
- Writing to other people’s constraints and timeframes will train me to get out of my head with my own copywriting. (I had always been unhappy with the way I copywrote for my own businesses. It took me forever and it was never ‘right’.)
- Writing across a variety of industries will keep me from getting bored.
Now for the downsides:
I won’t like it. I had an exit strategy in place and if it turned out I didn’t like it at least I’d have gotten some experience writing to spec which will help me in my own businesses People will order me around and I’ve been self-employed too long to handle it.Ahaha. Yeah, this never happens to me. It’s a vibe, I think. I’ll get too busy and won’t be able to turn down work durning the times when my other businesses need me. This hasn’t happened yet, but I have several copywriter friends I can subcontract to. (This is also included in my growth strategy). I won’t be able to negotiate a rate that’s high enough. This is actually an interesting one. I know my resentment rate (the rate at which I start to get pissy about having to work for so little) and I definitely never drop below it. But the fact of the matter is that with three businesses, it just makes sense to spend the most time on the one with the highest ROI. Thus, the ‘no-downside’ here is that, as your hourly rate rises higher in any of your businesses, you have to raise your rates in your other businesses with it, or they stop being a cost-effective way to spend your time. It’s actually a surprisingly effective way to negotiate, because to say “I just can’t do it for less than X” is absolutely true, because you have other things that will pay you more than what you’re doing, so you don’t go in to the negotiation feeling like your back is to the wall.
There’s nothing better than taking life into your own hands.