Never Take Two Ls in a Row

Life, much like the stock market or any form of trading, is a series of ups and downs. Losses, or “Ls,” are inevitable. They are the risks we take that don’t pan out, the plans that don’t go our way, the deals that fall through. However, there is a compelling reason to ensure you never take two Ls in a row: the steep path to recovery it sets us on is harder.

I made a graph based on a function I developed to calculate the percentage required to recoup losses from a specific percentage loss; this graph shows the relationship between loss rates and the required break-even percentage. In a single investment, the effort to recover does not increase linearly but rather exponentially. At a 10% loss rate, recovery is manageable at 11.11%; however, as the graph sharply curves upward, a 50% loss rate demands a break-even effort of over 100% — a daunting, if not overwhelming, challenge. Eventually, recovery becomes nearly impossible.

The Compounding Effect of Consecutive Losses

Consecutive losses have a compounding effect. In finance, this is a mathematical certainty, but in life, it’s a psychological truth. The first loss is a hit, but recoverable. A second loss, however, can shake our confidence, cloud our judgment, and compound stress, leading to a spiral of negative decision-making and even further losses. The depth or severity of the loss also matters.

The Resilience Strategy: Bouncebackability

The strategy, then, is resilience — the ability to absorb a loss without letting it define the next move. After a loss, the focus should be on a quick, strategic win. It need not be grand; small victories can re-establish momentum and prevent the desperation that often accompanies back-to-back losses.

Incorporate tactical pauses after a loss. Reflect on what went wrong and why. This pause isn’t inaction — it’s strategic processing. It allows you to step back and return to the game with a revised approach, ensuring your next move is calculated and not a reaction to the sting of loss.

Diversify your endeavors. Just as investors spread their capital, spread your efforts across different areas of life — professional, personal, and educational. This way, a loss in one area can be mitigated by a win in another, maintaining overall balance and forward momentum.

View each loss as a learning opportunity. There is a wealth of knowledge in failure that can be harnessed to prevent future losses. It’s not about never failing but about not failing the same way twice.

But two Ls in a row

But what if you find yourself facing the daunting scenario where multiple Ls have already occurred in succession? It’s a tough spot, but not insurmountable. Here’s what to do when you encounter multiple Ls:

• Calm down: Stop anything that could lead to more losses. This is about damage control.
• Assess objectively: Take an honest look at why the losses are happening. Is there a common denominator? Is it bad luck, poor planning, or skill issue?
• Seek external input: Sometimes, you’re too deep in the problem to see the solution. Talk to mentors, peers, or friends. Fresh perspectives can provide insights you might have missed.
• Revisit your goals: Are your objectives still realistic? Adjust your goals to reflect your new reality, but keep them challenging.
• Plan your comeback carefully: Once you’ve gained a clearer perspective, plan your next steps. Every action should be deliberate and aimed at recovery.
• Take care of yourself: Multiple losses can be mentally and emotionally taxing. Ensure you’re in a good space by taking care of your physical and mental health.
• Start small: Regain confidence with small wins. They’ll add up and help rebuild the foundation that was shaken by the losses.

Multiple Ls doesn’t mean the game is over. It means it’s time to pause, regroup, and come back stronger.