My first house was a 1970s split-level in Finn Hill, a suburb of a suburb of Seattle.
We’ll use round numbers because internet math is hard, but I purchased the house for $450,000 about six months before the housing market started to crumble, the early days of the Great Recession. I had friends and neighbors walk away from their homes, but I decided to stick it out. I needed a place to live anyhow.
Eventually I moved in with my girlfriend, who became my wife, and we purchased the home we live in today.
The market was still on the long road to recovery, so we rented the Finn Hill place to a few different families. The rent was enough to cover the mortgage and repairs but not much more.
The market was slowly climbing, and around the time my daughter turned one, we decided to sell. We didn’t want to carry the debt, and we didn’t want to deal with renters. The market wasn’t great, but it looked like we could break even and chalk it all up to a grand adventure in the real estate business.
After the tenants moved out, I channeled my inner Ty Pennington, spending a few weeks getting the house ready for market.
[Ty Pennington was a very serious craftsman]
The house sold quickly, just a few days, and we had an offer for $500K.
It only took 7 years, 3 tenants, a small flood, a new deck, an exploded water heater, and a few dozen sleepless nights wondering if I’d ever get my money back.
And eventually I did.
To paraphrase Hunter S. Thompson, the real estate business is a cruel and shallow money trench, a dark, dingy, back alley where thieves and pimps run free and good men die like dogs.
And there’s also a negative side.
The all-cash offer came from a family moving up from Los Angeles. I didn’t think twice; I was happy to be rid of the place before the balloon payments kicked in.
Three years after selling the place, I made a huge, foolish mistake.
I got curious.
I started wondering how the old house was doing. A few years can make you nostalgic. I remembered the fun times: the time Dad came for a visit, my first attempt to barbecue a turkey on thanksgiving, the Super Bowl party.
But what I found made me question my ability to operate in the world of business, the real estate industry specifically.
Those all-cash buyers had already sold that wonderful 1970s split level in Finn Hill.
And they sold it for a cool $1,000,000.
Seven years, and virtually no profits for me, but plenty of heartbreak.
Three years, and a double for those genius all-cash buyers from the City of Angels.
Ain’t that something?
I’d been sleeping much better with it off my books, but all of a sudden, I was tossing and turning again – that one really stung.
My view of the world had been changed, but maybe I was looking at the situation through the wrong lens.
Your Sleep Number
David Gardner, co-founder of The Motley Fool, has an investing principle he calls a “sleep number.” You’ve probably heard about the Sleep Number mattress company, where you adjust your mattress firmness on a scale of 1-100. That number, where you are comfortable, is your Sleep Number.
In finance and stock picking (or home buying), Gardner thinks of his “sleep number” as the maximum percentage any one single stock or asset can be in his portfolio. From 1-100.
If you are investing in VOO, the Vanguard S&P 500 ETF, you are probably feeling pretty diversified, and you are, but you still have nearly 7% of your money allocated to Apple, 6.5% percent to Microsoft, 6.2% to NVIDIA, and another 10% allocated to Amazon, Meta, and Google. Roughly 30% of your diversified portfolio is in mega-cap technology.
Can you sleep with that? Without pills?
That is what Gardner wants you to find out. Everyone is different. If you have more than you are comfortable with in any one asset, change it. Get comfy.
When I sold the Finn Hill house, it was almost entirely because of my sleep number. That real estate mattress was just a bit too firm for my liking. It kept me up at night.
Your sleep number does not come free of charge. You’ll be making trade-offs. Decisions that help you sleep, lower your stress, and make life more enjoyable.
But these are not things you should regret.
Knowing that, and writing it, I still have my moments. Moments where I look back and say, “I should have known better.”
I Should Have Known Better
I had a bitcoin once. One, single, glorious bitcoin. Got it for about $3,000 and sold it for a bit more than $30,000.
Not bad.
But then Bitcoin went to $90,000 and beyond.
I had Amazon back in 2012 at $12.00 per share. Tesla in 2017 at $16.00 per share.
Couldn’t hold on. Worse, couldn’t go heavy, push all my chips in.
I should have known better.
This is how regret works.
An emotion and a punishment all rolled into one. That looping voice in your head that says, “I should have known better.”
You can visualize that alternate ending, and you want it, you like it better than the one you ended up with.
Jeff Bezos has advice for you. It’s essentially YOLO, but he calls it the “regret minimization framework.” It’s a mental exercise that has become part of his risk-calculation process. He’ll visualize his life at eighty, thinking back on the decision at hand, and he’ll ask this future version of himself if he’d regret the choice he was about to make.
Discussing his decision to leave Wall Street and start Amazon.com, Bezos said, “I knew that when I was eighty, I was not going to regret having tried this. I was not going to regret trying to participate in this thing called the internet that I thought was going to be a really big deal. I knew that if I failed, I wouldn’t regret that, but I knew the one thing I might regret is not ever having tried. I knew that that would haunt me every day.”
Daniel Kahneman would agree.
The Psychology of Regret
In Thinking, Fast and Slow Kahneman writes, “You can take precautions that will inoculate you against regret. Perhaps the most useful is to be explicit about the anticipation of regret. If you can remember when things go badly that you considered the possibility of regret carefully before deciding, you are likely to experience less of it.”
The most painful regrets are those of omission, not commission. People regret not having acted, sitting on the sidelines, or missing out in favor of the status quo.
They regret not buying the stock, not asking the girl out, and not taking the job.
So, a potent antidote for regret is to spend time up front thinking it through. Your anticipated regret is likely to be the worst of it.
According to Daniel Gilbert, people generally anticipate more regret than they will actually experience. This is the source of that anxiety you feel before a big decision. Anticipated regret is a self-defense mechanism, it allows us to envision the future, a bad outcome, and change our path.
It’s also total fiction. It’s make-believe. The future, the actual future, is much brighter.
Because humans are inoculated with a wonderful immunity to regret. We forget. We misremember. And we change the facts to ease our pain and trauma.
More than likely, the regret you are anticipating far exceeds the regret you’ll actually feel. And even if it’s not, your future self will cover up the truth, easing the burden of regret.
It’s with this combination that we live with “no regrets.” Anticipated regret keeps us on the safe, risk-averse path. Hindsight bias covers our tracks when things go poorly.
And most things stay safely the same.
The psychological override against regret isn’t just theoretical – we see it in some of our most challenging experiences.
I’d heard about this before, framed with the idea that women tend to forget, or gloss over, the pain and difficulty of pregnancy. You hear similar stories about Navy SEALs going through BUD/S training.
Looking back, it doesn’t seem that bad.
Daniel Kahneman says, “The remembering self’s neglect of duration, its exaggerated emphasis on peaks and ends, and its susceptibility to hindsight combine to yield distorted reflections of our actual experience.”
And this is why so many people say they have “no regrets.” They can’t remember them.
They’ve fooled themselves; they don’t see their past clearly, and their lizard brain has polished away the prickly parts.
Living with Less Regret
Do I regret selling the Finn Hill house when I did? Do I regret not holding it for another three years?
You’re damn right I do. But mostly, I regret checking on it. What was the point? To try and feel smart?
I have a blog for that.
Not that you should stick your head in the sand and hide from your mistakes, but the biggest regrets come from decisions where you can easily imagine doing something different. Can I imagine not selling that house? No, not really. I’d tried and failed before. The fact that I got it ready, looking good, and sold it so fast is actually a point of pride. But we’ll take on pride in a future post.
If you are living that YOLO life, and we all are, why look back?
That was my regrettable mistake.
Dr. Edith Eger, Holocaust survivor and the author of The Choice has a path through regret and guilt. One sentence: “If I knew then what I know now, I would have done things differently.” We cannot change the past. All we can do is make the best decision the moment a decision is needed.
Don’t spend your precious time on things that can’t be changed. Because that’s something you will truly regret.
Speaking of Regret…
One thing that gets lost in all the New Year’s revelry is taking a quick look in the rear view. What actually happened over these past 12 months? More importantly, what didn’t? It’s much more common to push forward. We don’t want to dwell on the past, so we avoid it altogether.
But I’d bet if you looked back at 2024, you had a moment where you promised to change a thing or two. I’d bet you “got on the path,” committed to a healthier lifestyle, attempted Dry January or Sober October. I’ve got a hunch you had some “new year new you” ambition that didn’t make it through the dog days of summer.
And if you were brave enough to look back, I’d bet you had regrets. As much as I try to avoid it, I know I’ve had a few.
If that sounds like you, 31 Easy™ might be exactly what you need. It’s free to start, free to finish, and inspiration is available for purchase. It will help you build a daily practice, so that this time next year, you can look back and find a bit less regret.
Check it out: 31 Easy™
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