Welcome to the Managing CRE Risk Podcast with Jeremy Goodrich. Today, we dig into a topic that comes to the surface right from the beginning when we start thinking about risk – analysis paralysis. We talk about why you shouldn’t have a 100% analysis before making a decision and how to identify all of the most crucial risks.
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“Your thoroughness is going to be better. And at the same time, you will still have high efficiency, because you’ll have studied beforehand about how this stuff works.”
Many commercial real estate professionals get into analysis paralysis at one point in their investing journey. Analysis paralysis is the inability to make a decision due to over-thinking a problem.
We all want to identify and understand the risks and truly know how to manage everything fully in our minds before we take any action. The problem with this approach is that if we go too extreme on it, we become too slow and miss out on opportunities. This means really low efficiency and an incredible slowness.
The other side of the spectrum is low thoroughness and high efficiency. Here you maybe only identify 10% of the risk, but you just keep moving forward. However, not identifying the potential risks sometimes means that that step forward might create two steps back.
So how can we avoid losing opportunities because of our slowness or getting into situations that are too risky for us? We have to make sure that our team and our decision-makers understand, identify, and are able to manage the risk.
Practice this method with small decisions first. Many people try to make gut decisions when it comes to real estate investing because they haven’t practiced identifying and managing risks. That can be dangerous.
As you think about your decision-making process right now, where are you on this spectrum? Are you high thoroughness, low efficiency, or low thoroughness, high efficiency? Let us know!
Mentioned in the show:
- Jeremy’s LinkedIn
- The REI Clarity Framework
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