Loss is part of life, it is part of investing, it is something that we have to accept as going to happen - but should it ever be easy? Should we ever just shrug it off as if it didn't happen, or should we savor the feeling of pain and make sure that it imprints on us deeply enough that we carry the lesson of that loss forward, always?

If you can shrug off a loss, you can't be a winner.

Vince Lombardi

Perhaps there is something to this, where it is always recommended that never invest what you can't afford to lose completely, it doesn't mean that losing it is not felt. Skin in the game means more than having some money on the line, it is having enough money on the line that if it is lost, it is going to be felt, that the skin is going to be scraped and cut, pain felt.

Loss has to hurt.

If it doesn't hurt, why learn from it?

It is like the playground problem that they have supposedly observed in Australia over the last decades, where since they have made the equipment much safer and padded everything, they have noted a reduction in motor-skills in children. If it doesn't hurt to fall, there is no reason to improve to make sure not to fall. In order to learn from mistakes, the mistakes have to be recognized and pain is a way for us to recognize that error in judgement, whether it be physical pain like falling from play equipment, or psychological pain like incurring a monetary loss on an investment.

But, perhaps we are now living in a society that looks to "ignore the pain" by covering it over, where for example, when we have a headache, we take a painkiller to ease the pain. This takes away our drive to understand the source of the pain and deal with it at the core. Similarly, when people feel emotional pain, the tendency is to take a "pill" that draws the mind away, often through entertainment practices, like gaming or watching TV - an act of avoidance.

There are so many ways nowadays to "self-medicate" so that our pains and discomforts are lessened, that we might be missing key signals that could inform us to change our procedures, or directions in general. This means that we can stay on the "wrong track" far longer than we should, because we haven't felt enough pain yet in order to question what we are doing and find a better way.

At least for most of us, we are unlikely to make any significant changes in our lives unless we are hurting enough, which is why so many of the addicts only act when they recognize that they have hit "rock bottom". Up until that point, most of us seem to put off changing, because it is still bearable.

We can also see this when it comes to entering into a recession, where many people try to maintain their current lifestyle, even though it is coming at an increasing cost, with the extremes being that we will sell off generative assets in order to keep our consumptive habits. This happened a lot in 2008 in Finland for example, where while the sales of luxury cars remained steady, people were selling off summer houses and stocks at lows, as well as taking on additional debt. The result was that people on average were far worse off down the track, because their short-sightedness cost them a long-term position of value. This was common in many countries and the mounting and growing debt burdens are continuing, with no respite in sight.

It seems that people aren't hurting enough.

Where the challenge comes in is that people fear the pain of loss so much, that they do not take risks where that pain can be felt. While this lowers the chances of short-term pain, it will also likely increase the chances of long-term pain, because investments aren't being made to generate or mitigate the risk of the changing world. For illustrative purposes, it is like someone sitting on the couch doing nothing for the fear of the pain of pulling a muscle, but because they do nothing, they are increasingly going to find themselves in pain.

For many, this is a counterintuitive issue, because what they are doing seems right, but over time, it tends to have the opposite effect. From a consumer standpoint, it is like being cheap will mean buying twice, but the reason the cheap was chosen in the first place, was to save money. Similarly, a lot of people who "can't afford to invest" are the ones who should be going out of their way to invest, even if it is painful to do so, because that immediate pain is less impactful than the long-term pain.

However, we aren't very good at predicting how we are going to feel about things in the future, whether positive or negative, so we tend to put a lot more weighting on the current moment. However, investent mindset requires looking down the track a lot further and, being willing to put the immediate desires on hold, in order to turn current resources into more than their current value. It is because of this that most people do not invest well, and those who do, are able to generate so much value overtime, because they know that most people are impatient and they can use time to their advantage.

Just like compound interest can give significant cumulative gains, a lack of interest will likely bring significant cumulative pains. But, because it builds slowly over time and we have been ignoring the low level pain for years whilst focusing on satisfying the immediate desires, we feel that the pain is not our fault, we are victims of circumstance. This is true, we are all victims of our experience, including the conditions we create for ourselves.

It might hurt to realize this.

Whether we learn from the pain or not, that is up to each of us.