Advice, Learning Lessons, And Negative Oil Prices

“Can I buy a barrel of oil? Will someone pay me to take it?!” – random people across America in April 2020 as the price of oil went negative

Giving advice to someone about something they (or sometimes you) have no experience in can be really hard. We can explain, show data and tell stories until we are blue in the face, but actual experience is sometimes the only way to bring a concept home. As Mark Twain put it, “Good judgment is the result of experience and experience the result of bad judgment.”

There’s a reason it’s so valuable to make mistakes early in activities we do repeatedly. A 50% loss on a $1,000 investment is $500. Now consider 1/10th the percentage lost at 10x the value – a 5% loss against $100,000. In the second example, you’re down $5,000. On a percentage basis, it’s 10x lesser of a loss, but on an absolute basis, it’s 10x more. Where would you rather learn the lessons of financial losses? Can you imagine losing 50% of a $100,000 bet? Experiences change people. Fail small fail fast is good advice. Making bets where you can’t quantify your downside? Not just bad advice, probably an absence of advice.

Our brains aren’t wired to handle any of this well, much less riddles like negative oil prices. The world is messy and math isn’t always as intuitive as it should be. We aren’t always as rational as we think we are. When we offer good advice, we get to the heart of these underpinnings and understand the language of why people perceive risk the way they do.

Good advice doesn’t force rationality, it acknowledges and respects the presence of irrationality. Good advice aligns the attention a person is giving some topic with the intentions they actually seek to achieve in their life. Experience is the greatest teacher. Even lousy experiences can be valuable if we learn something from them. Sometimes we have to let someone learn a lesson. Other times we have to show them, in as visceral a way as possible, what the consequences could mean so it sinks all of the way in.

*the best answer to the oil question is Tracy Alloway’s 2015 article, “That Time I Actually Tried To Buy A Barrel Of Crude Oil.”