EP37 Dealing with Failure and Financial Loss

In this episode, Mike Scott shares a personal experience of financial loss and explores the concept of reframing failure. He discusses the emotional journey following a significant loss and emphasizes the importance of separating one's identity from failures. By focusing on identity, environment, and habits, Mike provides insights on building resilience and navigating challenges in business and life.

Takeaways

• Reframing failure can lead to personal growth.
• Experiencing loss can provide clarity on what truly matters.
• Your identity should not be tied to your financial status.
• Emotional responses to loss can vary greatly.
• Building resilience involves intentional changes in identity and environment.
• Recognizing that loss is a common experience can alleviate feelings of isolation.
• Creating supportive environments is crucial for personal development.
• Habits should align with the identity you wish to embody.
• Failures can be viewed as events rather than defining moments.
• Gratitude can emerge even in the face of significant loss.

Chapters

00:00
Reframing Failure: A Personal Journey

07:02
The Impact of Loss on Identity

12:54
Building Resilience Through Identity and Environment

Find out more about working with me. mike@smbmastery.com.au or https://www.linkedin.com/in/mikeadamscott/

Transcript

Mike Scott (00:01.336)
Hello everybody. Good to be back. Today's episode was actually inspired by a client of mine. So this is a shout out to David. David shared something with me recently around reframing failure. So he was very inspired by something. He shared that with me and it just got me thinking quite a lot about this around like how we think about failure.

And it took me back to something that I shared on LinkedIn recently, which was a, I sustained a massive loss, financial loss recently. I, I lost hundreds of thousands of dollars in what was effectively like a second order consequence of the last pass hack that happened a couple of years ago. And the net result was that my cold storage crypto wallets were drained of everything. And it was a massive hit to, to my financial security.

I've shared pretty openly and continue to that I have a lot of anxiety around financial stability and I catastrophize a lot around financial future and destitution and all these things. And it's often devoid of logic, but sometimes it's within logic. So you would think that something like that happening to someone like me would send a brain like mine into spiraling negativity and anxiety, but that's not actually what happened, which was quite weird. And I'll talk a little bit more about that.

But today I sort of just want to talk around this concept of loss and this concept of failure that maybe leads to loss. And I'm not talking today so much around personal loss. If you've lost someone really close to you, my deepest sympathies, that's not what I'm talking about. I'm talking about, let's call it material loss, business failures, business loss, monetary loss, monetary failures. That's what I want to talk about today. Not much more important losses like...

very close people to you. That's another level. And that's not what I'm talking about today. So let me let me sort of take you back to what played out with my recent loss, right? So it was on a Sunday, I had taken the kids or one of my one of my kids swimming at the beach. And it was a really an awesome day. I got back home and my wife and my little boy were here. It was a beautiful, beautiful day, warm weather, just awesome. Came into my office because I wanted to do something on my portfolio. And I didn't actually check my portfolio for

Mike Scott (02:17.624)
for about two months, I think. I don't check it very often because I don't really do much. I just kind of invest and let it sit. And logged into my cold storage wallet. And sometimes there's glitches with these things. And it sort of told me that there was a thousand dollar balance. thought, it must just be an update that's needed. So I did the update and it just didn't change. And this led to me just going into the transaction history, you know, because it's blockchain, you can literally see every transaction. And my heart just sank when I realized that back in December,

Within about 10 minutes, every single asset had been completely drained from my account. Hundreds and hundreds of thousands of dollars gone. Now I won't get into the technicality, but this is not like losing money in a bank hack or something where there's security and insurance. Like this is gone. It's gone. And not only is it gone, but even if I could find the thief and kind of prove to the authorities where the crypto is sitting, crypto is a bearer asset.

So I'd actually have a really hard time proving that it's even mine. I won't get into the details there, but it's a weird characteristic of crypto. So it was gone, right? This was probably late afternoon on a Sunday and I walked into my, my, my wife is not feeling great and I walked, she just come back from, she's recovering from an operation. And I was like, shit, this has happened. We've just lost hundreds of thousands of dollars. And you know, she's always just my absolute rock. And she was just like, okay, like let's talk through this.

In the next three hours, I went through like this crazy range of emotions. I literally went through all of them, know, despair, denial, acceptance, the whole range of emotions I went through in the space of about three hours. And then a really interesting thing happened. Very uncharacteristic for me, like very uncharacteristic. What happened was I actually just became extremely calm, like extremely calm to the point that I was actually thinking that I was having a weird stress response. And I then went and did

stuff that I normally do, but I went to did like some of my sort of let's call it health or fitness routines. I jumped in my ice bath and I jumped in my sauna. And I think I did a little workout on the bike and I just felt great. Like, like honesty, I felt extremely calm and extremely focused. And at the risk of sounding cheesy or cliche, I also just after it happened, my daughter walked into my home office and I just looked at her and absolutely like marveled at her, at her.

Mike Scott (04:44.674)
Perfection, right? Just this deep sense of gratitude that I'm safe. My family's healthy. My house is like, everything's actually amazing. And this is really weird for me. Like this is not what happens, right? So there's this huge shock, this massive loss that's significant for me. That was a significant amount of money for me. Let me just be clear about that. I can't quote unquote afford to lose that kind of money, right?

did my sort of routines and this feeling just didn't go away of calm and focus and woke up the next day and had one of the most productive focused days I've had in years. And it's just kind of stayed like that. After that, I went to South Africa for two weeks and it just kind of stayed. And at first I thought it was a stress response, but it became very clear that this is actually how I'm dealing with it. And I've done a lot of work on this stuff, right? So it's not like out of nowhere, but it did kind of hit me that

an interesting thing that happened. I have so much fear about losing all my money, about not being able to provide a reasonable lifestyle for my family. I have so much anxiety around that happening, whether it's within the realms of logic or not. And then it kind of happens, right? So like not, not completely. I'm not financially destitute, but I got a serious knock in the realm that gives me the most amount of anxiety. And yet my response was like positive. Why is that? And

Somebody pointed something out to me and they said, Mike, you know, it's interesting. A part of your deepest fear has happened now. And that was really interesting. Like it's not my deepest fear. My deepest fear is around family and all the rest of it. But I have this huge anxiety around money. So I've had to this knock. I've quote unquote experienced a portion of this financial destitution, right? It's not actually destitution, but it's a portion of it. And I'm alive to tell the story. I'm actually fine.

It actually doesn't affect my day to day. It doesn't affect the relationships that I care about, the people that I care about, my health, my ability to earn income. Like none of that stuff's actually affected. So it's kind of like a part of this massive fear has now happened. And I've sat back and gone, wow, I'm fine. I'm totally fine. And that's been really, really interesting to me. Right. So why am I sharing this? I'm sharing this because if you're running a business, right, you are very likely.

Mike Scott (07:02.574)
to get into a loss situation or a failure situation, right? Whether it's significant or not, you might have significant cashflow issues. You might lose a massive client that actually attributes for a massive amount of your revenue. might, knows what can happen, right? It's almost certain that you're going to be in a situation where you have failed partially and there is a loss component. What often happens here though, is we make that our anxiety, sorry.

What often happens, Chad, just take that last bit out. What often happens here though, is that we take this on as our identity rather than acknowledging it for what it is, which is an event. So we take on the language of, am a failure. I have failed. I am someone who fails. I am someone that has lost these things versus this is a thing that's happened, but my identity is still intact. The way that I bring value to the world is still intact.

The person that I am becoming is still intact. The person that I'm moving away from being is still intact. And this is a critically important and powerful point in this whole thing. You are not that failure. You are someone that has experienced an event which is a failure or a loss. And this is a critical thing that I had to experience is in that moment after years and years and years of work and saying these kinds of things, I think I actually experienced that for the first time to go, Hey, this is a thing that's happened to me.

But this is not me because a lot of my identity and self-worth is tied to my given financial feeling of security at the time. It's a very negative way, very sort of unhealthy way to live. When I'm feeling financially stable, then I have a high sense of self-worth. I'm confident, I'm social. When I'm feeling financially insecure, then I don't want to be around people. I have a low sense of self-worth. It's not a very healthy way to live, right? We need to be able to say, hey, this is my identity.

free of whatever is happening to me. And then this is the stuff that's happening around me. And where do I have control to change this stuff? So there's a model that I like to use for myself and I use with my coaching clients, all of whom are business owner operators, just to give you context, right? And these are people that are varying degrees of success, but most of them are what you would generally call outwardly in the world, successful people running multi-million dollar businesses, often tens of millions of dollars of businesses. Yet they still struggle with the same things that all of us do.

Mike Scott (09:29.794)
And this model is very, very simple. So if you picture sort of three levels of hierarchy and at the top, we talk about identity. Who, who do I need to become? Right? This is about being intentional around who I currently am, not what I do, but who I am. Who I want to move away from being who I want to move towards becoming. This is about who I am, not what I do. Right? So I am someone who I bring value to the world by.

I am moving away from being a person that. This is a critically important part of this. So it's identity at the top. It's first, who am I? Then we move into environment. What about my environment do I need to change to support this identity? Environment is things, the obvious things are things like where are you physically, what does your physical surrounding look like? What do you need to change in your physical environment? It can be as simple as putting a plant on your desk. It can be as significant as moving home, if that's within your

your sort of realms of reality, right? It goes all the way down to more subtle things like the content you're listening to, the food you're putting into your body, right? It's everything physical around your environment. So what environmental changes do I need to make to support this new identity? And then right at the bottom, you've then got, are the habits and behaviors that I need to practice within this environment to support this identity? And the practical application of this is pretty simple, but pretty profound.

If your habit is getting up at 5 a.m. every morning to train, often when you're sitting in the bed and you're about to snooze, you don't really have a strong answer to like, why I must get up at 5 a.m. and train. But when you're very clear about who you are becoming, the identity that you are going to and want to and will assume, then the answer is clear. I will get up at 5 a.m. to train right now because I am a person that invests in myself or because I am a person that is fit and strong and values my health over

whatever my career, whatever, whatever it is, right? This is about you. It's not about sharing it with the world. And this hierarchy can really be incredibly powerful identity, who I am, who I'm moving away from and who I am becoming environment. What do need to change about my environment to support this identity and then habits? What are the habits and behaviors that this person, excuse me, that this person needs to exhibit? Right. That is a very, very powerful model. I've worked with CEOs of

Mike Scott (11:55.81)
you know, mid-sized businesses, know, multiple tens of millions of dollars that in one particular one that I'm thinking about, she had a shift into this identity around someone that needs to be decisive and that takes action. And watching that unfold, this actual real shift around it has made her take significant steps to being a better leader, to leading the business in a better direction. To be clear, a lot of that has come from intentional work around who

she needs to become, not what she needs to do. When we can be very clear about who we need to become and who we are not going to be anymore, the environment becomes pretty obvious. People we need to stop seeing, other people we need to see more, places we need to stay away from, places we need to go to more, things we need to put into our body and our ears and into our mouths in the form of food and drink becomes obvious. And the behaviors and the habits suddenly also become a lot clearer. But you've always now got this why, this cascading effect. This stuff can help you

massively help you weather what we normally call failures and losses. Because if you can assume this identity and set up your environment in a constructive way, in a healthy way, and choose behaviors and habits that serve these things, then when, not if, when life throws you these failures, these losses, they're less likely to hit you at your core identity. And you're more likely to able to view these things for what they really are, which are experiences and events.

But then you go, hold on, I am a person that X, Y, and Z, and you get back up and you keep building. And you're doing whatever it is that you have to do to get through or over or around these things. And at the risk of sounding kind of cheesy, it's now been, I don't know, two months or something since I sustained this loss. And legitimately I'm grateful for it. Like that's a very weird thing for me to say, but it really has been a perspective shift for me around who I am, where my worth and value is in the world.

how I contribute to the world, where I deliver and bring value. And that's a fundamentally important thing for me. It's worth a lot more than a few hundred thousand dollars, which is, need to be clear about this. That is a massive amount of money for me. I'm not being flippant around that not being a lot of money, but what I'm saying is that my identity being intact and moving towards that identity and actually centering things around that is far more valuable than a few hundred thousand dollars because that identity being intact

Mike Scott (14:22.51)
from a practical and material perspective, has the potential to yield and earn and deliver significantly more money in the long term, right? Just to be practical about the sort of philosophical side of this. So loss and failure, they're going to come. They're going to come all the time. It's not trying to avoid them. It's not trying to have a plan for everything that's going to happen because you can't plan for everything. It's really about choosing.

the identity that you want to assume and choosing the identity that you want to let go of. And then going through the cascading, right? Identity, environment, habits and behaviors. This stuff is not airy-fairy. This is as practical as it gets. I sit day in and day out with founders of businesses from one to $2 million revenue all the way up to almost $100 million of revenue. I sit with these founders. I sit with these owner operators. I talk to them about the struggles. I talk to them about the successes.

Never, never, not one of them have not experienced failures and losses. Not one. It's a consistent thing. But the degree to which they can not allow those failures and losses to consume them and to challenge their identity and to drop their sense of self-worth, the degree to which they can turn that into a constructive source of energy is the degree to which they succeed. And not just succeed in a material sense in their business.

but also in their, let's call it like their integrated life, their sense of who they are. And that trickles into the relationships in their life. It trickles into their leadership capability, their operational capability, the business quality, everything. So just wanted to share that. This is going to be quite a short episode today. Garbud, thanks for the share and the inspiration for me to sort of think deeper about this. And I really hope that this is helpful to at least some people hearing this. I hope it's hit at the right time.

Because like I say, if you're experiencing failure or loss now, you are not alone. I spend my days speaking to people every day that on the outside often look like everything's going well, everything's together, everything's awesome. They're celebrated entrepreneurs and celebrated business owners, but often the inside story is very different and you're not alone. This stuff is difficult, but it's not unique. So share this with someone who you think might need to hear it. And as always, I really hope it was valuable.

Mike Scott (16:45.71)
and I'll see you again soon for the next episode.