Finding Your Way Out, One Step at a Time

The options you still have

Late one night in the autumn of 2021, I met Zhou in a private room at a Japanese restaurant in Beijing's Guomao district. There was a draft mortgage agreement on the table and an ashtray full of cigarette ends. A year earlier, his consumer-goods company had been valued at 500 million yuan, and investors had been queuing up to take him to dinner. Now a supply-chain failure and a downturn in his industry had left him with enough cash for half a month's payroll.

He wanted to borrow 5 million yuan to bridge the gap. "If I can just get through the Singles' Day sales, I can turn this around."

Debt reminders kept appearing on his phone. I looked at the punishing terms of the bridge loan and urged him to get professional advice about winding down the business before putting his family's last home at risk. He wouldn't hear it. Liquidation meant admitting defeat. He signed, pledged the house, and kept going. Six months later, the sales campaign had failed to rescue the business, the house was sold at auction, and he disappeared from our circle.

I've watched investors and founders lose money, and I've examined my own worst drawdowns. Zhou's experience wasn't an isolated one. People can suffer a similar loss of employment, business, or a relationship and emerge on very different timelines. One difference is the number of workable options they still possess. An economic way to understand a crisis is to look at the collapse of that choice set. A year before, Zhou could have raised capital, sold the business, or reduced its size. By holding on, he narrowed his options until only two ugly choices remained: borrow on ruinous terms and gamble, or go under immediately.

A bad decision produces a loss. The loss reduces your room to move. Anxiety then pushes you toward another bad decision. Adding more effort to an approach that has stopped working can strengthen that loop.

When income, confidence, capability, and outside conditions are all deteriorating, I wouldn't stake everything on one dramatic reversal. First stop the damage from feeding on itself. Then build a process in which small gains can accumulate. The work is to recover your options in the right order.

1. Stop the losses before attempting a comeback

The first objective is to stay in the game.

In investing, avoiding ruin takes precedence over any target return. A position down 50% might recover. If leverage forces you out and wipes out the capital, a later tenfold rally won't help. The same logic applies elsewhere. Continuing losses can consume every benefit of your next effort.

Start by examining cash flow, physical health, close family relationships, and the time you can still control. Put the numbers on paper. Cut spending maintained for appearances, stop businesses or side projects that keep losing money, and reduce avoidable sources of emotional strain. Under a zero-income scenario, how many months of basic living can your current resources cover?

Without a buffer, every decision becomes a forced trade. A shortage of money or time makes harsh terms and risky schemes look more attractive. Stopping a loss creates a period in which you don't have to decide under immediate pressure. The ability to correct a mistake may be the most valuable resource you have left.

During the venture-capital winter of 2018, a founder I knew was losing 400,000 yuan a month. Closing the company felt humiliating, so he mortgaged his property to keep paying salaries while waiting for another funding round. Six months later, the company failed, leaving him with personal liabilities of several million yuan and a place on a court's judgment-defaulter list. Another founder, facing six months of remaining cash, cut 80% of the operation and workforce, left an expensive office, and brought monthly spending below 30,000 yuan. That cash helped him survive until conditions improved two years later.

You need a concrete runway figure, perhaps fourteen months in the worst case, and evidence that the major leaks have been stopped. The number should no longer be shrinking every day.

2. Recover the capacity to make decisions

Your judgment may be impaired by the situation you're trying to judge.

In their 2013 study Poverty Impedes Cognitive Function, Mani and colleagues found evidence that financial concerns can consume cognitive resources and affect performance on cognitive tasks. That isn't a claim that intelligence declines permanently, or an explanation for every crisis. The useful idea is a "bandwidth tax": an urgent problem can occupy so much attention that other decisions become harder. Before treating mistakes as evidence of incompetence, examine the pressure under which they were made.

If circumstances allow, set aside two to four weeks in which you postpone major irreversible decisions: a large loan, an impulsive marriage or divorce, quitting in anger, or staking everything on a new business. Restore regular sleep and suitable exercise. At least seven hours of sleep a night is a useful priority; thirty minutes of daily exercise can be a starting point for adjustment, rather than a prescription that fits everyone's health. Remove sources of anxious comparison. Find a steady friend or mentor, with no conflicting interest, who can help you examine the situation.

Stress narrows your field of view. A local failure can begin to feel like a judgment on your whole life; a temporary downturn can look permanent. Making a hurried decision in that state makes it easier to overlook costs and alternatives. Give yourself a chance to describe the problem without having to relive the panic.

During the 2022 sell-off in Hong Kong stocks, a friend managing several hundred million yuan couldn't sleep after repeated heavy falls in his main holdings. He spent his days watching prices and chasing rumors. Trying to recover quickly, he turned over his portfolio more than a dozen times in a month and made the losses worse. I persuaded him to spend ten days in the mountains, away from his trading computer, running and reading history. When he returned and looked at his positions, his reaction was disbelief: "How did I end up owning these stocks? There's no logic to them."

Can you explain your position and its main constraints to an outsider, calmly, in three minutes? And can they understand what you mean? That's a useful sign that some perspective has returned.

3. Separate bad luck, missing skills, and a bad position

"Nothing works for me" is too vague a diagnosis to act on. I find it more useful to separate three kinds of problem, because they require different responses.

An external shock may involve a regulatory change, a recession, an unexpected illness, or a public-health emergency. Acknowledge the loss without treating every part of it as your own fault.

A capability gap calls for learning. You may need better financial management, negotiating skills, emotional regulation, or the ability to use AI tools. Estimate the cost and time required to close that gap.

A poor position calls for reconsidering where you're working: a shrinking industry, an organization with little room to grow, or a circle that drains your energy. More skill may not fix the structure around you.

Write down the problems separately. One of the most expensive mistakes is trying to solve a positioning problem by becoming better at the wrong job. There is little point in competing for a better cabin on a sinking ship. Distinguish the outside constraints you cannot change from the variables you can.

A reader I advised had been a middle manager in traditional private education. After the industry changed, his pay was halved; he worked fourteen-hour days and still faced redundancy. He blamed his management ability and enrolled in an expensive MBA. Our discussion separated the issues. The industry's contraction was an external shock. Remaining in a shrinking business was a positioning problem. His useful skills in course development and community operations needed a new market, perhaps services for older customers or businesses expanding overseas. He dropped the MBA and, three months later, joined a startup selling educational content to older adults. His income soon recovered.

The diagnosis is becoming useful when you can name the main constraint in a sentence or two and write down what evidence would show you've got it wrong.

4. Stop paying for past decisions

Recognizing a bad situation doesn't automatically make it easy to leave. Sunk costs and neglected opportunity costs can keep you there.

The money already lost is only part of the damage. Trying to prove that the original decision was right can consume time, attention, and capital that still have other uses.

Look at the project, investment, job, or relationship you're reluctant to leave. If you were starting today with the resources you now possess, would you choose it again? If the answer is an emphatic no, begin working out how to exit. Keep what you can carry forward: skills, customer trust, and knowledge of an industry. Treat spent money, past titles, and the need to save face as costs already incurred.

Sunk costs don't become recoverable because you make another commitment. What matters for the next decision is what you give up by making it. Sometimes the difficult quality you need is the ability to stop.

Early in my private-market investing career, I backed a smart-hardware project. The founder had a doctorate from a well-known university and strong technical ability, but commercialization was going badly. After the several million yuan invested over two years had run out, he asked for more, saying mass production was one final step away. I couldn't bear to abandon what we'd already put in. I invested again. A year later the project failed anyway. What hurt most was the second investment and another year of work supporting the company. During that period, the capital and attention tied up in it also contributed to my missing an early-stage clean-energy investment that later rose twentyfold.

Make a list of commitments to end, then actually end at least one. The result should be something tangible: time freed, an expense removed, or cash no longer being lost. A written resolution alone doesn't change the constraint.

5. Buy information through small experiments

After stopping the damage, the temptation is to plan a magnificent five-year comeback. But a large commitment made with poor information and few resources is a dangerous way to proceed.

I prefer several small experiments with limited losses and room for an unexpectedly good result. Build three to five around capabilities you already have. Give each a firm loss limit, perhaps 5,000 yuan or two weekends, and a short period in which to learn something: two weeks to a month. The immediate goal is external feedback.

If you're considering a coffee business, for example, you could work weekends in a specialty cafe for two weeks or publish ten pour-over reviews on Xiaohongshu, China's social discovery platform. Does anyone show enough interest to pay for your advice? You can learn that before resigning and committing the money required to open a cafe.

This borrows the logic of an option. A modest amount of money and time buys a chance to discover something useful, with a loss you can survive. You may already have the relevant ability and simply need a setting in which it is valued.

A former student lost his job in property while still paying a mortgage. Instead of borrowing to buy a restaurant franchise or committing blindly to civil-service exams, he examined what he knew: property transactions, writing, and AI tools. He tried three directions with no initial cash outlay: AI lead-generation training for local property agents, articles explaining the risks of court-auctioned homes, and asset-allocation advice for acquaintances. He gave each three weeks. The auction-property articles found an audience; by the fourth piece, more than a dozen readers were asking him about viewings and offering to pay for advice. The other two experiments attracted little interest.

Look for a response you can measure: a payment, a clear willingness to collaborate, or results that exceed a relevant benchmark. "I feel I've learned a lot" is useful personally, but it isn't evidence that the market wants what you're offering.

6. Commit to what works and make it repeatable

Once an experiment produces credible results, continuing to spread your effort evenly can become another form of avoidance.

An investing principle applies here: the gain when you're right has to be considered alongside the loss when you're wrong. As the evidence improves, change the size of the commitment. Then build a routine that doesn't require you to feel inspired every morning.

Cut the experiments that attracted little response and direct more than 70% of your time, energy, and resources toward the promising one. Treat that percentage as a working example, not a universal formula. Translate the aim into small, specific actions with a fixed starting cue. "Build a publication" might become: sit at the desk at eight, write 1,000 Chinese characters, then check the phone.

Progress accumulates when useful effort continues long enough in a productive direction. Repeatedly abandoning that direction can interrupt it. A routine reduces the effort required just to begin, especially when your mood is low. Results can help restore confidence; confidence needn't arrive first.

The former property employee did this after finding readers willing to pay for due diligence on auctioned homes. He stopped the other experiments and made this his full-time focus. To avoid drifting while working alone, he went to a library desk at nine, reviewed three auction-property files and wrote an analysis before noon, then visited two residential developments for checks in the afternoon. He treated this as a minimum routine even after a poor night's sleep. Six months later, he had become known locally in that niche, and his monthly income exceeded his former pay as an executive at a property company.

Check where your working hours go. More than half should now serve the same main direction. On a bad day, can you still do the minimum useful work? And is the work beginning to bring in new customers, opportunities, or income without starting again from zero each time?

7. Build a life that can withstand the next setback

An improvement in income isn't the same as becoming less vulnerable.

After a recovery, it's easy to return to borrowing heavily or relying on one source of income. Without a margin of safety, getting back to even may only mean you survived the last shock.

When cash flow turns positive, consider building a reserve covering twelve to twenty-four months of basic expenses, kept away from high-risk investments. Leave roughly 20% of your schedule uncommitted. These are examples of buffers to consider, rather than requirements everyone can meet immediately. Develop skills you could use elsewhere, such as designing AI workflows, explaining complex ideas, finding customers, or building professional trust. While the memory is still fresh, write down what went wrong, the early warnings you missed, and the mistakes you don't want to repeat.

If you regain your old income but retain the debt, dependence, and blind spots that made the crisis so damaging, the next shock may find you in the same position. The aim is a structure in which an ordinary failure doesn't put the rest of your life at risk.

A factory owner I know nearly went under in 2020 after a major overseas customer defaulted. It took him three years to recover. Instead of following competitors into another debt-funded expansion, he limited any single customer to 20% of revenue, kept enough cash for a year's payroll, and turned a sales team tied to one product into a separate cross-border e-commerce services operation. When exchange-rate volatility and tariff shocks hit the industry last year, his factory's profit fell 30%, but the business held up. He even had room to buy useful equipment from a competitor at a low price.

Imagine the same shock arriving tomorrow. Could you work out your runway in five minutes? Do you have two or three alternatives you could actually use? Those answers say more about your recovery than the income figure alone.

Having somewhere else to go

The sequence matters: stop the losses, recover some perspective, identify the constraint, and stop financing past mistakes. Then try small experiments, commit to a direction with evidence behind it, and build enough reserve to survive another setback.

I don't think there is a final state in which uncertainty disappears. A better position is one in which your set of workable options keeps expanding.

As an investor, the advice I return to for myself and for friends is to resist the all-or-nothing comeback. Stay able to keep playing. Give tomorrow's version of yourself one more viable choice than you have today.