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5 Steps to Turning Experience (and Failure) Into Wisdom Make better decisions by learning from your mistakes and successes.

By Russ Alan Prince

entrepreneur daily

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Wisdom is one of those "I know it when I see it" qualities that are hard to define. But having wisdom and using it well is often the difference between good and bad decisions in business. The key to becoming wise is experience, but experience doesn't automatically convert into wisdom. Experience provides the lessons that wisdom is based on, but it doesn't guarantee that those lessons will be learned.

Wisdom comes from examining your experiences to determine what works, what doesn't, what can be done better and which mistakes to avoid. You become wise when let experience be your teacher and when you're a great student. Being an entrepreneur means you very likely have met with successes and failures. And the longer you've been an entrepreneur, the more of both you've likely seen.

But ask yourself: As you have these experiences, are you learning from them so you can make better decisions going forward? Put another way: Are you becoming wiser through your experiences?

Related: 10 Harsh Lessons That Will Make You More Successful

Lessons not learned

If you answered no to the question above, or if you aren't sure, you're in good company. In my experience, lots of entrepreneurs fail to learn from their negative experiences. When projects fail and when initiatives (or even entire companies) turn into train wrecks, most people hunker down and retreat — they let those situations get the best of them. It's all too common to succumb to the headaches that failure produces.

Another unfortunate fact: Even many entrepreneurs who are able to get moving again after experiencing a major failure continue to fail, repeatedly, for the very same reasons that drove their initial failure. They make the same mistakes over and over because — you guessed it — they fail to learn from their failures.

Then there's the flip side: entrepreneurs who fail to learn from their successes. When a business endeavor is doing amazingly well, these business owners just go with it and don't scrutinize why. They fail to understand just what is producing their success so they can repeat these actions and achieve repeat success systematically.

Related: 6 Entrepreneurial Lessons From Evan Britton of Famous Birthdays

How top entrepreneurs differ

A consistent quality I've found in extremely accomplished and wealthy entrepreneurs is that they're experts at using losses and failures to improve themselves and their decision-making abilities. I have never encountered an entrepreneur with extreme wealth who didn't have a litany of stories about his or her bad business or investment decisions.

In some cases, they chose to align with the wrong interests or work with the wrong people. These folks see that failure is inevitable, but that the key to success is what they make of their failures — the lessons learned. That's wisdom.

The same is true of their successes. When something has worked well for them, they are keen to understand why. They recognize that by knowing what they did to produce a great outcome, they can repeat the actions and duplicate the result. That's wisdom too. So how do these top entrepreneurs do it? I've identified five vital steps in converting experiences into actionable wisdom:

  1. Review your expectations. Go into each business initiative with clearly specified expectations.
  2. Detail the results to date. There are different degrees of failure and success, so you need to precisely describe the current state of affairs in addition to where you see things going.
  3. Compile a list of all the good and bad decisions. Document all the decisions that turned out well and all those that went wrong. Very often the best way to do this is to construct a matrix, because many choices — such as depending on the right or wrong person — are core to both positive and negative outcomes.
  4. Specify the lessons you need to learn. By carefully considering the causes of good and bad outcomes, you're likely to see underlying reasons behind why things turned out as they did. From these conclusions, you can pull out lessons.
  5. Learn increasingly bigger lessons. Often you will see a pattern of behavior that produces consistent successes or miscalculations. Across multiple initiatives, you can determine ways of thinking, habitual actions and repeated judgments. From this, you can discern the bigger lessons you need to master in order to gain more wisdom.

Make no mistake: Becoming wise takes self-reflection, open-mindedness and work. However, as evidenced by some of the wealthiest entrepreneurs in the world, learning from experience and applying the lessons are powerful ways to create a strong, even game-changing company — and position yourself to become very wealthy.

Russ Alan Prince

Private Wealth Consultant

Russ Alan Prince is one of the leading authorities in the private wealth industry. He consults with the super rich, family offices and select driven entrepreneurs. He is the co-author of Elite Wealth Planning and Your Optimal Financial World.

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