Insurance is Not a Backup Plan. Its a Strategy
You can’t predict the future based on past performance, but you can protect yourself by diversifying your investments and building a financial cushion to absorb unexpected shocks
📣 I have started a cohort course for Write of Passage, and this is the second essay that I wrote. Enjoy!
I got a Slack message from the head revenue leader after standup - an alarming one.
The message started with, “It was a hard decision, and we decided to cut 25% of our workforce overall…”
“Woah, woah, woah, what?”, I thought.
My mind was racing, and my palms started sweating.
Am I impacted?
I started to think about multiple what-ifs.
What will happen to my life if I’m impacted?
How many runways do I have with the severance package? How can I survive paying for my family’s mortgage and expenses?
I checked my email to see if there was an invitation from HR or the manager.
Then, I opened a private chat to ask for more clarification from my manager.
But I realized her account was deactivated.
Oh nooo.
Did she get laid off?
She just attended our standup this morning. She told me during that meeting that we would have a 1:1 to discuss my questions regarding the feature that we will be launching soon.
Meanwhile, I noticed that the number of people in our developer channel was diminishing. It goes from 1000 to 900.
A minute later, 800.
Two senior engineers' Slack profiles got deactivated - as they were chatting in the middle of the public Slack channel conversation.
It reminded me of the Squid Game, where each member suddenly got eliminated in the middle of the game. In an abrupt way.
Am I next? Maybe they haven’t gotten to my name yet?
20 minutes later, I received another email from the revenue leader.
“If you received this email, that means you are not one of the impacted ones. Unfortunately, your manager was impacted. Please refrain from telling other people about this news…”
My heartbeat starts to slow down. A cold sweat drips over my shoulder. I was drenched. I felt like I just came out of a hot seat from a CIA investigation and was informed that I was not guilty.
That day, all my team members were impacted except me.
I would have been underwater if I had been impacted because I didn’t have enough cash reserve in my bank account to cover next month mortgage.
These events can be called black swans—unpredictable events with severe consequences that could happen to anyone, including you.
There is no way to prevent Black Swans. We often replay past events and use them to try to predict the future. However, the fact that they have occurred numerous times in our history is just an emblematic reminder that the human brain isn’t wired to detect the Black Swan event.
Thus, having insurance when taking any action. Insurance isn’t just a backup plan - it’s a strategy. It’s the quiet, unglamorous investment that protects everything else you’ve worked for.
Although insurance has a price, it creates a safety net that prevents one from being worried about a black swan event.
Cash is the best financial insurance. It gives us peace of mind when we sleep. If something unexpected happens, we have those amounts to cover ourselves. Cash helped me navigate the layoffs and the economic downturn for the past two years.
After that day, I realized how important it was to have cash in hand to prevent myself from having a heart attack at single company-wide layoff events.
Five months later, our company had another reorganization. This time, one-fifth of the workforce, including all engineering and products, were laid off.
When I heard the news this time, I told myself, “Okay. Screw this. If they lay me off, that will be good as well.”
I was lucky. I wasn’t impacted.
But I wish I was impacted this time around. At least I will get that fat severance package and have some time to explore other opportunities and take a break from this toxic culture. I can’t get that fat paycheck if I volunteer to quit.
Having cash in my bank account not only gave me the strength not to fear layoff events but also gave me the courage to quit my job and find a better opportunity.
Diligently saving for the last 5 months has helped me look at the position of the company in a more clear way. I was awake from being hypnotized by the founder's mission and all of its followers to work hard no matter what the outcome was. I was more clear in viewing the company as an investment instead of as an identity. I can now start to do more clear opportunity cost analysis with the other company based on how I spent my time because I know I have 5 months of burn rate.