There are many things that I believe to be true. Upon examination though, I find there is sometimes a crucial assumption or viewing point that effectively defines the conclusion. Would it be wise for me to asses that assumption before I decide that the truth in question is absolute?
I think so.
As investors, planners or just folks, we all fall into a pattern of thought that arises from what has happened before. Sometimes the message in what happened before is the wrong message, or we have misinterpreted its meaning or its scope.
Consider the 10-year-old hockey player who goes to the front of the net with his stick off the ice at waist height. Wrong says the coach. The blade should be on the ice. The behaviour continues. Again the message. Again the old behaviour. Finally coach gets wise and asks why the player wants to hold the stick off the ice.
“Remember last year in the playoffs when we won a game against X. I was in front of the net with my stick up and the puck came out from the corner and hit the blade and went in for the winning goal.”
Factual information, but the wrong conclusion about what works.
The problem is that most people believe things that did happen far more than things that did not. How many chances were missed because the puck came along the ice and the stick was not there? There is no convenient way for a player to keep track of those, so they disappear from the thought process. The one, and I emphasize one, spectacular success remains.
Does your investing profile include such a unique event?
It pays to assess apparent facts with a view to deciding if they are universal. We never see all the possibilities, so we have only a subset of reality when it comes to deciding.
Do government deficits and printing money always lead to inflation? Certainly, probably, sometimes, maybe, and no, each lead to different assessments of the present and the actionable future.
Are deficits necessarily bad? Many contradictory and knowledgeable opinions on that would suggest that there is no fact involved.
Is deflation better or worse than inflation? What if they appear together? Do they cancel or will some other previously unseen factor come into play?
Every one of us is prejudiced and biased. I am prejudiced against Brussels sprouts and in favour of sweet corn. I like red wine better than white. I enjoy meat, but only some fish. Every menu I design would include my biases. That does not make my menu wrong, but it makes me wrong if I decide that my menu is the only possible menu.
Everything we know and act upon is contextual. We should examine our context before we decide it is the only one that matters. Examining context helps us decide meaning.
It is unwise to trust everything you believe.
Don Shaughnessy is a retired partner in an international public accounting firm and is now with The Protectors Group, a large personal insurance, employee benefits and investment agency in Peterborough Ontario.