Incomplete Assumptions

It is easy to be wrong

When we assume things, even carefully, we are frequently wrong. The future is not deterministic. The past does not tell us everything we would need to know. Or does it?

It is possible that everything we need to know is contained in the past, but we can never collect, weight for importance, put them in the right order, ignore the ones that don’t matter, and organize it all to lead to a new vision of the future. When something complex and new comes along, like the assassination of Bin Laden, the first thing we notice is the details were all there years before.

In hindsight it is obvious. In present sight, 2,000,000 data points and an infinite number of ways to connect them makes it impossible to see before the event.

When it’s easy to be wrong

Being wrong about expectations is the normal result. The smart move is to recognize that all assumptions and their projections into the future will eventually be wrong. That creates, for you, a need to continue assessing the assumptions against observed reality. That is not always easy. It is not always ego affirming. It is always important.

Things change in your life in and in the world around you. To be successful you must adapt. If you could have just one high level skill, the ability to adapt would be a wise choice. It might not be the most important skill for everyone, but it would be in the discussion.

To be financially successful

Start with where you are. What you own, owe and might acquire. How do you earn your living? Is it stable? Are you hard to replace? How long do you expect to live? What do you need for your dependents, or people you wish to favour?

Some of those require an awareness of the context. Many people see their jobs as certain. Few will be right. Some are more certain than others, but everyone is vulnerable. It is a cost benefit thing. It might be economically feasible to replace truck drivers with autonomous vehicles, but not for a while. It is more likely higher valued skills will be made obsolete earlier. Especially ones that do not require new methods or equipment.

Computers that exist now are very good at comparison. Radiology is the examination of a picture and a decision about what it means. A computer with access to a database would find another identical picture and draw the inference from what happened before. The only hindrance is the database does not yet exist. It will.

Essentially the same thing for any diagnostic position. Could be a doctor, a lawyer, an auditor, or a weather predictor.

There is the same risk to your job if it relies heavily on computational or finding relationships skill. Computers are good at that too.

And risk

You might not make it at all. There is a thought in physics that says anything that is not specifically prohibited will happen. Like you might die young, or become disabled. Shed that risk to an insurance company.

Duration of life keeps moving ahead.

I have decided old people are ones who are at least 15 years older than I am. It was true when I was 15 and it remains true today. The thought keeps me feeling young, but it introduces for me the possibility of a very advanced age without being old. Longevity risk is real. What are you doing about it?

Things to notice about that risk include the risk of inflation, the risk of government action to reduce or defer pensions they have promised, and new needs related to care. Together these mean you must continually assess the mix of your assets, your external pension income, and your lifestyle. If your lifestyle begins to erode capital, how will you replace? It is a rather prompt downhill slide from first capital erosion. How would you adjust lifestyle as soon as you see the hint of a need to do so?

Quick adjustment is important in all scenarios

Projections are a part of planning.

A military thought. “Forecasts are always wrong, but I must have them so I can make my plan.” This is, of course, followed by the admonition that all plans are useless.

The lesson.

It is not the plan that matters, it is the process of planning that matters.

Projections help you learn about the context of your problem. Things that turn out differently are surprising and interesting. They help us learn.

The process is assess, project, observe, modify. Repeat frequently. Perfection is unnecessary. You’ll be okay if you are directionally right.


I help business owners, professionals, and others understand and manage risk and other financial issues. To help them achieve their goals, I use tax efficiencies and design advantages to acquire more efficient income and larger, more liquid estates.

In previous careers, I have been a partner in a large, international public accounting firm, CEO of a software start-up, a partner in an energy management system importer, and briefly in the restaurant business.

Please be in touch if I can help you. don@moneyfyi.com 705-927-4770

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