moneyFYI
Financial Freedom Is Merely Organized Common Sense
Decisions Again
Decisions are the fuel for a plan.
It is surprising how when you start thinking about somethings so many things appear. I found this video this morning. Three lessons on decision making from a poker champion.
Again Bayes logic comes up. Build you expectations for the future on what you have observed and can reason.
Rule #1
Believe in luck. I think that means random chance as Spock would say, but the point is you cannot be sure of anything. Just yesterday my older daughter experienced bad luck. She had reached the last 24 of a 1400 person NFL suicide pool. She and 22 others disppeared from the pool when the odds-on-favourite in four games all lost. Two of them in spectacular fashion in the last seconds of the game. You can get bad outcomes even though you have a good process.
Be careful. If you only count outcomes and ignore the process, you will be an unhappy person. Sometimes picking a favourite doesn’t work.
Our egos ignore luck when we are winning. We are less smart than we think. As Buffett has said, “Financial genius a synonym for a rising market”
I personally believe in luck as the thing that allows people I don’t like to be successful.
Rule #2
Quantify your thinking. Probably. maybe, sometime, and words like those are actually meaningless. Probably could mean anything. Fuzzy thinking is not helpful. We cannot assess outcomes against those standards and we cannot learn from things we cannot quantify. Bayes’ theorem requires data. Management requires data.
As Jack Welch has said, “You cannot manage what you cannot measure.”
Learn to record data carefully so it has meaning for your future decisions.
Rule #3
Don’t trust your intuition. Not that you should ignore it, but be sure it meets the Kahneman tests in yesterday’s article. The presenter in the video says things that are supposed to motivate you are often to general and in violation of the objective rules of life. She suggests:
“Success is sweetest when you achieve it across a large sample size.”
“Your gut is your friend and so is a cost-benefit analysis”
“The future is unknown, but you can damn well try and estimate it.”
Applied to planning
Pay attention to that last slogan.
It is the key to planning. Estimate, not predict the future. Use Bayes’ theorem to change your estimate as life unfolds. Value mistakes and the experiences of others.
Life would be far easier if we frequently challenged our underlying beliefs. They bend our perceptions of reality and do so to our disadvantage.
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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