You Can’t Know Meaning By Studying Outcomes

If identical outcomes, reached in different ways, have different meaning, how can you learn from studying outcomes?

I recently saw a way to become a millionaire. It was very simple.

First, begin with a billion dollars, then buy an airline. Poof! Instant millionaire. I’m sure there are other ways too.

Outcomes don’t assign meaning

The Covid19 example has everyone talking about the mistakes people have made in dealing with it. Closed air travel too soon. Prepared poorly in the poast. Trusted WHO. Trusted Chinese reports. Imposed isolation too late.

The reasonable place to start is to notice the defect and try to assess how it came to be. Usually it will point one of two ways.

  1. The decision was right based upon the information on hand at the time, but too little was available. Best guess I suppose.
  2. The decision was wrong becasue the information available was misinterpreted or the decision was ideologically motivated.

It is very difficult to retroactively assess the decisions because we use information only available later. It happens all the time. Quantum theory was fairly well understood in the early 1920s, but the math that describes it followed years later. Quite often new things happen out of order. In a perfect world things would happen in the right order and the decisions would be much better.

Outcomes don’t tell you much until you assess how the outcome came to be.

Sudden wealth

Suppose I live on a street in the Bridle Path area, (partof Toronto.) The poor people there have a net worth of $20,000,000. Siuppose someone wins $50,000,000 in a lottery and move there. Externally, that person would not be different, but at depth, would you hand theme your net worth to invest and expect them to do well with it. Maybe one of the neighbours would have been a better choice. Some of them know how to make money.

Consider two widows

  1. One has a business left by her husband, worth $4,000,000 at the time of his death.
  2. The other has $4,000,000 cash

The first widow has an asset that requires inputs to remain valuable. Management and executive decision making ability. Her husband used to provide those. She cannot. It is unlikely the business could be sold for more than $2,000,000 unless there is significant middle management in place. Further assuming they did not quit or be poached by competitors. Looking at the $4,000,000 estate would be reasonable in some ways but fundamentally wrong in her context.

The second widow can use the cash to make life decisions that suit her. Some of those choices will involve investments. If I counselled her to buy the first widow’s business for $4,000,000, would I get sued? Unquestionably.

If you own a business and are considering how your business would be a big part of what they would need to live in the future, ask a single question. Keep in mind, a business is not money. It is only money after the conversion to money and that transaction has unknowable parts.

  1. The people who will buy it.
  2. The way they will evaluate its worth.
  3. Their time frame. Your executors will have 12 months or less to complete the transaction or there will be adverse tax consequences.

The question. Would they like to have some money?

The point

  1. Judge people and their decisions in their particular context. People are doing their best and their experience and world view is different than yours.
  2. Hindsight has no value in assessing the future other than to notice we all make weak decisions when presented with incomplete or wrong information. Learn to revisit decisions and amend as necessary. If you look around at what works, you will find all of it evolved to that position. And will continue to evolve as context changes.
  3. If you are working for a future result try to assess it in the conetxt that is likely to exist then. Your current wolrdview is likely inadequate. You may need to explore with people who have passed through that space already or have seen others who have. This is one of the values of using profefssionals. Most have seen dozens of situations that may be like yours.

Careful assessment of context improves thinking skills.

I help people understand and manage risk and other financial issues. To help them achieve and exceed their goals, I use tax efficiencies and design advantages. The result: more security, more efficient income, larger and more liquid estates. Please be in touch if I can help you. 705-927-4770

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