moneyFYI
Financial Freedom Is Merely Organized Common Sense
Dealing With a Changing World
Suppose I arrived on Earth from Mars three years and when I arrived I knew nothing of the Earth’s history. I think I would find the behaviour of the people and their leaders to be be incomprehensible. Martians are highly rational.
Martians and investment managers
Martians and good investment managers have at least one common guiding principle that arises from being rational.
Each believes strongly in their positions, but they will change their mind when it appears there is a better choice. I have heard it expressed as “Strong opinions, loosely held.”
In my experience investment managers are among the most curious and objective people around.
Neither has a big ego that cannot admit error. Either will change their position as soon as new information becomes available. New information can often invalidate a previously sound position. The amateurs may see them as waffling. Nothing could be further from the truth.
In his time, John Maynard Keynes was an outstanding investor on behalf of King’s College. His stated position on the waffling criticism. “When my information changes, I alter my conclusions. What do you do, sir?”
How rational is that?
.In politics and medicine today, there is not much sign of changing positions based on new information. Why is that? I can see a few reasons.
- Their original position was not fact based so new information is truly new and unprovable in thir original context.
- They chose a path and promoted it strongly and the path chosen failed to deliver. The vaccines do not prevent the spread, which was their political promise. Political and ideological promises are very difficult to back away from. Covid-zero was never possible and they were too hasty in trying to appear useful.
- They demonized those who disagreed and now are having to adjust their position and try to back away from serious communication errors. Seems many of the disagreement was well founded.
- Science is not an easy thing to blend with ideology. Science demands the search for error and change.
- Uncertainty is the standard and successful people use it to their advantage.. “I think that when we know that we actually do live in uncertainty, then we ought to admit it; it is of great value to realize that we do not know the answers to different questions. This attitude of mind – this attitude of uncertainty – is vital to the scientist, and it is this attitude of mind which the student must first acquire.” Richard Feynman
When the situation is unknowable
The first sound step is to notice that you don’t know what to do. Therefore any program you introduce should be based on what you know, what you think it means, and what information you would like to have to make a better decision. It is easy enough to evolve a better answer when people know the limits to their decisions.
If a decision becomes part of your persona, it is hard to change your mind. Here is a defence you could employ.
“Avoid having your ego so close to your position that when your position falls, your ego goes with it.” Colin Powell
The bit to take away
Avoid taking hard positions if they rely on incomplete information.
Be humble in the face of complexity. It is nice to reassure people but it is better to inform them. Knowing more is reassuring for most of us.
As your information changes your position should too.
Always explain the part you don’t know and what you are doing to find the missing information.
Be patient. Complex changing problems cannot be solved in an instant. You look dumb if you do and the future brings more complete information.
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I build strategy and fact-based estate and income plans. The plans identify alternate ways and alternate timing to achieve both spending and estate distribution goals. In the past I have been a planner with a large insurance, employee benefits, and investment agency, 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. I have appeared on more than 100 television shows on financial planning, have presented to organizations as varied as the Canadian Bar Association, The Ontario Institute of Chartered Accountants, The Ontario Ministry of Agriculture and Food, Banks – from CIBC to the Business Development Bank.
Be in touch at 705-927-4770 or by email to don@moneyfyi.com
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