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Financial Freedom Is Merely Organized Common Sense
What Can You Learn From A Novel?
Of course, you can learn something.. Even more important is that it doesn’t have to be a classic novel. The very best novels are literature and have meanings at many levels. All good, but you can learn from any novel, just like you can learn from any person.
I recently set out to reread a late-70s Robert Ludlum novel. The Matarese Circle. It is of the spy, political thriller genre, and Ludlum writes good stories. They aren’t literature in the sense of The Pilgrim’s Progress, but they include an occasional aperçu that holds value beyond the pleasure of reading a well-crafted story.
I didn’t get far into The Matarese Circle before finding one.
Crafting reality
We can quickly become victims of our personal view of the world. Agree? If yes, how valuable is this thought?
“Teach yourself to think like the enemy thinks. Not how you’d like him to think, but how he really thinks. It is not easy; you can kid yourself because that is easy.” Character, Brandon Schofield, Consular Operations, US State Department.
I can assume few of us are spies and/or assassins, so perhaps the idea of “the enemy” doesn’t come up very often. Nonetheless, the tendency to delusion does. Reread the thought and substitute for “the enemy” some other things that come up in your life.
“The economy” Do you understand inflation, deflation, or the effect of printing fiat currency? Do you address the impact of regulation? Do you know the costs of officious bureaucrats expanding their power by defining ideas beyond their original intent of those regulations? Do you understand how free trade works or should work? What is the meaning of the central bank discount rate? If you are like me, the answer is probably not well enough. Nonetheless, I have ideas about how each of those works.
“Economics in general” Everything involves incentives, disincentives, and trade-offs. Especially trade-offs. You can get something only by giving up something. There is no free lunch. If you want money, you must trade skill and effort to get it. People who offer nothing for nothing rely on how little you really know. Free is not the same thing as someone else pays.
“The stock market” Do you know a share you buy is just a tiny slice of a business, and business fundaments will sooner or later define its value? Do you know how to assess the value of a company? Do you know how the market “thinks”? The volatility in the market arises from differing interpretations of value and the emotional input of the people buying stocks. Do you know how to address those variables or even find them?
“Other people” I think it is safe to assume that we can sometimes anticipate how others will behave but are confounded by the occasional surprise. Customers, friends, family, politicians, and, of course, spouses. How much attention do we pay when something varies from our idea of normal? Normal being what is “supposed” to happen. We pay less attention than we should. As with budget analysis, the variations are where the information lies. Experiencing what was expected teaches little.
You can substitute any particular subject in the thought and expect some insight.
A variation
Consider the idea of “strategic arrogance.” That’s the condition where we assume the enemy, the market, or the customers, will respond to our action in a particular way. Only the very best managers have another step prepared when they don’t. In the mid-80s, Coca-Cola introduced “New Coke,” and their customers refused to buy it. Coke is a well-managed company, and within weeks “Classic Coke” appeared to go back. The lesson for us is to seek and act on objective reality as you find it. That’s difficult. You have to recognize it, and you must have a way to respond.
Defending yourself from strategic arrogance
The initial step is to understand what unintended outcomes might appear. As soon as you realize there could be secondary effects from your decision, you are well on the way to creating a better plan and defences for the likely variations.
Always ask, “Okay, what next?”
The idea of planning is to anticipate better. You can’t know the future, but you can be ready for it. The examination of other possible outcomes is an adult choice that improves the value of your predictions. It is like seeking people who disagree with you.
The bits to take away
- Look for secondary effects and the defences for those. That alone will make your predictions more robust.
- Nobel Prize-winning physicists seem to understand
Richard Feynman, “The first principle is that you must not fool yourself — and you are the easiest person to fool.”
Edward Teller, “When you’re certain you cannot be fooled, you become easy to fool.”
- Mark Twain has explained why it is so easy to stay with a mistake
“It is easier to fool someone than it is to convince them they have been fooled.”
- Excuses are unhelpful. Have a network that helps. If you have fooled yourself, you will need an outsider to convince you, and even they will have trouble. Left to yourself, you won’t easily change a decision you made based on your own judgement. You will tend to rationalize it. Objective reality can be different from your assessment, and you should learn from that difference.
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I build strategic, fact-based estate and income plans. The plans identify alternate ways to achieve 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. I have presented to organizations as varied as the Canadian Bar Association, The Ontario Institute of Chartered Accountants, The Ontario Ministry of Agriculture and Food, and Banks – from CIBC to the Business Development Bank.
Be in touch at 705-927-4770 or by email at don@moneyfyi.com.
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