Sunday, July 25, 2010

Part II The Fundamentally Flawed More Personal Financial Planning Model/Heuristic

The Fundamentally Flawed More Personal Financial Planning Model
Part II

If some is good, more is better.

In more personal financial planning, the planner manipulates our assets. By analogy, the more vacation planner decides if we are going to vacation in Bozeman or Stowe, Des Moines or Paris. If the planner decides on Paris, he's going to be using very different investment strategies than if he decides on Des Moines. The planner selects what train to put us on, and we hope that we're at least getting a bargain for our money. We may end up in Stowe, Vermont in the winter instead of frying rainbow trout in Big Sky country, where we really wanted to be. But we did have a great express train ride didn't we? And it really was a bargain, wasn't it? Certainly it must have been better than Des Moines, although I've never been there. Too bad we don't ski.

Things not worth doing, are not worth doing well.
Evel Knievel

Actually, this example is about the best scenario I can imagine. What if the planner decides to try for the Paris trip, and our high‑risk investment goes belly up? We stay home. In fact, we may not take a vacation for a very long time.
The Case Against More

Most people wouldn't even think of using more vacation planning as I have described it. Yet almost everyone uses more personal financial planning. Our vacation is too special and important to let others decide for us a personal decision involving our values. Our life goals are far more special and important; yet we spend far more time planning our vacation than our financial objectives and willingly trust others to be stewards to manage our resources as they see fit. Our vacation plans come from inside us, not outside in; our life goals should also come from inside‑out. Each individual must decide on life objectives, based on empirically‑validated values. Yet, here again, most of us allow strangers to manage our assets with very little thought to achieving our objectives.

More personal financial planning will even get some people, albeit by accident, where they want to be. But more takes the personal out of Apersonal financial planning. We wouldnt let a travel agent select our vacation, and yet most of us readily let more personal financial planners select the train, the track and the destination of our resources. But what good is a fast train that isn't going where we want to go? As Eric Hoffer said, You can never get enough of what you don't need. If our vacation is special and important and personal, how much moreso are our life goals? More doesn't work for vacation planning and it doesn't work for financial planning.

What has happened is that in our society, our objectives have become disconnected from our resources. We are trying to manage our resources, trying to get more, without knowing or even caring what more is for. We just know that we want more. Our travel has been disconnected from our vacation and we're endlessly riding the train. How do we stop? If we haven't defined goals, how will we know when we have enough? We have gotten on the fast track to acquiring more for the sake of more. We are accelerating, unable to steer, unsure of the destination, yet crying, Faster, faster! as we derail.

Striving for more things leads to the realization that you can never fulfill yourself from the outside.
Dr. Wayne Dyer

Look at the figures in the margin. The first is a fluctuating line. It represents a high‑risk strategy for getting more. It might be a win it, lose it, win it, lose it entrepreneur, a chart of performance at a blackjack table in Las Vegas or performance of a volatile stock. The box represents an objective. In more personal financial planning, strategies come first. Then we attempt to retrofit the strategies to the goals. Notice that sometimes the performance exceeds the need of the objective, and sometimes the strategy falls below it. These two figures represent the bungee‑jumping method of personal financial planning.

If it so easy to see the insanity of more vacation planning, why is it so difficult to see the faults of more financial planning? Part of the answer lies in Thomas Paine's observation about doing the wrong thing for so long that it appears right. Part of the answer lies in our society's incessant indoctrination of consumerism. Part of the answer also lies in the cultural links between more, good and our sense of worthiness.

Our Cultural Bias for More

Our culture has a built‑in linguistic bias in favor of the concept of more. Words like more‑ality and social more‑s suggest that the more we have, the better we are, in both spiritual and financial terms. By middle age, we have read 50,000 ads and seen 350,000 television commercials all about dis‑satisfaction, about wanting more. Let's briefly explore the disturbing and persistent connection between monetary and spiritual values in our vocabulary. Worth, worthy, worthiness, worthwhile all connote ethical values, but we also link them with the financial term net worth. Is a person with little net worth to be considered worthless? In our society worthless doesn't mean without assets, it means Ano good.

God and good are etymologically linked in many languages. In Middle and Old English, for example, both words were spelled god. But good and god are also linked to tangible assets in the phrase goods and services. Are we less or more good morally because we have less or more goods?

What does more mean? It is virtually impossible to define except in relative terms. It is a moving target, like the horizon or a rainbow, that continually recedes from us. Yet as a culture, we suffer from a collective sense of urgency to acquire more, to capture the pot of gold we hope lies under the rainbow. Most of us believe deeply that more means growth, progress, improvement C in short, that more is inherently good. The logical extension of that argument is Midas, who gained more at every touch, but starved to death in his world of solid gold. Seeking more when we already have enough is akin to continuing to pour tea into a cup that is already full. When the cup is full, our strategies must change. But first we must individually create our individual definition of enough.

Unfortunately, most of don't know when our cup is full. The adjective and the noun content both derive from the Latin cognate meaning to contain. We should be content when we are full, when our cup has its full contents. Therefore, we need to understand what enough is for us. Otherwise we may pour more and more into the overflowing cup, spilling out our resources and indeed our very lives. The result? More actually becomes less! (Subtraction by addition.)

The less I had to get, the more I got.
Dr. Dean Ornish

In its most basic etymology, content means held in or held together. The contents of a full cup of tea are held in by the cup. It doesn't make sense to pour in more tea, because more cannot be contained in the full cup. Pouring water into an already filled cup will only spill the contents. More becomes less. This is the less‑on of subtraction by addition. It also doesn't make sense to use a cup which leaks. In ENOUGH, each one of us learns what is plenty, what the cup will hold. Then we attempt to protect those contents in a cup whose leaks are minimized or prevented. ENOUGH is the alignment of personal goals and values (the cup) with our resources (the tea).

In our culture more is addictive, actually limiting our choices. We use more motivation to keep score or because we like the action, or because we feel more worthy. In the words of William James, In our quest for having, we lose our freedom. As more becomes less, we become have beens. More has become the master, not the servant. And Alan Durning, In the final analysis, accepting and living by sufficiency rather than excess offers a return to what is, culturally speaking, the human home: to the ancient order of family, community, good work and good life.

Because more is so closely linked with our sense of inner worth, the alternative paradigm ENOUGH will not be easily established:

. . . the more important the old concept of reality is to a person, the more important it is to his sense of self‑esteem and sense of inner worth , the more tenaciously he will hold on to the old concept and the more insistently he will assimilate, ignore or reject new evidence that conflicts with his old and familiar concept of the world. This behavior is particularly common among very bright people because they can so easily develop and articulate self‑persuasive logic to justify the conclusions they want to keep.
Charles D. Ellis, The Loser's Game

The Ladder to More

When I was a young man, we had 10 cows and we did very well. When I was 30, we had 20 cows and we did not do better. When I was 40, we were barely making it. Now I'm 70. We have 70 cows and we are not making it at all.

To illustrate the difference between more and ENOUGH, I have developed Aladders@ for the more and the ENOUGH approaches. The more ladder illustrates the endless pursuit for more, based at least in part on the false impression that we are as more‑ally worthy as we are net worth‑y. The ladder for ENOUGH, by contrast, illustrates the aspiration for personal financial wellness as defined by personal life goals and values.

One compelling stimulus to prod us up the more ladder is a dualistic thinking; if I'm not getting more then I must be getting less; if I'm not better, I must be worse; if I'm not good, I must be bad. We are prodded up this ladder just as the train master steered us to our vacation destination. External forces are controlling, steering us, forcing us to stay on track. We are forced to climb rung after rung because we are convinced that more is better.

Shame is the glue that holds the more philosophy together. We accept the dualistic premise that more is good, therefore less is bad. If we are useful, of service, functional - we are right. Today's currency is being right and not being wrong. If we do what is useful, we are right (we get an A) and we are righteous (originally, right‑use‑ness). We feel worthless when we are worth less, so we pursue more. If we get more, we are better; if not, we are worse. Notice how the pernicious process drives us on and on. We feel guilty when we do badly. If I'm not right, I must be wrong, and therefore I feel shame.

As we climb the more ladder, money and external values coincide. I must be useful, or I am useless. (And doesn't everyone want to be useful?) If I am useful, then I am right and righteous. (Notice how more‑ality creeps in?). If I am right and get more, then I am better and a winner. If I do not continue to get more then I get less and I am both worth less and worthless. If I get more, then I am better (if I don't, I'm worse). If I'm better, I'm a winner - not a loser- and winners are good and godly - not bad or evil.

Since there are only two choices offered on the more ladder (more/less; better/worse), we perceive the only sensible choice to be to continue upwards for more and more. Staying on the more financial ladder is really an excuse for avoiding the awkward question, What now?Why am I accumulating more? What are my goals and values? As long as I am on the more ladder, someone must be admiring my accomplishments; someone must think that I'm good and successful. Some day I'll decide on my values and make a commitment to achieve them. For now, just one more time, I want more, even though I don't really know what more is! Isn't that what junkies and compulsive gamblers say? In our quest to be right, good or worthy we succumb to the dictatorship of more.

The poor rich. All they have is money.
Tom Moore

more, more, more what the hell are we all,
e. e. cummings

The late humorist George Carlin has developed a comic routine that nicely parallels my more ladder. I've adapted it, calling it the Full of Stuff Ladder. If you are useful and right, you have the right stuff. If you have more, you have double stuff (like the Oreos with double filling). More is better upscale stuff. If you are better you are a winner and you can strut your stuff. If you are a winner, you are good - hot stuff. If you are good, you are god‑ly, and full of stuff.

More Personal Financial Planners

To be culturally consistent, most of the personal financial planners I know sell Amake more, save more. Consequently, I term these planners more‑ons. Personal financial planning, as generally practiced, is merely financial planning applied to personally‑held assets rather than to the client. As a result, the client's goals are overlooked and the client often becomes a casualty. Why? Because they practice personal financial planning from the outside in rather than from the inside out. ENOUGH personal financial planning is an evocative process eliciting values from the client (literally, evocative means calling out of) rather than cramming pre‑packaged Astuff@ into the client. In personal financial planning, one size does not fit all.

I'm not even sure what I want, but that's not the point. It's that I want it right now!
Elvis Costello

End of Part II

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