In our last blog, we discussed getting to a place where you’re experiencing your life the way you want to. The financial planning is working. Your money is helping you create the life you want.
Some of you might have heard me say this before, but my life didn’t come with a manual - I’m sure yours didn’t either - but let me double-down on what that means.
There are obviously various outfits and institutions who calculate life expectancies. Generally, I think it’s fair to say that we use life expectancies to judge whether we are making progress or experiencing a decline, in terms of wealth accumulation, healthcare, etc. - in a nutshell, our standard of living.
It seems to me that we have missed a major implication of these calculations, however.
If you think about going about the process of calculating life expectancies, it begins as a simple matter of determining an average age to which people are living. It should be obvious that this means that calculating a life expectancy is no guarantee that any one person will live to a certain age—there are obviously those who will live longer and those who will not live as long. So, if a life expectancy calculation is greater than the previous one, then that would obviously mean that more people have lived beyond the previous life expectancy, and vice versa.
What this means is that a life expectancy calculation looks backward, not forward. The importance of this is that it is a measure of how long people are living, or have lived, not how long they could live.In other words, a life expectancy calculation is generally a function of the lifestyle choices we have made, not ones that we could potentially make.
Sure, we can infer that certain lifestyle choices are superior to others, based on a comparison of different calculations; and the more granular we get in our analysis, the more defined our inferences can be. The fact that we are talking about a comparison, however, means that it is still a relative matter—i.e., we can only tell whether one lifestyle choice is better than another.
What we cannot identify, with any certainty, is the absolute best lifestyle choice that will result in the best life, and this is because we have no way of knowing how long we could potentially live—again, life expectancy calculations don’t tell us anything about this, other than basically giving us a minimum life expectancy for the average person.
NOTE: I am well aware that I am only addressing quantity, essentially, when I refer to best, here, but know that there is absolutely a point to be made about quality also defining best. The same problem exists, however, if you were to attempt to define best in terms of quality—it’s simply not possible.
So, why the heck does all of this matter?
It matters, because if we have no idea how long a human being could live, then none of us know what we are talking about when we say that this way or that way is best. All we can say is that one way might be better or worse than another.
Just to ensure that we close the door on any equivocation, best and better are not the same thing. Moreover, when faced with options for lifestyle choices, we can only evaluate their potential for improving our condition by looking backward, and maybe only by observing the impact they have had on others, but we absolutely cannot project any improvement we might experience in our own lives with any measure of certainty—this is essentially where trial and error comes in, and you can find more about that in the same video referenced above.
Now, the fact that we might not be able to identify the best way to live does not mean that it doesn’t matter how we live; that kind of thought is basically nihilistic. I won’t go down that rabbit hole, but nihilism is not a difficult concept to defeat.
Further, if we look for what is best and we come up empty, it would be nihilistic to throw our hands up and end our search—that is unacceptable. This is where better comes in—better would seem to be an acceptable, and necessary, alternative to best. From my perspective, this is a good way to understand what I am speaking to: another way to define best would be perfect and another way to define better would be good—if perfect is not possible, then perfect is the enemy of the good, because only something that is possible allows for progress. Frankly, the fact that we can only find better when we seek best is one of the reasons taking an incremental approach to improving our lives is not only preferable, but it’s all we have.
I suppose the other issue that would need to be addressed in this context is that my excitement for clients living their lives does not mean that I am excited to see them living thoughtlessly. Frankly, living thoughtlessly, which I would define as reckless, would seem to indicate that someone is making decisions extraneously, with respect to any plan that might exist. This would potentially mean that they had no strategy for accumulating resources or managing what was accumulated, or at least one in which they had confidence.
A favorite rhetorical question I like to use: if you go to the effort to plan, and you have done your best to make sure it accounts for as much as possible, what sense does it make to dispense of that plan, or behave as if it is disposable, regardless of the reason?
This basically takes me to the point that risk is something to be considered as well. In other words, the main reason that exists to act responsibly with our resources is that there will always be things that are outside of our control. I am well aware of the anxiety that a bad market environment can trigger, as an example; that’s exactly why we apply the stress tests that we do.
The more thoroughly we account for that which is outside of our control, the more reliable the plan, and the decisions that result, will be.
Want to dig a little deeper? Check out my three-part video series that addresses analysis and decision-making in a world of risk: