Close Close

Life Health > Life Insurance

Yes, the World Is Messy

Your article was successfully shared with the contacts you provided.

Over the years I’ve attended meetings and read articles about the value of categorizing and prioritizing my clients. There is a sensible logic to this.
If you spend too much time with clients you like, but who don’t contribute much to your business, you’ll be a nice guy with a hobby. There is nothing wrong with this. You’ll have great relationships with people you enjoy, less stress, more time and not much money.

There are an infinite number of ways to categorize your clients: by revenue, by value (as a source of influence), by personality, by attention needs (high-touch/ low-touch) — the number is limited only by your imagination. The challenge, of course, is that the real world doesn’t order itself as neatly as we do.

I’ve had clients who believed that the entire stock market was rigged. I’ve had clients who called me daily asking why the market was or wasn’t reacting to the news of the day, and still others who never called; their response to something as scary as the 2008 global financial crisis never exceeded mild curiosity.

Different Strokes for Different Folks

Some years ago a divorced woman was referred to me. During her marriage, she had lived a very comfortable life with two beautiful homes, expensive cars and furniture, regular dinners at fine restaurants, long trips with first-class seating and five-star hotels.

Her alimony of $20,000 per month, while certainly ample for the average single person, was not enough to support her lifestyle, and she was slowly liquidating a nest egg that for most people would produce enough income to sustain one or two people quite comfortably. More critically, her alimony was due to end in five years.

There was nothing I could say or do to get her to acknowledge her self-destructive financial behavior. She was an intelligent and wonderful person, but her identity was so closely tied to her material lifestyle that she would rather extend it as long as possible (until she was impoverished) and deal with the consequences later.

On the other extreme, I had a client with a similar asset base who was so careful with her spending that she could have buried the money in her mattress, lived 30 more years and (barring a fire) still have had more than half left over for her children.

On the surface, they seem like polar ends of the same spectrum. But outside of their contrasting spending habits, both of these clients had attributes that would have grouped them together: They were sophisticated investors who understood stock market risk and could handle it. They were serious long-term investors who required little to no hand holding. And they were both sources of referrals.

Categorical Conundrum

The use of categories in business, in science and in life is a proven, productive and intelligent way to find commonalities; it saves us time and makes us more effective. We all know that real life will spill over the boundaries of whatever categories we create. But that spillover is not often a meaningful issue for business purposes, so we can ignore it until it creates a problem. And while practical, our decision to ignore the spillover is more complicated than we might think.

The late evolutionary biologist, polymath and thinker Stephen Jay Gould made a brilliant observation that addresses this issue. Gould’s insight is that we have a cultural tradition dating back to Plato — to view concepts like categories and averages not simply as tools to make our lives easier but as a way of uncovering an important essence.

Consider what comes to mind when you think about the concept of normal. Do you say to yourself, “When I think about ‘normal,’ I think of an abstraction, a mathematically derived calculation of data points from the real world. To me, normal is just something useful and valuable, but I know it doesn’t really exist outside of my own mind.”

Of course you don’t think that! I certainly don’t. But that is exactly what “normal” is: a valuable but artificial computation. We are not culturally comfortable with the ambiguity real life presents to us — the messy or amorphous situations and/or outcomes that it produces. We greatly prefer clearly defined distinctions and unambiguous answers, as this familiar story illustrates.

Instructive Anecdotes

On a young rabbi’s first day on the job, a huge argument broke out in the congregation over how a certain prayer should be recited. Half the congregation insisted that their tradition was to sit; the other half insisted that their tradition was to stand. The two sides started to yell at each other, and everything ground to a halt.

The rabbi had to think quickly. He noticed in the back of the synagogue the oldest member of the congregation. He walked up to him and asked, “You have been here longer than anyone. What is our tradition? Do we sit for this prayer?”

The old man seemed lost in thought while he considered the question and then replied, “No, I don’t think we sit for the prayer.” “OK,” said the rabbi, “so our tradition then is to stand?” The old man was silent a bit longer. “No, I don’t think we stand.”

Frustrated, the rabbi raised his voice, “Well, if we don’t sit or stand, then everyone is just going to scream at each other, and nothing will get done!” The old man’s eyes lit up, “Yes! That’s our tradition.”

Gould’s insight was that the messiness, the variation in almost everything in life, is the hard reality. Not only that, variation is the true source of strength, robustness and vitality in all aspects of life.

In investing, it is the wide array of perspective and opinion that forms the source of a healthy and efficient market. Bubbles, crashes and other behavioral excesses all occur when there is too much agreement and too much sameness.

This reminds me of a recent family trip, during which we stopped briefly in Portland with only a few hours of free time. We decided that Uber was probably the best way to get around quickly. Our driver entered our first destination (Tillicum Crossing) into her smartphone and proceeded to let it direct her. I mentioned casually that the GPS might not work to get us there, since there was no actual street address.

What should have been a five-minute drive turned into 35 minutes, as the GPS misfired, sending us down a freeway away from our destination. Our driver could not understand my frustration over her inability to consider any alternative to the GPS (like pulling to the curb to ask for directions, or looking at Google Maps).

A GPS is an incredibly useful tool to get from one place to another. It has been a life-saver for me in countless situations. But in the case of our Uber driver, she was interacting only with the GPS, not with the city of Portland. What should have been a useful tool had become her master. And what should have been an aid to help her navigate through the real world replaced the real world.

We all know Maslow’s old saying, “If all you have is a hammer then every problem looks like a nail.” The more we benefit from quantifying and measuring the world, the more likely we are to change our perception of the world to fit the way we measure it.

The business of advice is still a business, and to operate within it efficiently and effectively, we benefit from the use of any and all organizational and conceptual tools. As long as we understand that those tools are intellectual shortcuts that oversimplify the real world, we can and should use them. The trick is to never rely upon their guidance so much that, like my poor Uber driver, reality becomes a strange place where we are perpetually lost.





© 2024 ALM Global, LLC, All Rights Reserved. Request academic re-use from All other uses, submit a request to [email protected]. For more information visit Asset & Logo Licensing.