“It’s valuable to do pre-mortems. If this goes wrong, what might that look like?”
A brilliant exercise, Annie says do a pre-mortem before a decision, while crowds will wait to finger-point afterwards. She talked about the self-discipline of asking yourself ahead of time – ‘if I am wrong, what might that look like?’ In my business we utilize strict sell-stop disciplines on every single stock we buy. We do not count on, or blame, the overall market as good or bad. It all depends on where we look. In an overall financial plan, that means insuring against downside before any upside is considered, with risk-free investments first.
A far less crowded application of this pre-mortem advice is on the OTHER side of risk - how could things turn out better than we expect? If somebody is convinced something worse is going to happen, they also need to do this same exercise if they want peace of mind. If they are wrong, do they have buy-stop? Look at that chart above again. The worst leading economic indicators ever, almost double the previous low, all happened.
The call ended with Annie talking about using precious time to learn more new stuff she knows nothing about. Her humility and curiosity, which will undoubtedly help future decisions, were best summed up when she said:
“Peering into the universe of what I don’t know is really where I want to be.”
Annie is my favorite example of the Financial Freedom (and great parenting) that comes from NOT knowing, but learning how to decide.