Beware of Survivorship Bias

I had a fun dinner last night with some of the employees who work for my client. One of them asked me about our most recent podcast, which took us down the finance rabbit hole. One of the young men commented on how debt is good, citing its prevalent use as a common trait amongst wealthy people. The dots were connected that using debt fuels success. In some ways, he's right. Using debt can propel success. On the flip side, however, just as using debt can accelerate success, it can also accelerate failure. But we don't talk about that much in our culture. Why?

It reminds me of a story I once heard about WWII. After the battle, the bomber planes returned to base riddled with bullet holes. Most prominently, the wings and tail looked like Swiss cheese. After assessing the damage, the experts recommended they add more armor to these areas of the plane. After all, these were the hot spots getting obliterated by enemy fire. Then, one man stepped in and proclaimed they should do the opposite. Instead of armoring the areas of the plane most hit, they should armor the areas of the plane least hit. Why? Because the only planes they had access to were the survivors. What did the missing planes look like? If the surviving planes had limited damage to the engine and cockpit, that could be the tell. The experts had become biased due to having just one particular data set (the survivors), not considering a whole other data set missing. They got fixated on what they could see, and forgot about what they couldn't see.

Back to wealthy people and debt. Yes, many wealthy people attribute some of their success to using debt. There's truth in this. However, it's only part of the story. These are the survivors. These are the ones who made it back to base. What about the others? As much as the winners are talking about winning, most losers aren't publicly talking about losing. It can be embarrassing and uncomfortable. So we get a cultural echo chamber where the only people we hear from are the survivors.

Asked another way, how often have you heard someone in your life talk about how much they lost at the casino? Not many. Same with the stock market. How many people in your world do you know that openly talk about getting absolutely thrashed by that hot stock tip they received from some co-worker or neighbor? It's rare. The silence is deafening. We only hear from the survivors.

You may have heard the stories of people who used debt and won. They are more than happy to boast about their spoils. On the other hand, I have met with dozens upon dozens of families who didn't succeed. They used debt.....and lost. They didn't survive. These are some of the saddest situations I can think of. And they are suffering in silence.

Beware of survivorship bias.

The Struggle is What Makes the Adventure

Last night, our family time at the campsite was cut short when a nasty thunderstorm blew in. It was the whole package: thunder, lightning, rain, and wind. We quickly retreated to the tent where we rode out the storm and eventually fell asleep. While we were trying to settle the boys in, they were a bit panicked. I think there’s some lingering impact from an absolutely brutal storm we endured in the tent earlier this summer…..which included Pax getting flooded out in the middle of the night. In an attempt to calm them down, I encouraged them that these are the moments that make the adventure. It helped…..a little.

Think about your favorite movie. The struggle is what makes it. If Darth Vader wasn’t around, Luke Skywalker’s journey would have been a borefest. If the Hunger Games never occurred, Katniss would just be another girl. If Michael Jordan didn’t have the Detroit Pistons, his legend may not have been as iconic. The triumph over struggle is what makes it good.

I think about this a lot when it comes to work and money. It’s fun when we experience wins, achieve our goals, and continue to experience up-and-to-the-right progress. But the struggle? The struggle is what makes those moments so much sweeter. I remember back to January 2020, seven months after leaving my career to start my coaching business. That was the month when our monthly income exceeded our modest expenses. Until then, we were riding the struggle bus and supplementing our income from savings. It was a scary time, but the struggle made the win feel all that much more satiating. I can think of so many other struggles we’ve faced in the last 15 years. Struggles that oftentimes felt like they would break us. Like the struggle of fertility. Finding out I’ll never become a biological father, then the nearly three-year wait in the adoption process, then the failed adoption when we were ready to go meet our child. Gut-wrenching struggles. So when we met Finn and Pax four months later, it was the sweetest of the sweetest wins. It was the best day of our lives. All these years later, it was the struggle that defined us, not the win. When I look at my kids, I remember everything that went into becoming a parent and finally meeting them. I will never take that for granted.

So yeah, we’re huddled up in a tent with a storm whipping right through us. Not ideal, for sure. But the struggle is what makes the adventure.

It's Never Too Late (or Too Early)

Young adults have an amazing opportunity when it comes to getting control over their finances. So many things are working in their favor:

• Their financial life is probably the simplest it will ever be. Maybe not as many debts or other entanglements…..yet. Maybe not married……yet. Maybe not a homeowner……yet. Maybe not settled into a higher standard of living…..yet. Life typically gets more complicated as we age, so in theory young adults are living their simplest life.

• They haven’t yet developed deeply-seeded bad habits. Sure, there may be bad habits present. However, they haven’t had years (or decades) to become engrained into their life.

• They have so much time on the other side of getting their finances right. Let’s just say it takes a 24-year-old young professional 12 months to get their finances in order. That still gives them 50+ good years to thrive on the other side of the hard work. What an opportunity!

These are the reasons I love working with young adults. So much opportunity! On the flip side, the inverse of this is why I love it so much when older clients get their finances right. Their lives are more complex, they have to battle deeply-seeded bad habits, and they have less time on the other side of the transformation. All these factors combine for one inevitable outcome: a massive reason to celebrate and acknowledge a stunning win.

I have one client who is on the precipice of achieving a significant win. The win in and of itself is special. But what makes it even more special is the fact they spent multiple decades doing it the wrong way. They dug a deep hole, financially, relationally, mentally, and emotionally. Then, they decided to reverse course! After nearly two years of sacrifice, intentionality, and unity, they are nearing a point where their lives are fundamentally changing. Never again will they have to deal with what they dealt with for the last two decades. Everything can and will be different from here on out. It’s a weird idea to wrap their head around.

Their biggest roadblock to beginning this journey was the feeling it was too late for them. They were too old and too deep in their mess…..so why bother? The moment they believed it wasn’t too late was the moment they knew it was time to act. They wish they would have started earlier, but they are where they are.

It’s never too late…..or too early. If there’s something in your life that’s “too late,” no it’s not. Sure, it would have been nice to start 1 year, 5 years, or 10 years ago. You can’t go back in time, but you can start now.