How to improve decision making
The American Basketball Association was a basketball league that ran parallel to the NBA from 1967 to 1976.
The ABA was known for introducing aspects to the game that were fun for fans and generally more exciting than the traditions of basketball at the time.
If they wanted to make changes to the game, the league could do whatever they wanted but changing the rules and adding variables can be more complicated.
Could they change the game? Yes.
Should they change the game? It’s not so obvious.
Take the 3 point line for example. For the entire history of the sport, getting as close to the rim as possible created the highest likelihood of scoring and thus winning games. But when the ABA added a 3 point line, the entire strategy of the game changed.
Long time coach Hubie Brown talked about this challenge when coaching his players.
“Don't give them the 25-footer, which is something players had been conditioned to do all their lives. And as a coach, if you have a shooter with range, you have to give him the freedom to take the 25-footer, which is a philosophy that goes against what you learned as a young coach--namely, pound the ball inside”
When the NBA and ABA merged in 1976, the 3 point line didn’t come along as part of the deal. The NBA and NCAA could see what was possible but at that time, they determined they shouldn’t do it.
The impact on tradition, statistics, players, coaches, fan experience etc. was not worth it from their perspective.
A similar analysis needs to be done when it comes to our own decision making.
Could I do it?
Should I do it?
“Could” statements start the conversation
As a financial planner, once someone has an idea for their financial life, I like the idea of “could” planning because it is generally optimistic, goal based and aspirational. Sometimes we call this possibility planning because it looks at what is realistically possible based on our experience, behaviour and systems.
“Could I retire at 55?”
“Could I help my kids with a downpayment?”
“Could I leave a significant charitable gift in my will?”
“Could I buy a vacation property?”
Depending on the situation, the answer to these questions might be a no brainer. If you have the funds to do so, you could do virtually whatever you want!
But this is where the idea of normative economics comes into play. Should you be doing these things?
Could doesn’t always mean should… but this would be really nice
“Should” questions improve your decision making
A “should” statement looks at what ought to be. It’s a second level of thinking that will take into account the impact on others, the bigger picture, risks and opportunities to spend or give elsewhere.
Scroll back up to the previous list of questions and add “should” instead of “could”. Thinking at the “should” level, generally brings more questions than answers but the quality of your decision will improve by looking beyond the surface.
“If the kids are out of the house and all my friends are working until 65, what will I actually do if I retire early?”
You might be looking for value and purpose in your life beyond recreation and relaxation.
“If we help our kids to buy a house, will they become reliant on us for other things?”
You might have a greater desire to teach your children independence, hard work and the value of saving.
“Instead of leaving a charitable gift in our will, what’s stopping us from making that gift today?”
You might be living with the fear of running out of money.
“What are the tax implications of owning property in another country”
You might be concerned with all that is involved in owning multiple homes.
If you don’t know where you’re headed, any road will take you there
The most difficult part of financial planning is not the technical analysis of “could”. It’s very important but not always challenging.
“Should” is much more difficult because it is all encompassing. “Should” is different for everyone. “Should” is your value set, your priorities and your vision for your life.
They go hand in hand between what is desirable and what is possible.
“Could” questions will start the conversation. “Should” questions will improve your decision making.
Things change
It’s okay to re-evaluate when conditions change or you have more information. It’s okay to respond with “not yet”. There’s more nuance with “should” and there can be room to reconsider at at later date.
Back to the NBA for a second. Eventually, the league relented and added the once gimmicky 3 point line to their game. Today, it is critical to the success of teams and is integral to the strategy being employed by coaches the world over. But it is not universally loved.
Some people long for the days of “fundamental” basketball.
Others might find the game boring without 3 pointers.
When “should” becomes part of your process, the result inevitably becomes imperfect. There are too many questions to consider and stakeholders to please. But if decisions are made simply based on what is possible, it can be easy to make the wrong decision at the wrong time.
To take a John Maynard Keynes quote out of context, using “should” questions in your process is valuable because “I would rather be vaguely right, than precisely wrong”.