Popular Beliefs and Unpopular Evidence

What if many of the things you believe to be true are not? All of us think that our personal beliefs about anything and everything are based on facts.

However, when we are presented with new information or new facts we often find it difficult to change these beliefs.

“WICKED” FINANCIAL PROBLEMS

Solving financial problems requires aligning your beliefs (which often are built around popular narratives), with actual evidence (that generally isn’t so popular).

Dig a little deeper and you’ll find that financial problem solving isn’t the same as solving a math equation. As some researchers have put it, these problems can be “wicked” because they are tricky, difficult, and aggressive.

Unlike science and math, there often is no definitive formulation for solving financial problems. Because of the level of difficulty, you can’t afford to act upon beliefs that differ from actual evidence.

“Wicked” problems (a term used in a 1973 research paper by Professors Horst Rittell and Melvin Webber) are not necessarily true or false but rather good or bad. Understanding the problem depends largely on how the problem is described and one’s concept of solving it.

NARRATIVES VERSUS EVIDENCE

One very popular belief might help illustrate this dilemma. Many investors believe that the key to good investing outcomes is found in selecting the right investments and timing the market. While this belief may be popular, it doesn’t line up with actual (unpopular) evidence.

Generally, when investors are confronted with long term evidence (95 years of market data and decades of substantive research), they still cling to the popular, yet errant belief.

In many respects, the most critical piece of the financial problem solving puzzle is coming to grips with how you think, how you process information. Until you fix that, you really can’t fix the underlying problem.

Popular beliefs are usually derived from stories that are told to us in marketing messages and the media. Even when these narratives are erroneous, they can be very hard to dislodge.

As Seth Godin recently wrote, “the world likes popular, but it doesn’t have to be your goal.”

In our quest to improve the lives of those we serve, we often help clients confront beliefs that aren’t grounded in reality. This can be a catalyst for positive change and solving problems. Start there. Ready for a real conversation?