What if everybody is wrong? About everything.
With the benefit of hindsight, we can now cite plenty of examples from history where the consensus opinion was proven to be wrong.
Dating back to 600 BC, everyone agreed that Earth was the center of the universe until Copernicus proved them wrong in 1543.
Greek, Roman, and Islamic physicians all believed that the body consisted of four “humors” or temperaments—black bile (earth), yellow bile (fire), blood (air), and phlegm (water). It was believed that you only stayed healthy if these four humors were in the correct proportion with one another. If they got out of balance, you’d experience pain or illness. This became consensus in the medical community starting with Hippocrates in 400 BC and remained the foundation of mainstream Western medicine well into the 17th century.
The food pyramid, first published in Sweden in 1974 and introduced by the USDA in 1992, told us the optimal number of servings to consume each day from each of the basic food groups. We now know the pyramid to be a recipe for obesity.
This concept of the consensus being wrong wasn’t lost on Jesus. In Matthew 7:13-14, he said, “Enter through the narrow gate. For wide is the gate and broad is the road that leads to destruction, and many enter through it. But small is the gate and narrow the road that leads to life, and only a few find it.”
So it’s an interesting thought experiment to consider some of the things that are considered to be consensus now and ask, “What if everybody is wrong?”
What if continual advances in technology don’t automate everyone out of a job? What if, instead, technology eventually makes unemployment impossible?
What if CO2 emissions don’t do anything harmful in the long run, but simply make the earth’s climate steadily and slightly warmer, creating a more advantageous environment for life to thrive?
What if tariffs actually work in the long run and trade wars actually are easy to win?
What if Bill Cosby isn’t actually America’s Dad and he’s really just…wait, they’ve already debunked that one.
Who knows how we’ll look back at 2019’s consensus opinions 50 years from now. But I can promise you that the consensus will be wrong on some of them.
This should tell us there’s something that goes on in our brain that makes us absolutely certain that something is true, even if it isn’t. So, what does this have to do with your financial planning? Well…what if you’re wrong? About almost everything? Is it possible that you’ll someday look back on your current assumptions and realize that you were wrong? A few examples:
Assumption: “I don’t want to make any changes with my 401k; it’s done really well for the last few years.”
Reality: What if it’s done really well because the market has been terrific for the last few years, not because you’re an investing genius or because your 401k is a magical account that only gives you a good return?
Assumption: “I want to start my Social Security as early as I can. Who knows how long I’ll live, so I’m better off to get that money sooner, even if it’s a lesser amount, instead of putting it off until a later age and maybe only receiving it for a few years.”
Reality: What if a break-even analysis determines that you don’t have to live as long as you think for the higher monthly amount (started later in life) to work in your favor? There are compelling reasons in some cases to start your Social Security at a younger age, but unless you’re terminally ill, the “who knows how long I’ll live” mindset isn’t one of them.
Assumption: “I can find ways to spend less money once I retire, so I can go ahead and retire now.”
Reality: What if you actually don’t have that much wiggle room in your monthly budget? What if spending less makes you absolutely miserable because you’re living on such a tight budget? What if you need to spend more in retirement because you want to travel?
Maybe you’re right about most of the things that you accept as obvious truths. But what if you’re wrong about just a few of them? What if you’re wrong about just one big one? Can your plan withstand that mistake, or will we one day look back at you as we now look at 17th century doctors putting leeches on their patients in an attempt to get their four humors back into the proper balance?