A Good Decision Can Still Have a Bad Outcome | Ep. 65

You cannot judge the quality of a decision based only on the outcome.

In this episode of the Plain English Finance Podcast, Tré and Sierra discuss how to make better financial decisions by focusing on the information you had, the range of possible outcomes, and whether the decision would still make sense if you repeated it many times under similar circumstances. The episode starts with a simple illustration: one person drinks and drives but gets home safely, while another takes a taxi and gets into an accident. The outcome looks backwards, but the taxi was still the better decision because it reduced unnecessary risk. 

The same idea applies to personal finance. A bad investment decision can occasionally work out. A good financial decision can still lead to an uncomfortable result. That does not mean the decision was wrong. It means decisions should be judged by process, not hindsight. 

In this episode, we discuss:

•  Why outcomes alone do not tell you whether a decision was good 
•  Why likely outcomes matter more than perfect hindsight 
•  Why a good decision should improve your odds, not guarantee success 
•  Why bad decisions can sometimes lead to good outcomes 
•  How to think about decisions you would repeat 1,000 times 
•  Why too much information can lead to decision paralysis 
•  How to decide what information actually matters 
•  Why people often get stuck on small financial details 
•  Why every decision has a downside 
•  Why “safe” options can still carry risk 
•  How to compare real alternatives instead of imaginary risk-free choices 
•  Why worst-case scenarios matter 
•  Why a financial plan should focus on avoiding unacceptable outcomes 
•  When to revisit a decision after it has been made

Good decisions do not guarantee good outcomes. They improve the odds, protect you from avoidable mistakes, and give you a defensible reason for acting when certainty is impossible. 

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Transcript

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Tre 0:00

You cannot judge the quality of a decision based on the outcome alone. You must judge it using the information that you've had or should have had at the time This fundamental truth changes the way that you should approach decision-making, especially when it comes to personal finance. So let's talk about how to make good decisions regarding personal finance Oh boy, that's been a, it's been a while, I guess. Uh- We are rusty. We're in a new set. Yes. Uh, we're in a new set, and we moved over the last month or so, so we haven't recorded anything in a while.

Sierra 0:31

Mm-hmm. Um... It's been crazy. We've had- we put the set up. We've been working, moving, having a toddler, so it's been, it's been a lot. We've been very, very busy, and we have not recorded in a long time. S- and the set is obviously not done. We're still working on it, but we need... We're figuring stuff out and we need to get episodes out, so we're just going for it.

Tre 1:00

Here we are.

Sierra 1:00

Here we

Tre 1:01

are. Okay, so let's get into it. Yep. So I kinda want to... We'll start off with an illustration so people can understand the, the premise, I guess. So I want you to imagine that there are two friends. They go out to a party, and they've been drinking. Mm-hmm. And one of them chooses to get into a car and behind the wheel and drives himself home. The other friend calls a taxi, and that's how he chooses to get home. In this scenario, the person that called the taxi gets into a car accident, and the person that drove himself home got home safely. Mm-hmm. Who made the right decision?

Sierra 1:39

Taxi.

Tre 1:40

Why?

Sierra 1:41

Because it's... It doesn't always matter... No, it never matters the outcome, because you don't make a decision... A decision is made proactively, if that makes sense. You can't look into the future, so you make a good decision based on the information that you have at the time from what you know, and then, like regardless of the outcome, once the decision is made, it's already a good or bad decision. Would you say?

Tre 2:14

Yes. Yes.

Sierra 2:15

Kind of? Like it's, it's like- Pretty much once it's, once you've decided, it's either a good or bad decision regardless of the outcome.

Tre 2:21

Yeah, 'cause you... The outcome is unknown when, when you do it.

Sierra 2:24

Yeah.

Tre 2:24

The fact is that the individual that got behind the wheel of the car put himself at more risk than was necessary. Not only him- Mm-hmm but all those people around him.

Sierra 2:33

It's illegal. There's... Yeah.

Tre 2:35

Oh, ignoring the legality of it, just purely basing off of not whether it's a legal decision or not, 'cause obviously that does matter. But no- you're, you're putting people... Is there's a reason that it's illegal, right? Yeah. You're, you're putting other people at, at risk, yourself at risk more than is required. So and it's exactly the same with lots of different types of decision-making. When somebody makes a bad decision, it's very common that they'll look back on that decision and say, "Well, I couldn't have possibly known the outcome."

Sierra 3:01

Mm.

Tre 3:02

Despite it being a likely outcome.

Sierra 3:05

Mm.

Tre 3:06

So decision-making is about a range of outcomes that is reasonable, and then making a decision based on that range. Does that make sense?

Sierra 3:15

Mm-hmm.

Tre 3:16

Okay. So for example, if that individual got in the car who was intoxicated and drove, and they did get into an accident, they might turn around and say, "Well, I didn't see the deer coming out of the ditch. How was I meant to know that it was there?" That's irrelevant. Yeah. The fact is that you put yourself in a situation where the deer could come out the ditch and your, your reaction time was impaired.

Sierra 3:42

Yeah.

Tre 3:42

You put yourself in that range of outcomes.

Sierra 3:45

Yeah.

Tre 3:46

Okay? And the individual that got a taxi reduced that risk. Whether they got into an accident or not is irrelevant. Mm-hmm. You make decisions to put yourself in the best case, the best scenario possible.

Sierra 4:01

Yeah.

Tre 4:01

Okay?

Sierra 4:02

Yeah. The end That's it.

Tre 4:07

Yeah.

Sierra 4:09

Makes sense to me.

Tre 4:09

Yeah. Perfect. Good. Moving on. Um, so yeah, so I kinda wanted to talk a little bit about how that translates to personal finance and kinda to learn, I guess to learn a little bit more about, or help people learn a little bit more about the, the relationship between the outcome and the decision that goes into it. Okay, so-

Sierra 4:33

Yeah

Tre 4:34

for example, a good decision or how would you classify a good decision? What would you say? How would you know that, "Okay, I made a good decision," in said scenario?

Sierra 4:43

Um, in that scenario? Or

Tre 4:45

in any- It doesn't have to be. Just in any, in any scenario. So let- let's relate it back to, to personal finance now. Let's take, or do you have a, do you have an example that we could use?

Sierra 4:54

Well, of course I'm thinking of like cognitive function preferences. So the article-

Tre 5:01

Related to personal finance

Sierra 5:02

Okay. Yes, I know. But I'm saying with tho- 'Cause you were like, "How do I know if I've made a good decision?" So I am gonna talk a little bit about it because that's how I, my preferences for making decisions. My decision-making preferences are this way, so I weigh things a specific way. Does that make sense?

Tre 5:20

No. Okay.

Sierra 5:21

Well, the way I know I've made a good decision is when I have- I guess, thought about it extensively. So I've-- I like to, visualize scenarios and, like, play them out in my head. So not everybody likes to do that, but I like to imagine, like, possibilities in my mind. So when I'm making a decision, I think about a ton of different outcomes. "Okay, if I do this, this could happen," blah, blah, blah. Like, if this, then that statements. Yeah. Does that make sense? Yeah. Okay. So I'll, I'll run those through. Usually if it's a huge decision, like if I'm making a really big decision, I'll usually do a pros and cons list. I'll look-- I'll research a lot. Like, I'll look at source material. I'll look at what, like, the masses do or have to say. Um, and then yeah, I'm the type of person who does like to decide and then, like, move forward. I don't like to keep my options open for a long time. I wanna have, like, a decision made. So once I've run through that process, I will, like, feel good about my decision. I'll be like, "This is-- I've made a good decision because I've done my whole process of decision-making, and I've-- there's nothing more that I could have done," I guess.

Tre 6:45

Okay, so your, your view of whether it's a good decision is based on your process. So have I completed the process that I use to make decisions?

Sierra 6:55

Yeah, I would-- kind of. Like, do, do I have as much... It's probably based on, like, knowledge. Do I have as much knowledge as I can get? Do I have as much information as I can get on this in order to move forward? So if I, if- If at some point there's no way to move forward... How do I say this? If there's no way to get any more information without moving forward, and you have to decide, I'll gather as much as I can before that time, and then move forward. Does that make sense? Like, I like to n- like, I like to have a lot of knowledge before I make a decision. I like to research. I know some people like to have... They have close family or friends, and they really put a lot of stock into, like, their opinions of things. I'm not that type of person.

Tre 7:51

So then they would... So then my question was, like, how would you know whether it was a good... Like, how would you personally determine? So for example, somebody that puts a lot of stock into other people's opinions- Mm-hmm their view of a good decision is, "Well, my Uncle Bob told me that it was the right thing to do, so it's what they would do, so therefore it must be a good decision for me."

Sierra 8:11

I don't know if that's how people would measure a good or bad decision. I just know that is, like, a preferred method for certain people. Like, everybody has a different preferred, preferred method of making decisions, or what they put weight on for making decisions.

Tre 8:27

But that's how they make decisions. I'm saying how do they know that it's a good decision, where they're like, "Okay, this was a good decision"?

Sierra 8:34

I don't know how they v- view it. I told you how I view it, I think. I'm getting, like- Yeah a little confused. I'm like-

Tre 8:39

That's okay. So I, I, I

Sierra 8:41

what- I think other people do put stock on the outcome. What people tend to do, I think, behaviorally, is they make a decision that they deep down want to make. That's step one. They have, like, a bias and they're like... Um, I can't think of an example off the top of my head

Tre 9:02

Let me ask it in a different way. If I'm walking along and I see an apple on a tree- Yeah looks tasty, I have a decision to make. What are my decisions?

Sierra 9:13

Eat it or move on.

Tre 9:14

Okay. How do I know whether I... Let's say I decide to eat it. How would I determine whether that's a good decision?

Sierra 9:20

Do you have the information to know that the apple is safe to eat? Do you know who the apple belongs to? Like, to me, it's like you need that info, I guess. So that's why I know it's a good decision if it's like, okay, I've had... I have all this information. Um, like I've weighed the risk, I guess, and I'm willing to take that risk because I've weighed it. Does that make sense? Like-

Tre 9:48

Kind of. Okay. I'll, I'll, I'll skip ahead to what I-

Sierra 9:51

Okay, you do

Tre 9:52

would recommend. Yeah,

Sierra 9:52

you do. Um- You do you.

Tre 9:54

If you was to make the same decision repeatedly in them same circumstances, it would lead to your desired outcome

Sierra 10:03

Okay.

Tre 10:04

So for instance- Say that. Let's use-

Sierra 10:05

Say that in plain English

Tre 10:08

So if you, if I made this decision 1,000 times- Yeah I would expect on average to get the outcome that I was desiring.

Sierra 10:15

Okay. Yeah, that makes sense.

Tre 10:16

That's how you would determine, that's how I recommend people determine whether it's a good decision or not. Mm. Because you can't base the decision on the outliers. And something that you have to understand with decision-making is that you, it is not perfect. You can h- you can make a really good decision and have a really bad outcome, but you can also have a really bad decision and have a really good outcome.

Sierra 10:38

Mm-hmm.

Tre 10:39

So you need to put your- but that's a lot less likely. If I made those bad decisions over and over again, where would I most likely end up? So let's go back to this apple.

Sierra 10:49

Yep.

Tre 10:49

If I have that information, and my decision is to eat the apple, and I have the information, I know it's, it's fine for me, it's not poisonous, it's not... etc., and I know that, you know, crabapples grow in this area, etc., I'm gonna eat this apple. Most times with that information that I had, it would turn out well for me, right? Mm. If I'm hungry, that's what I'm wanting. If, however, I'm in a place where I do not have that information, I do not know that information, I just see a piece of fruit that I don't recognize, and I choose to put it into my mouth and ingest it, and I do that 1,000 times, I am likely going to get sick

Sierra 11:30

Yeah.

Tre 11:30

At some point, I'm likely going to get sick because-

Sierra 11:33

At some point, but on average?

Tre 11:34

Yeah, bec- I don't have that information, right?

Sierra 11:37

So what you're saying is you need the info, would you-

Tre 11:40

Yeah, absolutely. Ab- ab- absolutely, you need the information. I

Sierra 11:42

think we're saying the same thing, but you, you said it very concisely

Tre 11:46

I'm saying it 'cause my, I... Okay, I, I... Another question then would be because decision, like information paralysis is a, is a thing- where too much information is also extremely dangerous when it comes to decision-making. Mm. So how would you determine whether you've ha- you have enough information or not?

Sierra 12:04

I think, something I do where it's like, okay, this is getting overwhelming when there's so much info is, again, like I wanna look at the source, I guess.

Tre 12:19

The source of what?

Sierra 12:20

Source of the information. Okay. 'Cause information can come from tons of different places, but realistically- If your source is solid, like for example, if I'm looking at a medical procedure, right? Uh, there could be tons of information like health gurus being like, "Oh no, don't do it. Go all natural," or a doctor being like, "Yes, best decision ever," blah, blah, blah. Like, there's tons of different sources. But personally, I like to read medical journals. I know that's kind of... not everybody likes to do that, but that's where I like to get info. I like to read the study and how, how it might have been conducted or whatever, um, in order to get, get that research. And I would base more of my decision on that source, I guess. So even if there is information like analysis paralysis, it's like, yeah, my great aunt could be giving me information, but I'm not gonna weigh that as heavily as, this information. Does that make sense? So like, I, yeah, I guess that's how I would go about it, and, doing the pros and cons list as well. once I have that info, it's like, okay, this, there's still a lot of information. how would this pertain to me, I guess? Because every case is different. So then I'll write down like, okay, pros for me are this, this, this, um, cons list and then I'll weigh that as well. And I kind of take the whole picture once I'm done that process and then decide.

Tre 13:55

Okay. So then w- what I'm gonna do is we're gonna go through just a few questions, I guess, that you can ask yourself if you're trying to make a decision and trying not to get too overwhelmed with said decision. Why are you smiling like that?

Sierra 14:09

Because I'm like, I don't know how you feel about all the things I'm saying. If you're like, "This girl is nuts," or I don't know. No, no, no, no, no. I feel like you would agree with a lot of what I'm saying.

Tre 14:19

No, I... No, I do. No, I, I do. I do. I, I, I agree with a lot of it. It's just, um, there are certain decisions that, like, your way of decision-making would very quickly lead somebody to decision paralysis, where you're- ,putting a lot of effort onto decisions that aren't relevant.

Sierra 14:41

Mm. But I, I guess, yeah, I'm thinking of more important decisions, I guess.

Tre 14:45

Yeah. But how do you know... Again, and the thing about personal finance is, and that's, that's the scary thing for a lot, most people, is that how do you know what is important and what is not an important decision?

Sierra 14:54

Yeah. That's

Tre 14:55

fair. Because

Sierra 14:58

people get hung up on, on the wrong things. Yes. I guess that's a whole different area. Because realistically, like, everybody has to deal with it, but a lot of people don't know what's important and what's not.

Tre 15:07

Mm-hmm.

Sierra 15:08

Versus a lot of other things in life, it's like, okay, I know if I have an illness and the doctor's like, "You need to pick one of these medications"-

Tre 15:15

Exactly

Sierra 15:15

I know that's important, so I have to go through that set of information.

Tre 15:19

Yeah.

Sierra 15:19

So it's like, it's different. Yeah, I guess.

Tre 15:21

But let's say, uh, keep on the medical route, let's say there was three drugs and they were all the same active component to those drugs, and now the doctor was saying, "Okay, not only are you gonna pick the procedure, now there are 16 drugs involved in this, uh, this procedure that you will be taking throughout three months. Uh, here are eight different companies that produce every one of these drugs. Please choose one of these eight companies for all," did I say 16, "different drugs." Now you've went from I'm picking the procedure to what a lot of people do with personal finance, where you're now trying to make all these small, minute decisions. Mm-hmm. When the reality is in, in a doctor-patient relationship, they don't give you that information. They, they, you pick the procedure, and then they tell you exactly, "This is what we're doing." You don't get the option for all these different drugs. They, when you take a Tylenol at the hospital, they don't say, "Okay, would you like this brand?" Or, "We got this one from Safeway and this one from Superstore- and this one from Walmart. Which brand would you like? This Tylenol and this..." Like, they don't do that. Yeah. They give you the drug. Okay? And in personal finance, people tend to do just that, and they add tons of decisions onto it. So the first thing that I want people to ask, 'cause this is also the decision-making process that I go through when, when I was trying to put this episode together, like w- with what I go through when I'm trying to make decisions for clients, right? Mm-hmm. So, like, somebody comes in and I'm trying to... The way I work is I try to put myself in their shoes, figure out what is the most important to... Well, what am I trying to figure out? Okay, so the first step is what you're trying to accomplish. Okay? So in this medical illustration that we have going-

Sierra 17:04

Yeah

Tre 17:05

we are trying, let's say it's a, I don't know, what's a relatively minor- surgery that somebody might have. Okay, they, they tear their meniscus.

Sierra 17:17

Okay. That's

Tre 17:18

in their knee, right? I have no...

Sierra 17:20

ACL?

Tre 17:21

Yeah, I think those are, like, all different parts of the, of the knee. Anyway, okay, so they tear their, tear their meniscus in their knee. So please tell me that's in the knee, or this is gonna sound really, really dumb.

Sierra 17:31

Like, isn't the meniscus something to do with s- I just know this from a movie, but when the waterline is like... Now watch, I'm gonna be completely wrong. I

Tre 17:40

think you're completely wrong. I don't know. I don't know. Okay.

Sierra 17:43

You tear your knee.

Tre 17:44

Okay, yes. But the doc- So the goal is now to do what? Is it to fix the knee? Okay, 'cause that's very different than an athlete needing to be athletic on this knee. Mm. Okay? So two reasonable outcomes, and you might go into a doctor and think, "Okay, I need to fix this issue," but two very different outcomes, right? Mm. So if one of them is- It's like, do you wanna

Sierra 18:04

walk again, or do you wanna be able to-

Tre 18:06

Sprint and run and do a triathlon again? 'Cause they're very different, right? In order for you to be able to, to do those sports activities again Perhaps you need to take a little bit more risk in the type of surgery that you're willing to take in order to fully repair it. And your room of error is shrunk a little bit. So that's something that I often think about a lot with when making recommendations to clients is how much room of error does this decision have?

Sierra 18:35

Mm.

Tre 18:35

So people aren't perfect. We don't exact- we don't know exactly what returns are gonna be, what market volatility is gonna be. When I'm first sitting in front of a client, I have no idea how they're going to react in a market downturn. I have no idea their attitude to debts beyond what they say, and most people don't really think about these things to give me a good answer. So, you're taking a risk with not only the market side but also them as an individual 'cause there's information that you don't know. Just like in this illustration, you're taking a risk maybe with the type of surgery that you would undertake based on what your desired outcome is. So you always have to start with the desired outcome. What am I trying to accomplish here? Mm-hmm. Then you need to look at the real alternatives. So a lot of people when they're comparing options, they compare options to this, this version of events that doesn't actually exist.

Sierra 19:22

Mm.

Tre 19:23

Okay? So every single decision that you make has a downside. Yeah. Whatever it is. Doesn't, doesn't matter. There is a downside, and if you don't think there's a downside, it means that you don't know the decision well enough.

Sierra 19:33

Mm-hmm.

Tre 19:34

Flat out. There is always going to be a downside, and you need to be able to know and articulate what that downside is to what you're comparing it to. So for example, obvious one, personal finance, we're gonna talk about investing. So people might think, "Oh, leaving it in the bank account is the, the safe option." Safe. "No risk." Yeah. There is a lot of risk in doing so. Inflationary, opportunity cost. There's, there's tons of risk in doing so. But to compare an investment to this idea that the other option is risk-free...

Sierra 20:07

Not true.

Tre 20:08

It's not true. So you want to make sure that you're comparing your options to the true risk, which that itself very much informs the way that I make decision-making and the way that I build portfolios together. Mm-hmm. Uh, for example, me using the, the years of safety or the war chest approach, there is risk to that because that money that I'm putting aside in that is, has increased inflation r- well, not even increased inflation risk. It is guaranteed almost to lose out to inflation over time. Yeah. And the down- the, the upside is that it allows me then to better manage somebody's emotions in order to get through the vast swings in the market. So there's two sides of that that need to be addressed.

Sierra 20:51

Yeah.

Tre 20:51

Okay? The next thing that we're looking at, we'd be looking at is the- I already mentioned it, but the range of outcomes. So if this goes wrong, what happens? Okay, and that's something that in investing it's important, but any decision-making, that's important, right? Is the, what is the downside worth, worth the, the outcome? Going back to that, the first illustration of the, of the, the intoxicated driver, if this goes wrong, what happens? Somebody could lose their life. Mm. Multiple people could lose their life. It's just not worth it, right? Yeah.

Sierra 21:28

It's like a v- really big risk kind of-

Tre 21:31

Right? So it's just- Yeah it's just not worth it. So we protect against, that is an unacceptable risk, so we protect against those, those, those risks.

Sierra 21:39

Mm-hmm.

Tre 21:39

And it's exactly the same in decision-making. When you're making a decision, whether it's about insurance coverage, where it's about where you li- All of those things, think about what, okay, what's the realistic worst case scenario here? If that is not acceptable, then you need to control that- Mm-hmm that outcome. And that might mean picking a different option. It might mean managing that risk, right?

Sierra 22:01

I can't believe I didn't say that when we, we were talking about how I make decisions, 'cause that is definitely something I do when I'm, like, running scenarios, is I always start with worst case.

Tre 22:10

Mm-hmm.

Sierra 22:11

Worst case scenario, okay? And then I kinda, like, back from there. Like, I always start at the v- worst and then come back. So I guess-

Tre 22:20

And I show this to people a lot when I'm doing planning, 'cause I talk a ton about range of, range of outcomes, 'cause I hate with a passion straight line projections. They're so stupid. But anyway, the, and what you'll, what you'll notice is, like, I If anybody's done, if you've listened to this and you've done the planning stuff with you, I'd have shown you, like, a, like, a range, and I'd have said, "Okay, well, this, this scenario was ran 1,000 times. The range of outcomes is I wanna see that the top t- like, 75% of the time we don't run out of money," right? Ignore the top 25% of the time, cause the top 25% of the time you die with, like, $7 million. We're not, we're not t- we're not talking about that side. That is if that, if that is the trajectory we're on, we will s- you will s- I will tell you to spend more money. Yeah. Right? And there's definitely clients who will hear that and know, "Yeah, he tells me that all the time." Spend more money 'cause you don't take, you can't take it with you. But I- I, that's not the, that's not the r- scary risk for me. The scary risk for me is you running out of money, so that's where I'm gonna focus on making decisions to avoid, to avoid that if there's any reasonable chance of it.

Sierra 23:25

Yeah.

Tre 23:25

Okay? So very different. So what happens if I'm wrong? And then fifth is what information do I actually need in order to make this decision? So going back to the medical illustration, once it has been determined that the active drug is the same- Mm-hmm it is not important-

Sierra 23:46

To know the brand

Tre 23:47

To know the brands of the- Yep brands of the,

Sierra 23:48

the- This is reminding me of like, not to get controversial possibly, but like the COVID vaccines. It's like were they... I don't know. The, I just remember people always talking about like, "Oh, I got this vaccine, I got that vaccine," or like, "This one is good."

Tre 24:00

I think that wa- I think that was a little different 'cause I think there was recommendations around-

Sierra 24:04

Oh, okay

Tre 24:04

around, uh, something. I, I don't know.

Sierra 24:06

But it's like same idea where it's like you're maybe talking about, yeah, maybe we don't know what's important and what's not- Mm-hmm as the general public, I guess.

Tre 24:17

Yeah. You just don't have enough information to know, and so we tend to get fixated on the wrong things, right?

Sierra 24:24

Mm-hmm. Yep.

Tre 24:25

Um, and the information, what information should I know is, is an important one because it will stop what my concern with was if everybody just copied your decision-making for every single decision. Yeah. Because to determine, it's much easier for you to determine the information that I need to know versus looking at all the information available and then being overwhelmed with so much information. So for example, for investing, uh, it would be really important for you to understand the difference between stocks and bonds, Or for you to understand the difference between, uh, different styles of management, right? Like active versus passive, indexing versus w- what, like it would be important for you to understand those. What isn't important is if you pick RBC's global equity fund or Scotiabank's global equity fund.

Sierra 25:17

And that's what people talk about

Tre 25:18

and fixate on. And that's what people talk about and get fixated on. Or Vanguard's S&P 500 or iShare's S&P 500. It com- like those small decisions, yeah, they might make a small amount of difference. That is not gonna be the thing that, if we talk about range of outcomes, that significantly puts you on one trajectory or another. There are other bigger, bigger, much bigger, much more important decisions that must be made in order to make sure that you are on the better range of outcomes versus the worst range of outcomes. Yeah. And that shows up in people not making decisions. And something I said, I think it was episode one or two, what did I say?

Sierra 25:57

Oh, we, we keep saying it over and over. No decision is still a decision.

Tre 26:01

Absolutely. And when it comes to decision-making, it's really important for you to, to understand how to make a decision, and then you mentioned it, make the decision and move on. But know when to come back to that decision.

Sierra 26:16

Mm.

Tre 26:16

So another thing that's really important is that you have something in mind, a trigger almost, of when you should revisit said decision.

Sierra 26:25

Hmm.

Tre 26:25

Okay? So for example, when putting a portfolio together, how do you know when you should revisit it? Right? Like what would have to happen in the world for me to revisit it? And there are things when, when I'm putting my portfolio together that are those trigger points, but they are built around bad stuff happening, realistically. Yeah. So a market downturn is not one of those things that would force me to revisit the portfolio construction because it's built into the portfolio construction. Yeah. That is, that is on the path of, that is in the range of reasonable outcomes, likely outcomes that that's going to happen, so you build for that. What you don't do is every single time something happens in the world think that the right decision is to redo the, recha- change and redo the, the portfolio based on conjecture, based on nothing, just ba- based on what, based on-

Sierra 27:25

The passing of time.

Tre 27:26

Basically.

Sierra 27:27

Yeah.

Tre 27:27

Because there are things that would happen, could happen, but you should have those, what those are clearly in, in mind, okay? When you're making any decision.

Sierra 27:35

Yep.

Tre 27:36

Um, okay, so I've spent this whole time saying that outcomes don't matter to the-

Sierra 27:44

Like relativity of a good or bad decision Of

Tre 27:46

good or bad decision Does

Sierra 27:47

that make sense? I

Tre 27:47

don't know Yeah, like whether it's a good or bad decision or not, outcomes don't matter. Yeah. They do, right? It's not that they don't matter entirely.

Sierra 27:53

Yes.

Tre 27:54

Y- they, they inform the type of decision that you would make again.

Sierra 28:00

Yep. That's, uh, yes, 'cause it's like the decision-making is proactive, but you use the information on the outcome as part of the research.

Tre 28:13

Mm-hmm.

Sierra 28:14

So it is part of it, yeah. Right. I see what you're saying, yeah.

Tre 28:17

But so, uh, but it's important to distinguish the two because it's very easy for somebody to put way too much weight in the, in the outcome.

Sierra 28:27

Of their own-

Tre 28:28

Of their own outcome

Sierra 28:29

experience, 'cause that's what I- Yeah I remember at a, like, training that you did that I was watching. You were talking about decision-making, and somebody gambles and puts it all on red or something and then wins. Like, they only had 100 bucks, they put it all on red, and they win. It's like, is that a good decision? Because th- for them, the outcome was awesome. Yeah. So they might be like, "Oh, I'm so glad I made the right decision." But that, there's-

Tre 28:57

No. They, they did not because- Yeah and bringing it back to how do they know, because if they made that same decision 1,000 times- Mm-hmm what would the likely outcome be? Likely outcome- Loss would be loss.

Sierra 29:08

Yep.

Tre 29:08

So therefore, it was a bad decision.

Sierra 29:11

Yeah.

Tre 29:11

Okay? So that's it. That's, um-

Sierra 29:17

We're gonna stop it there.

Tre 29:17

We're gonna stop it there, yeah, 'cause the next episode, uh, which I have got planned here, w- is going to be about making decisions for other people.

Sierra 29:27

Mm.

Tre 29:27

So it's gonna be about other people's, like, power of attorneys, boards, condo boards, stuff like that. When you're on- when you're not making decisions on your own money, how do you make those decisions?

Sierra 29:39

Hmm.

Tre 29:39

Interesting. Because an important concept is that when it's not your money, you have to be objective, and your decision has to be defensible.

Sierra 29:48

Hmm.

Tre 29:49

Which means that you have to think about it differently, as in if somebody If I was in the court of law and somebody I had to defend my decision, and amongst people that know what they're talking about, could that, is that decision defensible? Okay? Yeah. That's a slightly different standard of decision-making.

Sierra 30:07

Hmm.

Tre 30:08

So if I could summarize everything, though, it's this. It's that good decisions do not guarantee good outcomes. They improve the odds. They protect us from unavoidable mis- unavoidable. Not unavoidable. Avoidable mistakes. Let me write If I wrote this down, I want to say it properly. Okay. But, uh, good decisions do not guarantee good outcomes. They improve the odds and protect us from avoidable mistakes, and they give us a defensible reason for acting when certainty is impossible.

Sierra 30:41

Hmm.

Tre 30:42

And that's-

Sierra 30:43

Very articulate

Tre 30:45

how to summarize this episode.

Sierra 30:47

Great summary.

Tre 30:48

Perfect.

Sierra 30:49

You're very, like, concise and, articulate, but I guess you prepare, and I just go into these blind, and then you ask me questions, and I'm like, "Uh."

Tre 30:57

There we are. "Uh." Okay. Perfect. We'll Thanks for listening. We'll see you in the next one.

Sierra 31:02

Bye.

Tre 31:03

Bye.

31:04

Thanks for listening to this episode of the Plain English Finance Podcast. Trey BYO, certified Financial Planner. Chartered Investment Manager is a financial planner with TC Wealth Management and a Visa wealth. You should always consult with your financial, legal, and tax advisors before making changes. This podcast is provided as a general source of information and should not be considered personal investment advice or solicitation to buy or sell at any securities. The views expressed are those of the individual and are not necessarily those of a Visa Financial Inc. Mutual funds and other securities offered through a Visa wealth, a division of a Visa Financial, Inc.