Financial Optimization: Are You Focusing on the Right Things?

Dan Nicholson

In my work and interactions with business owners, I've repeatedly observed a concerning trend. Despite their hard work, creativity, and determination, many are unknowingly optimizing their businesses for the things that worked for others instead of for their preferences.. This misalignment can drastically affect the trajectory of their financial journeys.

Consider the adage by Kevin Ashton, the creator of the Internet of Things, from his enlightening book "How to Fly a Horse: The Secret History of Creation, Invention, and Discovery." He says, “The greatest test of your expertise is how explicitly you understand your assumptions.” This statement is simple, profound, and holds true for our financial lives as well.

I’ve found that it’s more beneficial to reframe these "assumptions" as commandments. Why? Well, assumptions feel changeable. They're fluid, whereas commandments feel concrete. There's a clear implication that violation would be, in essence, sinful. Having these unchangeable guiding principles can drastically alter your decision-making landscape and keep you on track towards true financial certainty.

As you go about making financial decisions, here's a useful exercise. Consistently ask yourself, "Am I getting closer to what actually matters to me?" It's the first commandment of Financial Certainty: "Closer Over More". This isn't about amassing the most wealth possible, but about ensuring every decision aligns with your unique definitions of success and happiness.

Equally essential is discerning when there is and isn’t a right or wrong - that's commandment number two - “Preference vs. Binary”. This understanding will allow you to focus your energy on the decisions that truly matter, rather than spreading yourself thin over every minor choice.

My third commandment invites your to remember that every decision has infinite trade-offs. When we make one choice, we remove an infinite number of other possibilities. It’s crucial to be conscious of this, as it helps us understand the implications and true costs of our decisions.

Lastly, in business, we must strive for “Asymmetric Upside” which is my fourth certainty commandment. Resources are scarce, and we need to ensure that every bet we make has significant upside with little to no downside.

The journey to financial certainty is not an easy one. It requires a deep understanding of one's biases, gameplay strategies, and effective toolkits. However, as you consistently optimize your actions according to these commandments, I believe you'll find yourself moving closer to your ultimate financial goals.

Remember, the path to financial certainty isn't about amplifying everything. It’s about creating an integrated system that accounts for your unique disposition, evolving desires, and biases. Ultimately, it;s about creating certainty that you are getting closer to what you want. By shifting our focus to what truly matters, we can eliminate the unnecessary noise, optimize our financial decisions effectively, and ultimately win our own game.

Pause and Reflect

  • Have you ever found yourself optimizing your financial strategy for the wrong things? Could you share how this realization affected your approach to financial decision-making?
  • What are some situations where discerning between a “preference” and a “binary” decision has impacted your financial choices?
  • Can you recall a decision you made where you had to consider the infinite trade-offs? How did this realization change the way you made the decision?
  • How do you interpret the concept of “Asymmetric Upside” in your business or personal finance decisions? Could you provide an example where this principle played a role?
  • How has the idea of shifting from amplification to simplification resonated with your own financial journey? What changes have you made, or are planning to make, to implement this shift?

Dan Nicholson is the author of “Rigging the Game: How to Achieve Financial Certainty, Navigate Risk and Make Money on Your Own Terms,” deemed a best-seller by USA Today and The Wall Street Journal. In addition to founding the award-winning accounting and financial consulting firm Nth Degree CPAs, Dan has created and run multiple small businesses, including Certainty U and the Certified Certainty Advisor program.

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