Why All Financial Advice is Flawed

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The internet is a strange and fascinating place. You can get a lot of information here, but not all of it is stuff you should follow. Generally, you should be wary of everyone and anyone because the internet is a crazy unregulated place. Lots of people are just writing content in order to sell you stuff. And some others are just idiots.

You should even be wary of advice from good-hearted intelligent people. Most people are speaking from their own experience and everyone’s experience is their own. The decisions they made were “good decisions” because they worked out  – but that doesn’t mean you can or should make the same decisions. As much as personal finance bloggers like to say that the path to riches is simple and straightforward, there’s a fair amount of luck involved.

How I Got Lucky

My high income is directly tied to attending law school. So I could write an article about how everyone and anyone could go to law school to get a high-paying job, right? But I would feel that that was disingenuous. I know enough about my journey to know that the path was not guaranteed.

The timing of my law school graduation was fortuitous. I started law school four years after I graduated from college. If I had graduated law school in 2008-2009, I probably would have been fine for two years, but if I had tried looking for another job after that, I likely would have been stuck due to the recession. If I had graduated in 2010-2011, I would have graduated into an unexpected recession in the legal field, where many graduates were unable to find any legal employment, let alone high-paying jobs. There is some research that shows that the graduates from those years are still lagging behind financially compared to graduates from other years before and after the recession.

Instead, I graduated in 2012, which wasn’t the best of years, but showed vast improvements in job prospects over the 2010-2011 graduates. Furthermore, we all already knew that the job market was difficult and were going in eyes wide open (I started law school in 2009).

Still, I was also lucky to be hired. Interviewing is still a bit of a black box to me. People just like certain people more than others. (Perhaps you could be cynical and say it’s all white men hiring other white men, but I’m not white or a man, so that’s likely not how I got my job.)

There are certainly bad candidates, but we interview dozens of candidates from good schools with good grades and most are perfectly fine. I don’t have a real understanding for why I was picked. And I feel lucky that I was. I know someone who graduated near the top of my class who couldn’t get a job at any law firm and was still meandering years later.

Then there were the people who got fancy jobs but hated them. I know someone who decided to quit even before starting his job. I know more than a few people who rage quit after a few years. They did everything right, but, for these people, the legal field just wasn’t for them. (They could have switched to different legal jobs, but the people I’m thinking of just got out of the legal field altogether). Some people might think that they could have researched more about the legal field before going to law school but working at a law firm as a secretary or paralegal, as many college graduates do before pursuing law school, is not really a good indication of what it’s like to be a lawyer. Like most things, you have to do it, to really know what it’s like. And I was lucky that I was largely happy with my job.

The Trouble With Following Other People’s Paths  

Pre-recession, law was seen as a very safe and prestigious job. Post-recession, there have been a lot more horror stories.

The main trouble with any kind of big investment like law school is that you don’t really know how it’s going to turn out. There are all these forces outside your control that will determine whether you view your decision as a good or bad one. If someone graduates into the recession and can’t find a job, then the decision seems like a “bad” one. If the person gets a lucrative job, then it’s a “good” decision.

But each person started the decision with the same information. It’s a poor way to judge the thought process of a decision by its outcome when it was external forces that changed the ending. (For more on this topic, I would highly recommend Annie Duke’s Thinking in Bets.) You can make perfectly good decisions that go awry for reasons outside your control. It doesn’t mean the decision is a good or bad one. It just means that luck was involved.

We Don’t Definitively Know What Decisions Led to Any Person’s Success

If you were running an experiment to determine cause and effect, it’d have to have controls and be double blind. Real life is not like that. Most people don’t have an identical twin who was making the same decisions at the same time and chose the opposite path – and then continued to make identical choices keeping that one decision the only variable.

What most people think is, well I became rich. How did I do this? And they retrace their steps. But they aren’t considering what would have happened in the alternate reality if they had pursued other jobs, other careers, other spouses, other lifestyles and how the timing affected how those decisions turned out. And truly, even if they did consider this, they would all be guesses.

We Can’t Even Trace Our Own Decisions to Success

I made a spreadsheet for myself of when I would break even for law school. I assumed I would continue working for the job I had at the time and save the same amount.My break-even point was only a few years ago, even though my salary out of law school was 4x my original salary.

But I had to count the opportunity cost. It was 3 years without working and $200,000 tuition. Also, I was quite a little saver before I went to law school, so I think I would have continued that, which would have been particularly beneficial because I would have been saving while the stock market was low. Of course, I also had to assume that I would have been steadily employed throughout this whole time period.

Was going to law school the right decision financially or career-wise? I don’t think I can even answer that question without much more information and until I’m much further along in life. I don’t know the ending to my own story yet, so I certainly can’t tell you if going to law school will be right for you. For right now, the decision is fine. That could change.

We Don’t Even Know If Someone Is/Was Successful

I recently received a comment that detailed a woman’s tumultuous relationship with her husband. The relationship was absolutely fantastic for 10 years. And then it got tougher. They say that hindsight is 20/20, but that’s not really true. Our hindsight in 10 years may be different than our hindsight in 20.

I’ll see people (usually celebrities) touting relationship advice after only dating someone for a few months. Even if they’ve been married for 30 years, we can’t really judge if someone’s relationship advice is sound. We don’t know if they’ll make it 31 years. People get divorced later than that.

People tout skincare advice when they’re in their 20s. The true test is obviously what happens when they’re in their 40s and beyond. People tout career or financial advice when they’re in their 20s or 30s (hey, I’m included in that list!). I will be the first to admit that I have no idea what I’m talking about. I mean, I try not to give advice. I am just telling you my thoughts. I have no extra wisdom for you. (Sorry.)

So someone might have an immediate success right now, but that doesn’t mean they know what got them there. It doesn’t mean that they’ll stay successful. That doesn’t mean that that success was a good thing (because maybe if they had failed, they could have gone a different way that would have led to even greater success somewhere else). We could look at any number of luminaries who were called failures at one point. Steve Jobs was a failure when he got fired from Apple and Abraham Lincoln was a failure when he lost his first campaign. But we would be wrong to have written them off as failures.  The arc of the universe is long.

Be wary of people who are only part of the way along their paths. They don’t know their true ending yet.

Even if We had the Information, We Shouldn’t Judge Decisions by their Outcomes

As much as we all want to say that the difference between the rich and poor is the right decisions, there’s a lot of luck involved. The same decisions that make people rich also can make people destitute.

  • I went to law school, got a high paying job at a law firm and worked for long enough to break even.
  • Others go to law school and graduate with crushing debt and poverty-level jobs.
  • Still others, get the high-paying job and quit to pursue other ventures, still having to pay the hundreds of thousands in debt.
  • It was a great decision for Mark Zuckerberg and Bill Gates to drop out of college to start their own businesses.
  • The failure of other businesses has led some to homelessness. And dropping out of college generally doesn’t work out that well.
  • Some people get married and have a stable job, leading to wealth.
  • For others, the breakup of a marriage and a bad economy can lead to destitution.
  • The breakup of a marriage can lead to financial ruin all by itself.
  • There are likely people who invested in index funds or bought a house in a good area, lost their job or got a health emergency that stretched out longer than expected and had to withdraw money at a loss during a recession.
This is the problem with seeing other people’s outcomes and tracing back to one or two decisions. We don’t know if that person could have done better making another decision. And we can’t know now that making that person’s decisions from 10 years ago would be the right decision for us. We would like to say that the only thing keeping people from riches is making the right choices or hard work, and you definitely need those things, but a lot of decisions that worked for some of us, won’t work for all of us. A lot of people followed good advice and got into a lot of trouble. The path is not as error- and risk-free as we purport it to be.

Why All Financial Advice is Flawed

There was a time when people considered mortgage and student loan debt “good debt” but after the housing bust during the recession and with ballooning and insurmountable student loan debt ever rising, it’s doubtful that people can use that adjective to describe that kind of debt anymore.
I’m not saying you should make bad decisions. Though we don’t know the future, we can still make the best decisions we can given the information at hand, because they still work A LOT of the time. There are certain decisions that we must make, even if we can’t predict perfect outcomes:
  • Living within your means, to the extent it’s feasible.
  • Developing skills that will be profitable to you and others.
  • Surrounding yourself with good influences and a good environment.
  • Investing in index funds.

But many of the other decisions you may make – whether to choose a STEM major, whether to become a lawyer/doctor/plumber, whether to get married or stay single – those routes worked for some people but might not make sense for you. The best we can do is to carefully consider our options and try to make a decision that – if everything falls apart – we hope we can be happy with.

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5 ThingsĀ IntrovertsĀ Get Wrong About Extroverts (And Why It Matters)

5 things introverts get wrong about extroverts (and why it matters)

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I have read many off-hand comments by introverts making subtle digs at extroverts like:
  • “I’m an introvert so it’s hard for me to brag about myself” (extroverts don’t have a monopoly on bragging);
  • “I’m an introvert so I don’t like making small talk for hours with strangers at loud parties.” (actually, no one likes this);
  • “I’m an introvert so I lack self-confidence” (those are completely different things).

I think something about introversion and extroversion got lost in translation. It’s great that people are finding out more about themselves and their personality tendencies. It seems that in learning about ourselves, however, we can often incorrectly attribute our own tendencies to all people like us, and assume that the opposite is true of all out-group people.

So an introvert that likes to Netflix and chill may assume that extroverts can’t stand the solitude. (Truth: everyone likes to Netflix and chill). Or an introvert that hates people thinks that all introverts hate people (nope! That’s called misanthropy, not introversion).And so on.

Here, I’d like to clear up some myths that I see all too often.

1. Extroverts vastly outnumber introverts.

 

Most introverts seem to think they’re in the minority and this creates an us vs them mentality. The truth is that there are no hard statistics. Some researchers estimate that 50-75% of the population are extroverts.  Of course, that leaves open the possibility that there are an even or close number of extroverts and introverts (50-50, 60-40). Other research suggests that between one half and two-thirds of the population is ambivert – that is, both introvert and extrovert. So introverts and extroverts BOTH might be in the minority.

And even if most people were extroverts, there’s a wide variety of introverts and extroverts. It’s a spectrum; most people are in the middle of the spectrum. Being a complete extrovert or a complete introvert is rare and honestly, weird. We are all a little bit of both. We are actually much more similar than those personality tests would have you believe.

2. Everything social is easier for extroverts. 

People often confuse introversion for shyness, anxiety, or lack of confidence. Likewise, people confuse extroversion with talking too much, fearlessness and arrogance.  The actual dichotomy is that introvert and extrovert brains function differently in response to dopamine and acetylcholine.  Dopamine rises when we take risks and seek novelty. In contrast, when we read or use our minds, our brains release acetylcholine, which makes us feel relaxed and content

Extroverts lack dopamine and thus need to seek it out via social settings. Extrovert brains also aren’t as sensitive to acetylcholine. Introverts, conversely, have a lot of dopamine already and are sensitive to acetylcholine.  This is why introverts tend to avoid crowded places — introverts can quickly become overwhelmed with dopamine. Also, because of their sensitivity to acetylcholine, they will get quite a lot of contentment from quiet activities. Extroverts and introverts are just responding to the chemicals in their brain that give them the most rewards.

Based on this description, it’s clear that extroverts have no natural advantage in social situations – it just explains why they seek it out more. And again, everyone’s reactions to dopamine and acetylcholine are a little different so it may be true that extroverts seek a little more stimulation than introverts but not necessarily much more.

As I discussed with an introvert friend, he sometimes felt exhausted by the idea of getting ready to go out for a social situation, even though he liked being social.  I, an extrovert, relished the idea of preparing to go out, even if it was not to go to a social situation. It’s not the social aspect, necessarily, but sometimes I need a little more external excitement than an introvert.

3. Extroverts hate silence and being alone.

The optimal balance of chemicals that differentiate introverts from extroverts is different for each person. I’m an ENFP, which is one of the most introverted types of extroverts, so I need time alone. I live by myself and can read for hours with no music or external noise. I work in a very quiet office without much social interaction. This is not something that all or most extroverts, or even introverts, can handle, but I love it and need it.

I know introverts who need to be in the presence of other people but don’t want to interact with them. They like the din of noise that others bring. It would, however, be very stressful to me never to have absolute quiet for some part of the day.  This is all to say that there’s just a wide variety of introversion and extroversion. Somewhere in the middle, there’s quite a bit of mixing – with extroverts appreciating silence and introverts appreciating some fuss. You can’t really assume that one likes or dislikes science based on whether someone is an extrovert or not.

4. Extroverts aren’t shy.

I’m an extrovert and I’m a little shy. Most people are at least a little shy. Whether you’re an extrovert or an introvert, people are afraid of strangers and of rejection. Most people hate networking and few people have mastered the art of small talk (or like it).
My sister and brother are both introverted but they are not really shy. I could point them to a (nonthreatening) stranger and say, go introduce yourself and they would walk straight up to that person and extend their hand. They don’t need the social stimulation of talking to other people but they have less social anxiety than I do. Personally, I’m not sure how my siblings do it, but I know that shyness and extroversion can exist as easily as boldness and introversion.

5. Extroverts are [negative connotation].

I think it’s great that people are talking about introversion and extroversion and learning about themselves. But I think it can be dangerous to use this introversion/extroversion as a lens to understand everyone and everything .

Maybe you meet someone extroverted who is arrogant and loud. Maybe you meet extroverts that are great at parties. These anecdotes are not indicative of all extroverts. Some extroverts are arrogant and some are modest. Some are loud and some are quiet. Some extroverts have natural charisma, some worked very hard to develop those people skills and some are awkward and weird.  The same is true for introverts.
The other side of this coin is that introverts see their own social weaknesses and attribute all introverts as having the same problems. Introverts think that they can’t be good at networking, public speaking or any other “extroverted” endeavors and that couldn’t be further from the truth. These are all skills that need to be learned and practiced.

Why It Matters that When Introverts and Extroverts Don’t Understand Each Other


It wouldn’t necessarily matter that introverts are wrong about extroverts except that often these assumptions cast extroverts in a negative light or fail to empathize the universal problems that all humans have.  Introverts and extroverts all suffer a bit in social settings. It’s only natural now, when our society has moved away from tribes where everyone knew each other to live in huge cities far surrounded by strangers. (I actually heard about this when an author is describing why people are awkward.) Meeting people is hard. Putting yourself out there is hard. Being vulnerable is hard. If I’m good at any of these things, it’s because I forced myself to do them often- it didn’t come naturally from being an extrovert.

Your personality type is not your destiny. Nor is your personality type an excuse to keep you from advancing in your career/life. Everyone is still responsible for improving in areas that don’t come naturally to us, whatever they may be.

While it’s great to learn more about what environments are the most conducive for your own thriving, let’s try to be a little empathetic to people who are different to us, without assuming we know all those differences. We can all try to understand that it’s difficult for any stranger to extend their hand to us, so we can be the first to do so.