Noise and the Long Game

"Where there is judgment, there is noise―and usually more of it than you think." - Daniel Kahneman (Nobel Prize Winner in Economics)

Imagine this: On an annual physical, you receive a diagnosis of a rare throat condition that, if left untreated, would give you about 5 years to live. You are fortunate enough to afford consultations with some of the leading specialists in this area. Their recommendations:

• Doctor 1) wait and monitor to see how things progress
• Doctor 2) complete removal of your esophagus and stomach, which would lead to a severely reduced quality of life
• Doctor 3) regular invasive scoping and tissue testing procedures every 3 months in hopes of removing any cancerous tissue before it spreads

A few days after agreeing to #3, you receive the results...and the tests indicate NO ISSUES. This is the story of Ray Dalio, founder of hedge fund Bridgewater Associates in 2013 and he's still alive and healthy as of this writing. It is very hard to make life-changing decisions under stress. Medical decisions are an obvious example. Some decisions aren't so obvious.

Every day we make financial decisions that have the potential to change our lives (and those of future generations) forever.

Only in hindsight do we realize their impact. We want certainty in an uncertain world and listen to smart people who try to predict the unpredictable. There is no better evidence than the last 3 years in the markets:

• At the end of 2019, Wall Street predicted that the S&P 500 would earn +2.7% by the end of 2020**. The actual return? 31.5%.
• At the end of 2021, the smartest analysts on Wall Street predicted the S&P500 would end 2022 at 4,825*...it closed last year at 3840 (-20% lower).
• The US Federal Reserve employs about 400 Ph.Ds. Their prediction of 2022 interest rates at the end of 2021 was less than half of the actual year-end rate.

So what can you do if the smartest people, who are best equipped to make predictions, get it wildly wrong and frequently? Ignore the noise, and focus on what really moves the needle over the long-term.

How Playing the Long Game Could Help Build Wealth and Success

Key Takeaways:

• Start with your ideal long-term vision of what you want to achieve.
• Build a list of smaller goals and specific action steps to make your vision a reality.
• Persevere through challenges—while also remaining flexible as circumstances change.

We have found that many successful people have one thing in common: They have a very good handle on a concept that is key to success...the long game.?

The long game means having a concrete vision of your ideal future down the road—years or even decades from now—and taking specific, carefully considered action steps at every stage along the way to maximize your ability to get there.

Unfortunately, we find that most people don’t effectively plot out their financial or business futures. For example, most entrepreneurs rarely look much beyond their next immediate move or deal. Even those who have a vision of what they want to achieve typically don’t lay out a clear, actionable path to follow.?

As a result, people often come up with scenarios that are as unrealistic as they are attractive—fantasies that stand little chance of becoming reality. The lack of a vision, a path to run on or both also makes people reactive: They spend the bulk of their time responding to changes and challenges instead of driving methodically toward outcomes they truly want.

The upshot: It’s probably time to honestly assess how well you’re doing at both creating a detailed vision of your ideal long-term future and acting in ways that consistently move you toward that result. That’s true whether you’re trying to get wealthier through investing, earning a higher salary or building a great business.

Not thrilled with how you measure up? These guidelines can help you get on track!

Start at the end

Always work backward from your desired end result. This big-picture thinking starts with creating a vision of the ideal future you want (for yourself, your family, your business and so on). The word “vision” comes across as a bit New Agey to some. But the fact is, vision is a powerful tool that can be used to motivate, unify and inspire. As you develop a vision for your future, you start to gain clarity of purpose—an understanding of why you do what you do. Such clarity can be extremely motivational.

Well-conceptualized end goals have a number of decisive benefits, including:

• Keeping you highly motivated
• Helping you concentrate your actions productively
• Helping you focus on the processes and activities that really matter and avoid distractions
• Helping you stay on the path as times get hard
• Helping keep stress and anxiety at bay

Then think about the specific obstacles that could prevent you from reaching your specific goals. For example, say you’re a business owner who wants income growth of 25 percent annually. Specific obstacles that might get in the way of those types of goals include the time you have to spend training new staff, or the systems you currently have in place that prevent you from spending time on client-focused actions.

Only after you’ve spent time focusing on results and the obstacles in the way of those results is it time to move toward strategy. This works better than the traditional way of strategizing first and ending with goals because often you never get past the obstacles phase when you use that approach. What’s more, the things that seem to oppose our goals are actually the raw materials for achieving them. Thinking about obstacles in this way is extremely liberating. If your obstacles are closely tied to the results you said you wanted to achieve, you suddenly have the keys to overcoming them.

Plot out your intermediate goals and plans

As part of your long-game path to your end goal, you will need to specify intermediate goals. These are stepping-stones on your way to the end goals. You’ll also need to delineate well-thought-out plans that will enable you to achieve the intermediate goals that push you toward your end goal. In short:

Intermediate goals + thoughtful plans = end goals

Example: If you want to become seriously wealthy, you need to specify exactly what that means to you. It might be a net worth of $10 million or $20 million (or much more). This is your financial end goal.

Now, you need to determine how you are going to get there. One possibility is to establish and grow a business. A successful business then becomes an intermediate goal. There will be other intermediate goals on the way to founding a successful business, of course. And there may be other intermediate goals (such as finding and working with a high-caliber wealth manager) that will help you accomplish your financial end goal.

Bottom line: You have a clearly articulated long-term goal, along with specific plans and action steps to make that goal real.

Execute your plan

Perhaps the biggest challenge of playing the long game well is execution. But face it: You’ve got to act on your plan or you’ll make no progress.

Set specific goals and milestones to begin the work of making your vision a reality. Choose the broad strategies you will use to reach each goal. Identify the tactics for implementing each strategy. Once these tactics are clear, decide on actions to execute each tactic. Ensure that each action is specific and achievable, and set a target date for completion.

Above all, communicate on an ongoing basis with anybody else you’ve enlisted for help with your journey. Lack of effective communication is probably the biggest culprit in the failure to execute. You need to get buy-in on your strategic plan from key people you will rely on along the way.

The importance of perseverance

Perseverance is central to a good long game. As with most meaningful and large-scale endeavors, great results are unlikely to happen quickly. You need to be willing and able to stay the course for quite some time, as most successes are built on incremental achievements—that is, on attaining your intermediate goals.

Example: An entrepreneur sold her company for $30 million after taxes. Her financial end goal was to become wealthy, which she defined as a net worth of $20 million or more. She achieved her objective. However, consider what it took her: a quarter-century of continuous attention and effort, a slew of personal sacrifices, and soldiering on when obstacles got in the way. Without perseverance, the end goal would never have been realized.

Of course, life has a way of intruding and pulling people in all sorts of directions. Perseverance becomes much easier and more productive when you keep your end goals, your intermediate goals and the plans to get there top of mind. Doing so can help you avoid being overwhelmed by immediate circumstances. You can take a step back, keeping the bigger picture in focus as you patiently bring your plans to fruition.

Remaining flexible

The advice that you should stay on track and persevere through challenges comes with one big caveat: You can’t be rigidly locked into a plan. Flexibility is vital as you navigate inevitable changes in your life and the world at large that impact your vision, your goals and your course of action.

Indeed, one major trait of the self-made affluent is that they can generally adapt as necessary. However, they understand that in order to constructively adapt, you need clear goals and the processes to achieve those goals. Without them, you risk overreacting to challenges and veering too far off your desired course.

A road and a road map

In the end, long-game planning builds a bridge that links where you are today to where you want to be down the road. To get the most out of your efforts, remember a few key tenets of success—start with the end in mind, develop intermediate goals that propel you forward and execute with focus. With these ideas and your self-created road map to guide you, you can put yourself on the road to an ideal future.?

Don’t ignore personal goals

Chances are, you have a few end goals that are not financial in nature. Say, for example, you want to stay healthy as you age—a big goal for many people who are highly motivated to succeed. An intermediate goal may be to maintain a particular weight. You accomplish that through your plan—which likely involves diet and exercise.?

VALUES > MONEY

LourdMurray is a group comprised of investment professionals registered with Hightower Advisors, LLC, an SEC registered investment adviser. Some investment professionals may also be registered with Hightower Securities, LLC, member FINRA and SIPC. Advisory services are offered through Hightower Advisors, LLC. Securities are offered through Hightower Securities, LLC. All information referenced herein is from sources believed to be reliable. LourdMurray and Hightower Advisors, LLC have not independently verified the accuracy or completeness of the information contained in this document. LourdMurray and Hightower Advisors, LLC or any of its affiliates make no representations or warranties, express or implied, as to the accuracy or completeness of the information or for statements or errors or omissions, or results obtained from the use of this information. LourdMurray and Hightower Advisors, LLC or any of its affiliates assume no liability for any action made or taken in reliance on or relating in any way to the information. This document and the materials contained herein were created for informational purposes only; the opinions expressed are solely those of the author(s), and do not represent those of Hightower Advisors, LLC or any of its affiliates. LourdMurray and Hightower Advisors, LLC or any of its affiliates do not provide tax or legal advice. This material was not intended or written to be used or presented to any entity as tax or legal advice. Clients are urged to consult their tax and/or legal advisor for related questions.

VFO Inner Circle Special ReportBy Russ Alan Prince and John J. Bowen Jr.? Copyright 2020 by AES Nation, LLC. All rights reserved.

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*Source: NY Times **Source: NY Times