Every Sunday morning for the next few months, I’m going to “riff” on a chapter from my book, The Simple Dollar: How One Man Wiped Out His Debts and Achieved the Life of His Dreams by reflecting on particular pieces of it that I’ve had further reflections on or particularly excite me, including some elements that were removed from the final draft. You can find out more about the book by reading some of the life-changing experiences the book has given readers or reading the Amazon reviews.
Our lives are far more random than we think.
Our brains are wonderfully complex machines that do a very neat trick for us: they take all of the randomness that goes on in our lives – both good and bad – and they make it all seem very normal and smooth and predictable. On page 25, I delve into this idea a bit:
In Nassim Nicholas Taleb’s book, The Black Swan, which discusses unpredicatble events and how we handle them, he identifies this part of human nature as the narrative falacy. “The narrative fallacy addresses our limited ability to look at sequences without weaving an explanation into them, or, equivalently, forcing a logical link, an arrow of relationship, upon them. Explanations bind facts together. They make them all the more easily remembered; they help them make more sense. Where this propensity can go wrong is when it increases our impression of understanding.”
To put it simply, our lives are chock full of random events of all kinds, but our minds, to make some sense of our lives, attempt to construct a story that makes it all make sense. The problem with this is that quite often, random events don’t make any sense at all – they just happen.
The Simple Dollar is an obvious example of this. I can easily write a two or three sentence story about how I founded the site (I was in debt, I wanted to share the story, I loved to write, people started reading and sharing with their friends). The reality of it, though, was much, much more herky-jerky than that. The flavor of the site changed over time as I figured out what and how I wanted to write. The site’s growth wasn’t smooth – it grew completely in fits and starts with lots of mistakes and stumbles and disasters and complete revamps of what I was doing along the way.
Yet, when I look back without taking a sharp critical eye to all of it, it seems smooth and natural, like it all just neatly progressed from an idea in my head to something I spend my time doing.
How does this impact our personal finances? For starters, this is the reason why many people don’t have emergency funds or just pretend that their credit cards are their emergency funds. They glance back at their past, see that it looks pretty smooth, and think that they don’t really need one. What’s actually happend, though, is that their mind has glossed over all of those bumps in the road.
The flip side of this is also true: luck favors the prepared. As I state on page 32 (right next to a reference to one of my favorite movies of all time):
Luck has very little to do with a four leaf clover in your pocket. Instead, luck is simply finding ways to take maximum advantage of the numerous random positive events in your life, as well as opening yourself up to more possible random events, from noticing a great sale to having a powerful idea.
In the past, I even made a detailed list of tactics for improving your luck.
Fortune always favors the prepared, whether it’s bad luck (where the prepared have an emergency fund and a network of people to help deal with it) or good luck (where the prepared have all sorts of tactics available to maximize an opportunity). If you’ve prepared, the randomness of your life has much less negative impact and much more positive impact, and the end result of that is that you look like one lucky duck to the people around you.