One of the logical fallacies that is becoming increasingly prevalent in the contemporary world is that of the false dichotomy.  This is also referred to as the either-or fallacy, fallacy of false choice, black and white thinking or the fallacy of exhaustive hypotheses) is a type of logical fallacy that involves a situation in which only two alternatives are considered, when in fact there are additional options.  Unfortunately, the false dichotomy has become a dangerous tool for pushing public policies that are not necessarily in the public interests by presenting them as the only alternative to prevent a catastrophic scenario.

The reason why this logical fallacy has become so problematic is that it is frequently used as a means of creating artificial emergencies and rushing decisions that are typically optimal for connected parties and sub-optimal for everybody else.  By and large, the harder somebody pushes for a decision right now, and the more they try to get you to act out of fear, the worse off you will be from the deal.  As we go throughout business and life, it is very important to avoid falling into the trap of these false dichotomies, as they frequently lead to very bad decisions.  Some of the more famous false dichotomy’s in the contemporary world:

We need to do a bailout now or the whole economy will collapse

This was the (in)famous plea from Hank Paulson when he was Treasury Secretary during the financial crisis of 2008 when an unprecedented level of power was shifted to the Treasury and Federal Reserve.  What was left unsaid in his dire plea for “emergency powers” is what would happen if the firms in trouble simply went bankrupt and were sold off at a discount to other players in the marketplace.  As it turns out, the financial markets still froze up after the so-called “solution” to the financial crisis, since nobody wanted to trade in the impaired debt instruments due to uncertainty about whether the value(s) would be supported by the government.

With all of the players waiting to see if they could get a better deal from Uncle Sam, nobody had any incentives to play by the (normal) rules.  What ultimately resulted was an unbelievable concentration of power in the hands of the Federal Reserve and Treasury without much (if any) real discernible benefit to the greater economy.  The justification typically cited is that if the actions weren’t taken, the economy would have collapse.  Of course, this is another logical fallacy since it is impossible to prove a negative.  Naturally the people making these claims are aware of this fallacy, but still persist with using it to justify destructive policies and further concentration of power.

If you’re not with us, you’re against us

This was the famous phrase uttered by President George W Bush in response to the terrorist attacks of September 11th, 2001.  It drew great ire from the media, and is another example of a clear logical fallacy.  It is most certainly true that the United States has an interest in stopping terrorism.  However, it does not necessarily follow that you should target people who do not act against terrorism with the same aggressiveness as yourself.  It is quite possible that a group (or nation) could be quite opposed to terrorism, but unable to commit resources for the purposes of actively fighting against it.  Of course, this rhetoric is not only used by George W Bush.  Politicians of all stripes and colors regularly depict any opposition to their policies as “extremism” or paints any opponents as the enemy.  When attempting to curry public favor for his stimulus project, President Obama regularly stated that the spending was absolutely necessary to create jobs and avoid an economic catastrophe.  It turns out that the expected job growth didn’t occur, and the only sector to significantly benefit was government.  Of course, (as usual) “Things would have been catastrophic if the measure hadn’t been approved.”

If cap and trade isn’t adopted, global warming will destroy the planet

The full extent to which mankind has the ability to create or stop global warming is still a matter of considerable disagreement and doubt.  There is convincing evidence in favor of the conclusion that our contributions to total global greenhouse gases are not sufficient to change whatever climactic events are in motion.  Nevertheless, a consistent drumbeat of fear-based rhetoric over the environment and global warming has steered a large amount of public policy over the past few decades.  This is not to say that the environment should be ignored … simply that positioning anybody who opposes a policy or initiative as being against clean air or clean water is intellectually bankrupt.  Logical fallacies such as this are typically the province of those who either lack the mental capacity for rational discussion or seek to shut down the process of rational discussion for the purpose of passing rules that are favorable to their political allies.

Ultimately, the false dichotomy serves as a highly dangerous rhetorical tool that has been used to influence many destructive decisions.  By using fear to force a quick decision with incomplete information, the people in power can acquire favorable decisions that would not otherwise be possible under the full scrutiny of a logical examination.  As individuals, we cannot stop this tide of destructive decisions in the public arena, but we can ensure that our own decisions do not fall prey to this fallacious reasoning.

 

Recent news about the 8.9 magnitude earthquake and subsequent tsunami in Japan has caused many people to pause in consideration and prayer for those affected by this natural disaster.  As the news and images of the disaster comes in, they make the perceived difficulties of our lives pale in comparison to the real turmoil faced by those who are on the front lines of responding to the earthquake and tsunami.

When events such as this unfold, they draw a sharp line between the things that we spend time getting worked up over and the things that are really important.  In response to this, it would be wise for many of us to “get over ourselves” and put the so-called problems of our life in context.

Most of us remember the drama-filled days of high school when the tenner of our life revolved around what one person was saying about another person, and the furthest we looked ahead was the upcoming weekend.  The depth of self centered obsession in our youth only becomes apparent when the wisdom of age and experience has had an opportunity to emerge.  Upon deeper analysis of our lives in the context of a larger and more complex world, it becomes more and more apparent that the drama of our lives, which seems so important in the moment shades pale when compared against the larger world in which we live.  When mired in the depths of self-centered obsession, this is extremely difficult to see.  However, when one steps back from the gritty details of their own life, it becomes quite clear very quickly.

When thinking about the concerned of our personal world, it is important to understand that each of us are only a small piece of the larger scheme.  It is important to simultaneously avoid over-estimating the extent of our impact and take personal responsibility for the results of our own life.  Situations like a natural disaster frequently leave people with a feeling of powerlessness, as there is nobody to blame for the circumstances.  (Not that this fact stops people in power from attempting to assign blame or take credit)

It is most certainly true that none of us can cause, nor prevent a natural disaster.  It is also true that none of us can cause nor prevent a humanitarian crisis or economic recession.  What we can do is take specific actions to create specific results.  We cannot stop an earthquake in Japan, but we can contribute to the response.  We cannot stop an economic recession, but we can act to ensure that the financial well being of our family is secure.  We cannot stop people from being self-destructive in their personal decisions, but we can teach our children to make wise decisions in their own lives.

In the end, “getting over ourselves” ultimately comes down to a frank realization of what we can and can’t do.  This understanding allows us to focus on the things that we can do, the decisions we can influence, and the goals we can achieve.  In this way, each person can help to create a better world at large by creating a better world within their own sphere of influence.

 

Most people are aware of great deals and tremendous opportunities that people they know have seen or experienced throughout their lifetime.  All of these phenomenal deals share one key characteristic in common . . . somebody took action so that the opportunity could be turned into reality.  This willingness to act is what separates great achievers from the average person.

Conversely, a psychological paralysis grips many people and freezes them into stalling, waiting, and preparing until the opportunity to act has passed.  At this point, many people will begin to create justifications for their decision to avoid action.  This gives us a sense of satisfaction since we avoided what could have been a big mistake.  However, we also avoided what could have been a great opportunity.

The critical skill that high achievers develop is an ability to quickly determine which deals have the highest probability of success, and then to take action on those opportunities that are favorable.  This sounds simple, but it is surprisingly difficult to carry out in the world of reality.  Most of us gather information, get ready to act, then stall . . . and stall some more until the opportunity has passed.

The curious thing about taking action to create success is that it is not a one-time deal.  Most people who achieve high levels of success did not do so because of one single decision.  By and large, success is the result of consistently making wise decisions and taking action over an extended period of time.  It is likely that the benefits of your decisions will compound to produce greater results, but the important part is to start the ball of achievement rolling.

The other side of this insight is that we should avoid looking for the ‘one big deal’ that will make so much money that we never need to work again.  Those deals certainly exist, but they are very rare.  A much more consistent strategy for achievement is to start taking action now and remain open to opportunity as you move forward.  Always keep your future vision in sight, but focus on the next step that you will be taking now.

In the end, Aesop’s words will unfortunately ring true for most people.  However, they do not need to be a description of your life.  By finding opportunity, making wise decisions, and taking action you can consistently build achievements until a temple of success has been constructed for you and your posterity.

 

As we go throughout life, it can sometimes seem mysterious to think how we arrived at our current place.  Each person’s life represents the aggregate total of all their decisions and the influence of chance.  For many of us, it can be tempting to blame ‘fate’ or the actions of other people for the fact that their life has not turned out the way that they had previously imagined it would.  For many people, this has resulted in a slowly burning internal anger against their circumstances.  The enduring problem created by this phenomenon is that it constructs a mental barrier that prevents people from taking the actions that are necessary to improve their circumstances.

The first and most important insight that must precede any sustainable improvement in our life situation is the realization that we are fully responsible for the course of our life, and our decisions are the means by which we navigate the river of chance.  It is most certainly true that we cannot control chance.  There will always be events and circumstances in our life and the world at large that are out of our control.  The secret to influencing your future lies in understanding that there is no point in worrying about things that we cannot control and focusing all of our attention on the decisions and events that we can influence.

One example of how this situation creeps up on people is where you have a person that is living paycheck-to-paycheck and encounters an unexpected automotive repair, medical bill, or some other necessary expense.  With no financial reserves, this person may find themselves forced to go into debt, or possibly default on their financial obligations if they are already in debt.  From this person’s perspective, they have been assaulted by fate and ruined by chance.  However, the situation that placed them at the mercy of chance was completely the result of their decisions.  By modifying their lifestyle, these people could have built-up a savings reserve so that unexpected expenses could be met without destroying their budget.  By consistently living below their means, they could have ensured that their debt limits were not maxed out so that true needs could be met at the critical moment.  By understanding that the future is necessarily uncertain, and planning accordingly, many of the disruptions that cause disasters for other people could have been effectively avoided.

The critical insight here is that our ability to shape our future is dependent on our willingness to embrace a long-term perspective.  By thinking further out than our current wants and needs, we begin to see the benefit of making short-term sacrifices for the purpose of long-term gains.  Thus, by improving our decisions, we make the outcome of our future less dependent on luck.  In this way, making intelligent choices reduces our exposure to chance.  It requires us to discipline our feelings and emotions so that they do not dictate our actions.  It requires us to make conscious decisions that support optimal long-term results.

In the end, our circumstances are determined by both choices and chances.  However, the impact of chances is directly related to the choices that we have made in the past and continue to make into the future.  Each of us must ask whether the choices we are making today prepare us for a more prosperous future.  Each of us must ask whether the decisions and choices we make are the result of our feelings and emotions or if they are conscious and deliberate.  Most of us have a clear vision of what we would like our future to look like, and most of us also know the kind of things that are necessary to attain that vision.  What remains is to develop the discipline so that our decisions turn that vision into reality.

 

One of the great mysteries of mankind is that of the human mind and the relationship between its conscious and subconscious elements.  Most of us are well aware of how important conscious decisions are to our lives, since we can see the result of our decisions in a tangible manner.  What remains a great mystery is the effect of our subconscious mind in shaping our thoughts and actions.

One of the great insights made by James Allen in his famous book “As A Man Thinketh” is the fact that thought and character are inextricably linked to one another.  This principal is also reflected in the ‘Law of Attraction,” which outlines how the subject and character of your thoughts attract what you think about toward you.  The thing that remains a mystery to most people is how this effect manifests.

It is important to begin by explaining that the subconscious mind is much less linear than that of conscious decisions.  The subconscious mind works by framing the context in which we perceive situations *before* the conscious mind makes decisions.  The importance of this relationship lies in the fact that consciously acting against your impulses for a prolonged period of time requires a tremendous degree of willpower that is extremely difficult to build and maintain.  The way that we can influence our subconscious mind is by focusing our thoughts on the things we want to achieve.  In a way, our minds are a fertile garden that will grow whatever seeds we choose to plant.  If we are not careful to plant the right seeds, cultivate the soil, and tend the weeds it will result in a tangled nest of thorns & thistles.

The importance of this principal comes from the way that our mind processes and frames each individual situation.  What some people see as a crisis, others see as an opportunity.  The difference comes from the way that our mind has been trained to work.  And in what appears to be a strange twist of destiny, the objects of our concentration will appear to be drawn toward us.  This is not due to some mystical force of the ether . . . it is simply the result of removing the biases that ordinarily impede our vision.  Opportunity is not mystically drawn toward you through occult meditation.  Opportunity is discovered when you train your mind to recognize it.  It is discovered when you remove the mental barriers that have previously stopped your achievement.

Ultimately, the mind of each person truly is a garden.  For those who take the effort to tend the garden of their mind with focused effort, the result will be beautiful achievements and wondrous enlightenment.  For those who leave the garden of their mind to chance, it will undoubtedly be dominated by the weeds of doubt, despair, disappointment, and desolation.  Are you tending the seeds of your future achievement, or are the weeds of disappointment controlling the tenor of your circumstances.

 

Recent news of the US national debt topping $14 Trillion and nearing its legislative ceiling have spurred another (badly needed) discussion concerning government spending obligations.  Whenever the topic of national debt re-enters the domain of public conversation, there are two opposing priorities that consistently pull against one another.  The first is the desire to continue current (unsustainable) rates of government spending, and the second is a concern over the burden that is being passed onto the next generation in the form of a tremendous national debt.

An appropriate metaphor for this concern is the Greek Titan Atlas who holds up the world and heavens on his shoulders.  In our case, the future productivity of our children and their children will need to be confiscated for the purpose of paying for money that was already spent to subsidize the recipients of public bailouts, entitlements, pensions, and subsidies.  However, nobody has every stopped to consider the possibility that the future generations will not want to see their productive efforts go to subsidize other people’s lack of productivity.  To put it in the language of Ayn Rand, what if Atlas Shrugs?

This is a very appropriate, and very under-examined question.  What happens if the next generation decides that they no longer wish to pay for subsiding the lifestyle of other people?  What happens if the taxes and regulations are so burdensome that there are no new innovations to drive the economy?  What happens when the cost of employing workers grows so high that nobody is willing to hire anybody?  What happens when the rest of the world stops lending us money at low rates of interest?

The answer to all of these questions is essentially the same.  The standard of living that multiple generations of people have come to regard as their entitlement will come crashing down around them with nobody in sight to pick up the pieces.  When the farce of creating prosperity through legislative fiat is finally uncovered, there will be no comfort to ease the bitter hardships of life.  There will be a large mass of people who have been conditioned to avoid making their own decisions and who have been trained that producing something of value is not a necessity of life.

So what can you do?  The answer lies in reading the prior sentence again . . . what can YOU do?  The answer is that you must take ownership and control of your own life and your own destiny.  In short, follow the John Galt Promise from Atlas Shrugged, and commit to live your life for the sake of no other person and ask no other person to live for the sake of you.  Make decisions for yourself and do not expect others to make decisions for you.  Use those decisions to create a bright future for yourself and your family.  Learn how to create value in everything that you do so that each person who works with you is better off than they were before.

In this way, you will become the captain of your destiny.  Every decision that you make is a proclamation of your intellectual liberty.  This is not any kind of exhortation for greed or self-centered living . . . rather, it is an exhortation to make your own choices.  If you choose to be charitable, make it a choice, not a reaction to guilt.  When you produce something of value, refuse to feel guilt for your success.  Be humble in your success, understanding that all things are gifts from God, but never allow yourself to act out of guilt.  Focus all of your attention on the decisions and actions that you can make for the attainment of your own success and the success of those you care about.  In short, go out and do something great.

 

In the world of real estate investment, there is a term known as ‘highest and best use’ to describe the best possible use for a building or area of land.  When making decisions, many investors will stop to consider the highest and best use for the land that they are considering to purchase.  Would it be better to add another rental unit?  Would it be advantageous to add a garage or storage area?  It may be that the best use for a building is to tear it down and start over.  On the other hand, it may be that the current use of a property is the best use.

This same kind of analysis should be done for our personal decisions and the use of our time.  Every time you are doing something, ask yourself if it is the highest and best use of your time at that particular moment.  When you are undertaking a project, is it the best use of your efforts and energy?  The purpose of this analysis is to systematically replace the activities that do not represent the best use of your time with new ones that allow you to be more effective in accomplishing your goals.

When conducting this introspection and analysis, it is very important to keep your ‘true’ goals and objectives in perspective.  It can be easy to obsess on business or career goals, and forget personal and family priorities that are even more important to your long term well-being.  An example of this is taking time to play with your children.  As you replace more and more activities with the highest and best use for your time, you will find yourself moving closer and closer to your goals.

As time goes by, it is likely that your perceptions concerning the highest and best use of your time will change.  The important part is to be constantly thinking about your personal, professional, and financial priorities.  This thought process should guide the decisions you make concerning how to spend your time.  As you slowly change the priorities that guide each of your decisions, you will notice yourself moving closer and closer to your goals.  The movement is not necessarily the result of a grand strategy, but by consistent decisions that each bring you a little bit closer to your goals.

 

One of the more difficult things that each of us will encounter in our lives is the juxtaposition of what we know against what we think we know.  The reason why this creates difficulty is because our own perception of our own knowledge (i.e. what we think we know) frequently exceeds what we really know by a significant margin.  Furthermore, this phenomenon seems to expand as our knowledge base increases.  This produces the unfortunate effect of creating an intellectual elite that over-estimates the depth and scope of their own knowledge by many orders of magnitude.

This present an extreme amount of danger when decisions for large amounts of resources are controlled by a small number of people through the government, or through a financial institution.  The reason for this is because when people over estimate their knowledge of the market, they under estimate the chances of failure and frequently over expose themselves, their investors, and the taxpayers to catastrophic losses.

While it is pleasing to the vanity of those in power to make claims about how intelligent people should be in charge of everything, it may be better if people were in charge of themselves.  The reason for this is because I can only destroy my own resources if I over estimate my knowledge.  When a small regime in the government is in charge of vast resources, there is a tremendous risk of unfathomable, catastrophic failure if their estimates are incorrect.

Recently, this effect has compounded upon itself many times over.  The unfortunate set of events precipitating this consolidation of power was triggered by the massive financial sector bailout engineered in lieu of allowing the banks to go into liquidation.  This action created two destructive outcomes . . . the first is that it rewarded the irresponsible risk taking of the banks that were bailed out and the second was that it prevented the banks assets from being liquidated to responsible companies that did not engage in high risk lending practices and massively leveraged derivatives.

Furthermore, the financial sector bailout served as a precedent for an automotive sector bailout that still resulted in bankruptcy for two of the ‘big three’ US auto manufacturers.  In the end, the government is now a principal player in the automotive industry and either approves or purchases the overwhelming majority of all home mortgages.  With this amount of power and control, there is tremendous risk of economic damage by even a slight mistake in estimating the cost or effect of a program or decision.

In the end, each of us should be aware of what we ‘really’ know, and seek to maintain perspective when estimating the extent of our abilities.  When we are making decisions and constructing strategies, it is always wise to ask what happens if I am wrong?  By understanding the extent and limits of our knowledge, it will help each of us to minimize the impact if our decisions are wrong and maximize the benefit if our decisions are right.

 

One of the most prescient concepts in economics is the notion that “all changes occur at the margins”.  Expressed another way, this means that when things change, it happens in small incremental movements.  One of the commonly cited axioms of economics is that “rational people think at the margin”.  What this means is that our decisions should be framed in the context of what impacts our next action or decision, and ignore costs that are sunk or decisions that have already been made.

The importance of this concept comes into play when making both personal and financial decisions.  When deciding whether to fix an old car that has broken down, the only factors relevant to the decision should be the facts at hand.  It does not matter how much money you have already spent to fix the car . . . it only matters what you do with the current situation.  (Note that from a financial perspective, it is optimal to repair your existing automobile unless the cost of repairs exceeds the value of your car in reasonable working order.  The decision to get rid of your old car and buy a new one is almost never financial optimal.  This doesn’t mean that you should never get a new car, only that the purchase is a ‘lifestyle’ decision and not a ‘financial’ one.)

The inevitable result of thinking ‘at the margin’ is a narrowing of focus onto the decisions and opportunities at hand instead of dwelling on mistakes and missed opportunities of the past or fantasizing about expected opportunities in the future.  The only time that anybody ever has to act is now.  The past is gone, and the future has not yet come.  Action must always occur in the present tense.  This is not a renouncement of the benefits that come from planning for the future, but a realization that the future is built on many successive decisions, and that each decision we make builds the road for future decisions.

By zeroing-in on the decisions that you can influence today, it will create a remarkable degree of emotional freedom.  This liberation will come when you are no longer shackled by old decisions and no longer nervous about what will come in the future.  The future is and has always been uncertain.  However, people who have grown accustomed to making rational decisions develop the confidence that they can adapt to whatever future situations unfold.  The most important thing is to use the information and resources at hand to make the best decisions possible.  This crystallizes a seemingly infinite number of possible future options into one decision . . . your next one.  The result of that decision will set the stage for future decisions, but so will external events that are beyond your control.

The single area where most people run into trouble is that they under-estimate the extent to which their future will be shaped by things that they do not control.  Thinking about the unknown is inherently frightening, because we cannot plan for something we do not know will happen.  However, the unknown should not be allowed to become a crutch that scares us into inaction, but should also be appropriately heeded so that actions are not taken that greatly depend on a specific future outcome that is far from guaranteed.

The extent to which we can control our lives always is, always has been, and always will be at the margins.  We can influence small iterative changes that compound over time to produce tremendous results.  On balance, it is best if our actions create outcomes that are robust or adaptable to future changes in the marketplace.  While we may not know what these changes will be, we can be confident in our ability to adapt to them.  By shifting our focus to present things that happen ‘at the margin’ it will allow us to enhance our circle of influence by improving the effectiveness of our decision making.