The Power of Negative Thinking
- The Power of Negative Thinking
- Active United Airlines Pilots: PRAP, Roth Conversions and Your Financial Plan
- Roth Conversions and Your Post-Retirement Redzone
- Achieve Your Home Remodeling Dreams
- Investment Commentary | How To Lie With Statistics
- Q4 2020 Economic & Market Outlook
- Making Sense of Political Risks in Estate Planning
- Tax Planning in an Election Year
- Start with “Why”: Part I of VI on Choosing the Right Approach to Charitable Giving
- The Show "Succession" Teaches Us About Succession
- Election, Emerging Markets and Your Investment Strategy Webinar
- Business Owners & Estate Plans – The Playbook
- Succession Planning: Making the Inevitable Your Masterpiece
- A Proactive Approach to Protecting Your Business
- Investment Commentary | “An investment in knowledge pays the best interest.”
- A Proactive Approach to Protecting Your Personal Property
- Investment Commentary | The Corn Moon
- DOL Issues New FAQs on FFCRA Leave and Return to School
- 2021 Benefits Planning and COVID-19
- Insurance Considerations for Riots, Vandalism and Civil Unrest
- Investment Commentary | Double Tops in Mountain Biking and the Market
- Navigating the Nationwide Coin Shortage
- Start the Conversation - Protecting Your Child's Privacy Online
- Telemedicine in a COVID-19 World
- Investment Commentary | Recovery or Recovering?
- The Ever-Changing Absence & Accommodation Landscape in the Era of COVID-19 Webinar
- Q3 2020 Investment Outlook
- 2020 Mid-Year Outlook Webinar
- Investment Commentary | Waffles Again?
- Buying a Home During Covid-19
- An Update on Required Minimum Distributions for 2020
- Investment Commentary | Not Back to This Future!
- Paycheck Protection Program (PPP) and Retirement Plans
- Social Media and the 2020 Election
- Latest Foreign Exchange Market Insight: USD falls, EUR and CAD rally
- Investment Commentary | Municipal Bond Credit Quality Outlook
- Investment Commentary | For the U.S., How Much Debt Is Too Much?
- – Premier Partner for the PPP and Prosperity
- Learn from Michelle Kwan: Avoid the Destructive Power of Comparative Thinking
- Water Damage and Insurance - Am I Covered?
- Market Call: For Better or Worse?
- Employment Compliance Considerations for Re-opening the Workplace Webinar
- Investment Commentary | New Tricks
- To spend or to save? Strategies for using your tax refund or economic impact payment
- Action Bias Amid Market Uncertainty
- Investment Commentary | Is this “third time’s the charm” for the S&P 500 Index at 2,900?
- Families First Coronavirus Response Act Policy for Employers
- How to Protect Your 401(k) During COVID-19
- OSHA Eases Enforcement of Respiratory Protection Standards During N95 Shortage
- Employer’s Guide to COVID-19
- Investment Commentary | Real-Time Information Helps Us Gauge Economic Conditions
- Don’t try to avoid all emotions. Lean into the right ones.
- Powers of Attorney and COVID-19
- Turmoil in the Middle East
- Spring cleaning? Don't forget your financial records
- Regulatory Update: Stimulus Package Impact
- Investment Commentary | Lessons From a Business Owner
- Coronavirus and Managing Remote Work Cyber Risks
- Staying the Course: How to Navigate Through Market Turmoil
- Scammers Prey on Emotions – Tips for Protecting Your Financial Information
- COVID-19 and the Importance of Estate Planning Documents
- Market Call: Coronavirus, Global Economics and Your Portfolio - What's Next?
- Force Majeure and Coronavirus
- Planning Opportunities Under The CARES Act
- Investment Commentary | Waxing Moon
- Families First Coronavirus Response Act (FFCRA) Webinar
- Building a Plan to Handle Uncertain Times
- What You're Feeling During Crisis Is Normal
- Protecting and Enhancing Your Plan
- Writing a New History
- This Is Why We Plan
- Business Interruption Policies and Coronavirus
- Coronavirus and the Workplace
- Investment Commentary | Valuation Does Matter . . . in the Long Run
- New laws that may affect your business
- Preparing for 2020: Politics, the Economy and Your Business
- Investment Commentary | Information Overload
- New World Order
- Investment Commentary | Where are we now?
- Investment Commentary | U or V?
- Effects of Marijuana in the Workplace
- Investment Commentary | A Long and Winding Road
- Investment Commentary | Groundhog Day
- Legacy, Loyalty or Liquidity?
- Investment Commentary | Cold or Flu Season?
- Investment Commentary | Geopolitical Risks!?
- Turmoil in the Middle East
- Turmoil in the Middle East
- How the Secure Act May Impact Your Company
- What makes a great financial advisor?
- Protect your wealth with umbrella insurance
- What does end of life for Windows 7 mean for you?
- How low can you go?
- Better Than Feared
- The War for Talent
- How low can you go?
- Trade vs. Trump
- Busting Three Popular Succession Planning Myths
- Economic & Market Outlook – Fourth Quarter 2019
- Have you ordered your first pumpkin spice latte?
- Writing a Story Worth Retelling
- Product contamination: Is your company covered?
- Are you covered in case of a business interruption?
- A Good Sniff
- It’s open enrollment season: Let’s up your game
- Now Hiring!
- Experience Modification Factor Explained
- Split Point Experience Rating Formula Explained
- Let's talk about China
- Dealing with disruption takes muscle
- Effects of Marijuana in the Workplace
- Separating the Signal from the Noise
- Thinking of relocating your business?
- Geek Fest
- Do you need an estate plan? No, but you want one.
- Economic & Market Outlook – 2019 Mid-Year Review
- How Our Brains Sabotage Our Financial Planning
- Mind the Gap
- What story does your estate plan tell?
- Can you push too far?
- Economic & Market Outlook - Second Quarter 2019
- The Implications of the Tax Cut and Jobs Act
- Temporary Worker and Joint Employment Webinar
- U.S. and China Trade Tariffs Explained
- DOL issues new proposal on overtime exemptions
- Why move when you can improve?
- Economic & Market Outlook - First Quarter 2019
- Bridging Generations Essential to Success in Family Businesses
- Time for an Insurance Review
- OSHA Log and e-File Webinar
- A New Year's Resolution
- Are you financially literate?
- Maximize Your Pension Plan in Retirement
- PBGC Benefits Review
- 401(k) Plans and Retirement Planning
- Will the multifamily housing development boom continue?
- Savvy Tips For Shopping Securely Online
- Investment Basics: Rebalancing
- HR Pros: Are you ready for year-end?
- Market Timing vs. Retirement Planning
- Couples: Have you discussed financial planning?
- What's your exit plan?
- Saving Strategies As You Approach Retirement
- The Impact of OSHA's Drug Testing Policies
- Layering Your Approach to Retirement Spending
- Survivorship Guidance Planning
- Proper planning prevents poor performance
- Multigenerational IRA
- Should you roll your 401k into an IRA?
- How to Choose the Right Investment Advisor
- Are you saving enough for retirement?
- What is a financial plan?
- 401(k) vs. Roth 401(k)
- The Case for Wine Insurance
- On the move? Your lender is your premier partner
- Employer Acquired: Retirement Plan Options
- Issues to Consider When Hiring an Attorney
- Making the Most of Your 401(k) Plan
- After Tax Rollover Rules
- Making the Most of Your Savings in Retirement
- HIPAA Privacy and Security Compliance Toolkit
- Are you ready for the Foxconn factor?
- Five Events That Can Ruin a Succession Plan
- OSHA Suspends Electronic Reporting
- Employer Efforts to Increase 401(k) Participation
- Cyber and Financial Fraud Threats
- Prescription Drugs: Effects on Health Plan Costs
- Protect Your Business from Phishing
- Beneficial Ownership Rule
- ACA Affordability Percentages Will Increase
- When Politics and Markets Collide
- How will the new tax law affect you?
- Advance Healthcare Directives
In the 2008 summer Olympics, Michael Phelps broke the record for gold medals in one Olympic Games with eight. And because he swam in exactly eight events, Phelps needed to be perfect in each race. Of all of these, the one he knew he would not have to worry about was the 200-meter butterfly. In that event, he was unquestionably without equal.
But while his win was expected, the way he won was shocking. You see, after the first turn, Phelps’ goggles filled with water. He swam 75% of the race totally blind.
So how did he win? Phelps has many great habits and great talents. But he describes his greatest competitive advantage as “the power of negative thinking.” He quite literally prepares for the worst. He had, in practice, swam this race blind and knew exactly how to do it.
In all of the thousands of races Phelps swam, his goggles filled with water exactly one time. The chance of that ever happening to him was miniscule. The chance of it happening at the 2008 Olympics was infinitesimal. But at the end of the day, what mattered was that Phelps had prepared for the worst-case scenario. And that is why he won.
The Stockdale Paradox
In his book Good to Great, Jim Collins describes a common mindset of successful leaders: they maintain optimism while confronting the brutal facts. Collins called this the “Stockdale Paradox,” named for Admiral James Stockdale.
Stockdale was a prisoner of war in Vietnam. He was brutalized and tortured. When he was finally freed, Stockdale was interviewed and asked whether there was a commonality among those prisoners who did not make it back. Without hesitation, Stockdale responded, “It was the optimists.” When asked to compare his own mindset, Stockdale explained that he hoped for the best and planned for the worst. In other words, he maintained faith but did not engage in self-deceit. See the exhibit below that show the differences between naive optimism vs. realistic optimisim.
Why Financial Plans Accommodate Unlikely Outcomes
So, what can the most decorated Olympian of all time and a prisoner of war teach us about achieving our financial goals? Think about how you have engaged in the financial planning process with your advisor.
- First, your advisor uncovers and captures what you want: What makes you happy? What are your specific wishes, hopes, dreams and desires?
- Then, your advisor collects information about your assets and income.
- Finally, your advisor tests whether your assets, income and behaviors are sufficient to accomplish your goals. This “test” is the financial plan.
In testing the viability of your assets and income to meet your goals, your advisor begins with a fairly standard list of assumptions, including how long you will live, how your investments will grow, and how the costs of your needs and wants will increase.
Typically, your advisor will start by looking at your current state and historical averages. Your income will grow at the pace it has grown. Your business will continue its pattern of economic success. Your investments will grow at an average rate over time. Inflation, too, will continue at its historical average.
The reason for these baseline assumptions is that over time, on average, for the “typical” client, they are the best predictor of what will happen.
However, your advisor needs to test your plan based on a different set of assumptions. This is where “the power of negative thinking” comes in—or, as Admiral Stockdale put it, hope for the best and plan for the worst.
- What if your income goes down? What if it goes away?
- What if your business fails?
- What if you do not live until 86.3 years old? What if you live to 96.3? 106.3?
- What happens if your spouse files for divorce?
- What happens if the markets perform worse than anticipated because a virus shuts down the economy?
- What happens if one of our children requires additional support?
The list of what-ifs can go on and on. The genius of planning is you can visualize the impact of “the worst” without necessarily experiencing it. You can see, in vivid detail, the economic consequences of bad things that statistically do not happen to the average person but could happen to you.
You get the gift that Marty McFly got; the gift to go back to the future. You get to test different ways to deal with the unthinkable. You get to see what works and what does not.
And then you can build a plan to handle the worst. It will include what you will do today to help prepare for those bad times, plus a plan of action for what you will do if and when the worst occurs.
Michael Phelps’ Coach
When asked why he had the foresight to imagine—and prepare for—the unimaginable, Michael Phelps credited his skeptical mindset and the wisdom of his coach, Bob Bowman.
He and Bowman would sit together and imagine everything that could go wrong and then “swim that race.” Bowman did what great coaches do. He did not tell Phelps what he wanted to hear. He did not tell him he would win. He did not tell him everything would be okay—even if, in the typical race, all of those things would be true.
Rather, Bowman coached Phelps to expect to win while preparing for the toughest fight imaginable. That is exactly what you need from an advisor. Someone who helps you embrace the possible while preparing you for what could go wrong.
Johnson Financial Group is a privately-held financial services company and marketing name for its subsidiaries Johnson Bank, Johnson Wealth Inc., and Johnson Insurance Services, LLC.
Johnson Financial Group and its advisors do not provide tax advice. You should review your particular circumstances with your independent tax advisor.
by Joe Maier
Joe has extensive experience helping high‐net worth individuals, family offices, business owners and corporate executives meet their wealth and legacy goals. His areas of specific interest and skill include business succession planning, financial and estate planning, and wealth transfer strategies.READ MORE about Joe Maier.
by Bob Schneider
Bob Schneider specializes in providing clients with the educational information and tools necessary to make informed decisions regarding their financial planning goals. He uses his financial planning experience to help individuals and families plan for and enjoy their retirement years.READ MORE about Bob Schneider.