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Week 3: Weekend reading for health, wealth and happiness


By Sam Instone - January 21, 2021

I've long been flummoxed by the difficulty people have making important decisions.

How can people get things so wrong so often in managing their health and fitness, family finances and career choices?

Now, don't get me wrong, I am certainly no different and have made more than my fair share of blunders.

But it's dawned on me that the demons people wrestle with are very real and of Herculean proportions.

Individuals applying self-care approaches will make certain conscious or subconscious choices, referred to as System 1 (fast) and System 2 (slow) thinking, when adopting health, wealth and life change strategies like programmes or philosophies, habits and routines.

System 1 is an emotional process with more error-prone cognitive illusions, not unlike brainwashing, that often lead to failure, and sometimes even dangerous 'herd behaviour'. System 1 is steeped in misinformation. Exploiting this is central to the sales tactics used to promote many of the health and fitness products and services, showing that emotionally charged decision-making can promote illness, disease and injury.

Unfortunately, many people seeking to improve eating and exercise habits fall victim to this approach through marketing hooks, especially the popular one-size-fits-all diets and exercise programmes that System 2, the rational cognitive process, knows are too good to be true. System 1 decisions are largely ineffective, may not be beneficial, and indeed, may actually be harmful.

In contrast, System 2 is a rational decision-making process, associated with personalised plans that tend to be more successful. It relies on conscious intellect, requiring time to think and deliberate about a particular course of action.

Family finances and wealth creation in particular is a packed minefield that few navigate without getting maimed thanks to 80% of our financial decisions being made with System 1 thinking.

It's replete with mirages - what you see if often not what you get. Our first instincts hurt us more often than they protect us. Actions that are sensible in every other realm of life lead us astray in finance.

System 1 and 2 graphicAt AES, we've adopted a System 2 approach.

System 2 thinking is promoted as having a much more reliable, long-term impact that creates sustainable improvements, but generally requires much greater personal engagement than System 1. In practice however, this is easier said than done.

Within our Wealth Advice business, this means we're unconditionally committed to working with you to create the best context possible for your economic freedom, so you don't have to worry about money.

Within our Health Advice business, it means a commitment to prevention rather than cure. Long-term solutions that solve systemic problems. An integrated balance that goes beyond just insurance.

System 2 thinking is the reason why I hold the performance coaching, education and insights offered from working with people like Mick Todd at 2B Limitless in such high regard. They help me be my best, so I can live my best. 

To learn more about this area, I can't recommend 'Thinking, Fast and Slow' by Nobel Prize winner Daniel Kahneman highly enough.

Turning to financial markets, in addition to having two daily declines greater than 10%, March 2020 was also the most volatile month in stock market history. But volatility is simply the entry price to be able to enjoy future long-term returns.

I reviewed a client portfolio this week which had grown by more than $1 million in 2020 by sticking to some basic investment principles. In his article for Of Dollars And Data, Nick Maggiulli shares '10 investing lessons from 2020'.

On the theme of finding your purpose, I wanted to share 'three life lessons from a dying man'.

As always, and true to my own military roots, the final word is taken by former senior British Army officer, inspirational leader and Ironman Champion David Labouchere on 'Progress, Purpose and People'. This contains at least two of my favourite ever quotes - one on purpose and one on people.

 

A question for you 

Ask yourself - With whom will you make progress towards purpose today?

 

This week's meditations

"The trajectory of your life bends in the direction of your habits."
- James Clear

"Instead of asking how many tasks you can tackle given your working hours, ask how many you can ditch given what you must do to excel."
Morten Hansen

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Have a great weekend and enjoy the ‘light’ reading! 

 

Tony Tran's explanation of 'Herd Mentality' for I Will Teach You To Be Rich

Daniel Kahneman's 'Thinking, Fast and Slow'

'10 Investing Lessons from 2020' by Nick Maggiulli for Of Dollars And Data

Aaron Nichols' post 'Three Life Lessons From a Dying Man'

David Labouchere's article 'Progress, Purpose and People'

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