Wealth of Wisdom

CHAPTER 53Making Better Decisions by Telling Stories That Have “Already Happened”

Stacy Allred

Recall a hospital scene in the movies where the operation has gone awry and the patient has died. The medical team is gathered around to perform a postmortem —to analyze the situation after action and see what they can learn. Family wealth¹ decisions, all too often, are similar to the postmortem—learning and analysis is done after the fact and frequently with suboptimal results.

Consider the story of a generous couple who made a large outright gift to each of their three adult children.² Simply put, the sibling who was a saver saved, the risk-taker made an outsized bet, and the spender ran through the money and came back asking for more. Lamenting the mixed results, the matriarch commented, “I should have known; these gifts magnified their long-standing relationship to money.”

Yet, there is a simple decision tool with the power to

• increase ability to correctly identify risk factors,
• see new opportunities, and
• build intuition about and sensitivity to future problems.

How Does It Work?

It starts with the idea of prospective hindsight;³ that is, leveraging our natural ability to tell stories but to tell them as if they have “already happened” before the big event as a method to tap into deeper insights⁴ and combat common decision biases (e.g., overconfidence). Prospective hindsight seems to spur more insights because it offers a firmer cognitive foothold by forcing a family to ...