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You are here: Home / LWM Blog / The Weakest Link

The Weakest Link

June 12, 2020 by Tim Mullooly

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Remember the British game show “The Weakest Link”?  In the early 2000’s the show became popular, and the catchphrase of the host, Anne Robinson, became more and more mainstream.

After each round of the quiz show, Robinson would send one player home saying, “you are the weakest link, goodbye!”

Why do I bring this up?  Earlier this week I was reading a post from David Perell about 50 ideas that changed his life.  I wanted to take a few minutes today to discuss a few of those ideas, and how they can help change your financial life.

Theory of Constraints: A system is only as strong as its weakest point. Focus on the bottleneck. Counterintuitively, if you break down the entire system and optimize each component individually, you’ll lower the effectiveness of the system. Optimize the entire system instead.

  • This is where The Weakest Link catchphrase popped into my head. As the theory states, your system is only as strong as the weakest link.  Eliminating the weakest link will make the entire system stronger.  This directly applies to your financial plan.  Instead of focusing on improving EVERY aspect of your financial plan at once, focus on improving your weakest area individually.  Devoting all of your attention to that weak link will help the entire plan run smoother.  Whether it’s cash flow management, budgeting, saving for retirement, paying off debt, etc. – strengthening that weakness will make your overall plan healthier and stronger. It’s far easier to focus on one task at a time than it is to divide your attention.  Like Ron Swanson says in Parks and Rec: “Never half-ass two things. Whole-ass one thing.”

Inversion: Avoiding stupidity is easier than trying to be brilliant. Instead of asking, “How can I help my company?” you should ask, “What’s hurting my company the most and how can I avoid it?” Identify obvious failure points, and steer clear of them.

  • When it comes to financial planning, trying to “be brilliant” really isn’t necessary. Despite what some people might tell you, successful financial planning can be extremely basic.  Most people don’t need to reinvent the wheel to retire comfortably.  It might sound boring, but that’s the truth.  The same can be said for investing.  Avoiding stupid mistakes (panic selling, market timing, complicated products) can help your portfolio significantly more than a complex, over the top, investment strategy.  It’s a cliché phrase, but ‘keep it simple stupid’ really does apply here.

Secrets are Hidden in Plain Sight: Most people think of secrets as Easter eggs. They assume that if a secret is important, it’s necessarily going to be hard to find. The best ideas can come from things that are so well-known that they aren’t well-seen.

  • Piggybacking off of the last point, plenty of people get caught up in complicated investment products, and unnecessarily complex investing strategies because they believe it can’t be that simple. The belief that for something to produce superior returns it needs to be more complex is completely false.  We discussed this very point on the Mullooly Asset Podcast last week.

Mimetic Theory of Desire: Humans are like sheep. We don’t know what we want, so we imitate each other. Instead of creating our own desires, we desire the same things as other people. The entire advertising industry is built on this idea. 

  • This is a point I’ve discussed before in blog posts and podcasts. Plenty of people go through life never REALLY thinking about what THEY want.  They see what other people have, and what makes other people happy, and just say “yeah, I want that too!” without ever really considering it.  When it comes to financial planning, the process needs to start with a dedicated period of time to figuring out specific goals and specific desires.  Having those goals in mind and knowing they’re YOUR goals, and not someone else’s, can be extremely liberating and motivating.

I don’t want to downplay the challenges of implementing some of these ideas.  I strictly mean to promote their importance in your financial life.  As the saying goes, it’s simple but not easy.

Just know if you need help implementing these ideas into your financial life, there are people happy to help you!

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