The Opinions of Others
Hello All,
Hope everyone is having a lovely start to the new year! As a gift please find a mild rant below (please feel free to email me with your own opinions on this):
I’ve had various conversations with people on the subject of small business and personal finance which start with “my friend told me”. This can be compared to a game of broken telephone where the original knowledge is interpreted by the various recipients and often results in amalgam of truth and opinion, presented as fact.
In the broad area of finance, there are certain knowns eg. tax rates, how taxes are calculated, the definition of a debit and a credit or profit (for the accountants out there), interest rates, how a balance sheet works etc. There is however a massive grey area which does require some interpretation. This might include whether something can be expensed, how to classify a certain transaction, do you have too much debt, should you do your accounting, can you afford to buy a house etc.
You might contemplate these quandaries on your own as they come up but most of us seek out a second opinion. Hearing someone else’s insight on somewhat complex decisions can help us to organize our own thoughts (speaking or writing are both excellent ways to do this) and gain some knowledge that we might not already have.
When soliciting other people’s opinions we often rely on the experience and confidence of presenter of the “facts”. And while confidence sometimes comes from expertise, we have all met know it alls who might know less than their demeanour seems to imply. As an example, I recently spoke to a consultee who has a profitable and growing service based business. She was told by various people that she needs to hire a bookkeeper despite the fact that she is competent with numbers, has a perfectly good (spreadsheet) system, a great accountant and only a handful of transactions. She knows all of this to be true but was second guessing herself because other people seemed quite confident that once you have reached a certain level of revenue, you must need a bookkeeper.
Finance and tax are particularly tricky because, unlike rocket science or brain surgery (which most of us know literally nothing about), they are areas where we all have some knowledge. But for those who aren’t in the field, this knowledge is often imperfect. We have a portion of the picture and ask others to fill in the blanks. Because we might lack confidence in ourselves, we give more weight to what others say. This can lead to bad decisions.
Of course there is no way to avoid all bad decisions. Accepted wisdom tells us that we learn from our mistakes. So a bad decision can actually be a good thing as it contributes to our experience which in turn improves our critical thinking skills. Instinct can be a great guide as long as we continue to hone and develop it, and have confidence that in many cases we know our own situation better than anyone else.
