Simplicity>Complexity

Many years ago in one of Peter Lynch's books he said something along the lines of if you can't explain why you own a particular stock so a child could understand, then you don't really understand the stock. This might have been my first introduction to the idea of simplicity versus complexity. This Lynch idea has also been applied to other things beyond stocks, if you can't explain a particular concept so that a child could understand it then you don't understand the concept. That might have come from Richard Feynman and if it did, maybe that is were Lynch got his heuristic (rule of thumb) about stocks. 

Many years later Nassim Taleb came along with a related idea when he said (paraphrasing), everything you need to know about finance you learned from your Grandmother. Save money, don't lend money and don't go into debt. I have applied this same idea to diet and exercise. On some level we all know too much sugar is bad for us even if we don't fully understand where sugar comes from (it comes from carbohydrates) and we also know that we need to exercise even if we don't know the most effective and efficient way to do it (resistance training with weight). 

Quite a few years ago there was a skit on Saturday Night Live with Steve Martin, Amy Poehler and Chris Parnell called Don't Buy Stuff. Parnell plays an author/guru who created a program called Don't Buy Stuff You Cannot Afford. Poehler and Martin keep asking essentially the same question over and over and Parnell says then don't buy it. 

Most of life can be that simple, certainly personal finance for ordinary folks can be. You need to save money, you know that and it's simple. Too much debt will cause problems, you know that and it's simple. Building a simple investment portfolio with broad based funds can get you to where you need to be if you just let it do its thing for you. That's a slight level up but if you've been engaged with markets for even a little while you know this, it's simple even if not always optimal. If you make a huge bet on something risky you stand to take a huge hit, you know that and it's simple. Years ago, a reader left a comment on the blog about having put 25% of his money into a lottery ticket biotech that went bad. He knew better going in but did it anyway. Keep it simple. 

I get a lot of questions about diet and exercise on social media and from friends. The starting point is very simple. Cut carbs, lift weights and skip breakfast. That's it. It's very simple even if not easy. Cutting carbs (sugar) and lifting are a little easier to understand, the science behind skipping breakfast requires a little study but the idea is simple, eat your first meal at mid-day. 

I see an overlap in the previous paragraph and the one higher up about simple portfolio construction. For most people, their ultimate financial goal is to have enough money for what the realistically want to do when they want to do it. The path to that outcome is simple, have an adequate savings rate, maintain an appropriate mix of stocks, bonds and whatever else you believe in and don't panic. For most people their ultimate health goal is to avoid being sick and be able to do what they enjoy doing. The path to this outcome is simple, cut carbs and lift weights and if you want to level up on that skip breakfast and don't eat food in boxes with a long list of chemicals listed in the ingredients. 

I try to bring this same philosophy to the fire department with the motto at the top of our white board.

Everything we do should be some combination of our staying safe, serving the community, learning and having fun. Not everything will be fun of course but my thought is why would someone volunteer if it wasn't fun for them so we make it fun where appropriate. It's a very simple foundation upon which to build a volunteer fire department. Simplicity can even be applied to medical calls for EMTs. A simple way to think about what an EMT does, as opposed to a paramedic, is to treat what they see. No pulse, CPR. Bleeding, direct pressure. Difficulty breathing, give oxygen. And so on. Medical calls boil down to some sort of assessment of the scene and patient and then some sort of intervention based on observations of the patient's issue.

Medical calls are not always that simple, often they are not but the underlying building blocks above are. Same with personal finance. People have all kinds of complicating factors but the building blocks are simple, save and invest prudently. People have all kinds of medical issues and even if the carb/lift/no breakfast doesn't quite fit, no one will be worse off for avoiding all the sugar in the typical breakfast of cereal/bread products/oatmeal/fruit/fruit juice combo.

Right or wrong, I think all aspects of life can be made simpler even if not truly simple. I've made this a priority in my life forever and I believe I've benefitted from it.