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Deep Understanding?

Deep Understanding?

July 30, 2021

Last month, I mentioned what I perceive as the recent increased use of big words by people in general and journalists in specific. I am seeing these ten-dollar words in articles on subjects ranging from food to finance. The words, heuristic and algorithm were the two examples I used but there are certainly more.

I think we use big words for two main reasons.

1- Because a simpler word or phrase does not occur to us in the moment.

2- As a signaling mechanism.

For example, if a chemist who works in a laboratory with other chemists, whose romantic partner is a chemist and who otherwise does not socialize much, casually references a phase diagram, it is probably because everyone they normally speak with is familiar with the term.

If you hear that term from a parent you are speaking with at your daughter’s soccer game, he or she might be signaling their educational or social status. Signaling is, itself, a more recent word choice for what used to be called showing off.

In my younger life, I, at times, used big words for both reasons. In fact, and it embarrasses me to admit this, I probably used them more to show off. This is probably because I was not completely confident in myself. Okay, scratch probably.

Interestingly, but perhaps not surprisingly, as my knowledge, experience and results grew with time, I found myself communicating more and more with plain language. I feel simple, straight forward talk is the best way to be understood. It is also the best way to help folks gain an understanding of unfamiliar concepts.

About 100 years ago, there was a physicist named Max Planck. Dr. Planck came up with Quantum Theory, which deals with the behavior of the smallest units of matter. I will not pretend to understand the theory well, but my point is, he was smart.

In the days before the Internet or television, when people had something to say that other people wanted to hear, they went on a lecture tour. Dr. Planck toured Europe explaining Quantum Theory. His tour gave rise to an instructive story.

One day, after several months on tour, the physicist’s driver asked if he could give the lecture, “just for fun.” Planck knew his driver had memorized the talk from constantly hearing it and responded, “Why not?”

The driver flawlessly delivered the lecture. Afterward, there was a question-and-answer period. A physicist from the local university asked a complex question and the driver, without skipping a beat, is said to have replied “I’m surprised that in a city as enlightened as Vienna, I would get so simple a question to begin. This one is so easy, I’m going to let my chauffeur answer it.”

Whether or not the story is true, no one really knows, but I think it conveys a good point.

The way to distinguish deep understanding from “chauffeur” knowledge is to ask questions. How does one financial product or concept compare with another? What are the relative strengths of the products and what are their weaknesses? How might the plan being advocated for compare with other options? What are some of the risks associated with a financial plan or product?

Remember, life seldom gives us exactly what we want. Instead, it gives us choices which present tradeoffs. Knowing what we are getting and, perhaps, not getting, is a crucial part of the decision-making process.

There is a big difference between deep understanding, real knowledge, and being merely articulate. That difference can make all the difference in your financial life.

If you like, put your financial planner to the test. Once you are confident they can do more than just talk a good game, take appropriate action.

Scott R. McGimpsey July 30th , 2021

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