Genchi Genbutsu - Don't Make Assumptions!

"I wonder if it deals with wavefunction collapse? If somebody observes your hedge fund, will it decohere into an eigenstate?" photo and quote by Arenamontanus

"I wonder if it deals with wavefunction collapse? If somebody observes your hedge fund, will it decohere into an eigenstate?" photo and quote by Arenamontanus

Genchi genbutsu – Japanese for go see the real thing for yourself.

This is another valuable principle used in lean management that can also be effectively applied to your own life. Don’t make assumptions. Genchi genbutsu aligns nicely with Principles of Financial Management #1 – educate yourself. Genchi Genbutsu is about not relying on preconceived notions because the only constant in life is change. What you thought before may no longer be relevant today.

How many times have you seen conflicting data presented? Global warming has become global climate change. Then others point out the world has had several ice ages and ask what was in between? Is red wine is a curse or a cure? The latest source of conflicting data, healthcare! Can the government mismanage it any better?

We read reports about how the average mutual fund cannot even beat the market average, yet it seems every funds marketing material indicates they are leading the pack.

Ask 3 different financial advisors for their suggestions on where to place your investments and you are likely to get 3 different answers, which one is right?

What do you do with all the conflicting information that is directed your way? Use the advice of the guy you like best, do you pick who was cheapest or are you simply frozen in fear of making the wrong decision. To know which direction to take you must arm yourself with education and understanding.

Genchi genbutsu is a philosophy that is taught to the front line staff of Toyota Motor Corporation. Their management staff came to learn that the person who knows the job best is the person that has the most vested in it, the employee. Over the years they found that computer generated reports and conventional textbooks were great but often failed to highlight the greatest opportunities based on their situation or failed to reflect the true root cause of their problems. Only by fully analyzing and understanding the real information at the source were they likely to develop a successful plan.

Anytime we engage with a vendor, be it a bank, a broker, real estate agent or clothing salesperson their objective is to sell us something. In some cases you will find a sales associate with integrity that will provide you with value for your money. More likely, they just want their commission.

When it comes to personal finance we can use the concepts of genchi genbutsu to help us ensure we get more value for our money. Every dollar we spend is for a good or service. Getting the most value for our money requires gaining ample knowledge of the market and options for a given product or service. When possible this means getting as close to the source as possible.

As an example, I’ve always believed that buying in bulk is more cost effective. Last week we began a price comparison project with the local grocery and discount stores and found several instances where buying in bulk was actually more expensive! This was genchi genbutsu in action.

When it comes to your finances, nobody will ever be more vested in positive outcome than you. Your retirement and the fifty or sixty years of decisions it takes to get there demands that you take an active role in making sure the decisions are the right ones for you. The only way you are going to know if your financial advisors are giving you best advice for you is if you are armed with the knowledge and understanding of the real thing.


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