By Chris Hanson
Mistakes are peculiar things; everyone makes them but few of us are willing to admit to them. Frequently, the more educated and intelligent a person is, the harder it is for them to admit they are wrong. It’s as if their whole identity is wrapped up in being the smartest person in the room.
If they’re actually wrong, then they fear losing self-esteem and social status.
The Wicked Smart Investor does not subscribe to this school of thought. After all, in financial planning, admitting to your mistakes can cut your losses and put you on a better path. Sometimes In life, owning up to a big blunder could lead to sweet success.
Let’s consider the story of a local heroine, Ruth Wakefield, a world-famous chef with very humble beginnings. Raised in Easton, Massachusetts, Ruth graduated from Framingham State Normal School Department of Household Arts in 1924. Over the next few years her career path followed a “normal” progression. Ruth taught Home Economics at Brockton High School and served as a dietician at a hospital. Later, she decided to go into business with her husband and soon enough nothing was “normal,” but in a good way.
In 1930, the Wakefields purchased a restaurant in Whitman, MA and named it the Toll House Inn. Conveniently located between Boston and Cape Cod, the inn attracted customers from all over the area. Ruth’s skillful cooking, high standards, and hard work made the restaurant successful in the first year.
The Kennedys even frequented the Inn; Joe Sr. loved the Boston Cream Pie while Jack opted for the Mary Jane Gingerbread. Serving Massachusetts “royalty” is pretty fancy, huh? But Ruth was a sharp lady with even more tricks in her pastry bag.
As smart as Ruth was, one day this Betty Crocker prototype made a huge culinary blunder. One version of the story had Ruth baking chocolate cookies based on an old colonial recipe for butter drop do’s. Pressed for time, she did not melt the chocolate first; instead, she chopped the Nestle chocolate in pieces then added the morsels in the mixing bowl. She figured the chocolate pieces would melt and evenly distribute throughout the cookies.
WRONG! When she took the cookies out of the oven, she discovered that the chocolate melted, but stayed in place. When the cookies cooled, the firm bits of chocolate gave the cookies a firm and exquisite crunch. The mistake, snafu, blunder, whatever you want to call it, eventually resulted in mouthwatering joy for millions and culinary superstardom for Ruth.
A true entrepreneur, Ruth exploited the opportunity presented by her error. I told you she was a smart lady. Her Toll House Inn patrons loved her creation and the recipe made its way into a Boston newspaper. Growing in popularity, the cookies became a staple in care packages sent to soldiers from Massachusetts, and then their buddies from all over the US asked their families for the cookies.
Don’t you wish your mistakes were this fruitful? I’ll bet your mistakes are not that fortuitous, especially if the blunder is in the financial planning arena. Maybe you put together a financial plan that did not take into account inflation, health care costs in retirement, or your true risk tolerance. Or maybe you made big bets on a favorite stock, made too optimistic estimates of stock market return or discovered you spend a lot more than you thought.
It’s probably time to admit your mistake and revisit your financial plan with a qualified advisor. I know admitting you’re wrong is hard to do but think of it as cutting your losses. Why pay for yesterday’s mistake for the rest of your life? A trusted advisor can minimize the damage and set you on a better path. An added benefit is a trusted advisor is like a vault; your mistake will never be as famous as Ruth Wakefleld’s “happy accident.”
Be proud of yourself for being wise enough to admit you’re not infallible; none of us are!