It May Not Have Mattered At All

Michigan Got Their Chance…and Deferred

The likelihood of Michigan winning was small, there is almost no chance that the UM coaching staff didn’t realize this.

If they played 100 times, how many would Michigan actually win in a straight-up game? 15 out of 100? Maybe? Again, quite sure that UM coaching and UG coaching staffs knew this.

In other words, Michigan needed something weird to happen, a very specific scenario needed to occur. To simply play the average probabilities wouldn’t work, Georgia’s best players were at least as good as Michigan’s, and the average Georgia player is better than Michigan’s. None of this was news, prior to the game being played. Coaching? It matters when all else is equal, yes. In this situation? Nah.

This happens in every competitive situation when there is a heavy favorite: the underdog has to accept its situation, and adjust its “average decision-making.” Ask anyone playing Novak Djokovic in a grand slam singles final. That opponent better win the first set, or else.

Yuck
Michigan won the coin flip, and then deferred. That means it chose to receive the 2nd half kickoff, not the 1st half. Georgia got the ball first. I groaned out loud, right away. Every single time I see an underdog do this, I shake my head (Michigan State deferred when it played Ohio State).

This was a clear error, and the simple reason is that Michigan needed the improbable, it could not use the “simple average game” scenario.

Stuff had to go right, very right. In order for the low-probability event (Michigan win) to occur.

The best way for that? GET AHEAD IMMEDIATELY.

How does that occur? GET THE BALL FIRST AND SCORE.

Even then, it may not have mattered. That doesn’t make the decision to defer correct.

Instead, what happened? Down by only 7 points, Michigan attempted to “go for it” on 4th down and 4, in the first quarter. In other words, Michigan knew it was in trouble early, and after it failed, and Georgia scored, I effectively stopped watching. It was over.

What Does This Have To Do With Financial Fluency?

When it comes to Social Security, the “commonly-held belief” is that you are supposed to defer. That is fine for the average case, when everything else is equal. In sports, that presumes that the teams are somewhat evenly matched. Then yeah, maybe.

In the real world, in financial decision-making, “all else is equal” doesn’t work, your specific situation is almost never the exact average as shown in the bell curve image.

Instead…

I have tried to state this in many different ways.

Be clear to yourself: are you really the average case? For example, “defer Social Security” is a generally-accepted average advice. That completely presumes that you live the average life expectancy. That assumes that you don’t have an urgent need in advance of this. That assumes that the reward you will get later will compensate you for the sacrifice you make today, by not receiving the money sooner. The list goes on and on.

If you are not average, make the adjustments required. Michigan wasn’t the average team yesterday. It was the inferior, it needed to accept that fact (it actually knew this, as evidenced by attempting to convert on 4th down in the 1st quarter), and make decisions accordingly. In the same way, deferring Social Security (just an example) isn’t a great idea if you have pancreatic cancer, is it? I realize this is an extreme example, that is intentional, the way to compare financial alternatives is to follow the cash flow outcomes under extreme scenarios, think of whether that is likely (or not) for your situation, and THEN compare the prices and details, in that order. The order of operations is vital, you don’t add and substract prior to multiplying or dividing, do you?

Sometimes, the rules are in your favor, even if you are not average. In that case, you can (and should) take full advantage. The ACA and Medicare open enrollment rules skew the rules in favor of those that are below average. Jabba the Hutt can access health insurance at the same price as Mr Perfect, because the ACA has created rules to favor Jabba the Hut. You now also understand why Mr Perfect isn’t in love with the ACA, the price has been adjusted higher, to account for the fact that the sellers (insurance companies) know that Jabba the Hutt is intentionally enrolling. You also now understand why the sellers (insurance companies) detested the ACA when it first arrived. Insurance companies were required to set their premiums in the complete dark, without any knowledge of how many Jabba the Hutts were going to enroll. If this was your commercial situation, what would you do? Simply not participate, right? That is exactly what happened.

Principle Is More Important Than Jargon or Sales Points

You can change the type of financial contract, change the jargon, the exercise is the same. The reason that people find financial stuff confusing is they are caught up in the “commonly-held advice” without getting the principles right first, as they apply to your situation. Instead, people watch YouTube videos called “what your life insurance agent isn’t telling you.”

In other words, they deferred, caught up in snappy takeaways, like Michigan did. Maybe it would’ve ended the way it did. Except, now we will never know. That doesn’t make that first decision (to defer) correct.

The same exercise exists, as applied to every financial decision, here’s an incomplete list.

Portfolio Construction

Social Security

Life Insurance

Health Insurance

Long-Term Care

Retirement timing

Financial Planning

Literally, the case studies on this are endless over here. The actual details of the policies themselves are secondary, we can almost always find the specific policy to “right fit” the situation.

Happy New Year, on to Dallas.