Trouble with Best Practices
“Today’s ‘best practices’ lead to dead ends; the best paths are new and untried.” — Peter Thiel
It has been my experience that these days we are overwhelmed with best practices to improve various facets of our lives — Health, Wealth, Career, Personal, Life, Social Life, Sleep, Running, Eating, etc
The trouble with best practices is not that they are wrong — it is just that they could make us lose our edge — they mislead us and make us complacent or overconfident or both.
I have been a relative late bloomer when it comes to use of best practices. For the first 30 years of my life or so, these words “best practices” did not even register in my mind. I did not know what they meant. Now that I think I understand what they mean and after having laboriously followed a bunch of them in various disciplines of my life, I have been able to see and experience the darker side of them as well.
Few examples of general prevalence of best practices:
- There are best practices around eating — colorific input well calibrated and balanced across various food groups: fat, protein and carbohydrates and neatly packaged regimen of vitamin tablets
- Breakfast is the most important meal of the day
Hygiene and Cleanliness
- Clean your hands every time you get back home (after COVID-19, we are expected to disinfect our palms every time we touch anything or anyone outside home)
- Use chemicals to clean the floors in our houses that kill 99.9% of germs
- We consume almost exclusively RO water or bottled water
- Proactive lifestyle medication — for Hypertension, borderline Diabetes, Vitamin and Mineral pills
- Best practices across areas such as Communication management, Risk management etc that are followed by institutions across the world
Financial asset diversification
- Diversification across asset classes, market caps, sectors, horizons, geographies etc
Here are a couple of my up-close-and-personal experiences with using best practices:
- Asset Allocation in personal finance: I have been quite seriously engaged in organizing my personal finance matters for over a decade now — this certainly helped me get to a point where I could quit my full time job and explore alternate paths. As part of this journey, I had implemented best practices in terms of asset allocation — the one that takes as primary input your present station in life, your financial goals and risk profile. This served me well or so I thought
- Diversification in personal finance: My primary vehicle of asset growth was equity mutual funds. For a number of years, I was well diversified in terms of positions in funds across market cap categorizations and across fund houses (AMC — Asset Management Companies). This was a best practice — or so it felt with my incomplete knowledge
Here are the benefits I derived from implementing best practices:
- They liberated me from significant cognitive load. I did not have to critically evaluate every step I was taking in life
- They make for excellent starting points/initial set of guidelines as you delve into any unfamiliar field
- No need to learn everything from my personal experience — I was able to rely on accumulated crowd wisdom — learning vicariously largely
- My actions were efficient and life seemed productive
So, what is the problem with best practices — they are meant to be “means” but they end up becoming “ends” in themselves.
Best practices are “generally” good but “specifically”, often meaningless. They could give a false sense of being on the right path. They could lull our senses from striving to do even better — in other words, not pursue excellence. Also, it feels like best practices have become vehicles for perpetuating commerce (best practice consulting, proactive medication, vitamin pills etc).
It is worthwhile to remember that ratings agencies played a crucial role in precipitating the great global financial crisis (2005/6-to 2013/4 or later) while strictly adhering to the best practices of assessing and rating financial assets.
Notes on the flip side:
- It makes sense to have balanced meals on an average — but spread over a number of days or weeks, not in every meal. Even this is gross simplification (for example proteins are meant to be taken sporadically but carbs on a more regular basis)
- Controversial but I am not sure if breakfast is needed at all — breakfast, the way most of us consume, may be causing more harm than good
- Hygiene is important but going overboard on it, I’m not so sure. People used to live healthy lives and had long life spans before the cleaning chemicals were invented.
- Excessive hygiene could be the main reason behind widespread deficiency of Vitamin B12 (and perhaps other vitamins/minerals)
Project Management: Despite best practices,
- Most projects fail with respect to their time and/or budget targets
- Unidentified risks materialize all the time and few identified and mitigated risks too
- Almost always, most of us end up sacrificing legitimate upside at the altar of “over”diversification
In my personal experience,
- Asset Allocation: I feel the primary purpose of asset allocation is to avoid “squeeze” (panic selling, margin pressures, having to liquidate equity position when markets are down) and not so much booking profits (by re-balancing exercise). This point alone could make for half a blog post
- Diversification: Diversify away only correlated factors — anything more is waste of opportunity. Also, my primary vehicle for growth is not mutual funds any more.
“Implementing best practice is copying yesterday; innovation is inventing tomorrow.” — Paul Sloane
So, what do I do (with varying level of success): as opposed to blindly following best practices, I try to understand the essence behind each such practice, assess its relevance in my personal circumstances and accordingly follow them after suitably tailoring them.
The best practice that served me best thus far has been to remember that “I do not know (enough)”.