5. Manage Drift
We make good plans, but inevitably there will be plenty of things which will push us off course. We need to actively deal with this.
a) Put the metrics in place to recognize when things have gone wrong
b) Have mechanisms in place to catch the problems is when we deviate from our stated goals.
Sometimes it’s very difficult to recognize when we are drifting. Take the example of a portfolio manager. He or she is doing the best to make money on somebody’s investment. Investing in a pool of securities, stocks, shares and bonds. There will be a mandate for the portfolio – it may be to invest in worldwide emerging markets, invest in Triple A bonds, invest in European income producing real estate etc.
The portfolio manager may have very good intentions. He or she will also have a vested interest perhaps. A proportion of the portfolio returns will probably be part of the manager’s bonus. Over time it is likely that the portfolio manager may look at areas outside of the investment mandate. Assets may be bought outside of the designated investment area. From a returns point of view, this might make very good sense. But it is not what the investor wants or expects.
Therefore investment firm portfolio managers will be monitored by the company and their investments will be scrutinized. Any significant drift from the stated investment mandate and tolerances will likely be picked up and corrected with the unmandated securities being sold.
In a similar way, we must also look at our life projects and make sure that they are staying on track. Problems arise sometimes and we take certain courses of action that we did not expect to take at the beginning. We must constantly monitor both our performance and direction and strategy. When things go wrong we must take action. And where it no longer makes sense to continue with a strategy or project we must stop it or change it if necessary. We have far more flexibility than a portfolio manager. We can change our strategy if we want and if it makes good sense. We shouldn’t just drift. Flexibility is both a good and bad thing. We should have a good reason to deviate from our chosen goals and not just use our executive power to switch from one project to the next just because something looks more interesting (or because it supports our innate desire to procrastinate).