14 Chapters
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Chapter 6 Step 2—Imagine the Future

Neuwirth, Peter Berrett-Koehler Publishers ePub

STEP 2—IMAGINE THE FUTURE

For as long as I can remember, I have been fascinated by the future and after reading my first Robert Heinlein book at age eight, I became a science fiction fanatic. For the next ten years, I read almost nothing else. It was not what I would call a balanced approach to literature, but it did expose me to a wide range of theories about the nature of time and the relationship between the past, present, and future. At various times, different paradigms felt more or less “true” to me. There was Kurt Vonnegut’s theory of being “unstuck in time” (or more specifically that our lives are set in stone and our consciousness just moves through them),12 there was the idea that multiple futures exist simultaneously (e.g., Fritz Leiber’s The Big Time13), and of course there were dozens of books that contemplated time travel and the ability to change the future by going back and changing the past. I voraciously consumed them all and considered each theory in turn.

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Introduction Thinking About the Future in a Systematic Way

Neuwirth, Peter Berrett-Koehler Publishers ePub

THINKING ABOUT THE FUTURE IN A SYSTEMATIC WAY

It has become a cliché to say that we live in an “Information Age,” but the fact of the matter is that the amount of data available to us has exploded and grown almost beyond our ability to comprehend. At the same time, we as individuals are, more than ever, inundated with choices in our daily lives, and unlike the past, these choices now come associated with an overwhelming amount of information. Some of that information we seek and some is thrust upon us, but in total, rather than help us, the data often simply paralyzes us. From the mundane consumer choices we make every day to life-and-death medical decisions, we are given facts, figures, and recommendations but no systematic way to sort through that information and actually decide.

In almost all cases where we have an important choice, we are asked to make a decision in the present that will have consequences sometime in the future. This book is intended to show you a straightforward and systematic way to make those choices without getting lost or confused by too much information. The key tool we will use is called Present Value, and it is one that actuaries have used for over a century to do their job.

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Chapter 12 Present Value and the Distant Future—Planting Trees and Leaving a Legacy

Neuwirth, Peter Berrett-Koehler Publishers ePub

PRESENT VALUE AND THE DISTANT FUTURE — PLANTING TREES AND LEAVINGA LEGACY

About two years ago, my wife and I bought a small farm north of San Francisco. With eight acres and two (rundown) houses on the property, it was only an hour away from our jobs and therefore an ideal short-term weekend getaway, a long-term retirement home for us, and maybe—if we are lucky—a place where our son and his family might one day come and stay. I can’t honestly say that I did a Present Value analysis when we bought the place. The simple fact was that we saw the property and just fell in love with it. But that being said, now that we own it, we are constantly having to make decisions that have Present Value at their core.

Most of those decisions are of a mundane, day-today type that we talked about in chapter 2 (e.g., whether to rewire one of the houses, put a new septic system in, and/or convert to solar energy), but more than a few are decisions whose future consequences extend beyond our lifetime. For example, the people who owned the property before us had a variety of animals. There were horse stables, chicken coops, and several fenced-in pastures for goats and sheep to graze. This is not our kind of farming, and so over the last several months we have been dismantling the infrastructure designed for livestock and thinking about what to put in its place.

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Chapter 5 Step 1—Clarify the Choice

Neuwirth, Peter Berrett-Koehler Publishers ePub

STEP 1—CLARIFY THE CHOICE

If you are going to use Present Value to make better decisions, the first and arguably most important step is to be clear on what your decision is. Too many times when we find ourselves in a quandary, we ask ourselves “What should I do?” and then try and formulate a plan of action. By now it should be clear that there is another more precise question that should be asked, and that is “What are the alternatives that I am trying to choose between?”

One thing I don’t want to do is to characterize Present Value as a magic bullet that can solve all of your problems. There are plenty of issues and choices we face where Present Value thinking is not helpful, but in many more cases than might be apparent, Present Value thinking can provide a systematic way of approaching decisions that leads to better outcomes. Fundamentally, Present Value allows you to compare and evaluate different alternative paths that you already see. It does not allow you to develop new answers to questions that arise.

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Chapter 13 The Value of the Actuarial Perspective and “The Rest of Your Life”

Neuwirth, Peter Berrett-Koehler Publishers ePub

THE VALUE OF THE ACTUARIAL PERSPECTIVE AND “THE REST OF YOUR LIFE”

Throughout this book, I have talked about how individuals, organizations, and even society in general should be considering Present Value when facing important (and not so important) decisions. It may seem, at times, that I am suggesting a perspective that is in some way revolutionary or “brand new.” In fact, actuaries have been using Present Value for more than a century, and the questions that they address with that perspective are both important and affect almost everyone. Space does not allow me to describe the efforts of the many actuaries who are using Present Value to make things better, but I don’t want to end our discussion without talking about two actuaries who are making a real difference in people’s lives—one who focuses on the decisions individuals make and one who consults with the organizations for whom millions of us work. While the 5-step process for using Present Value lies behind almost all of what we as actuaries do, in this chapter I want to focus on the results of that work and talk about the true power of Present Value to make the world a better place.

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