The 19th century mathematician Carl Gustav Jacobi is attributed to have said “Invert, Always Invert!”. His words never had it so good until recently. His name and work might have forever remained within the cocoon of academic mathematics if not for his quote made famous in recent times by Charlie Munger. The modern life application of Jacobi’s urging covers all forms of societal, economic and even personal issues where the concept of inversion can be useful. The concept can be applied at a global level or at an individual level. For example, the question “How do we increase our country’s exports?” can be inverted as “What are all the ways by which we can reduce our exports?”.
By answering the inverted question, we will be able to come up with actions that we must avoid in order to address the original question.
Since the government has not consulted me to solve the country’s problems, let’s take some inversion examples closer to home. 😌
Question 1 (Q1): How do we become financially independent?
Inverted Question 1 (IQ1): How do we remain financially dependent (on our job or on someone)?
Possible answers to IQ1:
1. We spend more than we earn (or) we don’t even have an idea how much we spend.
2. We don’t earn enough to cover even our basic living expenses and expect our family or friends to pitch in frequently.
3. We trade frequently incurring large brokerage commissions and short term capital gain taxes (or) We invest in expensive financial products where fees eat away large chunk of our returns.
4. We buy a big house way beyond our needs taking on a huge mortgage.
5. We fill that big house with many things that we don’t need or barely use.
6. We buy an expensive new car and trade up every couple of years so we continue to have monthly car payments.
7. We always like shiny new things rather than reliable old things and make sure our lifestyle reflects our ‘status’.
8. We choose our domestic partner(s) who are insecure and spend more than us (or) We have a partner who finances our life and gives us what we want (our own sugar daddy/mommy)
9. We have kids who think their parents grow money on trees and spend accordingly.
10. We expose ourselves legally without adequate insurance or asset protection.
By coming up with this list of answers, we can straight away identify what to avoid and work on doing the opposite of these actions. Avoiding these pitfalls will put us on the path to financial independence.
Let’s do one on personal health.
Q2: How do we remain healthy?
IQ2: How do we become unhealthy?
Possible answers to IQ2:
1. Eat whatever you want, whenever you want and how much ever you want.
2. Don’t exercise…ever
3. Don’t do any household chores that require physical activity (have someone do them for you)
4. Don’t play any outdoor games.
By not doing the above (that is, opposite of the inverted question’s answers), we answer the original question.
This method works exceedingly well in cases where the inverted question is easier to address than the original question.
Inversion doesn’t work everywhere, especially if the original question has only one or very few correct answers whereas the inverted question has many possible answers, which by process of tedious elimination, you finally arrive at the one answer which you would’ve easily got to by answering the original question. It also doesn’t work well in some “why” questions where the correct answer is an undisputed scientific fact. However, in many social, economic or managerial problems that have many interacting variables, inversion can be a very helpful tool to help us make the right decisions.
I will write in a subsequent post about how you can apply this inversion principle to investments and make a profitable decision.