Request from a Reader

A Summary for an Audience of Innovators

Yesterday, a reader asked that I write this summary introduction to CTRI for an audience of innovators interested in the “Constructive Skepticism” curriculum, as a result of his reading the first four posts in this series of nine weekly posts that will add up to a final “Constructive Skepticism” Notebook, titled “From Rational Investors, Inc. to the Curve, Triangle & Rectangle Institute, a 25-year Story of Change in a Hard-to-Change Industry, and What May Come Next”. This Notebook summarizes the author’s Fintech perspective on the history of retirement planning (“advisor-tech) over the last 25 years, and projects its future over the next 25 years.

The ninth post (in January 2025) will mark the last step in the dissolution of CTRI (on account of the retirement of one of its founders at age 80), and the possible placement of its IP in the Public Domain should no other not-for-profit organization want to actively continue the development and use of the “Constructive Skepticism” Curriculum. The placement of CTRI’s IP in the Public Domain would make it passively available to any and all, and thus remain a match with its “Meaning” and “Purpose” to help financial clients, advisors, and executives improve their individual, business, and investment decision-making by evolving the basis for their “Predictions” from “Trust Them”, to “Show Me”, and to “See for Yourself”.

One way or the other, CTRI’s founders hope that this IP will continue to help readers answer questions such as: What new ideas will inject themselves into the culture? How will these new ideas change the nature of the “Ideal Client” over the next 25 years? What do you need to know about such ideas, and their impact on your “Ideal Client” in order to remain a “Productive Host” in the evolving Fintech ecosystem? What can you do now, or did not do earlier, that will shape your future, and the future of your clients in this new environment?

This Notebook presents a 25-year history of change in a hard-to-change industry. Additionally, it makes “Predictions” about the next 25 years. This focus on “Predictions” reflect the importance of Rodolfo Llinás’ work in the development of the “Constructive Skepticism” curriculum, and the clarity that comes from summarizing his work as follows: “Brains” exist to manage “Motions” through “Predictions”. This one-liner summary created a decisive turn in the development of the central question asked, and answered by the “Constructive Skepticism” curriculum:  What can we do to improve our individual, business, and investment “Predictions”?

The 25-year history presented in this Notebook started in 1999 and ended in 2024. The “Perspective” that it created came from personal start-up experiences that began with the creation of Rational Investors, Inc. in 1996 and its sale to S&P in 1999; continued with Retirement Engineering, Inc. in 2001; the Retirement Income Industry Association (RIIA) in 2005 and the sale of RIIA’s Retirement Management Analyst designation (the RMA) to the Investment Management Consultants Association (IMCA) [then rebranded as the Investments and Wealth Institute (IWI)] in 2017; and finally the creation of the Curve, Triangle & Rectangle Institute (CTRI) in 2018. This entrepreneurial path “walked the target” of “advisor-tech” product/market fitness looking for scalable solutions from the perspective of the “View Across the Silos” in an industry full of business silos, and “Walled Gardens” with high regulatory walls.

Gathering speed in the early 2000s, a rising wave of 10,000 retiring Boomers per day pressured the financial industry to see that siloed models did not provide good-enough solutions for what became a critical mass of new “Ideal Clients”. This retirement wave favored solutions that worked across the business silos, and the Financial Industry needed to find answers to questions such as:

-         Who were the “Ideal Clients” for current investment planning solutions?

-         What were the retirement planning offers that differed from traditional investment planning offers?

-         Who were the new “Ideal Clients” for these retirement planning offers?

-         Which institutions/industry silos had best access to these new markets?

-         How could we measure the size of these markets?

-         How fast, and for how long would these accessible markets grow?

-         What were the growth and profitability impacts of drifting away from these new “Ideal Clients” in order to keep growing?

The bottom-line of this 25-year history of change created by the rising wave of Boomer retirements can be summarized as “Retirement Planning, Procedural Prudence, and the Household Balance Sheet (HHBS)”. Acknowledging the differences between investment planning and retirement planning, seeing Procedural Prudence as a scalable method across the industry’s silos, and using the HHBS as a holistic implementation tool were novel ideas in the early 2000s. This personal path took a new turn that opened a door to the next 25 years when we started the dissolution of CTRI in 2024. In the meantime, the last 25 years evolved as follows:

(i)               Account-level innovation (i.e. The Perspective of the Regulator): Rational Investors, Inc., for the Mass-customization of investment education and advice in 401(k) plans.

(ii)             Product-level innovation (i.e. Institutional Competitive Developments): Retirement Engineering Inc.'s Guaranteed Retirement Income Securities (GRInS)

(iii)           Process-level innovation (i.e. The Perspective of the Client): The center of gravity of RIIA’s “View Across the Silos”

(iv)            Validated best-practices (i.e. Advisor Best Practices): The RMA’s “Procedural Prudence Map”

(v)              Justified models (i.e. the Foundations of Investment and Retirement Theory): CTRI's focus on “Axioms, Assumptions & Hypotheses”

Starting in 2017, CTRI focused on reading research papers about Health, Wealth, and Statistics in order to separate “Spinach” from productive ideas. This reading of research papers turned into a formalized process and a curriculum, the “Constructive Skepticism” Curriculum, organized in Workbooks, Handbooks, and Notebooks. The process of writing the Workbooks, Handbooks & Notebooks of the “Constructive Skepticism” curriculum took a decisive turn with the reading of a 2010 paper titled “SPINACH, IRON and POPEYE: Ironic lessons from biochemistry and history on the importance of healthy eating, healthy skepticism and adequate citation”. Written by Mike Sutton, a former Reader in Criminology at Nottingham Trent University, this paper hit close to home, as I remembered my mother making me eat spinach, that I did not like to eat, because she believed it was high in iron. Given the number of follow-up papers and blog posts written by other authors since 2010, Sutton’s paper must have hit close to home with other people as well.  Eventually, the word “Spinach” became a CTRI code-word for things we think unquestionably true but look ambiguously false after asking a few questions. “Spinach” is not high in iron, and Popeye, the Iron Man did not each “Spinach” of its iron but for its vitamin A.

The greater value of “Spinach” for the “Constructive Skepticism” curriculum came from the change in “Perspective” that it created. Initially, “Spinach” in research papers felt like the exception. However, and over time it became clear that “Spinach” may be the rule because research papers present maps and “Models” subject to specific “Axioms, Assumptions & Hypotheses”. Most maps and “Models” look like incomplete, sometimes incoherent caricatures. Few maps and “Models” provide productive pictures that can be used to improve how we can navigate reality with better “Predictions”.

Sorting out the “Spinach” from the productive ideas for CTRI members interested in Health, Wealth, and Statistics issues became visible to the public in 2022 when we started a schedule of daily posts on Substack. Over time, these posts coalesced into a structure of four Workbooks, four Handbooks, and an open number of Notebooks. The Workbooks describe the core ideas with a focus on foundational “Axioms, Assumptions & Hypotheses”. The Handbooks provide glossaries (for the words and expressions in “quoted italics”), biographical and conceptual profiles of key authors, references, and tools such as the Template for Reading Research Papers that CTRI published on Amazon in 2024. The Notebooks present the application of the concepts, and tools to specific topics as well as specific papers. The “Pinned Post” at the top of the Substack homepage for https://francoisgadenne.substack.com provides a roadmap to help readers navigate through this collection of hundreds of posts, and pdf files.

CTRI’s work on “Axioms, Assumptions & Hypotheses” means working on the boundaries of what “Models” can help us see and understand in order to improve our individual, business, and investment “Predictions”. Fintech entrepreneurs of all types, including investment advisors benefit from developing such an understanding of the boundaries of what they do, and where it fits in the broader scope of the industry, its history, and its future. This understanding of boundaries helps them see, and focus on the 20% of their work that delivers 80% of their value-added. For instance, having an early understanding of the winning “Predictions” of the past 25+ years (i.e. “Retirement Planning, Procedural Prudence, and the Household Balance Sheet”) created many successful careers, and many successful retirements. This Notebook illustrates the nature, and timing of such changes in understanding with specific examples that include Mike Zwecher’s 2010 book, and Thomas Idzorek & Paul Kaplan’s 2024 monograph.

Looking at the past to see the future, we observe that during the first 25 years of the 21^st Century, the generational wave of retiring Boomers provided a rare scalable “View Across the Silos”, as exemplified by the HHBS. Now, that these retirees are starting to reach the end of their retirement horizon, the resulting wealth transfer to the following generations will likely require different solutions. What winning ideas will reveal the boundaries of the next 25 years of growth in the financial industry? What ideas will become the equivalent of “Retirement Planning, Procedural Prudence, and HHBS” for the next 25 years?

Thus, this Notebook addresses the continuing evolution of retirement planning solutions, and future growth areas in the financial industry including expectations that (i) the aging Boomers’ retirement wave will soon morph into generational wealth transfer, and that, pressured by the regulatory contradictions between their statutory agencies as illustrated by the example of annuities in 401(k) plans discussed during CTRI’s last member conference on September 22, 2024 , financial solutions will move away from the Boomers’ “View Across the Silos” to become siloed again, perhaps in the form of individualized collections of risk-specific “applets” (e.g. “Account Vehicle”-driven tax optimization)  derived from household balance sheet analysis, (ii) advisors, and clients will embrace “Terrain” perspectives, such as the household balance sheet, and Gerd Gigerenzer’s Algorithmic Heuristics from “Ecological Rationality” that recognize, and manage the presence, and the position of risk-specific “Absorbing Barriers” as a counter-balance to the traditional focus on optimization and (iii) advisors, and clients will recognize the existential differences in “Meaning” between the “Ensemble” perspective of the Disinterested Observer (i.e. academics & practitioners), and the “Time Average” perspective of the Decision-Maker (i.e. clients), especially for clients living closer to their ”Absorbing Barriers” and thus with a greater sensitivity to the downside of “Variance”.

In the last 25 years, we may have lived through a wave of unfreezing of the industry’s “Walled Gardens”. In the next 25 years the walls may be freezing again, and profitable growth will become siloed again, but in the context of the household balance sheet, and a few other and, similarly productive models that can improve our “Predictions”.

This “Introduction” described the curiosity and the motivation behind the creation of CTRI, and the “Constructive Skepticism” curriculum. The sections of the final Notebook tell the rest of the story as follows:

-         “Models Reduce Reality to a Map of Lower Dimension” starts the Notebook by creating a shared context for the use of the word “Model”

-         “The Reducing Axioms, Assumptions & Hypotheses Behind Financial Models” continues this shared contextual development with a description of the “Feet of Clay”  at the foundation of financial “Models”

-          “Models for Ideal Investment Clients and Models for Ideal Retirement Clients” applies the shared context, concepts, and tools to discuss the evolution of best-practices in retirement planning over the last 25 years by illustrating key milestones with reviews of Zwecher (2010) as well as Idzorek/Kaplan(2024)

-         “Absorbing Barriers Lead to Terrain Theories” takes this historical perspective of the last 25 years and applies it to the next 25 years

-         “The Ergodic Ensemble of the Ideal Investment Client and the Non-Ergodic Individual of the Ideal Retirement Client” focuses the discussion from the conceptual issues to the quantitative details that should matter in the developing history of the next 25 years

-         “Conclusion: Recapitulating the Introduction, and Beyond” closes the loop started with this “Introduction”, and summarizes its key idea with memorable one-liners.

-         “References” gives readers access to the sources, and tools that support the “Constructive Skepticism” curriculum so that they can “See for Yourself” to make better “Predictions” as the future develops.