By: Juan Toran

In any transitional period in life, there exists an in-between stage where an old reality and a new reality blur together. Such is the case for me as I transition from a career in public service to one of private financial services. As my brain works on overdrive to absorb new concepts and new ways of thinking, my memory bank strives to find shortcuts to learn more quickly. It looks for old memory pathways similar enough to the new ones that allow for re-use. One such pathway draws upon a concept I often discussed in the capacity of my role as a law enforcement instructor, the OODA Loop, which I quickly realized applies to our client relationship model here at Fiat.

The OODA Loop is perhaps the most often misused and over-simplified mental model in modern history. Most who quote the OODA Loop do not even know the name of the strategist that came up with the concept, John Boyd. For the sake of brevity and because this is a blog post and not a research article, I will now fall into the same trap and oversimplify the concept to get the point across, while still respecting its greatness. I invite you, the reader, to fill in the gaps by doing your own research. I promise you will not be let down.

John Boyd was a fighter pilot in the Korean War who later became, according to some, one of the greatest American military strategists in history. One of his many contributions to military strategy and philosophy was the OODA Loop, which he never wrote about, but instead discussed in his briefings. The concept has since been adopted by military, law enforcement, government and private business organizations to build out decision-making processes for times of rapid change and/or conflict. And this, precisely, is the how, the why and the where my memory created the shortcut to what we do at Fiat.  

Boyd described the OODA Loop as a cognitive cycle consisting of four main stages on a loop: Observe, Orient, Decide and Act. I will explain each stage on its own and within the context of our business.

Observe

“If we don’t communicate with the outside world to gain information for knowledge and understanding, we die out to become a non-discerning and uninteresting part of that world.” -John Boyd

The first stage is to observe. We must constantly be observant of our surrounding environment. This is often applied to personal security by being aware of yourself and your abilities, the people around you, the entrances, exits and escape paths in case of emergency. In a financial world, observation means to inwardly know and understand your financial situation and goals, and outwardly observe and understand legislative changes to tax code, market trends, new investment vehicles, etc. There are two threats to the observation phase: (1) we will never have complete information and (2) there is too much information, and we can get lost searching for what is relevant to us.

During our discovery process here at Fiat, we fulfill the observation stage in the OODA Loop by establishing a clear understanding of our clients’ financial picture and their goals; and sifting through the over-abundance of information to highlight what is relevant to their situation.

Orient

“Orientation isn’t just a state you’re in; it’s a process. You’re always orienting.” -John Boyd

For Boyd, orientation was the focal point of the OODA Loop. Our observations feed the orientation stage, where our minds then analyze and synthesize the information through the lenses of our previous experiences, genetic heritage and cultural traditions, forming a mental model within itself. Boyd argued that as soon as a mental model was created, it would just as quickly become outdated. Therefore, to be successful, one must constantly be shifting their perspective to fit the new reality. Boyd pointed out how frequently humans will let a mental model become a doctrine, and repeat a process not because it successfully works, but because “that’s the way we always do it” (my line, not his).

Understanding our tendencies as humans to fall into this doctrinal trap (see: man with hammer syndrome) will both help us understand others around us and prevent us from falling in it.

Here at Fiat, we understand that no two financial realities are the same, and therefore the same tools and mental models cannot be applied uniformly from one client to another, nor from one moment in time to another moment in time in a particular client’s life. As your reality changes and your goals change; so change the tax code, interest rates, market trends and the availability and relevancy of certain strategies over others. At Fiat we will orient your plan to your internal and external reality and align it with your needs and goals.

Decide

Once you have observed reality, sifted through the imperfect and abundant information to deciphered what is relevant to you; and you have oriented yourself to this reality to form a mental model, you must decide on a course of action.

At Fiat, we will guide our clients through the observation and orientation stages, however the final decision will always be in their hands.

Act

Action is the final step, where you test the mental model you developed in the orientation stage and decided upon in the last stage.

Acting is not the last stage, however, because the OODA loop is a learning system. Based on the information we glean from observing our actions and their consequences, as well as our orientation to the ever-changing environment around us, we continue to develop new mental models and make and act upon new decisions.

At Fiat we understand that last year’s decisions will affect this year’s outcomes, but they are only one of the many evolving factors that affect your reality. Therefore, we understand that the loop continues, and our past actions are now observations that we will include in the process of orientation and decision-making so as to not fall in the trap of staleness and irrelevancy.

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The application of the OODA Loop in my previous career involved training myself and others to learn how to break with mental models to develop new ones and do so quickly in high-stress situations. My understanding of the OODA Loop as a learning process has now provided me with the realization that our clients’ success at Fiat occurs because of the fact that we operate within the OODA Loop ecosystem. Through this understanding I can better serve our clients to help them create winning mental models which in turn empower them to make the financial decisions that are right for them.