The Sketchbook of Wisdom: A Hand-Crafted Manual on the Pursuit of Wealth and Good Life
Buy your copy of the book Morgan Housel calls “a masterpiece.” It contains 50 timeless ideas – from Lord Krishna to Charlie Munger, Socrates to Warren Buffett, and Steve Jobs to Naval Ravikant – as they apply to our lives today. Click here to buy now.
Blaming the system is soothing because it lets you off the hook. But when the system is broken, we wonder why you were relying in the system in the first place.
~ Seth Godin
This story dates to September 2008. I remember this clearly because it happened on the day Lehman went bust.
The event is more vivid for me because, when the news broke out, I was less than a mile away from Lehman’s headquarters, with a school friend.
My friend, who was working in the tech division of another investment bank in the city, met me to discuss his India investments. His portfolio had already taken a beating in the financial crisis that had started at the beginning of 2008.
It was a messy portfolio, loaded with bad businesses – mostly from the power and infra sectors – and so I advised him to take his losses and sell most of it.
At the end of our clean-up exercise, we were left with just two FMCG stocks. My friend was not happy with the thought of converting his ‘paper’ losses to real ones, but I convinced him to do so.
Anyways, as I had expected, my friend laid the blame of his ‘bad portfolio’ on his ‘bad financial advisor friend’. It took me a while to explain to him that the problem was not his advisor friend but he himself. What did him in was his greed to earn quick money and the fear of missing out on hot stocks that his colleagues and other friends made money on before the crisis unravelled. And so he willingly listened to whatever his advisor advised him, not questioning him once.
That conversation has repeated in several of my interactions with other friends and relatives over the years, who have blamed the ‘system’ and ‘advisors’ for causing them financial troubles.
Some were sold bad insurance policies, some bad mutual funds, some were stuck in bad portfolio management services, and some saw their wealth evaporate at the advice of their friendly, neighbourhood financial advisors.
In short, all of them were unhappy with the hand they were dealt with by ‘others.’ Almost no one took ownership of the mistakes that caused them financial troubles.
Seth Godin, a noted American author, says, we blame the system because that lets us off the hook. We refuse to take responsibility for our mistakes. It is always a problem caused by ‘someone else.’
Godin also says, “…but when the system is broken, we wonder why you were relying in the system in the first place.”
Do not get me wrong here. Our financial system is not broken. It is well-regulated and sound. But one part that is broken, is the part about incentives and how they are mis-aligned between the receivers of financial advice, and the givers, which now also include social media (mis)influencers that our finance minister recently called a ‘growing concern’.
A quick explanation. The incentives of the giver of financial advice depends on increased activity from the receiver of financial advice. More stocks you – the receiver of advice – buy, more you trade, more mutual funds you own, more insurance policies you buy, more your advisor, broker, and agent benefit.
However, the truth is that ‘more,’ in most cases, is bad for you. You need ‘less’ of activity, trading, and number of stocks, mutual funds, and insurance policies. Less is manageable. Less requires reflection.
But then, Matt Haig wrote in his book Reasons to Stay Alive –
The world is increasingly designed to depress us. Happiness isn’t very good for the economy. If we were happy with what we had, why would we need more? How do you sell an anti-ageing moisturiser? You make someone worry about ageing. How do you get people to vote for a political party? You make them worry about immigration. How do you get them to buy insurance? By making them worry about everything. How do you get them to have plastic surgery? By highlighting their physical flaws. How do you get them to watch a TV show? By making them worry about missing out. How do you get them to buy a new smartphone? By making them feel like they are being left behind.
To be calm becomes a kind of revolutionary act. To be happy with your own non-upgraded existence. To be comfortable with our messy, human selves, would not be good for business.
Investing is not away from the reality Haig has talked about in his book. The things we read or watch in business and social media, or what we hear most advisors, experts, and influencers speak, are designed to depress us.
Happiness (of their customers, prospects, and viewers) isn’t very good thing for them, for how else would they peddle their bad, often toxic, financial advice?
We are sold insurance policies, mutual funds, stock ideas, and other get rich quick schemes, as if our lives depended on them. And that if we don’t buy those products or advice, we would end up in poverty and despair, even as our friends and all those friends we know on Twitter and Facebook would get rich.
People are led to make financial plans for 20-30 years ahead, while not many are taught to deal in the present with the behavioural aspects of taking care of their money, like simplicity, frugality, and patience.
But…but the problem is not ‘them.’ The problem is ‘us.’
Reinhold Niebuhr’s Serenity Prayer reads –
God, grant me the serenity to accept the things I cannot change,
the courage to change the things I can,
and the wisdom to know the difference.
What others advice me to do in life and investing is never in my control, and so I cannot change what they advise. But what advice I apply to my life and investing is in my control, and so I must ensure that I play just that part well.
So, the problem is not the advisor or influencer peddling wrong financial advice. The problem is ‘I’ not understanding what is wrong for me and what is not. Yes, that is the problem.
The more you are willing to get influenced with the idea of getting rich quick, the more there will be influencers telling you the secrets – and to millions of their other followers – of how to get rich quick.
My grandmother often advised me this – “सुनो सब की, करो मन की.” It means, I may listen to others, but must do what my mind tells me to do. She must have known about ‘confirmation bias’ in her own way, but what she meant was that even after listening to the advice of many others, I must do what I believe to be the right thing to do, after putting in careful thought behind my actions.
And that is exactly what I tell young and other investors who are worried about what to trust from the plethora of financial advice – often about how to get rich quick – from the multitude of financial and other influencers – “सुनो सब की, करो मन की.”
Influencers will not cause you any problems. Your fears, and greed to succeed and get rich faster, certainly will. So, take care of what you think and how you act, not how others want you to.
Life would be quieter, and simpler, then.
Influencers will cease to be ‘the’ problem.
That’s about it from me for today.
If you liked this post, please share with others on WhatsApp, Twitter, LinkedIn. Or just forward them this email.
If you are seeing this newsletter for the first time, you may subscribe here.