In the world of personal finance, just about everyone wants the masses to convert to our “religion.” It’s lonely seeing the light, apparently, so we need as many followers as possible. We’re like David Koresh, but without the terrible 90s glasses.
So we do what any good religion does, and that’s indoctrinating the children. Yes, Mrs. Lovejoy, somebody IS thinking about the children. We relentlessly stress for financial education in schools, even though evidence argues it might be a waste of time. We post financial tips on our blogs, with some of them even being useful. And I guarantee a full 96% of us would actually cream our drawers if somebody showed up and wanted us to be our personal finance mentor. (Not me. I don’t have time for that crap. Figure it out on the internet like I did, champ.)
This is all well intentioned, but I think ultimately misguided. I not only think that the vast majority of this stuff is a waste of time, but that we should go even further. We should encourage people to actively not take an interest in personal finance.
Only so many opportunities
In the world of value investing, there are only so many cheap companies. And out of those cheap companies, the majority of those are trash. They’re either in a secular decline, or they have too much debt, or whatever. There’s a lot of crap out there, especially in the value world. Think of the whole exercise as turd mining, actually. You fish through a lot of turd to find something decent.
This extends to other personal finance options. Think about something like an emergency fund. If everyone had an emergency fund, banks would be flush with cash, and they wouldn’t have to issue so many bonds. So they’d pay deposit rates for the cash, while people would borrow a whole lot less than what they do now. Lower volume equals higher interest rates, plus less jobs in banking.
In a world where everyone buys less junk, the retail industry would be decimated. People would make their own beer and only buy lentils and whatever meat the grocery store had on sale. That’s probably good news for Walmart, but terrible news for luxury retailers. Nobody is buying a Tiffany’s necklace in this new world.
Even think about cars. Everyone would drive a Honda Civic or a Toyota Camry, because the luxury car segment would barely exist. And since car companies wouldn’t have luxury models to pad the bottom line, the price of a Camry would be more than what it is today.
And finally, there’s the world of regular investments. If you think the market is expensive now, imagine how expensive it would get when you add trillions in cash that isn’t getting spent on gadgets, fancy sofas, or credit card interest. There’s only so many investments to go around. And remember, stocks like Coca-Cola, McDonalds, or Nike wouldn’t be very attractive at all, since every consumer would be drinking delicious tap water and making their own hamburgers.
Our entire economic system is based on people buying stupid crap that they don’t need to impress people they don’t care about. We all think it’s stupid. But without it, the world gets a whole lot harder to compete in.
It gets worse
Imagine a world where everyone took our advice completely to heart and successfully implemented it.
Forget about the economy for a second, even though it would be completely different than it is now. Just look at something like employment. We’d be full of overachievers that are sitting on huge emergency funds, just waiting to switch jobs because something better comes along. There would be no under performers, because we’re all working hard so we can eventually retire early.
How is the average performer supposed to get ahead in a world like that?
In Canada, one of the driving forces behind our economy is people borrowing against their houses to consume. What happens to the economy if we don’t do that?
People think that if we take away the consumer-centric economy, that money will automatically flow into investments and people improving themselves. We’ve already debunked the myth that more money into investments is automatically good, so let’s squash the other myth.
Frankly, it’s laughable that the average person is just a better financial situation away from accomplishing something great. If the average person has his financial poop in a group, he’s not going to create the newest internet business. He’s going to spend more time staring at the TV (Netflix, of course). He’s just not smart enough.
Let’s face it. Most people who would create cool new things are already doing it. If Bill Gates had credit card debt, would that have made him less good at computers? Somehow I doubt it.
If you want to get ahead, you need to do it by stepping on the figurative back of someone else to get there. If everyone had the same goals as the rest of us, being wealthy wouldn’t be extraordinary. It would just be the expected outcome, like pinching one off after a big meal. What a terribly boring world to live in.
Fortunately, this will never happen. Consuming makes people happy. That stupid diploma on the wall apparently makes up for the $50k in student loan debt. And the new car makes people feel good too. But in reality, this is all moot. No matter how much people like me claim we’re smart and do all the right things, the fact is PF nerds buy stupid crap all the time. And if PF nerds do it, what chance do regular people have?
If you really want to get ahead, you should be cheering for everyone to get further behind. Less competition is a good thing.