Social Life & Behavioral Finance
March 4, 2022: Thoughts about Social Media, Fears, Morgan Housel, and Obama's 2008 Acceptance Speech
I was born into a low-middle-class family.
We always had a roof over our heads, 3 meals a day, all the basic creature comforts. But, lots of my clothes and toys were hand-me-downs or generic fabric brands (no Hot Topic for me lol), and money was on my mind from a very young age.
Relatively, my family was a bit behind many of my peers in my school and neighborhood (if you could call the woodlands of Rapid River a neighborhood).
Luckily social media wasn’t really in my life as I was growing up tho, I didn’t have that comparison that would’ve made me think less of myself and my family.
The Problem With Social Media
I don't think social media is the enemy that most people make it out to be. I've noticed significant and emotional attacks on these platforms for how they are used.
Of course, their algorithms are meant to keep us engaged and any system is "hackable" but social media is a window into other people's lives. With social media, the era of acquaintance is no more.
Twenty years ago: You knew Fred because he owned the local hardware store, told stupid dad jokes all the time, and loved the Packers.
Now: You know Fred believes in conspiracy theories about the Deep State turning people into sheeple and he is always ranting about something fucking stupid. You know that he comments rude and cruel comments on liberal-leaning posts, and he blames others for his misfortune.
The once wonderful Fred is now revealed to be a flawed human.
This is hard to cope with.
When our heroes get revealed as villains, when our neighbors force us to either get with the program or get out, and when our direct experience with the outside world includes such intense hatred from both sides it makes it really hard to believe in a better tomorrow.
Compromise has gone out the window, patience becomes a lost virtue, and integrity is a fool's errand. How can we continue when this is what we're stuck with?
Humans are very literal beings.
We take a book written thousands of years ago as ageless, we find the terminology once used should always be honored even though that word and its meaning has evolved.
Of course, those personality traits that are prevalent throughout our species would surface in the world of social media too.
The problem with social media is simple: It’s a perfect reflection of us.
Humanity In All of Its Splendor
How is it that as life has gotten objectively better for mankind (even with a fucking pandemic, rising geopolitical bullshit, and looming macro issues like global warming); we’ve grown more dissatisfied and unhappy?
There’s lots of conjecture on this, but I think its simpler than what most are saying.
Many of the explanations that experts provide are rooted in specific issues like wealth inequality, racism, manipulative media, and so on.
Now those issues are definitely present and can be extremely overbearing in the lives of many, but they’ve always been around.
So I think what’s causing this disconnect is more of a result of the new medium (the internet) rather than the underlying systems.
There’s a lot of noise out there, and nowadays everyone has their own megaphone. We’re still learning how to use these amazing tools in constructive ways…
My advice: Learn how to parse the chapter from the book. Those that master judging the weight of the evidence will be better off than those that get lost in the 24-hour cycle of outrage.
Fighting Fears
Fears are very social.
I could sense the financial fears that my parents had all their life, especially during the GFC, and they became cemented into my mind. I think this is how most fears work, they are learned.
The fears my folks’ had are now something I recognize in myself to this very day.
Fighting fear is really hard, and I can't say my advice will work for everyone, but I've learned some tricks that might be beneficial:
Focus on self-awareness in order to determine your current state.
Analyze your current state circumstances to identify your advantages and disadvantages.
Then build a macro strategy (these are the right things I want to do) and a micro plan (here's how I will do the right things) in order to get to your desired future state.
Apply the concept of friction to make the right things easier to do and the wrong things harder to do.
Jeff Bezos talks about this concept a lot when it comes to Amazon and his leadership style. If you want to lose weight, you want to make it harder to eat junk food and easier to exercise.
Example: If you're a boredom snacker, make sure your fruits and veggies are easy to reach when you open the fridge while your junk foods are hard to get to.
Lean on other people to help, many hands make light work, and doing things with others creates an inherent feeling of safety.
Finally, forgive yourself for the bumps you hit while on the road to your desired future state. Being mad at yourself will not help you in any way, shape, or form. Being mad at others won’t help either.
Note: Fear can be good too, and the financial fears that dominated my parents’ lives enabled me to learn some of the right lessons for myself. For example, I think it attracted me to the financial influencers that have taught me SO MUCH about the markets and economy.
Cliff Notes: Morgan Housel on His Life & How to Improve as An Investor
I think I want to make a series out of capturing some of the golden nuggets from long videos, essays, and books. Here’s Morgan Housel’s Interview with Tim Ferriss:
Here are the notes:
The importance of independence and autonomy - there is not a lot of room for error in most of the world. Positioning yourself with a financial safety net can truly elevate your life.
The value of desperation - Morgan joined The Motley Fool out of desperation and it took him many years (5+ years) before he “hit a stride”. But that initial desperation significantly shaped his entire life.
People want to connect with people, not with companies - Audience shifting as a result of going from The Motley Fool to The Collaborative Fund was concerning to him when he considered making the career change but he recognized that people care about certain writers and believed that his audience would follow him. This has not only worked for him but it speaks to a higher macro trend we’ve been seeing in the last decade.
“Every job looks easy when you’re not the one doing it.”
“Every successful business is a loosely functioning disaster.” - Brent Beshore, quoted via Morgan. I’d add that all of life is some level of disaster, and the best parts of it fit that description of being loosely functioning.
Morgan points out that the nuance in words can often be missed or not explained. I agree. Terminology use (and misuse) get lost in semantics over the general intent of the message. Many people are too literal or get too fixated on one particular component versus the whole message.
Selfish writing - “do I personally think this is interesting?” Morgan writes for himself. He even argues that focusing on his joy with the topics he’s writing about probably makes his writing better and more enjoyable for others too.
Intuition vs. emotion - We know intuitively not to do things, as investors and as humans. We know our emotions get in the way. Like we know that we shouldn’t panic sell… But it’s really hard to practice this in reality.
Lifetime successes - most of the successful investors, companies, etc… all really had just a few mega winners (aka, they were lucky). Their “Willy Wonka golden ticket”. Tim Ferriss asks Morgan if there are any ways to skew luck in our favor?
Sufficient bankroll
Time horizon maximization
Leverage paranoia
Being rational vs. being reasonable - mathematics, models, and probabilities may run in the background, but human beings shouldn’t be expected to consider those when their financial safety is at risk, when their house is on fire, or when their life is in danger.
Anderson Cooper is a Vanderbilt!!!
The Great Depression: A Diary by Benjamin Roth
Biggest takeaway - This story is not influenced by hindsight bias.
The Big Change by Fredrick Lewis Allen
Biggest takeaway - People never see it coming.
“Risk is what is left over when you think you thought of everything.” - Carl Richards via Morgan. Being a bit more financially conservative is prudent because it allows you to absorb the unforeseen risks that come knocking.
The most important thing you can do with your benchmarks (internal and external), is to avoid moving them. If there’s one thing that helped Morgan is that no one is thinking about you more than you are (so stop showing off for the sake of showing off, just make yourself and your loved ones happy).
Fees versus fines - A fine means you did something wrong while a fee is an expected cost of entry. Rework your perspective on various costs you face and you’ll be amazed at how much you can stomach.
Example: Volatility should be treated as a fee but most investors treat it as a fine.
He was basically given a high school diploma and had to work his way up from scratch during his college years and when he started out at The Motley Fool. Lots of wonderful people helped him on his path and that’s why he endured.
They referred to serendipity, which is something I really value and think we all need to make an allowance for. To read more about this “allowance of serendipity”, check out my Here’s What I Think (2020) LinkedIn article.
Innovation and invention always tend to start with a dynamic that is unsustainable. In the US, there were 2000 car companies in the early 1900s and now there are 3 (and 2 went bankrupt).
One Final Thing
A question was asked on Twitter about “what is the best speech?” and my kneejerk answer was Obama’s 2008 Acceptance speech:
There are so many things that can be learned from in this speech. How to relate your circumstances to the broader events of the world. How to be humble and honor your opposition (who’d have thunk it?). How to craft a vision for the future.
It’s just so good.