11 Apr 2024 Financial Weirdos

In Philip Ball’s Beyond Weird—which I am committing to finish before I dive into his newest book on biology—he makes this interesting point to open: “Quantum physics defies intuition, but we do it an injustice by calling that circumstance weird.” 

For a long time, even in the early to mid-20th century when the likes of Einstein and Planck and Feynman were discovering bewildering mathematical concepts that seemed to defy classical physics, their equations and constants and theories were looked upon with a great deal of skepticism precisely because they were so difficult to describe within the language available to us. But, as Ball argues in his book, this is not to let us off the hook in wrestling with the reality at hand.

Here are just a few non-intuitive financial concepts that I myself have written about on this blog or given directly to clients in my office:

• Giving your money away is good for you. Taking dollars out of your pocket and putting them in the pocket of someone who needs them more will bring you joy, and have the natural effect of reducing your lifestyle “needs” and the anxiety that attends them.
• Most of the actions we are tempted to take in response to market movements will reduce our long-term returns. The data here is irrefutable. The overwhelming majority of investors do not earn the return of the investments they own, because they are engaged in a variety of behaviors that feel right in the moment and look terrible in hindsight.
• Most of the work of compounding is done when it doesn’t seem like compounding is happening at all. What I mean by that is, your savings rate is dramatically more important than your investment returns, especially in the first two-thirds of your working career. Then the switch flips. But you had to do the hard work first.
• A singular focus on building wealth is paradoxically the worst way to enjoy the wealth you build. It’s much easier to build wealth than it is to use wealth in meaningful ways, so as wealth increases, it can naturally create a feedback loop that is less about meaning and more about arbitrary accumulation.

For many, money and financial concepts have roughly the same reputation as quantum physics: heavy, complex, silly, non-intuitive, and weird. But maybe that’s doing an injustice. Maybe what’s needed is a bit more digging into the concepts themselves, and a bit of reflection about what is weird and what is actually healthy and real.

It’s not easy, and it’s a large part of why Beacon exists in the first place. At the end of the day, if it is weird, we can at least be weird together.

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