Sunday, May 14, 2017

It's Not Fair!

It has been said that there is nothing more dangerous than for an investor than to see their neighbor grow rich.


Because it usually means you will do something stupid with your money to catch up with the Jones'. They might have purchased Apple at $10. You are buying at $140. It is an altogether different cost/benefit relationship. However if your neighbor can get rich buying Apple, you should be able to do it as well. It does not work that way. You can't let emotions get in your way when it comes to money.

Of course, emotions always get in the way. It is the way of the world.

We also don't measure ourselves in a vacuum. We measure ourselves in relation to others.

For example, Harvard students were asked in a survey whether they would prefer (a) making $50,000 a year while others made half, or (b) $100,000 per year while others made twice as much.

The majority chose (a) even though they made only half as much in absolute terms---$50,000 rather than $100,000. It is not logical but that is the way our minds work.

People do not measure their circumstances in absolute terms. They measure in relative terms.

We constantly hear about income inequality and unfairness in the U.S. economic system. However, measured on a global scale, 56% of Americans are considered "high income" and 32% are considered "upper middle income" according to Pew Research. That is 88% of all Americans. Only 7% are considered "middle income", 3% "low income" and 2% "poor" when measured across the entire world.

On a global scale, of all the people in the world, 56% are considered low income and 15% are considered poor. Only 7% meet the high income definition.

In other words, 56% of Americans are considered high income as measured against a global standard in which only 7% are. On the other hand, 71% of the people in the world are considered "low income" or "poor" while only 5% of Americans are in that group. Despite these facts, there are millions in this country who think they live in an economic system that is unfair.

You begin to understand where all of this comes from if you view this video clip that a BeeLine reader sent me.

The video is an excerpt from a TED talk by Frans de Waal, a primatologist, ethologist, and professor of primate behavior at Emory University.

It is a little less than 3 minutes but it is well worth the time.

You should have a much better understanding of the concept of relative compared to absolute incomes and where it comes from.

You might also see a little bit of yourself in the clip.

I know I did.

Click here if the video does not open in your browser.

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