The Arbitrage Of Intimidation & Misunderstanding

in #education4 years ago (edited)

I am a big believer that our world would be a much better place if everyone paid more attention to finance and economics, in their own personal lives and in a general sense. I have long said that to really understand the way in which our society operates one must follow the money.

Fellow readers should also understand my conviction that it is everyone’s duty to take responsibility for their own finances. Everyone has the same goal in mind: achieve financial independence.

This independence allows one to shift focus away from a life of 9-5 work to pay bills, acquire more material items, and pursue happiness via a life of convenience. This mentality is fading, as it has proven to us repeatedly that it is not the path towards happiness.

The best things in life are those that are often the most difficult. This is a bit of a cliché, but often I find clichés to hold truth; after all, there is a reason they’ve become clichés. Clichés have been repeated so many times and passed down through several generations that we tend to take their meaning for granted.

Logic tells us that these clichés offer up some truth in a world that is increasingly doubting the validity of anything and everything (see fake news).

Speaking of clichés, here are a couple of my favorites….

“You give a poor man a fish and you feed him for a day. You teach him to fish and you give him an occupation that will feed him for a lifetime.”

“A penny saved is a penny earned.”

And moving into deeper water, here are some of my favorite quotes with respect to the relationship between education and money…

“Nothing in the world is more dangerous than sincere ignorance and conscientious stupidity.”
-- MLK, Jr.

“Education is the most powerful weapon which you can use to change the world”
-- Nelson Mandela

The reason I provide the quotes above is because they so eloquently put into words exactly what I will be explaining in this post. In short, all that stands between you and financial independence is a simple understanding that you must educate yourself on the single most important facet of survival in our modern society, money. More specifically, your money and personal finances.

Wall Street and the financial apparatus surrounding it like to intimidate us, the humble American civilians, with use of complex-sounding jargon, acronyms, formulas, algorithms, terms like “smart-Beta”, and all sorts of nonsense.

I appreciate that beginning the quest to understand finance, investing, and economics is a daunting one.

The reality of the situation is that it is no different than any other subject; all it requires is time and dedication. Think back to some of your most challenging courses in high school, university, or wherever you feel you have learned the most, and recount how you felt on the first day.

Reviewing the syllabus, you likely asked yourself…

“What the hell is this material about?”

“Will I succeed, or will I struggle with this?”

“What if everyone else here gets it right away and I am the only one who doesn’t?”

Each of us ask ourselves these very questions, in some size or shape, anytime we commence exploring a new area of knowledge.

Unfortunately, it has been my personal experience that even the brightest of minds somehow fall into the trap of believing personal finances, investing, economics, or anything money-related is a different learning process compared to other topics.

I am talking about some very intelligent individuals, too. People involved in very complex matters in a wide-ranging set of industries. Yet, they somehow fail to see the importance of educating themselves about money.

At the same time, I have met my fair share of people like this guy…

Wall Street and the individuals who study these very topics somehow have an edge on us; it is a specialized set of knowledge, we had better leave it to the experts, right?

I have long said that experts do not exist. They do not. After all, human understanding is a subjective measure and the rules we operate under are constantly changing. This includes everything from scientific law, mathematics, and health to psychology, biology, a countless list of others, and of course, money and our monetary system.

In the world of finance, these so-called experts throw around terminology that is purposefully designed to sound complicated, intelligent, and difficult to learn. Fortunately, everyone I have encountered understands basic arithmetic damn well, and at the core of all this talk of economics, pension gaps, wage increases, Fed rates, debt loads, etc. lies such a simple, fundamental equation that we often mistake it as just another cliché.

Income – Expenses = Savings


This equation underpins all of Wall Street’s models, projections, and all “expert” jargon. In fact, I reckon the real reason financial analysts speak in such industry-specific speech is because they are all hiding from the simplicity of this equation, and once the façade of being a financial wizard dissipates they will be out of what is a very high-paying job.

There is a reason they are referred to as the “wolves of wall street”. Essentially, they arbitrage people’s misunderstanding of the simplicity of it all and charge up the ass in fees for doing what you’d be better served doing on your own.

Without trying to sound like a father figure, we all know that savings is the sum net present value of work we have completed to date. The more we have saved, the less we must work in the future.

Most people think of their savings pool as a fund meant for spending on items often materialistic in nature. Things like cars, homes, clothes, and vacations. There is no doubt savings must be used to pay for things like food, shelter, and enjoyment.

However, I often sense that people do not truly appreciate the fact that savings is really a way to reduce how much future work you must do. Sticking with this whole cliché thing…

“A penny saved is a penny earned.”

For every dollar in income you earn and save, that is a future dollar that you do not need to earn. Of course, our survivalist human nature compels us to go and make the future dollar anyways to better our situation even further, but with the current amount of outstanding consumer debt currently in our economy, I truly doubt the everyday American understands what savings really represent.

Is this the flag we now pledge our allegiance to? Makes me wonder sometimes…

Our consumer-driven economy has brainwashed us all into thinking that we are better off spending our savings on material things rather than saving. I have gone into detail on this very topic in my previous post, here.

Getting back to the importance of education related to money, I want to reiterate the following:

To think that there is an individual other than yourself who has more intrinsic motivation to grow your capital – and achieve financial independence on your behalf – is foolish and naïve. You must always ask yourself, “What incentive does this person, other than me, have to grow my capital for me?”



The simple answer is that they don’t give a damn. They are out to maximize their own personal savings, not yours. And the way they do this is by charging fees to you for their services as an “expert”, as a financial wizard.

The only person who you can rely on when it comes to achieving financial independence is yourself, and the first step you must take is learning about finance, investing, economics, and all other ancillaries of MONEY.

DISCLAIMER : This content is for informational, educational and research purposes only. This post is not to be taken as personalized investment advice.

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Image Sources:
https://i.redd.it/s0jumk2mxp101
https://retiringfed.files.wordpress.com/2015/08/wolf-in-sheeps-clothing
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https://pas-wordpress-media.s3.amazonaws.com/content/uploads/2014/09/MoneyQuotes.017