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Weekend reading: not a prayer for serenity

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What caught my eye this week.

You know those movies that you’ve seen half a dozen times – Raiders of the Lost Ark I’m looking at you – but when you come across them channel-hopping on terrestrial TV you stop and watch them again?

(I’m aware I’m talking to a dwindling band of readers who spent countless hours flicking through their TV channels like this. Please use your imagination if you’re under 30.)

That’s how I feel about the 1960s’ investing classic The Money Game by the pseudonymous Adam Smith. Any time I find a quote from this book popping up on the Web, it feels like one of the best things I’ve read for days.

This week it was Financial Ducks in a Row who added Money Game magic to their blog. Here’s a bit of the extract:

It has been my fate to know people who have made considerable amounts of money, sometimes millions, in the market. One is Harry, who made it and blew it and made it again. Harry really wanted to make a million dollars, and he did.

I think Mr. Linheart Stearns1 had a very good point when he said the end object of investment ought to be serenity. Now if you think making a million dollars will give you serenity, there are two things you can do. One is to find a good head doctor and see if you can discover why you think a million dollars will give you this serenity. This will involve lying on a couch, remembering dreams, talking about your mother, and paying forty dollars an hour. If your course is successful, you will realize that you do not want a million dollars but something else which the million dollars represents to you, such as love, potency, mother, or what have you. Released, you can go off about your business and not worry any more, and you will be poorer only by the number of hours you spent in accomplishing this times forty dollars.

The other thing you can do is to go ahead and make the million dollars and be serene. Then you will have both a million dollars and serenity, and you do not have to deduct the number of hours times forty dollars unless you feel guilty about making it.

Genius and in my experience very true.

With the possible exception of my cow-chasing co-blogger The Accumulator, I don’t know anyone who got markedly less stressed when they got much wealthier. I’m not saying everyone had a breakdown, but the reality is money to lose brings worries that are hard to imagine when you’re first getting your snowball rolling.

There are things we can do about this, maybe. But honestly, I like Smith’s suggestion to just choose to be chilled about it. It’s probably as (un)likely to work as anything else.

Of course some people make millions, put the money into a well-constructed portfolio, and never worry about it again – even when the big crashes come around.

But few of those people read – let alone write – investing blogs.

Us? We strive on.

Membership housekeeping mini-bit

A quick follow-up to my note about Monevator membership last week.

A couple of members reported issues reading locked content on the site. We can’t recreate the problem but it’s almost certainly a caching issue. We’re looking for ways to stop this happening at the server level. In the meantime please try deleting your cache if you can’t access the special stuff.

Also remember that third-party cookies cannot be disabled if you want to access the Monevator website as a logged-in member. (The software needs a way to know to show you content.)

Ad-blockers may give you grief too. Members get an ad-free experience anyway once logged in anyway!

Please see the FAQ. You can always read our member articles via email if cookies are a no-go for you.

A few of you suggested making it clearer when it’s a member email that’s hit the in-box. I’m now including something in the subject line to that effect. A small tweak but hopefully useful.

Okay have a great weekend all.

Not much summer left. Wasn’t much summer to begin with…

Feel free to share your ‘stop and watch’ films in the comments. To stay on brand, a newly emerging one for me is Margin Call. Gotta stay for Jeremy Irons!

From Monevator

Duration matching: should you match your bonds to your time horizon? – Monevator [Members

Cash and bonds are different investments – Monevator

From the archive-ator: The high cost of active fund management – Monevator

News

Note: Some links are Google search results – in PC/desktop view click through to read the article. Try privacy/incognito mode to avoid cookies. Consider subscribing to sites you visit a lot.

Inflation falls sharply to 6.8% – Guardian

UK [nominal] wages rise at record pace – BBC

Ofgem energy price cap predicted to fall to £1,823 – Guardian

Global yields hit 15-year high – Yahoo Finance

Birthrate in England and Wales drops to lowest level in two decades – Guardian

Nearly half of UK retirees say they need more cash than expected – This Is Money

Robotaxi expansion gets the green light in San Francisco… – BBC

…but there are already calls for the red light after accident – CNBC

Is Britain really as poor as Mississippi? [Search result]FT

Products and services

Santander boosts its new Edge account to pay market-leading 7% – This Is Money

Could paying for these premium bank accounts save you money? – Which

Open a SIPP with Interactive Investor and pay no SIPP fee for six months. Terms apply – Interactive Investor

Another warning over repayment risk with interest-only mortgages – BBC

How to challenge your Council Tax band – Which

It is not illegal for shops to refuse to accept cash – Full Fact

Open an account with low-cost platform InvestEngine via our link and get £25 when you invest at least £100 (T&Cs apply. Capital at risk) – InvestEngine

UK banks will have to ensure access to cash within three miles, ministers say – Guardian

Beware the crypto spot ETF bubble – Morningstar

Homes for sale on the riverbank, in pictures – Guardian

Comment and opinion

The stock market never provides lasting happiness – A Teachable Moment

Investing for immortals – Klement on Investing

Just a little bit of Bitcoin adds a lot of risk to a 60/40 portfolio – Morningstar

2,500 years of thinking about ‘enough’ – Steve Sanduski

Higher interest rates won’t crash the UK housing market – This Is Money

Millennials don’t suffer alike. What separates them is privilege – Guardian

Your answers may vary – Humble Dollar

ETF discounts and premiums, explained – Vanguard

Five unusual books to prepare for retirement – Kiplinger

‘Girl math’ is all over TikTok, but it “straight-up does not work” – CNBC

Look at bonds now mini-special

Why aren’t investors selling stocks to buy bonds? – A Wealth of Common Sense

Have bonds finally reached escape velocity? – Cullen Roche

Naughty corner: Active antics

The perils of long-term forecasts: GMO edition [Search result]FT

A closer look at cutting losses early – Elm Wealth

The interesting history of Berkshire’s Class B stock – Rational Walk

New unicorn creation has dwindled from two a day to two a month – Crunchbase

Seth Klarman on value investing in 2023 and more – Institutional Investor

Kindle book bargains

Factfulness: Ten Reasons We’re Wrong About The World by Hans Rosling – £0.99 on Kindle

How to Avoid a Climate Disaster by Bill Gates – £1.99 on Kindle

Doughnut Economics by Kate Raworth – £0.99 on Kindle

Trillions [Inventing the Index Fund] by Robin Wigglesworth – £0.99 on Kindle

Environmental factors

We’re bad at predicting the future and there’s no way around it – Vox

Disney World is hell – Fast Company

The LED light revolution has only just begun – Vox

The republic of cows – Hakai

Robot overlord roundup

What if generative AI turns out to be a dud? – Marcus on AI

ChatGPT tests in the top 1% for creative thinking – SciTechDaily

Publishing scammers are using AI to scale their grifts – Vox

Off our beat

What the heck happened in 2012? [Smartphones!]The Intrinsic Perspective

In different places – Humble Dollar

With no second date forthcoming, he asked for his money back – CNBC

Living without purpose – Life After The Daily Grind

A story about fragile the world can be [Podcast] – Morgan Housel via Apple

Baseball and bombers: USAAF Reconnaissance photography in WW2 – Historic England

Disney’s Taylor Swift era – Stratechery

In the US, a simple age verification law has the porn industry in retreat – Politico [h/t Abnormal Returns]

You’ll be able to ride a dazzling vintage tube train in London this September – Time Out

And finally…

“Spending money to show people how much money you have is the fastest way to have less money.”
– Morgan Housel, The Psychology of Money

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  1. A contemporaneous author. []
{ 48 comments… add one }
  • 1 ermine August 19, 2023, 10:24 am

    > I don’t know anyone who got markedly less stressed when they got much wealthier. I’m not saying everyone had a breakdown, but the reality is money to lose brings worries that are hard to imagine when you’re first getting your snowball rolling.

    *scratches head. WTAF?*

    Give up work, dude. JFDI 😉 The whole point of all this FI stuff is that life is easier when you feel you can knee the old wolf at the door in the nuts, and removing the treadmill of having to work improves that too.

    Or did I just read the whole thing ass-backwards, and can stop reaching for the tiny violin cupboard 😉 Serenity, indeed. Joe Heller had it taped.

  • 2 Gary August 19, 2023, 10:35 am

    As someone who started out in poverty and now is very comfortably well off I can confirm that a comparison of serenity between the two isn’t even close – now is miles ahead.

    I don’t know too many people who are in a similar position, but they are all also seem to be very calm too, so it is alien to me to think that most wealthy people are stressed. Whereas almost everyone I know who is less well for are totally stressed.

  • 3 trufflehunt August 19, 2023, 10:49 am

    ‘Margin Call’ and ‘The Big Short’…… classics of the genre.

  • 4 The Investor August 19, 2023, 10:50 am

    @ermine — I am not talking about work / not work or even standard RE, I’m talking about us (my peers) with £30,000K in savings and renting in our mid-20s versus the mental attitude of the handful of those who now have several million or more.

    @Gary — It’s weird but it’s true. I have a close friend who I all but had to talk down from the ledge when tech stocks were blowing up in 2021. I pointed out to him that he literally had more *cash* in the bank than my net worth, that having all this notional money in the market wasn’t changing his life when it doubled so what was different now it had halved, and that compared to where we were back in our 20s his position was a fantasy life come good.

    I guess it calmed him down a little (he did get off the metaphorical ledge via the ladder) but at the worst point he was visibly completely stressed, almost an image of tearing your hair out.

    This is far from an isolated case, though perhaps at the more extreme end. “More Money Mo Problems” as the man said.

    We can all see it in the cold light of day it’s a bit silly, but people are people.

  • 5 ZXSpectrum48k August 19, 2023, 11:09 am

    Not sure more money makes me any less anxious. If I’m not anxious about the job or money, then it’s my health, my children, the environment, the rise of neo-fascism, global thermonuclear war. Anxiety is conserved! So might as well be anxious about the job and money. At least I’ve contained the issue.

    I’m not even sure what it would feel like to be serene. Is that the numb feeling when one anxiety has dissipated and a new one has yet to manifest itself? An extended period of serenity probably means I’m dead, so I’ll skip that if you don’t mind.

  • 6 PhilosoFIRE August 19, 2023, 11:52 am

    A film I’ll always happily re-watch (not finance related though) is Little Miss Sunshine – Paul Dano is fantastic in it, as are the rest of the cast.

    As for people becoming less stressed as they get wealthier, my instinct is that you see a significant initial drop-off in stress once you’ve got enough money to reliably put food on the table and a roof over your head (and you internally ‘know’ that to be the case and feel fairly secure in it), but that beyond that point it probably gets more individual in terms of knowing what your personal sources of stress are and accepting there’s also a baseline which you probably can’t change a lot (as ZX alludes to).

  • 7 Tom-Baker Dr Who August 19, 2023, 1:04 pm

    I can definitely relate to this! I remember being so impressed by the Raiders of the Lost Ark that it inspired me about a year later to code my first computer action game on the then just released ZX Spectrum 48K. Most of it I programmed in slow Sinclair BASIC (interpreted rather than compiled) but the critical fast action bit I coded in machine code. I might still have somewhere the old cassette tape with that game.

  • 8 Tom-Baker Dr Who August 19, 2023, 1:31 pm

    As to worries about losing money, I think I am in TA’s team. If you tone down the “millions” below, I am one of those few people who fits this description yet still enjoys reading this blog 😉

    “Of course some people make millions, put the money into a well-constructed portfolio, and never worry about it again – even when the big crashes come around”.

  • 9 Hariseldon August 19, 2023, 1:57 pm

    Achieving FIRE late 40’s was a great step forward, to get out of a very stressful small business, unexpected events forced me to JFDI, otherwise there didn’t seem a way out….

    The next issue is the money potentially has to last longer than you have been alive.

    16 years down the road the realisation that you will almost certainly never spend what you already have…. So off in January for four months to the hemisphere that won’t be winter and again the following year, because if you can’t do it now, when will you ?

    As for the money worries of what markets will do next, there is nothing you can do to change it, you can make sensible portfolio choices, avoid expensive financial commitments that could trip your future self up and go with the flow.

  • 10 Tom-Baker Dr Who August 19, 2023, 2:31 pm

    Like most writing on investing, Klement’s “Investing for immortals” must be taken with a pinch of salt.

    Life on Earth is very far from being in a steady state for the Copernican principle to hold without a number of caveats. The time we are living through right now is in many ways very special. For example, it is only now that the disc of the Moon seen from the surface of the Earth has roughly the same apparent size as the disc of the Sun in our sky. When the dinosaurs roamed the Earth, the Moon appeared much larger in the sky than the Sun as it was closer to the Earth. In the future, the Moon will appear smaller than the Sun as it moves away from the Earth.

    Another example directly related to investing is this long period of time from the second World War in the last century until now when America outshines every other nation. If you think of what was around before you were born but still during this period when America dominates the world economically, you are still looking at a special period of history.

    In a very long time frame practically everything will change. I guess that only some sort of slowly changing active investing allocation can hope to survive in a very long time frame that approaches the age of the universe 🙂

  • 11 G August 19, 2023, 6:02 pm

    I’m with Gary and Ermine. Starting from poverty, and reaching FI in my 40s has resulted in far far less stress. The two situations don’t remotely compare. One involves rooting down the sofa to try to scrape together enough coins to buy some bread and anxiously counting the resulting coppers over and over again in the supermarket queue in case you’ve lost one – and then shamefacedly handing over a handful of copper with the exact money, the other means picking whatever bread you like up without looking at the price – even in Waitrose – and simply swiping a card. Having tried both situations, I’d know which I prefer.

    Maybe this stress and anxiety over having enough to live comfortably is a middle class thing.

  • 12 Hospitaller August 19, 2023, 7:29 pm

    The little article on whether bonds have reached velocity is timely. I have been buying slugs of 10 year bonds during a year when yields have yoyo’d but have a chunk in both gbp-hedged US Treasuries and Gilts still to do.

    What may also prove rather “interesting” is if medium term bond yields go to say 5%. In that event, a lot of money may leave the equities markets (for so long the only place to be) and head for the bond market. For sure, the equities markets have so far been negatively impacted by having to discount future profits at much higher
    rates than previously. But I think that is fair to say they have not been impacted so much by funds preferring a different medium term asset class. Could get quite dramatic.

  • 13 mr_jetlag August 20, 2023, 1:29 am

    Another one on team “money increases serenity” here, although serenity is too strong a word, perhaps “chillaxitude” better describes my state of mind.

    “Money doesn’t buy happiness, it gets you a better class of misery”… I’m not worried about losing the job or paying the bills, main worries now are finding good schools for the kids and caring for the grandparents (hooray for the sandwich generation).

    Conservation of anxiety definitely exists, the only solution is to rewire your brain – in that regard studying philosophy (particularly stoicism) has helped a bit especially when the markets decide to take back their paper gains.

  • 14 old_eyes August 20, 2023, 7:52 am

    Love Margin Call. A great ensemble performance in a claustrophobic space and time. The Jeremy Irons quote “Maybe you could tell me what is going on. And please, speak as you might to a young child. Or a golden retriever. It wasn’t brains that brought me here; I assure you that.” stuck with me. It is a great test of whether people know what they are talking about, and frequently demonstrates that I don’t.

  • 15 JimJim August 20, 2023, 8:37 am

    I’m in Ermine’s camp too, a year after the start of “funemployment” my stress levels are in the basement. It is not that I have been idle, far from it, this last year has been one of the most busy and varied of my life to the point we decided to have a quiet august as we were tired of things happening. The above point about stoicism rings true. None of us know the future, we just try and cover most of the reasonable outcomes and set sail on the ship of FIRE from there. It could sink, but if it does, I dare say that we will be swimming in the sea with a multitude, I’m lucky enough to have been poor so have had my education on surviving with less.
    Two movies I will always stop and watch whilst hopping channels (I don’t do that by the way) are Oh brother where art thou and No country for old men. Both have lessons in serenity.
    JimJim

  • 16 Pikolo August 20, 2023, 9:54 am

    Am I seeing that a world high yield bond index tracking investments article is inbound based on the “Look at bonds now mini-special”? An equivalent to https://monevator.com/best-global-tracker-funds/ perhaps?

    I know HYBs belong in the equity side of the portfolio, and that many portfolios skip them, but it would be great to get a comparison of candidates meeting the basic criteria (tracks an index with geographical diversification and 10+ years of history, priced in pounds, OEIC/ETF available in the UK, low fees)

  • 17 ZXSpectrum48k August 20, 2023, 10:04 am

    Re: “A closer look at cutting losses early”. Rare to see a piece on that topic in retail finance since they prefer buy-and-hold. Not sure I agree with some of the numbers he presents but, professionally, aggressive stop-losses have always been the key to outperformance at the funds I’ve been at. Personally, I’ve always found a momentum approach for stop-loss and re-entry useful, most especially in commodities, but also in bonds and equities.

  • 18 Alan S August 20, 2023, 10:10 am

    I know you’re talking about ‘stress’ which is a rather catch-all, but looking at data on depression (https://www.ons.gov.uk/peoplepopulationandcommunity/healthandsocialcare/mentalhealth/articles/costoflivinganddepressioninadultsgreatbritain/29septemberto23october2022) is informative. Figure 2 in the document indicates that rates of symptoms of moderate to severe depression fell from about 30% to 10% going from a personal income of less than £10k to one of more than £50k. That fall does look statistically significant given the size of the error bars (which are largish given a sample size of just over 4000).

    Also striking in the same figure, is the difference in rates between the economically inactive who are retired (less than 10%) and those who are long term sick (nearly 60%).

  • 19 The Investor August 20, 2023, 11:22 am

    @Alan S @Others — Thanks for the thoughts. Just to repeat myself, I wasn’t talking about going from no money to comfortable, but rather getting very rich. The book is talking about the same thing.

    Fully agree poverty sucks both mentally and physically. And while my uni peers I mentioned in our early 20s didn’t have much, we were like most graduates of excellent universities etc ‘going places’. (Some far further financially than others as it turned out! 😉 )

    @ZXSpectrum48K — Retail advice talks buy and hold but not sure how many retail stock-pickers follow it!? The Vanguard data is pretty clear for index funds though that as you say the vast majority of the saver-investor types they see don’t trade their index funds.

  • 20 petejh August 20, 2023, 12:10 pm

    TA, I think you’re often guilty of talking about people in London and the SE – an environment designed to make very rich people feel inadequate and stressed. The world is a bigger place than the SE of England, dare I say anyone rich AND smart would move.

  • 21 petejh August 20, 2023, 12:22 pm

    Actually I’d change that to: ‘anyone rich, smart AND who valued serenity more than they valued the London/SE environment, would move.. ‘

    I think a lot of rich people value the ‘endless keeping up with the rich Jones’ more than they value ‘serenity’. It’s a big part of the reason they got rich.

  • 22 The Investor August 20, 2023, 12:33 pm

    @petejh — @TI here. I don’t disagree with the gist of your solution. 🙂 It’s like the old behavioural research finding that it’s better to be the richest among your friends, then much wealthier but the poorest. I’ll post a link to my article on this below.

    However I think some comments here are either misunderstanding (in that I’m mostly talking about rich-rich, not FIRE at 55 rich, perhaps I started this by mentioning @TA) or they are describing the world as they logically think it ‘should’ be.

    Of course we can all see having lots of money should be a reason to be less concerned / stressed not more.

    And/or we can all be envious of those who have become very rich and salve that feeling with a dose of ‘what numpties!’

    But the fact is this is what happens in many (not all, maybe not even most) cases that I’ve seen, and that you see everyday in the media. How often do we see already rich people still in business — or blowing up because they took a risk too far? Pretty much any business person any of us could mention is still out hustling. As has already been said, it’s in the nature of some.

    I’ve seen it multiple times, and one of the greatest investing books of all time dedicated the chapter above to it, where he describes the problem as pretty much universal. So yes, it’s real. 🙂

    https://monevator.com/rich-friends-poor-friends/

  • 23 Tom-Baker Dr Who August 20, 2023, 3:11 pm

    @TI (#22) and @petejh – “It’s like the old behavioural research finding that it’s better to be the richest among your friends, then much wealthier but the poorest”.

    Sorry to be contrarian again, but I’d rather be wealthy, but the poorest among the much wealthier, than be the richest among the much less wealthy.

    If you have the oldest, smallest, cheapest car in your neighborhood, car thieves will probably leave your car alone and target someone else. If your house is modest in a neighborhood of ostentatious houses, it’s much more likely that burglars will prefer to target your neighbour’s houses rather than yours.

    The Schroders chief executive, Peter Harrison, was quoted in the Sunday Times this week as saying

    “We are a socialist country with a capitalist system, and we are struggling to reconcile the two”.

    So if you accumulate wealth above a certain level, there’s a growing risk that eventually society will want to grab most of your hard earned wealth.

    The problem is that if you look at what most of the popular press has been saying, the level of wealth that is perceived by most people as too high is actually quite modest. This is evident in the value of the previous pension Life Time Allowance of just over £1 million that the chancellor has just scrapped but that Labour has promised to reinstate. In income terms, this only allows you to lead a modest life style. Yet many people perceive it as a lot of money because they have no idea of what a safe withdrawal rate is and do not think about it in terms of income.

    I would personally feel much happier and safer if the much talked about leveling up actually happens (rather than the leveling down that seems to be unfolding). It would be splendid if one day in this country I find that I am well off but everyone else is even better off than me 😉

  • 24 Al Cam August 20, 2023, 4:54 pm

    @TI:
    Nice links – FT graphic above is fascinating as are some of the comments to the original posting.
    OOI, by my calculations the seven “rust buckets” you featured a couple of weeks ago sold for around £350k; search for “David Brown collection” at: https://angliacarauctions.co.uk/classic-auctions/2598-19-Aug-2023

  • 25 Al Cam August 20, 2023, 8:30 pm

    Having said that, this maybe provides some context from across the pond:
    https://www.bbc.co.uk/news/world-us-canada-66563807

  • 26 Hospitaller August 20, 2023, 9:08 pm

    @TomBaker

    Some of course would reverse Peter Harrison’s comment and say

    “ “We are a capitalist country with a socialist system, and we are struggling to reconcile the two”.

  • 27 Algernond August 20, 2023, 9:16 pm

    Hello @ZXSpectrum48k – you say ‘Personally, I’ve always found a momentum approach for stop-loss and re-entry useful, most especially in commodities, but also in bonds and equities’
    – Have you expounded on what system you use on this blog or any others ?

  • 28 Kraggash August 20, 2023, 9:40 pm

    One stress I now (retired, pretty well off, no real money worries) have is: how much to help our children? In particular, with buying houses. I want to keep worry-free for myself and wife, whatever that markets do, but also would like to help them get decent properties. We have already given them a fair amount, but house prices are still so high nowadays.

  • 29 Boltt August 21, 2023, 7:23 am

    @ Kraggash

    I’m with you – how much, how soon, and in what way…? (not easy answers)

    Kids need help asap to help make as much difference as possible. Helping when they’re retired seems a bit late.

    Some of my kids spending drives me up the wall – we tend to help with grandkids activities such as swimming lessons, karate, singing classes etc. And holidays – a cheap week in Spain cost ‘them’ £700 pp last year.

    Since I can’t help optimising everything I came up with the idea that I’d put money in their sipp when(if) they start paying 40% tax – it’s efficient and they can’t waste it on crap in the meantime. But perhaps I miss the point – perhaps they should be spending it on crap and enjoying themselves

    One daughter is about 4o and I’ve said I’d like to help fund her leaving work 5 years earlier (probably 65 v 70 for her) – the sipp May be a good plan!

  • 30 Fi-Firefighter August 21, 2023, 9:40 am

    When and how to help the kids? We have been mulling that over as well recently.
    No conclusions other than knowing we will help them at some point in, some way.
    Probably contribute towards a house deposit when or even if they decide to go that route.
    Early days yet so not rushing into anything.

  • 31 Neverland August 21, 2023, 10:31 am

    @Kraggash, Boltt, Fi-Firefighter

    Encouraging your kids to be dependent on you for funding their lifestyles is unlikely to end well for you, them or society as a whole

    Thomas Stanley covered the risk of creating financially dependent adult-children in detail in the Millionaire Next Door series thirty years ago

    And its as timely as ever the Guardian link in the main article covered it last week “Millennials don’t suffer alike. What separates them is privilege”

    https://www.theguardian.com/commentisfree/2023/aug/13/millennials-dont-all-suffer-alike-what-really-divides-them-is-privilege

  • 32 xxd09 August 21, 2023, 1:02 pm

    We spent a lot on kids in time and money terms
    Told them many many times however that after uni no more money-that would be our time and there might be no money left inheritance wise!
    Seemed to work -all qualified and in work,married,have their own houses and have kids of their own
    After 17 years of age it’s probably too late to make serious parental advice stick so get your input in from birth onwards
    Money given after 17+ risks creating dependency
    We were well enough off but not hugely affluent-it can be more of a problem for wealthy parents
    xxd09

  • 33 ZXSpectrum48k August 21, 2023, 1:42 pm

    @petejh. I don’t see how this has anything to do with London/SE or with keeping up with the Jones. I just don’t attach much value to ‘serenity’. In the same way I don’t attach much value to being happy. If my life was just an extended period of serenity (or happiness), I wouldn’t feel serene (happy) for long. I’d just emotionally recalibrate to see ever small issues, ever more minor perturbations, as ones that would break that serenity and cause anxiety. Emotions are essentially relative. Without the lows, you wouldn’t feel any highs.

    @Algernond. I couldn’t expand on such a topic in a comments section. The existence of momentum in commodities is well known and used by many CTA funds in that space. With modest Google-fu you can bring back more research on this that any one person can read in their lifetime. Personally, I find the idea of being just long commodities rather odd since it’s not an investment asset class. So I’d look for strategies that use a time-series, long-short approach (long a basket of the best performing, short a basket of worst performing), usually modified by some risk factor weights and constrained with some stop-losses. You can achieve the higher returns with much lower drawdowns than just being long commodities.

  • 34 Mathmo August 21, 2023, 3:23 pm

    Presumably if @ZX is worrying about Global ThermoNuclear War then it makes the goto rewatchable pretty obviously WarGames.

    Strange Game, Professor.

    One might say the same about investing sometimes.

    It strikes me that anxiety and depression as a personal characteristic often have very little to do with reality — and that is the nature of those mental illnesses. And if they are detached from reality, then the reality of financial comfort or otherwise might not impact them.

    In other words if you are a worrier then you are a worrier — whether a poor worrier or a rich one. I do wonder if worriers tend to be driven to accumulate more money as they believe it might help.

  • 35 Tom-Baker Dr Who August 21, 2023, 5:39 pm

    @Hospitaller (#26) – Yes, I know where you are coming from. Apologies, but I quoted Peter Harrison out of context. He was referring to the diminishing importance of the City in the financial world after Brexit with companies preferring to list in New York, much less M&A, and more investment banking jobs being created in Europe than over here.

    I think if you compare with the US, the general public in Britain is increasingly more favourable to socialist ideas. I think this is not just a recent phenomenon with the increasingly likelihood of a Labour government but something like a secular trend. I wouldn’t be surprised if we end up with something like what they have in Sweden. Of course, there are many barriers stopping that from happening like the class system and so on. It’s my impression though that many of these barriers are being eroded. Posh accents tend to be sneered at by the younger generations, RP (which by the way was invented by Public Schools) is basically dead, regional accents are being welcomed now much more than in the past, etc.

    As we’re talking about social issues, there’s a 2019 British film that I think it is worth watching: Denmark.

    I also think it is unforgivable that no one has mentioned yet any Charlie Chaplin film. One of my favourites is The Kid. Another favourite of mine is Modern Times. This is the one with the famous Chaplin song “Smile.”

    Talking about British films, I would recommend “Son of Rambow” and more recently “The Phantom of the Open” and “Mrs Harris goes to Paris.”

  • 36 petejh August 22, 2023, 1:02 pm

    @ZXSpectrum48k . The premise of TI’s article – the correlation (or lack of) between wealth and serenity – has a lot to do with a person’s environment.

    Loads of research showing that happiness is impacted by comparison with other people in your environment to ascertain ‘status’. Comparison is obviously context-dependant – i.e. you can only compare with who else is in your environment.

    If you look at environment in terms of wealth you find that personal wealth in the UK is highly concentrated in London/SE England. It’s therefore reasonable to suggest that someone of high wealth, who moves from such an environment to an environment of lower average wealth, might feel happier about their newly-acquired higher relative status.

    That might only apply to people who value their improved happiness – via improving their status in a smaller pond – more than they value striving to improve/maintain their status in a big pond.

    One approach seems much easier than the other, but involves swallowing pride and some degree of giving up on competing. Unnatural for a lot of people?

  • 37 FI-FireFighter August 22, 2023, 2:13 pm

    @Neverland – I know I didn’t spell it out in my post (didn’t think I had to on this forum), but I am not encouraging my kids to be dependent on me.
    They have no idea that my wife and I are having any such conversations.

    I, and I expect most if not all regulars to Monevator, are teaching their children to be financially aware and literate. To understand the value of money and to (try to) spend it wisely.
    My parents never helped me financially as they were unable too. If they had been able to, they would have.
    I am able to, so I will.

    And your reference – And it’s as timely as ever the Guardian link in the main article covered it last week “Millennials don’t suffer alike. What separates them is privilege”

    Twas ever thus

    or have you forgotten?

    As a child of the 70’s I clearly remember my friends and peer group was made up of kids who came from vastly different backgrounds and wealth, which followed us as we got older.
    Those who had cars bought for them, could afford to go to university, given house deposits etc and those that didn’t!

    What is different now, IMHO – is Millenials are a generation who like to moan about such things, to suck people into believing they are a hard done-by generation.

    I believe the author of the article is a …….Millenial

  • 38 FI-FireFighter August 22, 2023, 2:25 pm

    I believe the author of the article is a ………………. Millenial

  • 39 FI-FireFighter August 22, 2023, 3:24 pm

    Apologies for the repeat post, I got caught out by a delay with the edit function.

  • 40 ZXSpectrum48k August 22, 2023, 4:42 pm

    @petejh. I have no disagreement with research that states that relative position is more important than absolute one. I embrace that idea. We are tribal apes and pecking order matters.

    Where I disagree is that by moving location and/or changing the people you meet day-to-day, that you can delude yourself so easily. That may have been relevant a few generations ago. Now, though with all the data that is available, with 24 hour news, and social media, it’s very hard to do. I could move to a very cheap area of the UK but it wouldn’t make me feel any better because I’d still know where I was in relative terms on a national and global basis.

    The majority of people in the UK have a great standard of living. Yet, grumpiness only rises because where ever you now live, somebody else’s Insta-life in London, Dubai, Miami looks better than yours.

    Also running away from stress and anxiety doesn’t help. My children go to a school where 80% of grades are A or A+. I could move my children to an average school where that is more like 27%. My children would clearly have little or no competition. Is that really going to help them? Would they be less stressed or would that stress just manifest itself differently? I suspect the latter. I’d prefer them to be stressed about their grades, rather than stressed about the brand of clothes they are wearing. Focussed anxiety can be driver for achievement.

    I’d emphasise though that my children and I are all “neuro-divergent” (or mentally ill as someone above has put it). So what do we know!

  • 41 Time like infinity August 22, 2023, 10:50 pm

    Such a packed with excellence links fest that its taken a while to respond. Sorry this is a long one.

    Film: people like quoting from the “greed is good” monologue at Teldar Paper’s EGM but, as this is Oliver Stone directing, the essence of 1987’s moral fable ‘Wall Street’ is Ghekko’s “you didn’t think that this is a democracy” speech. American pretentions to moral exceptionalism demolished in 3 mins 40 secs. Available on YouTube.

    Elm Wealth a stand out among so many great articles. Be interesting to hear from @ZX (following #17) on which numbers in the piece he disagreed with and why. IMO CLE-LPR is a good life strategy as well as an investment one. If something is good, then fight to keep it, to develop it and to improve upon it. If not, just walk away. Otherwise you can spend a good chunk of life waiting for mean reversion to a more stable equilibrium. Don’t be afraid to fail, but fail early and fail fast. Worth clicking through to other Elm pieces, including last year’s ‘A missing piece of the SBF puzzle’, looking at ideas around the Kelly criterion and expected utility. CLE-LPR tells us what to do, Kelly tells us how to size what we then put at stake when we do it.

    AWOCS essential reading for bonds

    Feel sorry for GMO and Jeremy Grantham. His notes read well, and they believe in their forecasts. But that belief has not translated into success, so far. At least they’ve been consistently wrong. No one can accuse them of opportunism. Every dog has its day, so maybe their forecasting will eventually start to pan out.

    Marcus on AI’s ‘great disappointment scenario’ is all too plausible a near term future for LLM based machine learning. We may get to AGI, and even Artificial Super Intelligence, but the pathway, if any, to those goals is very likely to be a lot longer and more complex than generally assumed. Another AI winter could be coming.

    @Tom-Baker Dr Who #10 and Klement’s Investing for Immortals (plus the Vox piece on predictions and the further links contained in each article): this is a huge topic. What to make of, and how to apply, Copernican or Anthropic reasoning?

    Klement in his piece links to his 2019 post explaining this by reference to Richard Gott’s discovery in 1969 of what has since become known (although Klement omits this) as the Doomsday Argument (‘DA’), which is a significant subject of ongoing study in existential risk prevention and of controversy in philosophy.

    There are in fact several versions of the DA. The original one which Gott and Brandon Carter formalised in the early 1970s (and popularised from 1993) has been effectively disproved. We cannot derive real knowledge of the future just from current knowledge of ever updating indexical information (e.g. our birth rank amongst all those born in history to date, or when something presently existing first came into being).

    The Gott-Carter DA, for example, has been used to predict that there is a 95% chance that no less than 3 bn and no more than 4.4 tn people will ever live in the future, upon the basis only of the estimated 117 bn people who’ve ever been born so far (109 bn of whom have died, and 8 bn of whom are alive). It is also the basis for the claim that, as humanity is 200,000 years old, there is a 95% certainty we will go extinct in somewhere between 5,100 and 7.8 mm years.

    Whilst this first, simple version of the DA has been debunked, this is not the case for the much more sophisticated and subtle Bayesian update version of the DA, which Carter and John Leslie have come up with.

    The Carter-Leslie DA implies that if there are actual possibilities for anthropogenic human extinction, but we have a low prior credence about their likelihood of occurrence in the future, then we will have to update that uninformed prior by comparing the numbers of persons born throughout history to date with an average of the plausible estimates of the numbers of persons we would expect to be born in the future if humanity becomes a truly long lived civilization e.g. one of many millions to billions of years’ duration. This includes taking account, on a weighted probability basis, of what the future numbers of persons might be if we become a Type 2 or 3 civilization on the Kardashev scale (and over millions to billions of years utilise all the resources of the Solar System for K2, or galaxy for K3).

    Doing so then leads to a dramatic increase in our assessment of the risk of human extinction from near term anthropogenic events such as global thermonuclear war (as @ZX mentions at #5), an AI apocalypse or (most plausibly) a future genetically engineered global multi-pandemic (with the simultaneous release of multiple synthetic and/or genetically enhanced transmissibility and lethality pathogens).

    That fits in with the basic intuition that, if humanity were to be long lived and more numerous in the future than now, then it seems a bit odd to find the world as it is as we’d expect ourselves to be living at a random observer moment in the whole of human history but, instead of being in the middle of that history, we find ourselves living in what would then be the earliest days of the whole of the history of human civilization and in the earliest numbers of all the humans who will ever live. That seems rather unlikely to be the case.

    In turn, this suggests either ‘Doom soon’ or far fewer persons living in each future generation (curtailing the possibility of our going on to become a long lived and truly expansive species).

    The history and various controversies of the DA are explored and discussed in William Poundstone’s “The Doomsday Calculation” (published 2019). If you want existential angst, then this is the book for you!

    Further sleepiness nights can then be induced by reading Nick Bostrom’s 2019 paper ‘the Vulnerable World Hypothesis’, which introduces the idea of the black ball in the urn of invention. Most balls are white, representing beneficial tech. Some balls are grey, representing negative but manageable tech. However, there’s also a black ball in the urn, symbolising a truly disastrous invention which could end civilization, or even lead to humanities’ extinction. The Carter-Lelsie Bayesian DA suggests strongly that the black ball is in the urn, waiting to be picked out, if it has not been already.

  • 42 The Investor August 23, 2023, 8:07 am

    @all — Great comments! Super busy the past few days but have been enjoying the conversation here.

    @TLI — That’s a fascinating comment and argument, lots to think about though perhaps not incredibly on-topic from an investment perspective. (I believe even the oldest company is only about 1,500 years old – a Japanese construction company from memory).

    Re: The Doomsday Argument it does strike me as more than a little abstract, and a statistical reach when we have n=1 examples of the history of intelligent life to draw on. Of course I know they will have considered this.

    One can see how easy it is to go down this rabbit hole though. On the one hand, humanity has been murderous and reckless throughout known history. (Frequently engaging in genocidal wars, scientifically / technologically near-unbounded in terms of research, consuming nearly all resources to hand as available/affordable). On the other hand, we sometimes curb those tendencies and are still here.

    The latter is clearly what leads them to their Bayesian analysis. As a naughty active investor, I’d probably base my bet on the ‘fundamentals’ of the first hand though. 😉

  • 43 BBBobbins August 23, 2023, 11:23 am

    Surely the stress/serenity point depends a bit on how you are wired. I believe from my own experience that we will manufacture stress when we have removed major stressors from our lives but I’m also grateful that I don’t personally have the desire to be constantly seeking status through things.

    I do question the role of cause and effect or nature v nurture a bit on ability to achieve serenity. I didn’t have early stellar career success but even now I don’t know whether I didn’t have enough drive from wanting to be high up the pecking order, and with the accoutrements like sharp suits and fast cars, or whether the lack of desire for those things meant I was was destined to coast along somewhat.

  • 44 Tom-Baker Dr Who August 23, 2023, 5:29 pm

    @Time like infinity (#41), @TI (#42), @BBBobbins (#43) – As TI has pointed out, having data for a single case of intelligent life so far makes any doomsday analysis highly uncertain.

    Being a chronic optimist, I also can’t help thinking about the large amount of evidence that suggests humanity has grown kinder over the ages, extreme poverty has trended down consistently, and human ingenuity has saved it from disaster time and time again. Anyone under a different impression should check:
    Hans Rosling, Ola Rosling, and Anna Rosling Rönnlund, “Factfulness: Ten Reasons We’re Wrong About the World – and Why Things Are Better Than You Think” (https://www.amazon.co.uk/Factfulness-Reasons-Wrong-Things-Better-ebook/dp/B0769XK7D6/ref=mp_s_a_1_1?crid=3FT9F113F2M82&keywords=factfulness+by+hans+rosling&qid=1692805400&sprefix=factful%2Caps%2C117&sr=8-1)

    https://www.gapminder.org/

    https://www.ted.com/talks/steven_pinker_is_the_world_getting_better_or_worse_a_look_at_the_numbers

    As to the discussion about status seeking and pecking orders, I think it’s not an essential human attribute at all. It might be an important trait for some people, but I suspect that this need to seek status and to move higher in some sort of pecking order is absent in a number of people.

    There is another approach to life where you get a lot of pleasure, happiness, and satisfaction from finding out how Nature works, creating new ideas and inventions, etc. Some people enjoy the chase, the thrill and adventure of doing interesting things rather than simply winning and finishing “the game.” For some people, winning or reaching the end of an interesting project is an anticlimax. The fun is in the act of doing it, not in the successful result or the status gain at the end.

  • 45 Time like infinity August 23, 2023, 8:45 pm

    Intrinsic Perspective piece on 2012 being a pivot year is well worth taking the time to click through to argument referenced that, actually, 1971 was the real hinge of history. wtfhappenedin1971.com is a hoot.

    Big thumbs up in agreement with @Alan S #18. Of course, having a decent income reduces stress significantly. Anyone who imagines that, in general terms, the stress of absolute (not relative) poverty is not much worse than any problems of having plenty of money (‘affluenza’) is not living in the real world. But, it’s about balance. Eudaimonia. Going from £10k to £50k p.a. income will reduce stress from 30% to 10%, but increasing it another 5 fold to £250k p.a. is not going to eliminate the last 10%. We haven’t evolved to be happy all the time. What survival / reproductive advantages would constant bliss confer? Whatever level of wealth or income one has there will always still be irreducible levels of anxiety. And if you have to work yourself to the bone, not getting enough sleep to boot, then you’re gonna be stressed out even if you’re well into seven figure earnings territory. Just ain’t worth it IMO.

    @TI #43 and @Tom-Baker Dr Who #44, we have to always remain at least somewhat long term optimistic as investors. You can’t invest for for apocalypse, after all, whatever the Goldbugs and Bitcoiners may claim. BTW, if ever civilization did fall, just how exactly do BTC Heads / Coiners then imagine that they’re going to get access to the internet and to their wallet holdings? BTC might ‘run on the Blockchain’ via a decentralised ledger, but it still needs electricity. It’s neither failsafe nor resilient.

    In any event, existential despair doesn’t help here in practice. We might as well go about our investment decisions just as we did before. We really have no choice. As investors we can’t actually control for the very worst case scenario – i.e. the worst that could happen, not the worse that we can plan for or manage to get through. Markets can close (as did Russia’s in 1917, not to reopen until 1992). Sure things can collapse (e.g. RBS, HBOS, AAA rated MBS).

    Agree with #44: things have consistently got much better over time, especially since the Enlightenment. The issue which the DA highlights (the Bayesian update version, not the refuted original) is the bad leverage problem, whereby tech may be taking us to a place where a single (or small group) of nutters could endanger the whole future. Whilst such persons have, from time to time, sadly obtained positions of power, their ability to do ill has been limited by the lack of willingness of others to do their bidding and the courage of the many to resist them. Near future tech like (AI assisted) digital to DNA sequencing/CRISPR-Cas9 follow ons could, for the first time in history, place horrific destructive power directly into the hands of the deranged. There is no precedent for this. The fact that ingenuity has saved us from big and urgent problems before (or at least mitigated them) can’t give us comfort where there’s no prior parallel. Forthcoming tech may unwittingly enable a democratisation of disaster, making the unthinkable inevitable.

    Also agree with all the criticisms of the DA made at #43 and #10. Unfortunately, they only go to the original version, not the Bayesian update one. I would like nothing more than for that version to be falsified too. I haven’t yet found a watertight and convincing refutation though. I very much hope that there is one out there.

    I’m including some links below on the DA for any interested. They start with general intros, typologies and explanations, and move on to address the specific risk which I fear is the most plausible black ball technology in the urn of invention (bearing in mind here, to assuage @ZX’s fears at #5, nuclear is the prerogative of great powers, who accept the logic of deterrence, and even if deterrence should fail, an all out exchange would still fall far short of an extinction level event in all but the very most unlikely nuclear winter scenarios; global warming is dreadful, but it is not going to cause our extinction even allowing for the remote risk of extreme feedback like methane hydrates bubbling up; and what harm could misaligned AGI really do on its own as we’d just switch it off, even if that meant powering down the world and replacing every single bit of programmable hardware).

    J. Richard Gott III: ‘What is the Doomsday Argument?’
    https://youtu.be/m0VI5-xJ0Fo

    Matt O’Dowd, Professor, Astrophysicist, City University of New York and American Museum of Natural History:
    https://youtu.be/dSvgw9ZOK3I

    David Kipping, Assistant Professor, Astronomy, Columbia University:
    https://youtu.be/84LcUXKNPCY

    Fergus Simpson, University of Barcelona: ‘Apocalypse Now? Reviving the Doomsday Argument’:
    https://arxiv.org/abs/1611.03072

    Joshua Cooper, Dep. of Mathematics, University of South Carolina: ‘Bioterrorism and the Fermi Paradox’:
    https://people.math.sc.edu/cooper/pubs.html

    Alexey Turchin, existential risk and life extension researcher:
    https://philpapers.org/rec/TURAMA-4
    https://philpapers.org/rec/TURAMA-3

    Phil Torres, see the 2018 two part paper: ‘Who Would Destroy the World’, and ‘Omnicidal Agents and Related Phenomena and Agential Risks and Information Hazards: An Unavoidable but Dangerous Topic’:
    https://www.xriskology.com/scholarlystuff

  • 46 Delta Hedge April 29, 2024, 9:49 pm

    The 26 April 2024 Monevator Weekend Reading (“The City that never sleeps mulls midnight share trading”) links to a Science piece on 18 April (“Technological risks are not the end of the world”) which, in turn, links to a 754 page report (“Forecasting Existential Risks, Evidence from a Long-Run Forecasting Tournament) by multiple authors, including (Dom Cummings’ most favoured) ‘super forecaster’, Philip Tetloc.

    It’s worth a read through, but, boiling it down to just a single line, the subject area experts in the tournament gave a 4.75% median chance of human extinction by 2100, whilst the ‘super forecasters’ gave only a 0.38% chance of human extinction occurring by that date.

    However, whilst this is obviously useful both in order to empirically survey the various participants’ subjective priors, and in order to aggregate them to give a best guess ‘base rate’ collective prior for human extinction risk; it wholly misses the most important point.

    Priors have to be adjusted in light of new relevant information.

    The birth rank of current humans is such information.

    The Population Reference Bureau in “How Many People Have Ever Lived on Earth” (18 May 2021) estimated that number to be at 117 bn.

    Assuming, momentarily, that humanity does not go extinct first for either of anthropogenic or for natural reasons, then – under extremely conservative assumptions where global human future population averages 1 bn (compared to 8.1 bn now) with 100 year average lifespans (shorter lifespans would mean more expected future people) – over the course of the 10 mn + year lifespan of a typical longer lived mammal species there would be 100 tn future human lives.

    This is ~1,000 times the number of people who haved lived to date, both those who have died in the past and those alive now.

    This ratio could, of course, be a truly massive underestimate.

    If colonisation of just the solar system takes place over 10 mn years (or longer should humanity survive the ecological and evolutionary constraints that have limited the earth’s non-technological species), then very much larger future human populations could be readily sustained via a ‘Dyson Swarm’ of O’ Neill cylinder type colonies (likewise if, over that enormous timespan, realistic fully simulated lives become possible with the use of AGI).

    But, just taking 1,000 to 1 to be the a piori credible minimum ratio between, on the one hand, the number future persons (absent any anthropogenic extinction risk) and, on the other hand, the more or less actually ascertainable number of current and past lives; one can then easily apply Bayes’ rule to the tournament participants’ aggregated median pior expectations for the risk of human extinction occurring by 2100.

    Bayes rule is fundamental to scientific and statistical reasoning, and universally used to update credences in light of new information.

    In light of this, I would submit it is quite appropriate to apply it to the results of the tournament.

    Using Bayes’ rule, the probability of ‘doom soon’, given an early birth rank, is:

    p/(p+(1-p)x(soon/late)

    Where p is the prior probability of doom soon, and soon/late is the population ratio of doom soon to doom late.

    Applying Bayes’ rule in light of the birth rank of current living humans within the reasonable minimum number of expected human lives overall, absent anthropogenic extinction risk (i.e. including otherwise expected future human lives) updates the prior expectation of human extinction by 2100 as follows:

    A 0.1% prior expectation of the risk of human extinction occurring by 2100 now becomes a 50% expectation.
    A 1% prior becomes a 90.1% expectation.
    A 10% prior becomes a 99.1% expectation.
    A 50% prior becomes a 99.9% expectation.

  • 47 Delta Hedge June 21, 2024, 10:02 am

    Even before the breakthroughs from OpenAI with LLMs in 2022/23, Toby Ord and the Centre for Long Term Resilience were sounding the alarm (in 2021) on engineered biohazards as being a main risk (as highlighted as one of several major anthropogenic risks in Ord’s 2019 work “The Precipice”).

    https://www.longtermresilience.org/post/future-proof-report-2021

    The risks of ML/AGI/ASI surely overall is very greatly and rapidly exacerbating the engineered biohazard risk both through its misuse by bad actors and possibly in its own right.

    We’re not building either AI or genomic sequencing synthesiser hardware which can only run proven safe software and safe software which will only run on machines with safe hardware.

    We’re not designing out at source, as we need to, the exponential increasing risks of unsafe RNA (viral) and/or DNA (bacterial) sequences being synthesised.

  • 48 Delta Hedge August 27, 2024, 10:24 pm

    Maybe the Doomsday Argument risk is overstated – or is this reduction in risk a mathematical sleight of hand?:

    https://arxiv.org/abs/1303.4676

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