Cognitively Yours 1.23
"When we do plan for an investment, we always scout for opportunities which maximises our returns rather than be contented with those which help us achieve our financial goals comfortably."
Once upon a time, there lived a King who, despite his luxurious lifestyle, was neither happy nor content. One day, the King came upon a servant who was singing happily while he worked. This fascinated the King, why was he, the Supreme Ruler of the Land, unhappy and gloomy, while a lowly servant had so much joy. The King asked the servant, “Why are you so happy?”
The man replied, “Your Majesty, I am nothing but a servant, but my family and I don’t need too much, just a roof over our heads and warm food to fill our tummies.” The king was not satisfied with that reply. Later in the day, he sought the advice of his most trusted advisor. After hearing the King’s woes and the servant’s story, the advisor said, “Your Majesty, I believe that the servant has not been made part of The 99 Club.”
“The 99 Club? And what exactly is that?” the King inquired. The advisor replied, “Your Majesty, to truly know what The 99 Club is, place 99 Gold coins in a bag and leave it at this servant’s doorstep.” So the King ordered to do it. When the servant saw the bag, he took it into his house. When he opened the bag, he let out a great shout of joy, So many gold coins! He began to count them. After several counts, he was at last convinced that there were 99 coins. He wondered, “What could’ve happened to that last gold coin? Surely, no one would leave 99 coins!”
He looked everywhere he could, but that final coin was elusive. Finally, exhausted, he decided that he was going to have to work harder than ever to earn that gold coin and complete his collection. From that day, the servant’s life was changed. He was overworked, horribly grumpy, and castigated his family for not helping him make that 100th gold coin. He stopped singing while he worked. Witnessing this drastic transformation, the King was puzzled. When he sought his advisor’s help, the advisor said, “Your Majesty, the servant has now officially joined The 99 Club.”
He continued, “The 99 Club is a name given to those people who have enough to be happy but are never content, because they’re always yearning and striving for that extra 1 telling to themselves, “Let me get that one final thing and then I will be happy for life.
John Bhogle, the Vanguard Founder told a story that highlights something we do not think enough: At a party given by a billionaire on Shelter Island, Kurt Vonnegut informs his pal, Joseph Heller, that their host, a hedge fund manager, had made more money in a single day than Heller had earned from his widely popular novel Catch-22 over the whole history. Heller responds, “Yes, but I have something he will never have enough.” Enough is a very powerful word with deep meaning. For a critical element of our society including many of the wealthiest and most powerful among us, there seems to be no limit today on what enough entails. There are many examples of the dangers of not having enough, and what they can teach us.
Rajat Gupta was born in Kolkata as an orphaned teenager. By his mid 40s Gupta was CEO of Mckinsey. He retired in 2007 to take the roles with United Nations and the World Economic Forum. He partnered on philanthropic work with Bill gates. He could have done anything he wanted in life. However, what he did after the sixteen seconds after the deal between Goldman’s Sachs and Buffett changed his life forever and made an indelible mark in his life.
Another example is Bernie Madoff. He swindled investors for two decades before his crime was revealed. Before the Ponzi scheme that made Madoff famous he was a wildly successful and legitimate businessman. His legitimate, non-fraudulent business was by any measure a huge success. It made him hugely wealthy. And, yet the fraud.
Crime committed by those living on the edge of survival is one thing. Poverty will not make you feel the pain and they do not have anything to lose if they are caught guilty. But, the wealthy criminals had already everything: unimaginable wealth, prestige, power, freedom. And they risked everything they had, lost them completely because they wanted more.
There is no reason to risk what you have and need for what you don’t have and don’t need. We may not be wealthy as Gupta or Madoff and able to risk millions of dollars like they did. But there are instances, when we have money adequate enough to cover every reasonable need, still aspired for a little bit more.
1. The hardest financial skill is getting the goalpost to stop moving. If expectations rise with results, striving for more is counterproductive, because once you achieve more, you will feel the same. The taste of having more - more wealth, more power, more prestige, enhanced status - increases the ambition faster and satisfaction becomes elusive. The goal post gets pushed and you have to disproportionate risk to catch up. As you concentrate on attaining more, what you may generate is envy and jealousy from your peers. Life becomes meaningful with a sense of enough. Happiness, is just results minus expectations.
2. The ceiling of social comparison is so high that virtually no one will ever hit it. The only way to win the battle of social comparison is to not fight to begin with - to accept that you might have enough, even if it’s less than those around you. “The only way to win a Las Vegas casino is to exit as soon as you enter.” That’s exactly how the game of trying to keep up with other people’s wealth works, too.
3. “Enough” is not too little. “Enough” is not conservatism, leaving out possible opportunities and potential drift away. But “Enough” is realising that an insatiable appetite for more - will push to the point of regret. For maximising returns, you have a very high risky investment allocation, which is not sustainable. Or just to achieve the elusive “enough” resort to fraudulent activities as every dollar is worth reaching for regardless of consequence and ends only matter and not the means.
4. There are many things never worth risking, no matter howsoever the potential gain. Reputation is invaluable, so are freedom and independence. Family and friends are invaluable. Happiness is invaluable. You should know when you have enough and anything more requires you to take risk that may jeopardise any of these things mentioned above.
This is a lesson for us in investment. When we do plan for an investment, we always scout for opportunities which maximises our returns rather than be contented with those which help us achieve our financial goals comfortably.
We can be happy, even with very little in our lives, but the minute we’re given something bigger and better, we want even more! We lose our sleep, our happiness, we hurt the people around us, all these as a price for our growing needs and desires. We must learn to maintain a balance of our need and desires to enjoy a happy life with what we already have.
In short, "Santosha tulyam Dhanamasti Naanyat" - No wealth is comparable to contentment in a person.
References: The Psychology of Money by Morgan Housel
Photo credit: @xb100 (edited) - www.freepik.com
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