#3: Your relationship with money is complex. But it needn't be complicated.

5th October, 2020

Welcome to the Idiot Money newsletter. The newsletter that would rather get comfortable with complexity than seek simplistic succour.

This week: becoming wiser with money by understanding that success with money isn’t about knowing how investments ‘work’, what to invest in, or whom to delegate that stuff to, but understanding money’s role in your life and how to live with it every damn day.

Whenever you hear someone praised for being ‘good at explaining complex ideas in simple terms’ what you are hearing is a piece of crap. Grasping why is fundamental to financial advice.

People seek financial advice because they think – or rather believe – that finance is complex, that the complexity is numbers-based, and that therefore it’s worth paying someone who understands the numbers to make the complexity go away.

This is thrice-flawed. The numbers bits of finance that are relevant to you are simple, the complexity comes not from the numbers, but from the narrative of your life, and complexity by definition cannot be made to go away.

True complexity is irreducible. When people see scary numbers-based ‘complexity’ in finance, what they are seeing isn’t complexity, but complication. Because people are either being stupid or trying to sell you something, simple things are made complicated such that we praise those who cut through the crap, rather than blaming those who put the crap there in the first place.

While complications can be dissolved, to ‘simplify’ a complexity is to distort it, resulting not in simplified, but simplistic. It’s comforting, but crap. Simplistic versions can be stepping stones – children read Dahl before Dostoyevsky – but they’re not substitutes. Retweeting a conclusion hasn’t saved you the time taken to understand something, it’s wasted the time you could’ve understood it in.

Often a simple version of a complex thing, or a conclusion with a cursory understanding (so-called chaffeur knowledge) is all you need. But when it comes to how you interact with money, be it by its direct input into decisions, or just thinking about it, nothing so obviously or so frequently shapes and expresses who you are: it’s not the time to be taken for a ride.

By all means break a life down for analysis, but if the aim is the living, not the analysing, don’t forget to put it back together again.

Unfortunately, complex and complicated (and simple and simplistic) are hard to distinguish. Yet the distinctions are important. Because scared minds – as ones thinking about money often are – are so desperate for simple answers that they beg to be sold them, blind to the fact that such answers not only don’t work, but can’t work.

When we talk of ‘knowing’ about money or investments, it’s crucial to understand what we really mean.

There are four ways we can ‘know’ about money. We talk about the two that don’t really matter, and ignore the two that do. [Continued…]

Simple and complicated can be reduced to propositions and procedures: statements of fact and technical know-how. Complex requires a knowing that is perspectival and participatory. That understands ideas in the context of the life they are symbiotically serving.

What you do with money is irrelevant unless it’s making your life better. You can get rich and stay deceived, and those riches won’t mean shit. Think about money more clearly, and not only will you use money more meaningfully, but you’ll get richer as a side-effect.

We see all things financial as complicated and scary and in response cover our eyes. When a well-meaning, well-heeled helper offers to sell us a guide dog, we’re so grateful we barely pause to consider how much it costs, or how effectively it works. And it never occurs to us to just uncover our eyes. We remain money blind. [Continued…]

Believing simplicity automatically equals sophisticated is dangerous. It deceives us into perceiving profundity when presented with triviality, and teaches people to “optimise for solving easy problems in ways that make it harder for them to think about the hard ones”. A byzantine recipe could be because of Heston Blumenthal, but it’s usually because of some idiot inflating their own intelligence and importance. In financial advice, it allows con-men to create unnecessary complications and charge for removing them.

When someone claims a complex idea is being explained in a simple way, what they mean is a simple idea has been stripped of its traditional covering of unnecessary complication. Complex processes may end up with simple conclusions, but to jump to them is to trivialise them. And trivial is not transformative. It’s a self-deceiving trick to make you feel you’ve solved something despite knowing in your soul that you’ve done no such thing, and wasted time in pretending otherwise.

Most investment advice rightly knows it has to combat the perceived complexity of finance, but focuses on painting prettier pictures of clarity and simplicity, forgetting that the audience still needs to go to the gallery, still needs to remove their hands from their eyes, and still needs to learn how to see what they’re looking at. [Continued…]