#69: Red Pill Financial Planning: Escaping the Money Matrix

10th January, 2022

Welcome to the Idiot Money newsletter. This week, becoming wiser with money by understanding that financial certainty isn’t what you think it is, including:

• how everybody wants certainty right up until the point they actual have it;

• living heroically through learning financial kung fu; and

• possibly reading a little bit too much into the Matrix films.

We crave nothing more than certainty. Yet actual certainty is a terrifying abyss, devoid of drama, and hope. What we want instead is a heroic capacity to be comfortable amid uncertainty, for which crystal-ball inevitability is an inhuman and unworthy proxy.

There’s a scene in the new Matrix film (don’t worry, no spoilers!) where our hero Keanu is on a treadmill in a dark basement gym, being about as unheroic as it’s possible to be.

Treadmill-trapped Thomas Anderson is awfully far from the free-flying Neo who’s spent three films fulfilling his potential and saving the world as a side-effect, all while being a badass advert for the exceptional talents of both his tailor and his hairdresser.

The aging Mister Anderson is stuck going through the motions on an unheroic and unhedonic (and unsubtly metaphorical) treadmill: one mindless, one-track machine atop another.

Needless to say, Keanu escapes the treadmill, as well as the equally anodyne disco lights, banging tunes, and drinks in triangular glasses that make up the rest of this picture of modern Matrix-mapped ‘success’.

He follows the white rabbit.

And of course he pops the red pill: the choice everyone wants to make, but few enough do that a multi-million-dollar film franchise has built up around inspiring us to do so.

Do you really want to know where your path leads?

No one wants the blue pill.

Yet if it weren’t clearly so damn universally tempting, despite being clearly so damn universally unwanted – The Matrix wouldn’t’ve been made, let alone become so popular.

The point of the blue pill is spelled out by Trinity in the first film before the blue pill has even made an appearance: ‘You have been down there, Neo. You know that road. You know exactly where it ends. And I know that's not where you want to be.’

And later, in the mouth of Morpheus: ‘You take the blue pill, the story ends.’

Everyone knows where a treadmill goes because a treadmill goes nowhere.

The blue pill is algorithmic, mechanistic, certainty.

There’s a reason ‘it is inevitable’ is Agent Smith’s villainous catchphrase.

And yet, as unremarkably as it slithers off the tongue of a villain, so does some abstract notion of ‘inevitability’ underlie so many of our money-based actions.

That we crave certainty is hardly news.

It’s the foundation of most psychoanalysis and just about every financial-planning business, even most of the ones that advertise that they’re doing nothing of the sort.

When it comes to financial planning, given it’s what 99% of the market comes to a financial planner for in the first place, not selling certainty – either outright or in some sort of subtle stochastic packaging – is a punchy and likely unprofitable move (and screw the fact that craving certainty is at the heart of most people’s failure to make more of their money!)

And yet… there’s something awfully strange about it.

What’s fascinating about our craving for certainty is that certainty, when spelled out, horrifies us.

Imagine you knew precisely how your life was going to go and then spent however many decades, day after day, sort of detachedly watching it play out. Can there be a more reliable recipe for making a life feel mundane, miserable, and meaningless?

Would you still watch sports if you knew the score? Would you still play Wordle if you knew the answer?

The moments we really want are those when we’re in flow – those characterised by a challenge that lies at the edge of our capability. And yet so many dedicate their lives to money in a way that removes all semblance of any meaningful challenge. (This isn’t about glamourising aestheticism, of course, as we covered a couple of weeks ago).

To crave certainty, as the Matrix spells out, is to run from reality: to live more like a machine than a human.

With minds frazzled by momentary overwhelm, we kid ourselves into believing that our desire for a breath-catching pause is actually a desire for a life-stopping stagnation… forgetting that if we had actually arrived at a state where we (and the world, and our interactions with it) weren’t going to change ever again, it’d not only be suicidally boring, but we’d be the first human in history to do so.

(Recall the futile idiocy of the ‘Arrival Fallacy’ from Idiot Money #53 and why retirement is famously such a terrible idea for the majority of people from here.)

Down the rabbit hole

We’re drawn to chase rabbits down holes precisely because we don’t know what’s down them.

The stories that grab us, from myths to fairytales, to blockbuster films about living in a simulation, the ones that wrench us from ‘reality’ do so best when they speak to something that is somehow magically ‘more real’.

There’s a reason the hero’s journey story archetype is so magnetic. We’re drawn to heroes because they venture into the woods, not because they take a look at the darkness and decide they’ll come back later when someone’s razed the trees and built a resort.

The point of the hero archetype is that unlike the villain, the hero recognises ability, if it’s to mean anything, is tethered to responsibility. The villain is a ‘freedom to’ character. They use their ability to say f-you to the world. The hero is a ‘freedom for’ character. They use their ability to help the world in the way that only they can (usually after having actively rejected the predictable path of the sort of beach bum or hedonist that modern retirement dreams are made of).

We crave money for the promise of synthetic certainty… a certainty that goes up in smoke the second something human happens, like a health scare, or the chance to do work that you actually think isn’t completely pointless.

Far more valuable than the numbers in a bank account are your ability to learn financial kung fu.

Learn kung fu

What do you do if you have everything and still feel lost?

The typical multi-millionaire client of a financial adviser is no more lost than anyone else. But they are more aware of it. Because it’s harder to keep believing that more money’s the answer when you’ve got more than basically anyone that’s ever lived.

Living in closer alignment with reality, it turns out, is quite important.

And the mechanistic certainty of the blue pill is far from real.

We care about things feeling ‘real’.

Imagine you feel you are in a committed long-term relationship, though your other half (unbeknownst to you) is being… less committed. Is it better to find out, or not? If you’re like most people, you’ll reject the soma of unshakable, certain, contentment, and plunge into the pain and suffering of red-pill reality.

Your story shouldn’t end in bemoaning the loss of certainty and the injustice of the world, however. The best stories inspire you to learn kung fu – learn how to dance with the uncertainty – to equip yourself to deal with whatever may arise, rather than crossing your fingers that what will arise will be a smooth line, perfectly contoured to you doing an impression of a sloth.

In financial terms, this means get a grip on your philosophy of money.

‘But what is philosophy?’ asked Epictetus, ‘Doesn't it simply mean preparing ourselves for what may come?’

A sound financial philosophy better equips us to live with money. All investing is preparation, and because we’re investing – preparing – for living, the preparation of our money is inescapably intertwined with the preparation of our minds. The point of philosophy is not to inform, but to form.

Living well with money is a case of using it to equip you to handle increasingly complex challenges, not to fuel your retreat from them.