Investment Quotes - Some Good, Some Bad

[moda0306]

http://financialedge.investopedia.com/f ... -Time.aspx

Buffett's about diversification is mind-boggling... even the smartest stock picker in the world should have some some gold & LTT's, IMO, to offset the unknowns.

[Tortoise]

Dave Ramsey's quote about giving back to the community caught my eye.

The general assumption in our culture seems to be that if a wealthy businessman who has worked hard and acquired considerable wealth during his lifetime does not "give something back" to the community in the form of altruism, he is selfish and greedy.

That notion deserves closer examination.  Is it justified?  If the businessman acquired his wealth by providing goods or services that many people valued more highly than the money they traded with him for those goods or services, then didn't the businessman add value to those people's lives and thereby increase their quality of life to some extent?

Let's say an entrepreneur invents a device that enables him to produce a common household widget for a small fraction of its current price, and much faster and on a far wider scale.  He starts a company around his idea, mass-produces the item, and earns billions of dollars doing it.  That's one side of the coin.  The other side of the coin?  Millions of people can now purchase that common household widget for a much lower price than they previously could, thereby effectively putting more money in their pockets.  And the far lower cost also allows a whole new segment of the population to purchase and enjoy the widget who couldn't even afford it previously.

Yes, the entrepreneur made billions of dollars for himself, but he did so by effectively "donating" vast sums of money and new widgets to the community, by breathing life into his unique idea and sharing its fruits with the community.  It's a win-win situation.  That's the beauty of how ideas and hard work create wealth and raise everyone's standard of living--not just that of the businessmen--in a free economy.

So when people cast judgment on wealthy people who "don't give enough back to the community" in the form of altruism, I get slightly annoyed.  Voluntarily conducted business itself is an incredibly powerful boon to the community--orders of magnitude more powerful than philanthropy--yet many people implicitly ignore it by clinging to the twisted notion that only altruism truly serves the community.

[AdamA]

So when people cast judgment on wealthy people who "don't give enough back to the community" in the form of altruism, I get slightly annoyed.  

I agree with you.  HB talks about this a lot it his book "How I Found Freedom in an Unfree World."  

He coins this "morality trapping."  It's essentially when someone does somthing out of obligation to some vague sense of morality instead of what he really wants to do.

This is not to say a rich guy can't give back, just that if he (or anyone) does, it should be because they get something in return (ie, a sense of satisfcation b/c they are giving to a cause they truly believe in, etc).  

[Tortoise]

I think part of my objection is with that very phrase "giving back" to the community.  It implies that the person took--or stole, even--something from the community, so in order to avoid being a total jerk, is somehow obligated to "give back" some of it.  That assumption is rooted in a false view of the economy as a zero-sum game in which wealth cannot be created, only transferred from one person to another.

Honest businessmen don't become wealthy by stealing from the community.  They become wealthy by creating wealth and thereby adding value to the community.

I think part of this misunderstanding of business vs. altruism in our culture is the fact that the way a community benefits from altruism tends to be specific and highly visible, whereas the way the community benefits from business tends to be more diffuse and less visible.  For example, when a person donates money to some cause, the money is being given by one specific person to one specific group--all at once.  People see that and think, "Gee, that's wonderful."  But when a person increases the wealth of a community just by operating his business, it is not nearly as clear who specifically is "giving" and who specifically is "receiving."  The overall benefit to the community may be orders of magnitude larger in the case of the business, but the cause-and-effect relationship is harder for the average person to recognize and understand.

Henry Hazlitt discussed this visibility issue as it applied to many different economic issues (e.g., the Broken Window Fallacy) in his excellent book Economics In One Lesson.  Also, Frederic Bastiat wrote an essay about the visibility concept called "That Which Is Seen, and That Which Is Not Seen."

[Pkg Man]

Perhaps I am missing the point, but I think charitable giving is certainly a good thing and to be encouraged.  I see nothing wrong with trying to persuade individuals to donate to charity by appealing to religious beliefs, morality, a sense of community, or whatever.  And I see no distinction between this type of behavior and any other form of advertising.  If someone chooses not to give I find it entirely appropriate to call that person uncharitable, but society should have no ability to punish him for his choice.

Recall that Adam Smith, the father of modern economics, wrote two great books.  The most widely known is The Wealth of Nations, and the other is The Theory of Moral Sentiments.  I think a society that subscribes to the tenets of both is clearly the preferable one in which to live.

[AdamA]

Perhaps I am missing the point, but I think charitable giving is certainly a good thing and to be encouraged.  

I agree, but I don't think it's a moral obligation. 

[Pkg Man]

I suppose that depends on what the definition of moral obligation is.  I think most Jews and Christians consider it their moral obligation as there are numerous passages in the Bible that encourage giving to the those in need.  I imagine many other faiths would also consider it a moral obligation. 

Atheists may believe that it is an obligation to society, with no religious overtones.

[MediumTex]

I suppose that depends on what the definition of moral obligation is.  I think most Jews and Christians consider it their moral obligation as there are numerous passages in the Bible that encourage giving to the those in need.  I imagine many other faiths would also consider it a moral obligation. 

Atheists may believe that it is an obligation to society, with no religious overtones.

The problem seems to arise when one person feels a moral obligation and then proceeds as if everyone else should share the same moral obligations.  That's a recipe for trouble, IMHO.

We all probably feel certain moral obligations of one kind or another, but each person creates a worldview and set of moral obligations that are unique from all others.  To me, attempts to standardize the notion of moral obligations seems to do much more harm than good.  I think the best example of this is when you see two religious groups who could worship in peace within the same society, but rather than coexisting they choose to fight each other because they think that their moral obligation requires them to rid the world of those who don't believe as they do, including what one or both groups might consider to be moral obligations.

Right now, of course, radical Islam gets a lot of attention for its destructive set of moral obligations, but this pattern has played itself out throughout history with many different faiths.

Is the answer a rejection of the notion of moral obligations?  I don't think so.  I just think that there should be some mechanism for different notions of what a moral obligation is to coexist, with a strong overall aversion to violence and coercion of any kind.  In other words, if your moral obligation requires you to coerce me through the threat of violence, I would be inclined to say that you are not really acting on a moral obligation, but more along the lines of a political or cultural preference. 

The one legitimate use of coercion is probably to prevent even greater acts of coercion, but this is a difficult move to successfully execute--that's probably why every war is sold to the public as a necessary means to prevent another group from carrying out unspeakable acts of violence.  What the public often winds up with is just a whole lot of generalized violence with little good to show for it.

[pershing83]

Dave Ramsey lives nearby. Nashville and Franklin are filled the extremely well off. It is worth noting Ramsey got a strong dose of religion not long ago which is always suspect. At least I hear that.

Everyone should do the best they can to help others, but "giving back" sounds like you lifted it from someone.

[Drewskers]

Everyone should do the best they can to help others, but "giving back" sounds like you lifted it from someone.

I think you misunderstand what many people actually mean by that phrase "giving back". Just about every person I've known that's been successful, understands it was not only by the sheer dint of their hard work, they realize that many other people have contributed to their success - teachers, mentors, spouses, family members, friends - and also groups such as schools, professional organizations and spiritual communities. They may also realize they were born into, or otherwise found their way into, circumstances that allowed them to make the most of their native gifts. There really is no such thing as a "self-made man" (or woman). So when successful people talk about "giving back", I think they are most often coming from a genuine sense of gratitude for the support and opportunities they have received, and they are sincerely interested in helping other people find their way.

In my estimation people who seek to "give back" out of genuine gratitude (as opposed to externally opposed moral obligation), are among the happiest and most content people I have known. Ultimately, helping others is a pleasurable act; as such (and this is born out by modern biological science), it is good for our mental, emotional and physical health.

[AdamA]

In my estimation people who seek to "give back" out of genuine gratitude (as opposed to externally opposed moral obligation), are among the happiest and most content people I have known. Ultimately, helping others is a pleasurable act; as such (and this is born out by modern biological science), it is good for our mental, emotional and physical health.

Agree.

The problems start when others view "giving back" as an obligation of the successful.  Leads to stealing in various forms. 

[LifestyleFreedom]

In my travels through life, I've found there are two basic ways to view the world -- a world of scarcity or a world of abundance.

Those who believe the scarcity model are always hoarding because they feel someone else will pick up the crumbs if they don't get to them first.  I grew up poor (more or less) and survival was at the forefront of my mind in my earlier years.  My attitude about money back then was "easy come, easy go" because all of my resources had to go to basic necessities.  I had to strain in order to avoid running out of money before running out of month.  I never had to learn how to budget because I instinctively knew how to make my money last until the next paycheck.

Those who perceive the abundance model believe there is more than enough to go around for everyone.  People who are successful often like to share their resources (intelligently, of course) to help others achieve success because it brings them joy.  It's not a moral obligation and any charitable organization who uses the appeal "you're rich, therefore you have a moral obligation to help others less fortunate than yourself" is a major turnoff.

People who come up "the hard way" tend to know what it takes to be successful and are in charge of their financial lives.  They have money smarts and feel comfortable with their fortune.  They have the self-discipline that is necessary to live within their means.  I had to learn how to budget and to "pay myself first" as my income increased, which took a few years to figure out.  Luckily, I managed to avoid getting in over my head, so I was able eventually to get out of debt and build wealth.

People who receive a windfall (whether by inheritance or by winning the lottery or, in some cases, by working at a start-up that has an IPO), on the other hand, are often in worse shape financially a few years later than if they hadn't received the windfall in the first place.  They never learned how to feel comfortable with wealth and success.  Instead, they are still living in the world of scarcity mentally, even though their bank account is huge, and they tend to blow their fortune quickly (this isn't always true, but it is often true).

See Avoiding 'Sudden Wealth Syndrome' at http://www.bankrate.com/brm/news/pf/20050926a1.asp

[Lone Wolf]

That notion deserves closer examination.  Is it justified?  If the businessman acquired his wealth by providing goods or services that many people valued more highly than the money they traded with him for those goods or services, then didn't the businessman add value to those people's lives and thereby increase their quality of life to some extent?

Absolutely.

The bottom-line truth is that charitable giving to a cause you truly believe in feels damn good.  While I give charitably "for others", it's something I'm ultimately doing because I empathize with their plight or needs.  The idea of making them happier or building what I consider to be a better world makes me really, really happy.

On the other hand, being guilted and browbeaten into fulfilling someone else's notion of your "obligation to society" is just that person trying to make you do what they want, for whatever reasons are important to them.  That's one of the evils of wealth redistribution -- the one whose resources have been confiscated derives no happiness whatsoever while the confiscator can bathe in self-congratulation.  It amounts to a moral massage at someone else's expense.

[Tortoise]

Some very good points have been made here regarding whether charitable giving should be considered a moral obligation or a personal choice.

The facet of this issue I am most interested in, however, is the morality of helping others by becoming wealthy through honest means.  Rabbi Daniel Lapin gave an outstanding speech in 2009 entitled, "What Is Morally Right About Economic Freedom" (https://www.mises.org/media/4316/What-i ... ic-Freedom) in which Lapin made the point that wealth obtained through honest means should actually be considered a badge of honor signifying service to one's fellow man--not a source of shame or guilt.  It was the first time I had ever heard someone make that particular point, and to my surprise it made perfect sense to me.  It really got me thinking about why people in our culture so often seem to expect wealthy people to feel an innate sense of guilt about their money and to be shamed into "giving back" to the community that which they supposedy "took" from it in a zero-sum sense.

So just to be clear, what I'm trying to say is that charitable giving and volunteering one's time are not the only ways one can help the community.  The very act of creating wealth--of conducting honest, profitable business--also helps the community by improving people's lives in ways that are often far less visible (though no less important) than the immediate and visible effects of charitable giving and volunteering.

[6 Iron]

Some very good points have been made here regarding whether charitable giving should be considered a moral obligation or a personal choice.
....
So just to be clear, what I'm trying to say is that charitable giving and volunteering one's time are not the only ways one can help the community.  The very act of creating wealth--of conducting honest, profitable business--also helps the community by improving people's lives in ways that are often far less visible (though no less important) than the immediate and visible effects of charitable giving and volunteering.

I agree, Tortoise. I give to charities, and it does feel good to do it. But, I would argue that I do considerably more good for society at large with the work I am employed to do, the services I provide, the jobs that are created, and even the wealth that I create, not to mention the family it allows me to raise. There is a tendency for some to assume that "giving back" is an act of atonement for taking in the first place. When giving becomes an obligation, it is no longer giving, and the good feelings we get from charity cease to exist. That said, I would be disappointed if my children did not possess a desire to charitable to those in need when they are adults.

[EM2]

The very act of creating wealth--of conducting honest, profitable business--also helps the community by improving people's lives in ways that are often far less visible (though no less important) than the immediate and visible effects of charitable giving and volunteering.

I very much agree with this idea of Tortoise's.  It reminds me of the Buddhist principal of Right Livelihood, making your living in a way that is non-harming.  There's an interesting book, The Buddha's Teachings on Prosperity, which makes it clear that while generosity is at the heart of that path, the Buddha also taught there's nothing wrong with getting rich in a non-harming way.  Apparently he talked about how to increase, preserve, and protect wealth and how to pass it along responsibly to the next generation. I think he taught at a time when there was a lot of brisk trade and wealth accumulation, and he worked with some very wealthy families.  An early Bogle. 

[vnatale]

Dave Ramsey's quote about giving back to the community caught my eye.

The general assumption in our culture seems to be that if a wealthy businessman who has worked hard and acquired considerable wealth during his lifetime does not "give something back" to the community in the form of altruism, he is selfish and greedy.

That notion deserves closer examination.  Is it justified?  If the businessman acquired his wealth by providing goods or services that many people valued more highly than the money they traded with him for those goods or services, then didn't the businessman add value to those people's lives and thereby increase their quality of life to some extent?

Let's say an entrepreneur invents a device that enables him to produce a common household widget for a small fraction of its current price, and much faster and on a far wider scale.  He starts a company around his idea, mass-produces the item, and earns billions of dollars doing it.  That's one side of the coin.  The other side of the coin?  Millions of people can now purchase that common household widget for a much lower price than they previously could, thereby effectively putting more money in their pockets.  And the far lower cost also allows a whole new segment of the population to purchase and enjoy the widget who couldn't even afford it previously.

Yes, the entrepreneur made billions of dollars for himself, but he did so by effectively "donating" vast sums of money and new widgets to the community, by breathing life into his unique idea and sharing its fruits with the community.  It's a win-win situation.  That's the beauty of how ideas and hard work create wealth and raise everyone's standard of living--not just that of the businessmen--in a free economy.

So when people cast judgment on wealthy people who "don't give enough back to the community" in the form of altruism, I get slightly annoyed.  Voluntarily conducted business itself is an incredibly powerful boon to the community--orders of magnitude more powerful than philanthropy--yet many people implicitly ignore it by clinging to the twisted notion that only altruism truly serves the community.

Looks like Dave Ramsey has never had a topic of his own here? I think this may have been one of the first references to him?

Here is an update on him.

Broke Millennials Are Flocking to Financial Guru Dave Ramsey. Is His Advice Any Good?

https://money.com/dave-ramsey-money-debt-free/

Vinny

[jalanlong]

Dave Ramsey's quote about giving back to the community caught my eye.

The general assumption in our culture seems to be that if a wealthy businessman who has worked hard and acquired considerable wealth during his lifetime does not "give something back" to the community in the form of altruism, he is selfish and greedy.

That notion deserves closer examination.  Is it justified?  If the businessman acquired his wealth by providing goods or services that many people valued more highly than the money they traded with him for those goods or services, then didn't the businessman add value to those people's lives and thereby increase their quality of life to some extent?

Let's say an entrepreneur invents a device that enables him to produce a common household widget for a small fraction of its current price, and much faster and on a far wider scale.  He starts a company around his idea, mass-produces the item, and earns billions of dollars doing it.  That's one side of the coin.  The other side of the coin?  Millions of people can now purchase that common household widget for a much lower price than they previously could, thereby effectively putting more money in their pockets.  And the far lower cost also allows a whole new segment of the population to purchase and enjoy the widget who couldn't even afford it previously.

Yes, the entrepreneur made billions of dollars for himself, but he did so by effectively "donating" vast sums of money and new widgets to the community, by breathing life into his unique idea and sharing its fruits with the community.  It's a win-win situation.  That's the beauty of how ideas and hard work create wealth and raise everyone's standard of living--not just that of the businessmen--in a free economy.

So when people cast judgment on wealthy people who "don't give enough back to the community" in the form of altruism, I get slightly annoyed.  Voluntarily conducted business itself is an incredibly powerful boon to the community--orders of magnitude more powerful than philanthropy--yet many people implicitly ignore it by clinging to the twisted notion that only altruism truly serves the community.

Looks like Dave Ramsey has never had a topic of his own here? I think this may have been one of the first references to him?

Here is an update on him.

Broke Millennials Are Flocking to Financial Guru Dave Ramsey. Is His Advice Any Good?

https://money.com/dave-ramsey-money-debt-free/

Vinny

I listen to Dave Ramsey’s podcasts from time to time. I do like to be reminded how bad debt is and how well off you can live without it.

However, his investing advice is very 1990s (active growth mutual funds) and the religious aspect of this is not my money, it’s god’s money turns me off as well.

Although not an actual investing quote, I love Paul Krugman’s 1998 gem:

“ By 2005 or so, it will become clear that the Internet's impact on the economy has been no greater than the fax machine's.”