One day, while at a local filling station, the pump attendant looked at me and drew closer to my car window. I rolled it down and told him how much petrol I needed. But instead of serving me, he drew closer and asked me Ã¢â‚¬ËœI bet you enjoy reading personal finance books. I can sell you oneÃ¢â‚¬â„¢.
He then went into the shop and brought with him a well wrapped bookÃ¢â‚¬â€Killing Sacred Cows. He confessed having never read it himself. It just reminded me of one famous clichÃƒÂ© that goes round Ã¢â‚¬â€if you wish to hide anything that would make an African prosper, then put it in a book.
It goes without saying that I do enjoy reading personal finance books particularly those that offer different advice and ideas than the rest, even if I donÃ¢â‚¬â„¢t agree with what they have to say. Killing Sacred Cows by Garrett B. Gunderson, falls into this category.
The book takes on some “myths” around our finances that the author argues they are destroying our prosperity. As with all such books, itÃ¢â‚¬â„¢s an entertaining read and it makes quite a few good points as well as a few questionable ones. I wish to highlight a few myths that Gunderson points out.
Myth 1: The finite opportunities. Quite often, people convince themselves that the good things in life are scarce. There is only so much success and money and opportunities to go around, they argue, and theyÃ¢â‚¬â„¢re jealous of the people that have the things they do not.
In truth, thereÃ¢â‚¬â„¢s a bounty of wealth and opportunities in the world, and someone elseÃ¢â‚¬â„¢s success almost never precludes your own. Instead of worrying and stressing about the great things others have, focus on improving yourself and claiming opportunities for you.
Myth 2: Financial Security. Some people think financial security is all about a steady paycheck and a pension. But the world doesnÃ¢â‚¬â„¢t work that way any more. Instead, the true source of financial security is you: the unique skills you have, the experience you have and the connections you have. If you can provide genuine value to others, youÃ¢â‚¬â„¢ll always find work Ã¢â‚¬â€œ if you canÃ¢â‚¬â„¢t, you wonÃ¢â‚¬â„¢t be finding work any time soon.
Myth 3: Money and Power. Others think money is power. Money is not power. Money is just an expression of the value created by people for people. People who create more value tend to accumulate more money. You do not need to have money to make money Ã¢â‚¬â€you just need to be able to produce value on your own with your skills, connections, experience, hard work, and creativity.
Myth 4: High risks ensure high returns. Some think engaging in high risk projects will ensure them high gains. An economist is an ardent believer in this. The big problem that Gunderson points to (in so many words) is that people often confuse volatility and risk. Volatility means that over a certain period of time, an investment might go up and down rapidly.
The stock market is volatile and you know itÃ¢â‚¬â„¢s going to be. Risk centres around the as-of-yet-unknown outcome of a future event Ã¢â‚¬â€you take on risk when you assume the outcome. A well-researched investment lowers the risk (because you increase your actual knowledge and reduce the unknowns about it) but doesnÃ¢â‚¬â„¢t change the volatility (itÃ¢â‚¬â„¢ll still be somewhat volatile, no matter how much you know).
If you assume a lot of risk, it just means youÃ¢â‚¬â„¢re investing in something you know little about, and thatÃ¢â‚¬â„¢s more or less akin to gambling.