Every year in this business is a time for learning and development. That’s the best part of being involved in the financial markets. They are so dynamic that you never quite “solve the puzzle” because the puzzle is always getting reshuffled in front of you right when you think you’ve got it solved. Here are some of the lessons I learned this year:
1. You know less than you think you know. There is a nearly insurmountable amount of material to learn about in the fields of finance and economics. They span the fields of math, accounting, psychology and many others. You could spend an entire lifetime on ONE of those and never quite figure it out. So it’s not surprising that finance people tend to focus on finance and economists focus on economics. It’s only stupid people like me who try to traverse both fields. But the big lesson is that I always have to remind myself that I know so much less than I think I know. This business will humble you if you don’t check your ego at the door. Always be learning.
2. Capitalism works best when capitalists serve others. It’s become fashionable since the financial crisis to demonize and blame capitalism. As if this system is inherently evil or bad for society. But the system is only as bad as we allow it to be. Any system filled with corrupt and evil people will become a harmful system. Capitalism is not an inherently evil system in and of itself. But I do wonder if sometimes we take capitalism to mean the pursuit of self interest and the pursuit of personal profit when, the reality is that capitalism is not at all about personal profit and the pursuit of self interest. In fact, capitalism is really about making goods and services that enhance the lives of other people and expecting to profit in the process. That’s a big difference. We are not in a system where it’s “every man for himself”. We are not rugged individualists. We are inherently social animals working together to achieve things together. I was educated in a Jesuit education system my entire life and the Jesuit motto is “men for others”. Capitalism would benefit greatly if more capitalists took that motto to heart.
3. The person who mistakes “money” for “wealth” will live a life accumulating things, all the while mistaking a life of owning for a life of living. This was one of the first years in my life when I really embraced the idea of living and not accumulating. It’s easy to fall into the trap of thinking that more money and more material goods will necessarily make you happy. And while it’s true that a certain amount of money will certainly make life easier, I find that more money and more material goods also bring more problems. I am happiest when I focus my time and energy on things that really matter to me like the people I love. It’s all about finding a balance for me. Money will make your life easier to a certain degree, but if you let money own you it will make you miserable. I became a lot happier when I realized that money isn’t true wealth.
I am opening the comments on this one. Let me know what you learned this year. And here’s to hoping that we learn a lot together in 2015.
Mr. Roche is the Founder and Chief Investment Officer of Discipline Funds.Discipline Funds is a low fee financial advisory firm with a focus on helping people be more disciplined with their finances.
He is also the author of Pragmatic Capitalism: What Every Investor Needs to Understand About Money and Finance, Understanding the Modern Monetary System and Understanding Modern Portfolio Construction.