Investment Strategies

How do people envision the future?  How do they consider uncertainties? How do they think about investing today to have a better tomorrow?

People seem willing to invest in their personal futures, e.g., retirement. They seem willing to invest in their children’s futures, e.g., education. The further they look into the future, the more difficult this becomes, e.g., their grandchildren’s retirement.

The more broadly they look, the more difficult it becomes. They might invest, perhaps modestly, in the futures of nieces and nephews. What about neighbors or other people in the community?  How about people in other countries?

People appear to have temporal discount rates for the future and spatial discount rates for distal people and phenomena. A child dying next door is a tragedy; 100,000 people dying from a tsunami on the other side of the world is a statistic.

We handle this as a society by taxing everyone, combining the resulting resources, and committing to longer-term and broader investments. Other social organizations, e.g., churches and other non-governmental organizations, do this as well. Many people benefit from this.

However, we are not explicitly and systematically addressing a key question. How much should we invest in assuring that the population of the US is healthy, educated, and productive so as to be competitive in the global marketplace?  This is not just “no child left behind”; it is “no one left behind.”

What would be the benefits of 100% of our population being healthy, educated, and productive? What if all disabled people could work and all elderly people could age at home?  We cannot address this here, but my projections show dramatically increased government revenues and substantially decreased government expenditures.

The logic is simple: everyone is productive, pays taxes, and needs less government support. The resulting surpluses can be used to help others — globally — to join the cohort of healthy, educated, and productive people. This is not pie in the sky; it is pie for everyone.

This makes moral sense.  It makes economic sense.  Why don’t we do it?  In part, it is short sightedness.  More fundamental, however, is the philosophy that everyone should take care of himself or herself.  Almost no one does this.  We use roads, drink water, benefit from sanitation and public health, take advantage of education and healthcare, and are defended from numerous risks.

Each of us, except perhaps for hermits in the woods, are cared for in many ways.  Yet, there is a pervasive sense among many of us that we are “self made” people.  It was our true grit that resulted in our success.  No one helped us with school, college, graduate school, and placement in plum jobs.  We accomplished all of this with no one helping us.

Why cannot everyone else do this?  The reason is primarily circumstances.  Not everyone is a member of Warren Buffett’s “lucky sperm club.”  Buffett happened to born in the right country, to the right parents, at precisely the right moment, to absurdly reward his special talent at asset allocation.  Consequently, he became one of Malcolm Gladwell’s “outliers,” with superior intelligence and motivation to work hard and, crucially, being at the right place at the right time.

So, Buffett was lucky.  Very few people are this lucky.  A larger population has a share of good luck.  A substantial population enjoys modest luck.  Such luck affects how you leave the starting blocks in the race of life.  Some people accelerate with great energies. Many struggle to stand up and then walk rather than sprint.

The key elements are health, education, resources and a social network that cheers you on throughout the race.  Many people are deficient in these elements.  We would all be better off if such deficiencies were quite rare.   We can, as a society, decide to make this happen.  Investing in the health, education, and productivity of everyone can, as noted earlier, provides a quite positive return on investment to everyone.  We just need the will to do this.


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