The Wisdom Bites: "They're people like any other people...They love money, but that has always been so...Mankind loves money, whatever it's made of." - Mikhail Bulgakov, The Master and Margarita
"'Can there be crooks among the Muscovites?' The barman smiled so bitterly in response that all doubts fell away; yes, there were crooks among the Muscovites." - Mikhail Bulgakov, The Master and Margarita
The Financial Parallel: Whenever there is a surplus of liquidity and a desperate search for yield, charlatans will gladly supply the public with the illusion of risk-free wealth. Low interest rates breed greed, and greed breeds fraud. It is human nature to want something for nothing, and Wall Street is perfectly designed to package that desire and sell it back to you for a 2-and-20 fee.
This is the psychological trap of the "febezzle"—Charlie Munger's term for the pleasant illusion of wealth created during a boom, where both the asset manager extracting fees and the investor watching their statement go up feel virtuously richer. Until the tide goes out, everyone ignores the crooks among the Muscovites. The fundamental nature of mankind doesn't change; when the financial scene starts reminding you of Sodom and Gomorrah, you should fear practical consequences even if you want to participate.
The Financial Takeaway: Do not put your faith in complex financial engineering or the sheer brilliance of the latest fund manager. Financial history is rife with crooks and frauds who thrived simply because mankind loves money. Maintain your skepticism, especially when everyone around you is getting rich effortlessly.
"Some people, you'll never know that they're lunatics unless they get very rich."
No comments:
Post a Comment