There is a seemingly infinite amount of behaviors that result in unintended consequences -- the pursuits in life that might appear appropriate, and even prudent now, but often seem to be foolish later or even end in nearly the opposite of the initial intention.
This is paradox.
In philosophy, especially among existentialists, there are many life pursuits that are paradoxical. For example, Soren Kierkegaard, considered to be one of the first existentialists, and a man of strong religious faith, urged his fellow Christians to find meaning in life -- that their earthly existence had purpose -- that they need not dismiss life on earth as a temporary sacrifice to find meaning in heaven -- that serving God is to serve the self -- to live a life of meaning and purpose on earth.
This form of paradox sounds like the pursuit of retirement, doesn't it?
- We sacrifice life now -- we sacrifice meaningful pursuits and diminish the value of life now and work in a job we hate for decades;
- We delay "gratification" for a day when we will obtain an undefined "financial freedom," which will presumably buy the time needed to finally be ourselves;
- We kill ourselves to live;
- And thus life is made a tool for money, whereas money should be a tool for life...now.
With those thoughts, I give you...
1. The greatest risk in life is not taking any risk: 'Playing it safe' is dangerous. If, for example, you keep all of your savings in an FDIC "guaranteed" bank account, you place your money at the mercy of inflation risk -- earning interest at such a low rate that it cannot keep up with inflation --this is called losing money safely. Life is the same: You won't get far playing it safe. The most successful people understand the difference between irresponsible risk and calculated risk. The latter, of course, being the most prudent and productive.
2. The solutions to most financial challenges are not financial – they are existential/behavioral/perceptual: A common thread that ties together the vast majority of financial problems derives from a perceived "lack of money." Certainly in this tough economy the lack of money is quite real for some; however, a deficiency of money most often results from a lack of meaning and purpose in life (existential) and/or a surplus of desire (perceptual). This lack of money, in the perceptual sense, is not the shrinking of financial capacity -- it is the perpetual stretching of what you require to be happy. As Epicurus once said, "If thou wilt make a man happy, add not unto his riches but take away from his desires."
3. The best means of serving yourself is to serve others: Instead of expressing this idea myself, I will defer to the wisdom of Viktor Frankl:
4. It is easier to find happiness when you are not looking for it: This extends upon and overlaps the immediately preceding paradox, expressed by Viktor Frankl. The most common (and mistaken) attempt to manufacture happiness typically is by way of manufacturing money and material wealth. Happiness, however, happens -- it is a natural byproduct of being and becoming the authentic self. It is not something that must be hyper-intentionally created. As Plato said, "The most virtuous are those who content themselves with being virtuous without seeking to appear so." And as his mentor, Socrates, said, "I tell you that virtue is not given by money, but that from virtue comes money." In other words happiness, like money, is an incidental result of being the best you that you can be without hyper-intentionally attempting to create virtue or the state of being happy.Don't aim at success. The more you aim at it and make it a target, the more you will miss it. For success, like happiness, can not be pursued; and it only does so as the unintended side-effect of one's dedication to a cause greater than oneself or as the by-product of one's surrender to a person other than oneself. Happiness must happen and the same holds for success: you have to let it happen by not caring about it. I want you to listen to what your conscience commands you to do and go on to carry it out to the best of your knowledge. Then you will live to see -- in the long run, I say! -- success will follow you precisely because you had forgotten to think of it.
5. Looking for shortcuts can slow you down: This may be the greatest of unintended consequences -- the highest form of paradoxical personal finance behavior that overlaps all money problems: The get-rich-quick mentality is certainly a normal human behavior -- to find the shortest distance between today and financial freedom; however, it is a behavior that increases the odds of losing financial wealth, but more importantly your mental and spiritual wealth, which comes from meaning, especially once your basic physiological needs are met.
6. Striving for perfection can diminish your capacity to do your best: There is much wisdom in the common phrases, "just do it" and "ready, fire, aim." Perfectionism falls in the over-lapping shadows of procrastination and self-doubt. Acting quickly often enables making the mistake quickly, which often hastens the optimal results quickly. As J.D. Roth at GetRichSlowly often says, "perfection is the enemy of the good." If you must strive for perfection, at least be willing to accept excellence.
7. Trying to control things can cause you to lose control: The desire for control overlaps with the fundamental human desire for safety, which is the root of many other potentially perilous paradoxes listed here. More money is often connoted with more control and more safety, or what is commonly referred to in the financial universe as security. Billions of dollars of financial products and services are sold every year on the basis of financial security by provoking an anxiety that consumers are in danger of missing financial goals. The problem with this practice is that financial goals are made in absence of life goals. Again, the existential challenge is that we seek meaning before money and purpose before planning. Adding another layer of paradox, an extended period of positive results can give the appearance of control, which elevates to a perilous level of overconfidence -- something called the illusion of control. The massive failure of the hedge fund, Long Term Capital Management, is a prime example of the illusion of control in the world of investing.
8. When it comes to information, more is less: More choices does not lead to better choices. In the book, The Paradox of Choice: Why More Is Less, author Barry Schwartz explains how choice overload, prevalent in today's information-rich environment, actually reduces one's ability to prudently choose, or even results in indecision. Also, economist and psychologist, Herbert Simon, coined the term, bounded rationality, which is a concept that suggests that individuals are only partially rational and that their rationality is bound by the information they consume, the complexity and abundance of the information available to them and the finite amount of time they have to make decisions. Simon says, “a wealth of information creates a poverty of attention.”
9. Death gives meaning to life (and purpose to financial plans): One day you will die – you will cease to exist. How often do you think of this? Hopefully not too often, but when you do think of death and dying, how much weight do you really give it? How far away is your dying day? If one is to truly begin with the end in mind, death is the proper genesis. To find and define meaning and purpose in your life, you must bring closer the thought of death. To embrace death is to embrace life – to fear death is to fear life. But what does death have to do with personal finance? Why must one think of death in the context of financial planning? It is not the date of death, or "life expectancy" as financial plans so eloquently state it, that is important to planning, it is the thought of death – or better, the proximity to death – that brings life into a more meaningful perspective, and the financial means to support this meaningful life.
10.The only constant is change: This paradox requires little explanation; however, one can never be reminded enough that change must be embraced, if not sought. All is in flux. Going against the flow -- to remain in a familiar suffering in avoidance of an unknown change -- is a recipe for a slow but certain drowning of the self.
What paradoxes have you experienced?
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Related:
Life Planning Part I: Are you a tool?
The Experience Stretching Hypothesis
Irrationality: The Most Magnificent & Unique Trait of Being Human
This post, without question, should be printed and given to every graduating high school Senior throughout the world -- it's that powerful and thought-provoking.
Kudos to you for putting wealth and life in perspective in a way that few on this earth really are willing to explore.
Posted by: Barry Goss | May 22, 2010 at 03:59 PM
Barry:
Thank you kindly for the generous compliment! I look forward to sharing more thoughts like these for a long, long time...
Cheers...
Kent
Posted by: Kent @ The Financial Philosopher | May 24, 2010 at 04:32 PM