One of the many benefits of owning an iPhone is free subscriptions to interesting podcasts. Recently, I listened to Matt Ridley give a talk at the Long Now Foundation’s Seminar of Long Term Thinking called “Deep Optimism”. Ridley is the author of The Rational Optimist. In his book he argues that we all collectively prosper through trade and that we only productively trade with those we trust.
In his talk on “Deep Optimism”, Ridley presented a well-researched and documented case for progress in all areas of our lives. In one very illuminating example, Ridley showed how it takes less time each year to work for a constant benefit, say an hour of artificial light at night.
Ridley proclaims “we are becoming healthier, cleaner, smarter, kinder, happier, and more peaceful.” He argues that the root cause of global prosperity is the exchange of ideas and specialization. And, more importantly, our progress is real, enduring, and for the near future unlimited. That’s a lot of optimism in the face of the pessimism that’s peddled in our daily news.
To me, Mr. Ridley’s optimism is based on exchange leads inevitably to market efficiency. In a free market there are willing buyers and willing sellers. Both are motivated to exchange based on their ideas or expectations of future returns. This belief in market efficiency greatly simplifies the investing process. It allows us to focus on what’s important in the process:
As an investment advisor, my job is to deliver a well-diversified portfolio based on my clients’ risk tolerance and goals. I continually focus on controlling costs and measuring results. Those are all very valuable services but there is something more valuable I offer clients. Recently, during the interview process, a prospective client asked me what my greatest value was. I don’t think anyone had specifically asked me that question before, but I had given it thought, especially after my experience during market meltdowns, most recently in 2008. My greatest value as an advisor is to keep my clients from making disastrous emotional mistakes in times of turmoil or deep pessimism. Investing is not an easy task especially undertaken on one’s own. While there is a cost to advice, it’s often worth the price to have someone optimistic by your side.
Other articles filed under Family Finances
February 7, 2018
Yesterday evening, Rockbridge's own Ethan Gilbert, CFA was featured on our local Spectrum news network. Check out the interview below where Ethan discusses the recent market shifts, how these swings can affect your retirement accounts, and how to protect your...
January 24, 2018
This past weekend, the New England Patriots did it again. Down 10 in the 4th, star quarterback Tom Brady orchestrated two scoring drives to pull off another comeback victory. In two weekends, the Pats will try to win their 3rd...
January 23, 2018
Stock Markets Returns from various stock market indices over several periods ending December 31, 2017 are shown below. The past quarter was good for stocks – REITs lagged. Over the past year, returns from stock indices, especially emerging markets, were...
January 19, 2018
Happy New Year! Now that 2017 is a wrap, one of the best presents you can bestow on yourself and your loved ones is the gift of proper preparation for the rest of the year. Want to get a jump-start...
January 16, 2018
As you are likely aware, Congress has recently passed significant changes to the tax law. These changes are effective beginning in tax year 2018, with many of the changes for individuals set to sunset after 2025. The summary below is...