On a recent episode of The Iced Coffee Hour podcast, Ben Felix of PWL Capital briefly laid out what he thinks is the real product finance influencers are trying to sell you: "The product that gets sold a lot by influencers and by people who are trying to create content is hope. [Hope that] you can build passive income with covered calls. [Hope that] you can build passive income with dividend stocks. [Hope that] you’re gonna pick the next big token before it blows up… it sounds sensible when you hear it, but it’s not real. It’s usually designed for clicks, and the people selling it [often] don’t understand what they’re talking about.” “You hear that you can make one percent weekly with covered calls, that sounds really good, and people are like ‘well yeah, I want that, I want to be financially independent without having to save a huge portion of my income’, so yeah, stuff like that is easy for people to consume because it gives them hope.” — One reason why I wanted to turn this part of the podcast into a post is that I was recently reminded of a discussion I had with another Blossom user who I believe exemplifies this idea of being sold hope. Instead of following the traditional process of saving and investing a portion of their income each year, they were adamant that they could retire MUCH EARLIER on an ultra-high-yield income portfolio of only $500,000. In one camp, some people might look at that and think, "Wow, really? Tell me more." While in the other camp, there might be skeptics (like myself) thinking, "$500,000? Geez, that seems awfully low." Given that the average life expectancy for Canadians is approx. 83 years, and assuming this individual is between 30-50 years of age, can they realistically expect to retire, and STAY RETIRED, for 30, 40, 50+ years on $500,000 (without considering other potential sources of income)? Another user chimed in saying you could even go as low as $250,000, leaving me even more baffled: A 30, 40, 50+ year retirement? On $250,000? With no margin for inflation, housing changes, sequence-of-return risk, or other unexpected expenses? Like... what are we doing here? What are we smoking? As someone in my mid-20s with what I think is an above-average level of financial literacy, I couldn’t help but think how absurd that premise is. It led me to think about how fascinating it is for our brains to be naturally wired in a way where we SEEK shortcuts. On one hand, shortcuts have the upside of saving us TIME and MENTAL ENERGY. If, for instance, finding a detour can save us five minutes of our morning commute to work, that's a shortcut I think many would agree is worth taking. However, when we try to apply shortcuts to complex domains governed by things like compounding and discipline, such as physical fitness, learning & education, and personal finance, that's where we can see some of the logic fall apart. You can't shortcut your fitness by relying on fad diets, you can't shortcut earning an education without doing the studying, and you certainly can't shortcut building a sustainable retirement portfolio without accumulating the required capital and participating in decades worth of compounding. That's where hope takes over. Hope is an incredible motivator; it's a phenomenon that I don't think we quite fully understand. Is hope always bad? - Not necessarily when it's associated with LONG-TERM optimism (i.e. hoping that the global economy will continue to grow for decades to come). But when paired with financial INSECURITY or the desire to ESCAPE the daily grind, the "rat race", or whatever you want to call it, hope can often blind us to risk. Going back to ultra-high-yield ETFs (sorry, you guys are easy to pick on... I'll pick on the people selling the shit coins/ICOs next time), hope leads people to MISUNDERSTAND their mechanics, mistaking yield for total return, ignoring the long-term consequences of paying high fees, of capped upside, of potential NAV decay, and believing that high distributions can magically REPLACE the need for a larger capital base. When it comes to influencing & content creation, preaching principles that are typically viewed as logically sound, responsible, or disciplined is algorithmically boring; most people seemingly don't like to listen to that kind of stuff. Influencers & content creators often try to monetize clicks and attention, so things that are flashy, things that complex, things that promise an easy way out will almost always spread faster (because it is more easily consumable) than the quiet reality of prudent, long-term investing. Ultimately, Ben Felix hit the nail on the head with his take: the most intoxicating product being marketed online isn’t an investment strategy; it’s simply hope. Do you think a lot of influencers and content creators take advantage of trying to sell people hope? Link to full episode: https://www.youtube.com/watch?v=UMCGWxSFzX4
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31 Comments
Solo FIRE@solofire · 22d
The best shortcut to financial freedom: Never take shortcuts
Michael Conroy@conroy119 · 22d
This was a great message! It was a really good interview too. Ben Felix has been doing lots of them lately as a guest.
Ronan @ronan · 21d
Watched pieces of that podcast, happy to see Graham not have scammers for once on the podcast Hopium is absolutely scattered across Blossom and online. So much of the comments and thesis I see is simply “We’ll wait and see” So many poor investors getting tricked into buying things they don’t need. Reminds me of predatory cars salesman
Clantosa @clantosa · 21d
These people are definitely smoking something. I think the entire cc industry is feeding heavily on hope. Not one single person would invest in it without the allure of being able to retire on a small capital base
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