How Social Relativity Works

People are wired to believe in and act on concepts that are static. Meaning tends to diminish as some aspect becomes relativistic or wildly variable. Poverty is an example. In sub-Saharan Africa, poverty means something different than it does in San Francisco. Here, there are many students who have come from India. For them, “cold” takes on a new meaning in their first January.

Investments are like that too. If you think real estate is a good investment because they aren’t making more, you will find that it is maybe true in some places but not all. In places where it tends to go up, over long times, it is more volatile than you might expect. In the short term at least, real estate value is more affected by bureaucratic intervention.

The stock market is not like a bank term deposit. Volatility is always unpleasant on the downside.

People tend to have a simple definition for any word and they tend to accept trends as enduring. We like consistency and even when it doesn’t exist we don’t notice the change soon enough.

Those simplifications cause us to miss important things when volatility appears or when the context of the word changes.

A social example

Elon Musk has been receiving more attention recently. Some of it, he has encouraged, but much of it has arisen from people who see themselves losing influence and control. Is Elon Musk a member of the left or the right? Some would argue he has moved far to the right in the past few years. He doesn’t see it that way. Instead, he points out that the framework has changed and relative to the new framework he has moved right, but his personal principles remain the same. This meme appeared on Twitter a few days ago.

If we assess John F Kennedy’s policies in 1960 and assess them against the modern political standards, he is to the right of the Republicans.  I have noticed the same thing in my own life. At one time I would have said I was a centrist on social issues and a little more to the right on fiscal matters. I think that is a reasonable practical place for society to live. Make helpful changes as you can afford them.

Have you noticed poverty on the Earth? Using the UN poverty standard in 2022 we see 8% of the people on the planet live in abject poverty. Using the same standard when Ronald Reagan was president, it was 40%. It is useful to think through how that came to be. Hint: it wasn’t socialism.

Centrists have become to the right edge of the spectrum because the spectrum moved.

How relativity affects investments.

Investments change their values based on context. When people are comfortable they value growth over security. When they are fearful, just the opposite.

Investments are a group of possibilities and the order of precedence changes as circumstances change. The list includes many categories and each has its own characteristics. People choose based on their own hopes, fears and expectations. Think about the list in terms of future predictability and rate of growth.

  1. Precious metals. Volatile, has ongoing carrying cost, no cash yield while holding. Potentially liquid
  2. Crypto – highly volatile and on average poorly understood.
  3. Cash – no yield, some security issues, subject to inflationary losses. Very liquid.
  4. Bank term deposits – low yield, income is taxable, subject to inflation.
  5. Bonds – security varies depending on the issuer’s strength, income is taxable, subject to inflation. Government bonds are liquid and most business bonds are too. Value can change based on credit rating.
  6. Stocks – Volatile, dividends and appreciation are taxed at lower rates, may track with inflation but not immediately, Complex analysis. Very liquid.
  7. Rental real estate – Not possible to buy fractional shares. Inflation resistant over time, reasonable taxation of income and appreciation, some ongoing costs to hold it.
  8. Development real estate – Very unpredictable value. Possible to have capital gain treatment of gains on sale. Not appropriate for short to intermediate holding periods. Subject to political regulation and approval.
  9. Other real estate – may have cash flow, may have appreciation possibilities. Farms, resorts with large landholdings, quarries, oil and other natural resources possibilities. Illiquid.
  10. Owner-managed business – The future depends on how well managed they are. Could be affected by government regulation and economic management including interest rates and credit availability. Acceptable tax treatment. Very illiquid.
  11. Private equity – ownership of a share of someone else’s owner-managed business or real estate. Similar to owner-managed businesses but without control.
  12. Art, jewelry, and antiques – Unpredictable value. Taxed as capital gains. Carrying and security costs. No regular cash income. Buy retail, sell wholesale.
  13. Collectibles and Nonfungible Tokens. – specialist markets. Buy retail, sell wholesale. Taxed as capital gains. The very best are liquid, others are unpredictable.

That list is not fully complete, and it gets worse.

Each of us has different purposes when it comes to investment and they change over time. Retired people are more interested in cash flow than growth. Some people accept risk readily, others do not. Taxation is an issue for most. When people are young, fashionability is a point of interest. Each of us has a different capability to manage our assets, and some of us have insufficient capital to buy everything that comes along. How many can buy something where the minimum price is $1,000,000.

Ultimately we find that our individual abilities and proclivities dominate the investment decision. All investment decisions are relative to the individual and the relative appropriateness of any particular investment category.

The bits to take away

Nothing in society is static. Positions on any subject change as the social context and the opportunities change.

Holding a static position will mean, relativistically, you will appear to change.

Your decisions should match what you need. If you do that, pay no attention to your position on some scale. Could be political, or risk aversion, or wokeness. Satisfy yourself first.

You cannot please everyone and it is a mistake to try.

The problem is you need to know yourself, your skills and interests, and the nature of the world around you. Seek meaning. That’s hard work.


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I build strategic, fact-based estate and income plans. The plans identify alternate ways to achieve spending and estate distribution goals. In the past, I have been a planner with a large insurance, employee benefits, and investment agency, a partner in a large international public accounting firm, CEO of a software start-up, a partner in an energy management system importer, and briefly in the restaurant business. I have appeared on more than 100 television shows on financial planning. I have presented to organizations as varied as the Canadian Bar Association, The Ontario Institute of Chartered Accountants, The Ontario Ministry of Agriculture and Food, and Banks – from CIBC to the Business Development Bank.

Be in touch at 705-927-4770 or by email at don.shaughnessy@gmail.com

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