"I don't understand why people pick individual stocks," I told my dad. "It seems fairly obvious, if you were actually good enough to beat the market picking stocks, then you could most likely make a living off of that".
Are people just dumb? Or was I missing something? I think many people are truly not very informed when it comes to finances, but that doesn't tell the story.
"Never, ever, think about something else when you should be thinking about the power of incentives"
>>- Charlie Munger
The explanation my father offered was simple, yet compelling. "Many people find buying individual stocks more fun". As children, fun is one of the only incentives we respond to, are parents are well aware of this. As we grow older, we often forget about fun and replace it with incentives centered around time and money.
Workplaces mainly incentivize employees with monetary compensation and time off. They issue stock bonuses and performance bonuses as an incentive to keep employees loyal to their business. But what about fun bonuses?
I've heard many people try to explain the election of Trump by citing examples of ignorant Americans that don't know any better. Again, there is likely some truth to this, but you can't ignore the "fun" aspect of Donald Trump's campaign. He made politics exciting, entertaining, and humorous. There are real lessons future politicians can learn from these tactics rather than dismissing them as childish behavior.
The power of fun is real. How else can we use it to our advantage?