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I was at an industry conference in September that featured a speaker on generational differences. These talks generally don't sit well with me. There are several things that I don't like about them but I'll focus on one today. The whole generational discussion rests on the idea that the environment we are exposed to, especially when we are younger, can impact our behavior and thought process for the rest of our lives. I think this is probably right and I don't like it. The problem of course is that the lessons learned in one environment may not be the right lessons to apply to the rest of our lives.
I have been thinking about this all week, wondering what lessons we are collectively learning from the current financial crisis and recession. I am a big believer in trying to learn from our experiences, but I think we have to be very careful to either assign lessons to a specific set of circumstances, or make sure the lessons apply to other time periods and circumstances. For example, US treasuries have been about the only asset class to have positive returns in 2008, but I don't think the lesson is that we should all keep 100% of our portfolios in US treasuries for the rest of our lives. That example is obvious, but I think others are more subtle.
I wonder if a whole generation of investors will be overly risk-averse, rather than trying to add or reduce risk exposure based on the environment. Will there be a long term distrust of quantitative models? Has a whole generation "learned" that corporations are bad and can't be trusted? Some will almost certainly "learn" that debt is bad because they were kicked out of their home; others will "learn" that they do not have to live with the consequences of their dumb decisions because they were bailed out. The millions that were laid off may "learn" that that loyalty to an employer is not reciprocal, or that playing politics is necessary to survive. What have we "learned" about the role of government?
All I know that is I have been trying to identify the lessons I am "learning" from the current traumatic time period and deciding which I want to keep and which I need to resist (or at least assign to a specific set of circumstances). Think about it.
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In today's Chicago Tribune article about Circuit City's closure I read, "The liquidation of Circuit City follows the worst holiday shopping season since at least 1969. People have slashed their spending as they worry about their job security and declining retirement funds."
ReplyDeleteIf I am not mistaken it was about 1969 that my dad may have "slashed spending" in some areas but he decided to buy a better car. The news was full of hints that the Vietnam Was would get worse and he said he wanted to get a car while he could. At my questioning look he said he remembered the time in world war two when you couldn't buy rubber tires for civilian use because of government control used to help the war effort.
So I guess my dad had learned that the role of government trumps private interest in times of crises and he was trying to protect his own interests. Fortunately his worries proved to be unfounded.
Sounds like your Dad was applying a lesson he learned to a set of circumstances that reminded him of the context in which he learned the lesson. A great example of how it should be done.
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