Outline:
- A snob is someone who is offended by a lack of high status in others;
- Investing has evolved into a competitive sport and high status is conferred loudly;
- But status - whether that be money, power, or a simple investment strategy - does not neatly equate with either excellence or unworthiness;
- Think long-term and you'll outperform the snobs.
At its simplest, investing is essentially judging whether or not a business is going to succeed or fail.
But some people take that judging a bit too far and start casting it on people.
Those people are called Snobs.
These are their stories.
The snob scene
I was at a dinner recently in Sydney’s inner west, when a pal of mine began describing her recent investing success with Afterpay.
She’d bought shares in Afterpay (a company which offers a delayed-payments product) when it was considerably cheaper and was now, happily, in the money.
We all lifted our glasses and cheers’d her, because there’s absolutely nothing wrong at all with celebrating your wins.
But a strange circumstance developed. My friend outlined exactly how much money she’d made (it was quite a lot) and began to talk at length about the satisfaction she’d found in the share market.
We all felt a bit on the spot.
And all caught a bit of status anxiety and felt the need to justify ourselves.
Someone explained he mostly put his money into ETFs (exchange traded funds), another and his partner said they were saving for a house and I explained a bit about Spaceship. Two friends were quiet because talking about money can definitely be weird.
“Oh,” she looked around the table at us. “All of that sounds like incredibly boring investing.”
That kind of stumped us.
Not only because it was extremely rude, but because it kind of forced us to question if what we were doing was right and did our friend actually think we were boring? Had she always thought we were boring? Should we be buying different stocks? Should we be taking on more risk?
She was in the money after all.
It was only once I was on the train back to Redfern that I realised my friend had basically snobbed us.
And that, when it comes to managing money, is both an impolite and a stupid thing to do.
Snob
The word snob comes from the habit many Oxford and Cambridge professors had of writing sine nobilitate or s.nob. next to the names of ordinary students on exams in the 1820’s.
They wrote s.nob. so they could distinguish the regular, non-royal students from their aristocratic peers. For no other reason than it was probably a good idea to segregate classes, so the teacher didn’t accidentally fail the Prince and could instead look to fail those s.nob’s instead.
So snob originally meant someone without high status, but now it means exactly the opposite; someone who is offended by a lack of high status in others.
Snobs in investing are common. People have gamified the fractionalisation of profits into shares to such an extent, that it’s all devolved into a huge appendage measuring competition about who can make the most money.
But, the trick to developing your own wealth and achieving a happy level of financial freedom is basically by ignoring those people and calling a snob a snob.
But, given you’re a person who exists in the world, it’s likely you know ignoring snobbish people can sometimes be extremely difficult.
Why?
The thing that drives us crazy about snobs, is we know they don’t care about who we really are, only what we do or what we are worth (to them).
Investment snobs are in the business of ideas, but only ideas that align with their own points of view.
It seems that if you have different suggestions on how to make money or admit that making the most money isn’t your goal, then often investment snobs' eyes will glaze over and they will begin lecturing you on what you should be buying.
A snobbish investment strategy will generally align with what the top hedge fund managers are buying or will deliberately involve a strategy so complex, that person has had to buy themselves four drinks just so they can explain it all to you at the pub.
But often those strategies are narrow, and the person holding shares in whatever is in vogue, will miss an enormous appreciation opportunity from a simple, compounding index strategy.
“At the root of snobbery is a lack of imagination and confidence about how to decide who or what in the world is valuable,” writes philosopher Alain de Bottan, in his book Status Anxiety.
“They are just brutally misguided and slavish in their beliefs in how the superior individuals can be identified.”
Snobs in investing are sometimes hard to ignore because of how loud they are.
And because they can point to public share price appreciation or zip to Melbourne for a romp upstairs at Grossi Florentinos, it’s difficult not to acknowledge they might have made some correct assumptions with their money.
But investment snobs are overly concerned that if they can’t wield a socially acceptable badge of how clever or powerful or rich they are, then the risk is, no one will ever know! Could you imagine if no one knew how successful or rich you were!
It takes a healthy amount of inner ease to imagine that our status - whether that be money, power, or a simple investment strategy - does not neatly equate with either excellence or unworthiness.
You are cool just the way you are. And if you’ve got a simple, compounding investment strategy then that’s extremely cool too.
That inner ease takes some practice, but you can certainly start by slathering on a bit of some good-old fashioned logic.
In the case of my friend above, she’s under the illusion that superior people are those that pick the winning shares. And those that have an alternate strategy, be that dollar-cost averaging into a managed fund like Spaceship or a portfolio full of blue-chips or even equity in property, are less valuable. Or at least in her eyes, less interesting.
Warren Buffett, if he’d deigned to have dinner with us, would have probably given her this stern piece of advice.
“In many aspects of life, indeed, wealth does command top-grade products or services,” he wrote in his 2016 Berkshire Hathaway shareholder letter.
“For that reason, the financial ‘elites’ — wealthy individuals, pension funds, college endowments and the like — have great trouble meekly signing up for a financial product or service that is available as well to people investing only a few thousand dollars.”
The big shots want the big shot products.
Many people are familiar with Warren Buffett’s 2007 $500,000 bet that any combination of hedge funds would not outperform the S&P 500 Index over a 10 year period.
Though investors have paid enormous fees likely averaging the prevailing hedge fund standard of 2% of assets plus 20% of profits, the simple index easily outperformed the snobby, selective portfolio for the 10 year period from 1 January 2008 to 31 December 2017.
The S&P 500 returned a compounded 7.2% annual over that period while the hedge fund portfolio, chosen by Ted Seides of Protégé Partners, managed only a 2.2% gain.
Sure, be proud you managed to buy shares in a company before the rest of the market caught on. But be humble enough to know that everyone is operating at their own pace, and gloating is deeply unattractive and could blind you to solid investment returns.
It might be tempting to laugh at those who crave those kind of public symbols of status, but like Rabbi Max Forman said, “always hold your head up, but be careful to keep your nose at a friendly level.”
