Why Most People Will Stay Financially Average

By TLS

Could everyone be financially savvy? That would make for a good world, I think.

Financial discussions tend to make eyeballs roll back in the heads of many. To the financially nerdy among us, it’s a cause for exciting and energetic conversation. But, we seem to be a rare slice of the odd ball population.

If everyone was financially competent, would that allow for everyone to do well? Or would that simply just raise the relative bar of high performers and low performers?

My intuition tells me an economy cannot support everyone doing well. However, I do not know why. I am not referring to Communism or Socialism because both of those are doomed to fail right from the start. I’m mostly talking about free economies.

So, do some have to lose or many have to lose in order for some to do well?

Most economies, at least from the individual’s standpoint, are not zero-sum games. But on a macro level perhaps they are, I’m not an economist. With a finite supply of currency there must be some sort of limit. Yes, more money can simply be printed, but the more there is in circulation for the most part the lower the value.

If the majority of low performers in this model do well, that would most likely simply raise the base cost of living. This would also probably have the effect of decreasing the low performers net worth. In this respect that must mean there will always be a few high performers and probably a larger portion of low performers.

In virtually any category conceivable any measurement of values results in some form of bell curve. Economies and wealth distribution are probably not immune from this effect. On the large macroscopic view the equality is probably unlikely. However from the individual’s point of view, each person if self-motivated, could possibly achieve greater economic success.

We are all variations on a theme and some are more outliers than other. To the right of the bell curve are high performers. These people posess higher intelligence (usually), drive, motivation, and yes probably more opportunity. These are all rare so this group will be small. To the left of the bell curve will be low performers. These people will posses (or be stuck with) lower intelligence (or at least education), lower drive or motivation, and likely far less opportunity. These are more common so this group will be larger.

Simply because life is not fair, there will most certainly always be those who are financially savvy and those who are not. On the individual level though, it certainly won’t hurt to at least try to become financially savvy, or savvier. There will likely always be a much larger group at the bottom of the socioeconomic. However, if one finds themselves in that situation, the punchline from an old joke may be helpful:

There are two people in the woods, and they run into a bear. The first person gets down on his knees to pray; the second person starts lacing up his boots. The first person asks the second person, “My dear friend, what are you doing? You can’t outrun a bear.” To which the second person responds, “I don’t have to. I only have to outrun you.” Simply put, it’s better to do something useful.

If you find yourself somewhere on the left side of the financial curve, don’t stay there. Learn, practice, and take steps, however small, toward financial savvy. You don’t have to outrun the entire system, just move faster than the version of yourself that refuses to try.