Welcome to Finance and Fury

Looking around in Australia

– increasing disparity in wealth, and social fragmentation

  1. That social fragmentation means Australians are become “more self-interested, more materialistic, more competitive”.
  2. Our largest challenge as a society is the challenge of preserving social cohesion – where we are all working towards the same goals as a society –
    1. It is an Us Verse them – some want the 1% to pay for their homes, uni education, others want everyone to live in the dark by removing all CO2 use
  3. There’s no perfect society – We have the inevitable consequence of living in bigger, faster cities and working in more competitive workplaces.
    1. Our bodies respond to stressful events with a surge of adrenaline, which increases our reaction speed and helps ensure our survival – Trouble is, our bodies aren’t designed to cope with repeated stressful events and adrenaline rushes.
    2. If more “jobs and growth” and the higher incomes they bring are intended to make us happier, maybe governments would do better by us if they switched their objective from increasing happiness to reducing unhappiness.
    3. But Governments aren’t responsible for this – they are the reason why we are in a lot of messes
    4. It is up to you – Today looking back at the basics

Human behaviour

– How do we act when we have something we didn’t work for (or earn?) like UBI or government incomes

  1. Won’t make you happy – Without the ongoing work for something, dopamine release isn’t going to be as great
    1. Working on the goal is what provides longer sustained releases of dopamine
    2. My experience – Sanding a deck – if I had paid someone to do it then there wouldn’t be that feeling of achievement
  2. Beyond dopamine
    1. Serotonin Status – Serotonin – from our position in a hierarchy – Spending money for nicer cars, suits, watches – Try to live up to an ideal image. Doesn’t actually increase serotonin –
    2. Fake it till you make it doesn’t work here if – Your brain knows that you are just flashy/show with no substance
  3. The belief (anticipation) that spending money will give dopamine and serotonin becomes a dangerous cycle
    1. Without fulfilment – Just have to keep spending to keep up these feelings
    2. Also – Turning to easy releases of dopamine – The wrong way to do it – Easy releases of dopamine
      1. Gambling – The thrill – Uncertainty and anticipation are strong here
        1. But not sustainable – Only lose money to get dopamine
      2. Risky investment – Get rich quick schemes – Often just lose money
  4. Hedonic Treadmill – The tendency to revert back to a standard level of happiness
      1. Money/goals – despite a change in fortune or the achievement of major goals.
      2. As a person makes more money, expectations and desires rise in tandem, which results in no permanent gain in happiness.
  5. But – to feel happier we need to then spend more once you are hooked on this loop – MC hammer – paid his entourage first………didn’t work so well.
  6. The economists’ basic model views us as individuals, motivated by self-interest, and the goal of faster growth in the economy is aimed at raising our materialstandard of living
      1. And if some of our problems stem from changing technology– pursuing friendship via screens, for instance
      2. Economists assume that economic growth will leave us all better off. Most take little interest in how our social wellbeing is
      3. Our real incomes have grown considerably over the years – even for people at the bottom – and economic reform can take a fair bit of the credit. It can take most of the credit for the remarkable truth that, unlike all the other rich countries, we’ve gone for 27 years without our least fortunate experiencing the great economic and social pain of recession and mass job loss.
      4. But though most of us are earning and spending more than ever, there’s evidence we’re enjoying it less. Our higher material living standards have come at the cost of increasing social and health problems.
  7. Australians are wealthier than ever – but also more sleep-deprived, overweight, overmedicated and anxious and unhappy – taking these feelings out of society and pushing the blame onto things like Climate Change – form of projection of individual problems against a common enemy
      1. But not helpful and won’t solve the real reasons – Economists generally take little interest in social and health problems, regarding them as outside their field. But though problems such as loneliness, stress, anxiety, depression and obesity were with us long before the arrival of consumeristic cultures – but have got worse since the mid-1980s
      2. As our material problems have disappeared – you make up our own problems – social media and relative lifestyle of others that can be seen at a level never been seen in human history
      3. We can blame any Economic theory you want but the truth is when you watch what is happening around the world it is quite evident that we are an extremely lucky society – but when we live unhealthy lifestyles, our unhappiness, our huge suicide rates shows material focus isn’t making us happier or really wealthier beyond lifestyle assets
  8. Politically – drive division based around where you sit in the wealth and lifestyle spectrum – The economic models require conspicuous consumption, which has created the affluenza virus
    1. Everyone has heard the statement – More money more problems – Contradictory statement – can be both true and false
      1. False – Money is used in exchange for what you want – cover bills, emergency – more money = less problems
      2. True – The love of money, or the stuff that comes along with it, or not valuing money = lead to problems
    2. Depending on which one you resonate with – healthy view of money, or cynical view
    3. Cynic – a person who believes that people are motivated purely by self-interest – i.e. more money is selfish
      1. Oscar Wilde- a cynic was ‘a man who knows the price of everything and the value of nothing.’ 


Conspicuous consumption

  1. Conspicuous consumption – spending money on acquiring luxury goods or services to publicly display economic power = income or accumulated wealth of the individual
    1. Why does this occur? You aren’t going to carry around a bank statement/share portfolio
    2. Expressions of wealth then becomes materialistic – but this reduces your bank balance
    3. Exchange of wealth for things
  2. To the conspicuous consumer – the public display economic power is a means of their social status
    1. Conspicuous consumption can eventually become invidious consumption – meant to provoke the envy of other people
    2. But works against them – when someone else displays a superior socio-economic status – this hits your serotonin
  3. Created a new form of illness – Affluenza (not the flu)
    1. Defined as “a painful, contagious, socially transmitted condition of overload, debt, anxiety, and waste resulting from the dogged pursuit of more” – Economic problem – unlimited wants, finite resources
  4. psychologist Oliver James – looking into the correlation between the increase in affluenza and the resulting increase in material inequality: the more unequal a society, the greater the unhappiness of its citizens
    1. But this only occurs in a society where the material is held in highest value
    2. Says more about Culture than inequality – what does it matter if someone has more stuff than you?
      1. If the economy has been doing so well, why are we not becoming happier?
      2. Are you truly lacking? Or do others have more than you?
    3. Social media – online image sharing – Instagram – Overexposure – Previously was only what you could see
    4. Back in the day – your neighbour had more goats then you – Then Your neighbour had a better car – or a TV
    5. Now we see everyone – extreme wealth – billionaires with cars, private jets
    6. Keeping up with the jones – New race to the bottom – these platforms are designed to stimulate dopamine – red notification buttons
  5. Why? Competition for lack of substance is being fuel – marketing and advertising – create artificial needs
    1. the manipulative methods used by the advertising industry – nothing new
    2. Having celebrities (who people idolize) promote watches, cars, perfumes, etc.
    3. Related to the stimulation of artificial needs 


Where it comes from

– Marketing triggers your Spending habits – marketers are smart – trigger neurotransmitters

  1. Dopamine – Reward system – Buying something is the easiest way to get this
  2. Serotonin – Status symbols – feeling higher up in the social picking order
  3. Money provides both of these things – If your brain connect serotonin to what others can see – then you can get trapped
    1. Serotonin is harder to do – Does require a bit more self-confidence (self-esteem) to be happy not chasing the way out through buying things – but your brain knows you are faking it if you buy knock off goods
  4. Societies can remove the negative consumerist effects by pursuing real needs over perceived wants, and by defining themselves as having value independent of their material possessions
    1. Price Versus Value – With investing as well
    2. Compare two shares – one with price above value, one with price below value – what to buy?
  5. Affluenza eventually leads to overconsumption – enter a cycle of consumer debt or overworking to waste money on depreciating goods
    1. Cars, jewellery, etc – try to sell second hand – learn what a depreciating asset really is
    2. Creates a pressure lead to psychological disorders, alienation and distress
    3. Cycle to self-medicate with mood-altering drugs and excessive alcohol consumption
  6. Consumerism as a primary source of stress and dissatisfaction because it creates a society of individualistic consumers
    1. People who measure both social status and general happiness by an unattainable quantity of material possessions
    2. Where more money can be more problems – if you constantly need more money = more problems in stress


Downshifting – Spending habits

  1. This realignment of spending priorities promotes the functional utility of goods over their ability to convey status which is evident in downshifters being generally less brand-conscious
  2. Identify the need for an “alternative political philosophy”, and the book concludes with a “political manifesto for wellbeing”
    1. Instead of buying goods for personal satisfaction, consumption down-shifting, purchasing only the necessities, is a way to focus on quality of life rather than quantity.
  3. The long-term effect of downshifting can include an escape from what has been described as economic materialism, as well as reduce the “stress and psychological expense that may accompany economic materialism”.
    1. Focusing life goals on personal fulfillment, as well as building personal relationships instead of the all-consuming pursuit of economic success


What are the elements that help?

  1. Regaining control – Finances shouldn’t control you –
    1. Having control/certainty reduces stress – Knowing what you are in for helps, but being able to control it works better
    2. Tail wagging the dog – Financially stressed people spend to feel better
      1. Have $10k in CC debt, so spend $300 on a night out to make it better – spending gives control
    3. But you can get control over the debt – forming good habits and increase certainty
  2. What you can do – Endowment effect – Put more value to what you already own
    1. Turn it into thinking about Keeping your money – put a premium on your spending habits
      1. Essentials – 0% – no need to put a FV on this – unless you think a porche is an essential
      2. Non-essentials – Gross the price up by a factor:
        1. Example – New TV is $3,000 – Life of TV is 10 years –
        2. Earn 7% on that over the same time – Is the TV worth $6,000?
      3. Opportunity cost – To part with your money – the item better be worth it
      4. Have to change habits though – Ways to solve – Break Three timeframes to focus on


Summary –

  1. Know that most of what you see on social media is a lie – people only show their best sides
  2. Don’t try to live up to anyone else – set your values – what is important to you
  3. Know the value vs the price – regain control over your finances and happiness

Thanks for listening, if you want to get in contact you can do so here: http://financeandfury.com.au/contact/

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