“Economics is the study of the allocation of scarce goods and services. What could be scarcer or more precious than love? It is rare, hard to come by and often fragile.”  A quote from Ben Stein, lawyer, writer, actor and economist in last month’s New York Times.

I was quite blown away as I read this article, as it seemed a concise description of many of my thoughts in a time characterized by learning about both Finance and Love.  As I learned the inner workings of the stock market I noticed familiar trends in how the stocks behaved.  The result, my theory of Return On Emotional Investment:

- The greater your investment in a stock, the more your earnings will fluctuate with their movements. 
- Similarly: the more you are emotionally invested in a person, the more your happiness will fluctuate with their actions. 

- It follows that pursuing a risk management technique by diversifying your portfolio would be financially sound. 
- Dissimilarly: Love (romantic love) is a monopoly.  Argue if you’d like, but here I speak to my personal preferences.

The strategy that applies to both: research.  Research historical data, generate projections and forecast trends.  Granted, this involves a research procedure more qualitative and opinion-based in nature, but with a little common sense, I would say the method could hold even more credibility than its numerical counterpart. 

I would like to finish with the poem I wrote that incited a friend of mine to send me Stein’s article in the first place.  Maybe now you’ll understand why I was stunned at the overlap.

ROEI
Up and down my money goes, this businessgirl is stressed
I'd gain so much in peace of mind, if I knew how to invest
My public image took a hit, I lost accountability
When I invested all my love-bucks in this stock of volatility

Margins won't get larger, I'm always saying I'll finally sell
Then justify not doing so with bogus forecasts on Excel
For a while I did pursue a risk management technique
'Til my diversified portfolio made me subject to critique

Down and down it plunges, this stock only disappoints
The tiny hopeful upturn, and then down two-hundred points
Historic market data, future trends, they all say "pull!"
Oh!  Though my stock is bearish, this situation sure is bull.

 

 


Comments

Thu, 14 Aug 2008 23:15:43

Eventually you realize that people's actions aren't really all that random.

One summer when I was about 7 or 8, as I was sitting in my backyard, my dad explained to me that in the winter, the sun would be shining on a different part of our yard. Weird. Then he told me that right at that moment, it was winter in South America. I was amazed, but a little doubtful, as my dad has always been a joker.

Much like the various, spectacularly different parts of the elephant violated and palpitated by the blind men in the parable, people's actions may seem totally spontaneous and unrelated, until you begin to understand them as part of a whole - a thought, a complex, an entire personality. Once you understand this personality, you can learn to relax and not hold your breath, hang on every word, and over-analyze this person's actions 'til you're blue in the face.

You learn to enjoy your every interaction, relishing every emotion they express, every word they utter, as part of the whole of who this person really is. You learn to grow a real, deep appreciation for this person, as you begin to understand them. And no matter what happens, if your attitude is right, you'll never feel disappointment or sadness. It's really a beautiful thing.

So invest heavily. Mess around with your portfolio. Try different allocation mixtures, from the very "safe" to the very "risky", until you find out that there is no real "safe" or "risky" investment. Just don't fall in love with love.

So just like the blind men, those of us who are blind to the holistic nature of the elephant that is a personality, will be thrown wildly about by the seemingly random patterns of a person's behavior, where the wise among us will just sit back and appreciate the person.

Nowadays, I could tell you more than you'd ever want to know about the declination of the sun, how that affects weather patterns, and even how to tell your exact position based on the date and position of the sun in the sky. And I can explain the whole thing to my kids someday and watch their faces glow with amazement (and some doubt, since I expect to remain a joker for the rest of my life). All these seemingly unrelated things, tied together by the fact that our little planet wobbles around on its axis.

PS - I knew Ben Stein had a brain, but was quite surprised to learn he's got a heart!

PPS - This may be the longest comment I've ever written. I do have a lot to say on the subject though...

 

Thu, 14 Aug 2008 23:25:50

"So just like the blind men, those of us who are blind to the holistic nature of the elephant that is a personality, will be thrown wildly about by the seemingly random patterns of a person's behavior, where the wise among us will just sit back and appreciate the person."

Amazing, and so true. Thanks for this addendum to my post, it's so good I might write a separate post about it sometime! It probably applies more to when you are actually involved in a relationship with the person, though, as opposed to just being an emotionally invested spectator to their volatility.

 

Thu, 14 Aug 2008 23:38:49

The closer you are to someone, the more of them you get to see, and the easier it is to fully understand this person.

Those of us who are drawn to mystery and intrigue tend to invest ourselves more in getting to know those we have less access to, because of our unquenchable thirst for knowledge.

One thing strikes me about your comment, though. Why just be a spectator? Be adventurous and jump in. If it works, wonderful. If it flames out, move on.

"Twenty years from now you will be more disappointed by the things that you didn't do than by the ones you did do. So throw off the bowlines. Sail away from the safe harbor. Catch the trade winds in your sails. Explore. Dream. Discover."
-- Mark Twain

 

Fri, 15 Aug 2008 18:19:51

I disagree on the greater the investment in a person the greater the feelings will swing.

I think its a good analogy and the whole concept is worth discussing, but if you consider love like the stock market. Day trading generally is a poor strategy but investing for the long haul generally pans out and evens out over time.

Just like picking stocks you want to find a person with a certain performance criteria.

Emotionally available
Similar Values
Ready to Pay Dividends (return your love with interest)

you get the point.

A fun topic,

thanks,

Brian


 

Ali

Sun, 17 Aug 2008 20:37:57

Toti!

I love how almost every post that you have written features an insightful metaphor or analogy. It sure is fascinating to consider that the universe of human emotion, with all of its quirks and twists, is conceptually not all that dissimilar to the financial infrastructure of the world. Just to think that, if emotion can be claimed to be akin to the stock market, then surely love is like a market-sector or an industry. And hence, investing in a company of that industry is much like devoting time to truly knowing (and falling in love with) a person.

And I guess that it could be said that the above analogy works. Perhaps it really is the case that emotions are like markets, and that the way in which you and I seek love can be modeled by the way in which we seek money. But, as a sole individual who is basing himself on not much more than the feeling of his own ❤, I'd like to think that love is so much more.

I'd like to think that love is an elephant that is so vast and dynamic, that it simply cannot be compared to the black & white nature of the world of finance--where everything is tied to the performance of a single variable, and where more is always good and less is always bad. In contrast, the unimaginable universe of love, let alone all emotion, by far transcends every conceivable binary structure, for the direction that love might take is never confined to just up-or-down, good-or-bad, or more-or-less. Surely, if trading on the stock market is like ridding the ups and downs of a roller coaster, then falling love is like ridding a roller coaster that features, not only ups and downs, but also barrel-rolls, sharp-turns, corkscrews, helixes, sudden inversions, and bursts into extraordinary dimensions where even the notion of gravity disappears.

And, while I agree with AO about how each and every bend, twist and turn of the aforementioned roller coaster isn't random, I heartily disagree with AO and DE about the notion that one can come to completely understand the personality of another. Our variable genetic composition in any of over three billion DNA base pairs, combined with the infinite number of environmental forces that influence our lives, endows each of us with a unique and spectacularly complex personality. When it comes to trying to fully understand the intricacies of even oneself (let alone another person), hehe, I think that we're back to quantum physics for kindergardeners! :p

But is complexity a bad thing?
In my opinion, it's the contrary, for it's exactly what makes each person so interesting! The fact that we'll likely spend the rest of our lives learning more and more about the people that are close to us is one of the aspects of life that motivates me the most. So even though we may never get to "just sit back", it's the very ride along the roller-coaster of getting to know someone that we should look forward to, and not the final destination.

 

Ali

Sun, 17 Aug 2008 20:38:51

So I guess, what I'm trying to say comes down to this:

At its very core, love is about meaning. Throughout the limited span of our lifetimes, the lessons that we grasp from every experience, the pleasure that we derive from every event, and the positive influence that we impart on the world, are what make life meaningful. And, in the end, a life with love is a life that, while lived with meaning, is intimately intertwined with the life of someone else.

Un beso desde Cali,

Ali

 

Jonathan Toler

Mon, 18 Aug 2008 08:01:06

Georgina,

This is a good point that Ben Stein made regarding emotional investment. I also like to think it can be applied to other facets of business as well.

In essence, emotional investment in a person will often times result in greater loyalty in troubled times or when that person is seriously a negative influence in people's lives. I like to equate that with American's who bought really bad cars that were made in Detroit in the late 80's and 90's due to past affection.

In essence, a best friend and Consumer Reports can be interchanged as the people who warned you about that Pontiac GRand Prix or the unreliable boy friend who just wasn't good for you. Either way, you were loyal to him/Grand Prix, eventhough they both sucked the life/money out of you.

 



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