Will There Always Be A Greater Fool?

...and what if that fool is you?

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It makes no sense that a handbag should be worth up to half a million dollars, but Birkin bags are that expensive. The makers argue that it is because the bags are hand-crafted and exclusive. And the people who buy Birkin consider them an investment.

The investment pipeline of Birkin is ridiculous, but there is a lesson there, and it is tied to Ponzi, cryptocurrency, some financial investments, and many other things.

The people who buy overpriced items with no intrinsic value often do so because they hope that someone else will be more ridiculous than them and purchase those things off their hands.

This is the premise of the greater fool theory.

Greater Fool Theory

While writing for Investopedia, Adam Hayes explains that “The greater fool theory argues that prices go up because people are able to sell overpriced securities to a "greater fool," whether or not they are overvalued. That is, of course, until there are no greater fools left.

Investing, according to the greater fool theory, means ignoring valuations, earnings reports, and all the other data. Ignoring the fundamentals is, of course, risky; and so people subscribing to the greater fool theory could be left holding the bag after a correction.”

If you wonder why Ponzi works so well, the answer is in the greater fool. Although people involved in Ponzi are usually sceptical about its sustainability, they jump in nonetheless because they believe some greater fool will join them and take the tomfoolery off their hands. (Cue: affiliate marketers).

But there is a little problem; there will not always be a greater fool.

While the Birkin is made with great leather and built to last, Hermes makes new designs from time to time, making the newer Birkin more desirable than, the older ones. As fashion changes, so do the need for specific designs of Birkin. If 1,000 people can afford Birkin and 100 of them buy Birkin, there is no assurance that in 20 years, 100 other people will be interested in buying from the previous other 100. Many of them will become the greater fools.

Birkin is good; you get to hold a classic at the very least as a collector and, if you are lucky, auction it at some fashion event, but with other tomfoolery, the chances of passing the silliness are not always possible.

While this can be applied specifically to financial systems and knowing what masquerade investments to avoid, consider exploring the possibility of being someone’s greater fool in many aspects of your life.

Of course, the fool working hard to make you their greater fool will try to have their plans as foolproof as possible; it is your responsibility to ensure that you do not buy into foolishness.

TEA

The unavailability of NAN last Monday is due to a malady of body and mind. While this has been a well-handled recurring challenge for a while now, I have started to revisit some of the projects I work on and axe the ones that can buy me extra hours of rest.

Over the next few weeks, I will continue to eliminate commitments, and there is no telling that NAN may or may not be one of those projects.

It’s midnight on a Sunday and I am hunched over my PC trying to figure out the best way to close a newsletter. I guess this is it: see you next week.

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Until the next NAN, be kind to yourself and the world around you; be patient with yourself and others; love yourself and the people around you; do not give up on things that matter to you unless giving up will provide you more peace and security.