money matters

I think, perhaps, that everyone should be required to take an economics class in high school.  Along with the algebra that inevitably made my brain disintegrate, English literature that I adored, chemistry where everything seemed to follow such clear, elegant patterns of action, economics was not one of the required subjects.

My parents have emblazoned fiscal responsibility into my very muscles.  My spending actions have a measured quality to them – while I have never wanted for anything, the $400 adorable peep-toe heels just did not seem compatible with my lifestyle.  We always had savings at home, and after I left for I dutifully filled my Roth IRA to the brim with my residency paychecks, leaving the rest aside for housing and the occasional ruffly Anthropologie splurge.

We are taught, coaxed and goaded toward independence with the pointed sticks of education and reality and the American dream.  From early life, this country shapes us to be exploratory but grounded, learn to work in teams but to gather all the skills necessary to live an independent life, without relying on anyone’s influence or money.  I think the definition of success has long been attributed to the individual who comes from a dusty background of nothing and gains wealth and prosperity by his own sweat.  We condemn those who call in favors, rely on name and who squander hard-earned financial stability, especially if the perpetrator did not amass that wealth on his own.

To compete in this realm of independence, it is not possible to stay standing without some measure of understanding of money.  How much can you rely on your parents, your sister the accountant or your spouse? Beyond savings, can you really be a part of the lauded market economy, to which we owe so much wealth and tumult over the past two decades, if you consider yourself to be dissociated from the financial world?

Young doctors are especially guilty of this.  We went into medicine to heal, to solve diagnostic puzzles, to hold the hands of the dying.  For years, we earn just enough to cover our debts, live in a nice, safe apartment and lament about how the medical jargon has forcibly displaced any other useful knowledge about life or common sense.  We are then thrust into a world where we are given formal lectures about negotiation of contracts and salary basics.  After that, however, what do we do with these earnings?  No, I don’t believe that medical school should teach us how to save and invest – I think it should start much earlier.

What if an investment project was built into a middle school curriculum?  I remember the orange-paneled classroom and my social studies teacher, a no-nonsense woman with a platinum bob.  We were assigned to choose a stock and “invest” a certain amount of money into it, following how it fared on the business pages, and ultimately writing up a detailed account of our losses or earnings.  I was excited for the project – as a child I vaguely recall standing with my stuffed raccoon in one hand and hairbrush in the other, curiously staring at one side of the newspaper while my dad sat and pored through the other.  I could see the rows of numbers and letters that I knew described some trend that was important to grownups, but the inner workings were pure mystery.

I chose Avon as my investment.  This inspiration most likely came from an bottle of lotion that my aunt had passed my way, a “grown-up gift” with a flowery fragrance and pink powdery feel.  I diligently stole the newspaper from my Dad every few days, and traced the line in the NYSE over to the daily changes.  My heart would quicken, waiting for the punchline.  Aha!  I gained a few points.

At the end of that assignments, despite the lack of scientific rigor leading to my choice of stock, I had miraculously made some money.  This experience, however, was not followed up by a deeper assessment of world markets or economics until my first (and last) introductory course in microeconomics freshman year of college.  I stumbled along with the newspapers, trying to make sense of the ups and downs of the business pages that caused those more savvy than I to wallow in worry or delight in new purchases.  There was a time in later years, when AIG permeated the news, that I remember a discussion over the Thanksgiving dinner table pitting those separated from Wall Street (i.e. doctors and engineers) vs. those in the finance sector.  The first side looked incredulous and said something vaguely idiotic like “So, you’re saying that if there is no bailout, the entire population of the US will sink into a state of despair and disrepute, and everyone will catch malaria.”  And the other side saying something like “Yes.”

Of course none of us is completely bereft of understanding in how the world works economically.  My Dad tried for years to teach me how and why to buy and sell stocks, and for that reason, I do have some basic understanding and am grateful.  It is really that making sense of the opposing sides required a skillset that I did not use every day.  Perhaps a course in high school, looking at the practicalities of the stock market and our place in it, might make it more accessible, less opaque and certainly make investing seem like a club all of us can join.

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One Response to money matters

  1. Hari says:

    You chose a subject very close to my heart. I agree that developing an understanding of markets is important for everybody, but I wouldn’t go so far as you suggest. As a first-order matter, I don’t think it’s important for individuals to know how to buy and sell shares. As a doctor or an engineer, you have a comparative advantage in healing or building. Why not leave investment analysis and execution to folks that might have a comparative advantage in those skills?

    What is important is even more basic. We need to teach people to be better savers and to understand a fundamental relationship between risk and return. Of course this comes with obligations. For example, we should regulate consumer finance enough so that savers are confident they won’t be robbed blind.

    Your discussion of independence has a moral edge to it. Of course there are ethical issues here – doctors and professional investors both face conflicts of interest. However, economics has a lot to say about potential benefits from trade and the value of relationships. The notion of comparative advantage is a good place to start, but there are more concrete examples: borrowing, lending and professional courtesy. Everybody can be better off if debtors and creditors shake off the moral value of independence and enter into contracts.

    Professional courtesy – informally leaning on others for small favors and providing small favors in return – can help professionals build reputations for good work and a sense of accountability to their peers. The truly exceptional might succeed though dusty self-reliance. The rest of us are probably better off asking for help when needed and furnishing help when asked.

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