The age of anxiety
As I write this post, I'm trying to imagine the reader reactions. I have a feeling that to most people, this might seem like wishy-washy bullshit or downright nonsense. I can even imagine a certain segment of smart people going, "what the fuck is this idiot even talking about".
This is a very tricky topic, and I may not do it justice. So I apologize in advance if this thing gets messy. This post has nothing to do with investing or index funds but rather something I feel very strongly about and had been bothering me for a while. In a sense, this is much less a blog post than a one-way conversation in the hope that you may find it helpful.
If you’re reading this in your inbox, the email may break due to the length of the post. Here’s the link to the post.
With this stupid virus on the rampage again, things might get a whole lot worse in all possible ways before they get better, though I pray that I'm wrong. Given this, the already battered finances of people are going to get much worse. This is an incredibly tricky situation because most people who've had emergency savings have drawn on them or used them up during the first wave. If the second wave gets worse and if full-scale lockdowns are imposed, things will get ugly.
A lot of people have been highlighting the precarious financial situation of Indians. Several research papers have been published about the impact of COVID-19 on the finances of people. That's a good thing.
But what doesn't get as much attention is the psychological impact due to the financial hardship that people are facing. Financial anxiety can cause some serious physical and mental health damage, and the fact that there are hardly any conversations around this has been bothering me for a while. I had written about this a while ago in a different context but hadn’t fully fleshed it out.
I'm not sure why this is the case. Maybe it's because talking about your money situation, and your feelings is embarrassing, or maybe it's because of some misguided notion of masculinity, or 100 other things.
But one thing is for sure, talking about your mental health is a serious taboo. It's the equivalent of talking about your kinky sexual preferences. To be clear, I am not talking about the mainstream bullshit version of financial wellness that every idiot with an Instagram account peddles. There seems to be growing evidence that financial anxiety is distinct from general anxiety and financial wellness, and that's what I am talking about or trying to.
Before I started writing this, I started browsing around for any research on financial anxiety and surprisingly, there isn't a whole lot. It's surprising because financial anxiety can seriously affect everything from your self-esteem, physical health, cognitive abilities to your productivity.
Here's why I think talking about financial anxiety and the impact of money on mental health is more important than ever. I think the current generation of youngsters, the millennials and the Gen Zers, are the unluckiest bunch in history. Millennials are people broadly under the age of 40 and Gen Zers under 25. And within their short life spans, they have had to deal with the effects of two huge economic shocks with the 2008 crisis and the current COVID-19 crisis. And we don't even fully know the fallout of the COVID-19 economic shock, given that this thing is still unravelling.
We humans aren't built to deal with change. We are most comfortable when things are predictable. But this miserable world we live in is anything but. And given that we hate change, we suck at perceiving it too. This is a huge problem because we are in the midst of some profound and dramatic economic changes that will probably make half the planet unemployed.
You know the over the top, movie version of how Robots, Artificial Intelligence, Machine Learning, Blockchain and Quantum Underwear are going to make humans pretty much useless? There's a whole bunch of bullshit, but there's truth to it too. Things like automation will kill most of the low hanging jobs:
In the US, a new wave of investment in automation could stimulate as much as $8 trillion in incremental investments and abruptly lift interest rates. By the end of the 2020s, automation may eliminate 20% to 25% of current jobs, hitting middle- to low-income workers the hardest. As investments peak and then decline—probably around the end of the 2020s to the start of the 2030s—anemic demand growth is likely to constrain economic expansion, and global interest rates may again test zero percent. Faced with market imbalances and growth-stifling levels of inequality, many societies may reset the government's role in the marketplace.
A report by the International Labour Organization (ILO) found that India has one of the highest potentials for automation of jobs. It found that 51.8% of the jobs can be automated. If you ask your friends about the pace of automation in their companies, you'll be amazed at the pace. The counterargument smart people make is that other jobs will be created, which may or may not be true.
To give you some sense, because of the pandemic and the move to remote work, more things have been automated in the last year alone than the last five years put together. Have an equal amount of jobs been created? No!
As we head into this uncertain future, here's where we are as a society. There's a serious employment crisis and an even serious skill gap in this country. Indian colleges are producing engineers and MBAs by the lakhs as if they were rearing sheep.
But most of these engineering graduates and MBA grads have serious skill gaps. Most of them are either unemployed or are stuck in dead-end, low-paying jobs totally unrelated to what they studied with sizable student loans. The student loan crisis in the US gets headlines in India. But we have a student loan crisis of our own in the making. The official unemployment stats don't even begin to show the true scale of the unemployment crisis in this country.
And not to mention that the very nature of work is changing. The rise of the gig economy, the creator economy are the symptoms of this shift. These are fancy terms for people who are stuck in low-paying jobs with no job security and income predictability. Work is being unbundled at a dramatic pace. There was a time when jobs were reasonably predictable, came with long-term contracts, defined guaranteed pensions and other benefits. But that is a thing of the past.
And there's the economic upheaval everywhere. When talking about the state of the economy, it's customary to talk about income inequality, the top 1% rich getting richer, the rise of monopolies, free trade destroying the global economy and labour and so on. Without the right content and framing, I've always found these to be lazy narratives. I'm not saying that all these things aren't true, they are but in the right context. Without it, they are just lazy headline-grabbing narratives. Context is king when talking about these things.
But that's outside the scope of this post. What is true is that there's a serious inequality of opportunities. And the result is that we are living in an age of anxiety. This is causing serious harm to families and societies at large and we don’t even seem to care about it. Trivial issues that are jokes get far more attention.
But it's important to have a sense of how financially anxious people are. I couldn't find much research but found a few surveys, which tend to be seriously flawed. Though these surveys might not even be close to painting a real picture, this should help you have a sense of the situation. Now just multiply this by ten times and imagine the situation.
The current younger generation is freaked out and is riddled with crippling anxiety. Though these data points might make it seem like this is a post-pandemic phenomenon, it's not. This stupid virus has just made things that were already bad worse. I can say this because I belong to this generation, and I am riddled with the same crippling and debilitating anxieties.
Impact of financial anxiety
Financial anxiety can have devastating effects. But the tragedy is that we as a society have become desensitized when it comes to mental health issues. It's not as shocking as terrorism or gun violence, so it doesn't get the headlines. Consider these statistics. Terrorism causes about 20,000-30,000 deaths a year. About 6.5m died of gun violence between 1990 and 2016. But this study shows that over 8 million deaths a year can be attributed to mental health disorders, of which financial anxiety is one.
Financial anxiety is a crippling disease and can cause serious damage to families and communities at large. A Columbia study that showed poverty causes deaths confirms the same.
The devasting impact of bad finances:
Financial and housing distress also increase the risk of suicide. Economic crises are associated with increased suicide rates, especially in countries with weaker labour market programs.
These rises are greater among men, tied particularly to home repossession and debt for younger men and long-term unemployment for older ones. One study attributed a 57% increase in men’s suicide in Ireland to recession and austerity between 2008 and 2012.
Economic crisis also has implications for behaviour towards loved ones. Although it may paradoxically decrease rates of divorce, research indicates it may increase child maltreatment and intimate partner violence. One study revealed a link between foreclosure rates and domestic violence calls to police.
People in the negative wealth shock group had a 50% higher death rate than those in the positive wealth group, after statistical controls were applied. By the end of the 20-year period, more than half of the former group had died, compared with less than 30% of the latter.
For such a serious issue, it bothers me that there are no conversations around this. But what worries me even more are two things. These two factors are worsening this mental health pandemic. Yes, it's a pandemic. Anybody who says otherwise is either stupid or delusional.
Shills, quacks, low-life scum, and cockroaches
We live in an age of abundant information. We are constantly bombarded with information, and the effects of this manifest in different ways. Mainstream media and social media are making things infinitely worse for people. At its core, social media isn't about sharing, connections or friendships. As Eugene Wei wrote in his magisterial piece, it's about signalling and status. On social media, we are signalling our status in one way or the other.
If you think about this from the lens of incentives, it means we'll do anything in pursuit of status. And when it comes to conversations around finance, this becomes particularly problematic. Advertising has evolved a lot in the past decade. It's no longer just about putting a creative in a newspaper or running digital ads. Today, you advertise by buying the influence of people, and these people are called influencers—basically, people with huge followings on social media. You pay them to talk about your products. Native human advertising, if you will.
With the rise of the so-called influencers, the incentives on social media platforms have changed. If you build a sizable following, you can monetize the attention you command. There isn't anything inherently good or bad with the concept itself. But we humans, we are bloody idiots, and we always ruin things.
Because of these so-called influencers, social media platforms have become cesspools full of people peddling dangerous advice. And this is increasing the anxiety among people.
The thing about personal finance in a country like India is that very few people are financially literate. Actually, not just India, it’s the same everywhere. Bad financial advice far outweighs good financial advice by an order of magnitude. In such a setting, you can get away by saying anything, even dangerously wrong things. And the other important thing about financial advice is that you won't realize if a piece of advice is good or bad until it's too late.
Given these incentives, a new crop of idiots have become popular on platforms like Twitter, Tik-Tok, Instagram, Facebook and YouTube. Don't get me wrong; there are some really smart and generous people who spend a lot of time creating content to spread financial literacy. But the idiots and the garbage they produce far outweighs the content published by good people.
The way this influencer thing works is that these people make money in a couple of different ways. They create a lot of generic videos about investing, trading etc. and build an audience. They can then monetize this audience through affiliate marketing. The influencer gets paid for each purchase. The second way is that they subtly advertise products in their videos and get paid by that particular brand. And all you need to do this is the ability to form sentences and decent video editing skills. You don't even need a basic understanding of finance. You can spout random bullshit and get away with it.
The influencers who spread misinformation understand how to gain the confidence of people they will never meet, make content that captures attention, and persuade audiences to take action. - The Atlantic
On the other side, you have the “look how rich I am”, “I can teach you to be rich”, and “you can be rich if you hustle” videos on Instagram, YouTube and Tik-Tok. These videos basically appeal to the basest human emotion of all - greed. After all, who doesn’t want to be rich? These videos are the equivalent of all those fake P&L screenshots by supposedly Jim Simmons like traders you see on Twitter.
Now, think about the audience for these get rich videos. It’s not the rich; it’s mostly the poor people and people who are broke. And when you are in a bad financial situation, you tend not to think clearly. You look for anything and everything to get of that situation. And you end up following dangerous advice from idiots and quacks who otherwise wouldn’t be qualified to wash dishes in McDonald’s.
And I see this first hand, and I bet you would have too. If you have ever received a call from a friend asking if he can make 1% a month trading, then you can bet your ass he’s watched videos by these influencers. People are benchmarking themselves to some bullshit standards set by fucking idiots on Instagram and YouTube whose only skill in life is figuring out what facewash makes them look good on camera talking about things that they have no clue about.
People don’t realize that what they see on social media is just the photoshopped version of real-life and that it’s unattainable. But people who are in tough situations most often take the advice from these hucksters and charlatans as the gospel because they are desperate:
Seeing a heavily filtered version of someone else’s career has given us unrealistic expectations of what we should be achieving. “It's very difficult to just focus on yourself and your own goals [instead of] what everyone else is doing. There’s a feeling of having to accomplish so much so quickly,” comments social media consultant and founder of FindSpark & MCG Social, Emily Miethner. “Of course, everybody's only posting their highlight reel; they’re not posting those mundane or challenging elements of their work.”
Put another way, people are envious. And envy is a very, very dangerous thing.
At its core, envy is about attention. The more you pay attention to the rival and what they’re doing, the greater your envy toward them will grow. And there’s nothing that commands more attention than a neatly advertised path to success.
When someone’s showing you how easy it is to do what they have done, you feel inclined to accept their guidance. But by adopting their strategies, you also outsource your judgment to them, which means that you invest much of your precious attention to their path.
Whenever you do this, you tend to lose confidence in your capabilities, and any loss of confidence usually opens the floodgates to envy:
When you’re looking for ways out in life, thinking whether the person giving advice is competent or not is the last thing on your mind. And these self-help gurus, financial wellness coaches, and other low-life cockroaches making money by preying on these vulnerabilities.
And the end result? Welcome to the age of abundant anxiety.
The role of the financial services industry
You might have heard of the saying "personal finance is personal", it's true. But somewhere down the line, the financial services industry and the product pushers appropriated this saying to shill all sorts of toxic financial products and terrible advice.
For all their bullshit sermons about personal finance being personal, the financial services industry has become more impersonal than ever. When I say financial services, I mean everyone from advisers, distributors, AMCs, talking heads, and the financial media.
In their myopic pursuit of scale and higher margins, the financial services industry seems to have forgotten the investor at the centre of it all. It has become all about endlessly preaching - keep investing, invest more, SIP, SIP, buy and hold, buy & die, don't sell, increase your SIPs, invest more, invest more, buy this, buy that, keep buying.
As I write this is, I can't help wonder about who the fuck these people are even talking to? It's a sad state for the industry when all investors are to these companies are rupee signs.
Some parts of the financial services industry have even taken to money shaming. They spend so much time endlessly preaching that people should invest but have forgotten the investor at the end of it. It's like the industry is disconnected from the realities of the world. The same realities that affect the investors and how much money they invest, and their goddamn margins.
Don't get me wrong, getting more people to invest is important, and we need more financial inclusion in our country. We need to get more people to start investing. But is the industry even aware at this point that they are talking to a human investor?
The flawed nervous human being who is freaking about everything and mostly has no clue what he is doing and is looking for help, guidance and validation.
If you think about this from the lens that the fortunes of the financial services industry depend on how well the investor does, then the industry should be ashamed of itself. The modern financial services industry is full of vultures preying on people.
If you are wondering why the hell am I even talking about the financial services in a post about financial anxiety and mental health, here's why. The financial services industry, particularly the AMCs, are in the best position to create awareness of this issue.
They can sponsor research and publish it. They can bring in experts on mental health, organize events and publish content for investors on how to deal with financial anxiety. They can also train the distributors they employ and advisers they work with to be more sensitive when talking to investors and help them deal with their anxieties. They can be more sensitive themselves when communicating and launching products.
But nope. They are too busy launching some scammy overpriced fund that will never beat its benchmark. 30%-40% margins vs doing the right thing for investors? The margins will always goddamn win! What's good for the financial services industry is rarely good for investors.
The end result
All these disgusting shenanigans are making people more anxious than ever, and it's only getting worse. And sadly, nobody seems to even care about this issue, and I highly doubt it will figure on anybody's agenda anytime soon.
What should you do?
If you're reading this as a person who's anxious and looking for some ideas or answers to deal with it, I'm sorry I'll have to disappoint you. I don't claim to have answers. As I was Googling around, I came across pieces like these:
There's nothing wrong with pieces like this. But there is some nuance I'd like to try to explore here, and I may get it seriously wrong. Broadly, at the risk of gross overgeneralization, there are two groups of people - people with choices and people without choices.
For people who are in relatively good situations with the luxury of options and choices, I think having a crystal clear understanding of their situation goes a long way. You can't try to change things without knowing how bad your situation is. And if you are making bad choices with your money, then you can fix it. I constantly see smart people making silly mistakes with their money. And the thing about personal finance is that you don't feel the impact of bad decisions until it's too late. If you don't save enough, you won't feel the impact today but rather during an emergency or retirement. Same with insurance.
The links I shared above apply to people who are in ok situations making deliberately bad financial choices.
Financial Wellness is therefore not about eliminating all the risks or being in complete command of what will happen to you. It is about understanding the things that you can control, and managing those in the best way possible. - Evidence Based Investor
I’m very well aware that this sounds like some fluffy bullshit. But I can assure you; this is the same advice you’ll get even if you pay for therapy or a financial adviser.
For the people who are in really bad situations where the only choices are between things that are bad and worse, I don’t know what to say. This is more than half of India. When people talk about such situations, they often preach that anybody can pull themselves up by their bootstraps if they work hard and hustle, dream, and be relentless. This is probably true only for a small group of people who are in situations where there are options and a support system. But you have to utterly stupid if you think that anybody can change anything as long as they hustle and work hard.
We live in an unequal society. Across the vast majority of this country, there are real economic and social barriers that prevent people from having a shot at a decent life, forget fulfilling their dreams. Many really smart people live in terrible situations without access to education and the financial ability to pay even if they did. And then there are situations where they are responsible for families with disabilities and medical conditions, crippling debt, legal issues, or 100 other issues. These people are usually robbed of the luxury of choice and spend their lives doing things they don’t like because they carry the burdens and the sins of their fathers.
You have to be really dumb and stupid if you think hustling and working hard is the answer to everything. Having an opportunity to do that is a luxury most people don’t have. I’ve seen this first hand, having been so far below the poverty line that the poverty seemed like a luxury at one point.
Having said that, I don’t know the answer to these situations.
If you work in the financial services industry and interact with people, please have some empathy. Investors are not always equal to your margins. And if you’re an advisor, I seriously hope you are considerate about the mental health of people especially in desperate times like these.
To the investors
I think this stupid virus will make things insanely hard for us all. If you’re one of the privileged few, try not to do dumb things with money and make things hard for yourself. Better to be sane than be stupid and regret later.