Financial security, first principles, and you

Our universe is an inherently chaotic place.  Whether this is a natural consequence of quantum randomness or of the unpredictability of human choice is irrelevant.  Every day you will be affected by some kind of chaos outside of your control, and your handling of it can either be an asset or a liability.

Asimov had an inspired idea that he based a series of novels on: that although individual human behavior appears to be random, the behavior of a group can be predicted more accurately as the size of that group grows.  He made this analogous to the ideal gas law, where the movement of individual atoms is impossible to predict but get enough of them together and their properties (temperature, pressure, volume) are related in an extremely reliable way.  It is idealistic to apply this concept to human beings (and I suppose even to gases, hence the name), but it makes a great story, and the simplification has a degree of truth in it.

Let’s move on to a more relevant example.  The daily activity of the stock market is unpredictable, but the trend over time is clearly one of growth.  The stock market always goes up.  Yesterday it went down, as a result of the Boston bombings.  Similar events have had similar effects.  But over any 10-year period, including those containing a depression or disastrous event, the stock market is a winner.  Chaos is all around us, and the way to deal with it is to not panic.

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I personally don’t recommend taking the president’s post-9/11 advice to “keep shopping” but as a stockholder I certainly take comfort in knowing that many people out there are.  Many of you are probably familiar with the “Business Continuity” plans most companies keep for all manner of contingencies.  The system is the same as it always was, and keeps on rolling.  Life goes on.  So it goes.

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