Dustin Settle

P. A. McGavick and Associates, LLC

Can Contentment Cause People To Be Blind To Danger

As defined by http://www.dictionary.com, a parable is a short allegorical story that illustrates or teaches some truth, religious principle, or moral lesson. The parable we are talking about today teaches the truth about people and how they behave. The age-old story of the boiling frog goes like this. If you take a live frog and throw him in a pot of boiling water, how does the frog react? He jumps out because it's too hot, and it will severely injure or kill him if he stays in the water. If you take that same frog and put him in a room-temperature pot of water, he's happy; he's content. Now slowly turn the heat up 1 degree at a time until you reach boiling. What's the frog do? If you said, "He'll jump out," you're wrong. He stays in the pot until he dies from the heat; he's blind to the danger.

"The human brain is hardwired for maximum complacency," states the article "The Lizard Brain," https://annuity.com/the-lizard-brain/. Humans know how easy it is to sit on the couch and watch TV instead of heading to the gym for a hard workout. The sofa is the same thing as that pot of water that eventually boils if you choose the couch time and time again. While everyone agrees that exercise is the healthier of those two options, our brain is hardwired to avoid the pain associated with the workout. 

Why do we treat our financial lives the same way? Why do we go about what everyone knows is the longest bull market in history, pretending things won't change? One of the oldest pieces of investing advice is "buy low, sell high." Every market has a correction, just like 2000-01 and 2008. Yet, we continue to allow our money to ride the wave of market enthusiasm, silently knowing in the back of our minds that it will eventually change.

No one knows what the market is going to go. It's a game of risk, and if you are nearing retirement, do you have time to take risks anymore? It wasn't that long ago that the norm was to work at the same place for 30 years, retire, get a gold watch, a pension, file for Social Security, and you're set for life. However, in 1978 the 401k was invented and shifted the burden of retirement from corporations and placed it on the backs of the average American. Why would companies make a significant shift in their structures with the federal government's backing?

The answer is simple; corporations understood the advancement in technology, and medicine rendered the pension system impossible to support. As a result, for the first time in history, a record number of people were not only living to retirement age but well beyond it. We see people live 10, 20, and even 30 years into retirement. With our constant boiling frog syndrome of complacency, we forget that the average life span was 47 years old at the turn of the twentieth century. The average in 2019 is 78.5 years old, roughly a 40% increase in 120 years. Throughout the 1500-the 1800s, the average lifespan hovered between 30-40. In less than 500 years, we have more than doubled our lifespans.

In this age of abundance, the pressures of life are not felt the same way our ancestors did. We learn to survive with a new set of rules and technology that changes daily. None of these changes threaten our survival, like facing down a charging bull or perhaps jumping into a pot of scalding water. Instead, today we faced longevity-based survival issues. 

The good news is we have the power to change. We can fight through negative thoughts and feelings. But, most importantly, we can fight our COMPLACENCY.

Complacency is our enemy. Don't worry. Don't worry about your 401k or your stocks; the market is doing great. You have time; there's no rush to do anything; you'll get to it when you have to.

Sometimes it's easy; smokers know they should quit and don't until they get lung cancer. Or an overweight person who continues to eat and not exercise until they have a heart attack. Or a person who put their savings in a retirement plan, managed by someone who gets paid whether they win or lose, and lost 30-40% of it in 2000-2001 or 2008?

What's the difference? Some would say, "The markets always come back and then grow!" Throughout our short history of having a financial market, that is correct. They do eventually come back, but if you're one of the record-breaking 70 million baby boomers retiring over the next 15 years, is there time to wait? If you had money in a 401(k) in 2000, it took you until 2013 to break even. That's 13 years. Can you wait 13 years to retire? If you can, do you want to? Didn't you work all your life to retire on your terms at the time that you wish to and enjoy it?

Dustin Settle picture

Dustin Settle

P. A. McGavick and Associates, LLC

Boise, Idaho


(208) 585-7137

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