Investing for the Future You is an Act of Faith

Many years ago, when my now grown children were in elementary school, we attended a special evening activity at their school with Richard Paul Evans, author of The Christmas Box and many other best-selling books. Evans had just written a book called The Spyglass which he read to us. Evans had never written children’s books before, and I don’t think he has since. In fact, before reading the book he explained that, although it was a picture book, he didn’t really consider it a children’s book at all. The Spyglass has an important message and it is conveyed in a creative and fun way. I have loved it since hearing the author read it while sitting on a blanket with my family in an elementary school cafeteria fifteen years ago.   The book tells the story of a young king of a poor kingdom. The king has no idea how to help his kingdom return to the greatness they had known at an earlier time.          One evening an old traveler knocks on the door of the king’s humble castle mistaking it for an inn. He tells the king that in exchange for food and lodging for the night he will teach the king how to make his kingdom great again. Having nothing to lose the king agrees to the deal and entertains the traveler for the night. The next morning the king and the traveler go out to the balcony of the castle where the traveler pulls out a spyglass and asks the king to look at his kingdom through it. Looking through the spyglass the king can hardly recognize his kingdom. Instead of want and need the king sees abundance and plenty. However, when the king puts down the spyglass his kingdom has not changed. He complains to the traveler that the spyglass is nothing but a trick. The traveler replies, “Change requires work. But one must first see before doing.” The traveler tells the king he can keep the spyglass for two harvests, after which he will return for it. As he leaves he says to the king, “You have seen what might be. Now go and make it so.”   The king spends the next two years traveling the kingdom and showing his people what could be. Motivated by the vision of what is possible the people begin to work harder, to help each other, and to thrive.   The kingdom makes remarkable progress and is well on its way to prosperity when the traveler returns for his spyglass. The king offers the traveler all the gold he has to let him keep the spyglass, but the traveler refuses. He then informs the king that he no longer needs the spyglass, for it was only faith his people had lacked, and they now had sufficient faith to see what the future could hold without it. The traveler adds: “Faith is the beginning of all journeys. It is by faith that each seed is planted. It is by faith that each book is penned and each song is written. Only with faith can we see that which is not, but can be. The eye of faith is greater than the natural eye, for the natural eye only sees a portion of the truth. The eye of faith sees without bounds or limits.” The king hands the traveler his spyglass, and as the traveler departs he says to the king, “You have seen what might be. Now go and make it so.” Like transforming a kingdom, investing for your future requires faith. Among other things investing requires faith in:

  • The continued progress of mankind
  • Our financial system
  • The future you

What does looking through the spyglass tell us about these three areas?

Faith in the Progress of Mankind

Our minds are programmed to focus on negative, scary, and dangerous things. At one time this was a useful tool to protect us from physical danger but now it just blinds us to the progress we have made and gives us an unnecessarily negative picture of the world we live in. The news media plays on our bias towards the negative and magnifies the problem. An actual look at the data tells a much different story. In most measurable ways things have never been better. Perhaps the most exciting news is that the rate of improvement is accelerating. We are living longer and healthier lives, diseases are being cured, crime rates have plummeted, technology is improving lives all over the world, and hundreds of millions of people have been lifted out of poverty in the last several decades. On a personal note, my wife and I are both in our early fifties. I have had some fairly significant heart problems and Alice is just finishing a successful battle with breast cancer. Without the advances in medical treatment made over the past fifty years there is a good chance neither of us would be here now. Instead, we are looking forward to the birth of our first grandchild in December and are hoping to have several more decades of healthy, happy, productive living enjoying the company of our family and friends. Peter H. Diamandis and Steven Kotler, in their fantastic book Abundance: The Future is Better Than You Think, provide a fascinating and vivid look through the spyglass at the possibilities ahead for mankind in the immediate future. The book doesn’t look at science fiction possibilities that might happen sometime in the distant future but at things being developed right now, using existing technologies, that could completely transform the world for the better. I highly recommend it. If you doubt the progress that has already been made, take a few minutes to watch a fascinating TED talk from July 2013 by Hans Rosling called “The Best Stats You’ve Ever Seen.” Using publicly available statistics and interesting graphs he puts in to perspective the incredible progress already made.       There are certainly still a lot of problems in the world, but there is every reason for faith and optimism in the future of mankind. Cullen Roche, in his book Pragmatic Capitalism: What Every Investor Needs to Know About Money and Finance, suggests we should approach the world with measured optimism. While there will always be problems, downturns, and recessions, according to Roche, over time “The human species tends to make economic progress. History shows that betting against this has been a bad bet for hundreds of years.” Put another way, betting on the progress of mankind has been a great investment for hundreds of years, and a look through the spyglass tells us that it will continue to be for the foreseeable future.

Faith in Our Financial System

One of the most famous psychological experiments ever was conducted by Walter Mischel in the late 1960s. In the experiment he gave young children a treat such as a marshmallow and told them if they waited 15 minutes to eat it he would give them another one. Follow-ups showed that the children who waited generally fared much better in life. This has come to be known as the Marshmallow Test and is a great illustration of the importance of exercising self-control. People have been replicating and conducting variations of the marshmallow experiment ever since. One interesting variation was done by The University of Rochester in 2012. In this experiment, prior to the marshmallow test the children were either given a reason to trust the person providing the rewards or a reason not to trust them. Children in the group that had a prior positive experience with the tester waited over four times longer to eat the marshmallow than those who were given a reason not to trust the promise of an extra marshmallow if they waited. Those who didn’t trust the authority figure (the system) made the rationale decision that waiting wouldn’t really pay off, so they might as well eat the treat now. Investing is a real life delayed gratification test, and just like in the marshmallow test trust that the system will deliver its’ promise of future rewards is a determining factor in whether or not we play the game. Currently only about half of Americans have any money invested in the stock market. Many who don’t invest in the market lost money in the past and simply don’t’ trust the system. Is this lack of trust warranted? In the short term, yes. If your time horizon is short investing in stocks is risky and there is a significant chance you will lose money. However, if your time horizon is at least ten years this lack of trust is not rationale. In the last hundred years our economy has been through two world wars, numerous smaller wars, the great depression, recessions, epidemics, natural disasters, and the 911 terrorist attack that struck at the heart of our financial system. The system has survived and through it all delivered an average return on stocks of about 9 percent per year. According to Jeremy Siegel, in his book Stocks for the Long Run, stocks have been a better investment than less risky alternatives in 80 percent of 10-year periods, 90 percent of 20-year periods, and virtually 100 percent of 30-year periods over this time frame. While there are no guarantees, if you have time on your side having enough faith in our financial system to invest at least some money in the stock market will almost certainly pay off abundantly for your future self.

Faith in the Future You

What do you see when you look through the spyglass at the future you? Is the future you someone you are excited to save and invest for? Do you have a plan to transform the current you into the person you see through the spyglass? In addition to investing money you need to be getting an education, perfecting your character, developing your talents, improving relationships, and continually learning and improving. All of these things will become a part of the future you. Do you have enough faith in the future you to make it happen? Take a look through the spyglass, imagine what could be, and then with faith “go and make it so.”  

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