The flight from our California office takes me on a route travelled daily by thousands of others. Last week while enroute I was alerted to a Gulfstream G3 jet passing above me. I was flying my normal 300 mph but the G3 was doing closer to 500. I watched the gap between myself and the G3 increase as he pulled away. I was a little jealous of his speed, but realized I was still moving pretty quickly myself. His speed had no effect on my own progress. His going faster did not make me go any slower. If by chance he would have slowed down, it wouldn’t have benefitted either of us.
Statistics used improperly can be a dangerous weapon. One that has always annoyed me is what is called the “wealth gap.” This is the financial distance between different economic classes. It is often used to show that the gap between the top 1% and the bottom 50% of Americans keeps getting bigger, as if that’s a bad thing that needs to be fixed. It is often used to portray American capitalism as unfair, but I see it as a deceptive use of statistics.
In my airplane example, if the G3 is travelling any amount faster than I am, the gap between us will continually get larger. Just as if someone makes more money than you do, the financial gap between you and them will grow. It is basic and unchangeable math. The only way to stop the growth of the wealth gap would be to equalize wages and financial holdings nationwide. Such action is not only impossible, it would also be extremely destructive.
As I flew home that day, I decided the most important statistic was not the growing distance between myself and the G3, but the shrinking distance to my destination. I was moving forward at a very good rate, and that is all that mattered. Envying the G3 pilot could not improve my situation.
On the road below me were also people in cars doing about 70 mph. This wonderful eastbound journey was filled with travelers in various modes of transportation, but they all had something in common. Each was moving towards their destination and benefitting from the freedom to travel. Worrying about how fast someone else was going, or worse, trying to slow them down to make the journey “more fair,” would serve no one.
Many investors focus on the gap between them and someone else or get jealous when others make money on something they missed out on. These negative feelings often lead to poor investments decisions such as taking an unreasonable level of risk. We are seeing quite a bit of this type of investing behavior right now and I strongly discourage it.
Ignore the so-called wealth gap, except the one between where you are today and where you reasonably would like to be in a few years, and work on that one. And be grateful you live in a country that gives you the opportunity to do so.
Hi, I'm Dan. I'm a CFP® Professional.
Securities and advisory services offered through Commonwealth Financial Network®.
Member www.finra.org / www.sipc.org , a Registered Investment Advisor. Wyson Financial, 375 E Riverside Dr, St. George, UT 84790
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