The illiterate of the 21st century will not be those that cannot read or write, but those who cannot learn, unlearn and relearn.
Alvin Toffler
Maximilien Robespierre, before his head was separated from his body by the guillotine in the French Revolution, said: "The secret of freedom lies in educating people, whereas the secret of tyranny is in keeping them ignorant". The world is financially ignorant and the tyrants are exploiting this ignorance.
The financial industry does not want you to be free. Just like the medical establishment wants to keep you ill and coming back for treatment, the financial system wants you to consume like an imbecile. Through marketing and advertising, it sells you an almost unattainable lifestyle that if you reach, you simply become another one of greed`s whore. It is never enough. Banks want to keep you ignorant and coming back to buy their products. They say they want to educate you but nothing could be further from the truth. They want to sell you their rancid products with a new shiny wrap. They want to skrew you again and again, and you get to smile while they`re doing it.
According to a 2015 Standard & Poor's Global Financial Literacy Survey, only 33 percent of adults worldwide are financially literate. The bar on this survey was not set high. Respondents were not asked to build complex econometric models or use Markowitz to find the efficient frontier on an investment portfolio. Simple questions about inflation, compound interest and diversification were asked. The notable laggard in the survey was a rising economic power. China's citizens recorded an abysmal financial literacy score of 28 percent.
Moreover, literacy scores were not going up. The Financial Industry Regulatory Authority Inc.'s Investor Education Foundation's 2016 report found that 37 percent of individuals correctly answered four out of five financial questions. This was below the 42 percent reported in 2009. Humans are getting financially dumber, not smarter. Financially speaking, they are becoming more inbred than a redneck at a Trump rally. They have parked their seventy-four wheel mobile home, moved the livingroom furniture onto the front porch and eased into a lifestyle of beer-swigging, finger pulling, tobacco chewing, and weasel hunting.
Low levels of literacy are alarming as governments incentivize banks to make financial services available to a wider audience. Moreover, in the last 30 years, the retirement savings landscape has shifted. Decision-making responsibilities have been transferred to financially illiterate participants who previously relied on their employers or governments for financial security and guidance after retirement.
One question that vexes me is why the formal education system has never focused on financial literacy? At school, I was rewarded for translating Livy’s report of the First Punic War from Latin to English and memorizing the difference between igneous, metamorphic and sedimentary rocks. Education methods have not evolved in over a hundred years when schools were created as receptacles of information. Teachers stand in front of the class dressed in their tweed jackets and comfortable loafers. They orally transfer their knowledge into the heads of their devoted scribes. Standardized testing is then used to assess short-term knowledge retention of subjects that are useless in the real world. School boards control the narrative and ensure that no renegade teachers break rank from the program. The 1989 movie "Dead Poets Society" portrays the impact of a free-spirited teacher who tries to encourage his students to think, feel and seize the day. The movie ends tragically.
This education system is engineered to produce uncreative and loyal employees, not free-thinking entrepreneurs. As in most systems, however, imperfections exist. A minority fringe exit the system before graduating with their entrepreneurial fire unextinguished. Some spend their lives checking in and out of rehab, while others set up multi-billion dollar companies. The latter list includes Steve Jobs of Apple, Bill Gates of Microsoft and Mark Zuckerberg of Facebook.
They succeed in business not because of formal education but in spite of it. The architects of the system need these drop-outs, the one percent world, to perpetuate a system in which a handful of crusading pioneers employ the institutionally educated masses.
Corporations are not oblivious to the limitations of formal education. In 2018, job-search site Glassdoor compiled a list of top employers who no longer required applicants to have a college degree. The list included Google, Apple and IBM. In 2017, IBM’s vice president of talent, Joanna Daley told CNBC that 15 percent of their U.S. company hires do not have a four-year degree.
The message from these companies is that some traditional college degrees are emptier than a eunuchs boxer shorts. They do not equip graduates with the requisite skills to operate in their world.
So what is financial literacy and what does it take to become financially educated? According to the Cambridge English Dictionary, it is the ability to understand the basic principles of business and finance. This is as useful as advising a death-row inmate to reduce his dietary intake of trans-unsaturated fatty acids. My definition is different. To be financially literate, and to use this literacy to achieve financial freedom, you need to do two things.
Thing 1: Unlearn EVERYTHING you know about Money and Finance
Robert Kiyosaki, the financial freedom pioneer, in his book “Rich Dad, Poor Dad”, says that from an early age we are taught to go to school, get a safe job, save money, live below your means, buy a house, get out of debt and invest for the long term in a well-diversified portfolio. These precepts are the biggest load of bull since Joseph Goebbels launched his massive campaign that Germans were the superior race. These lies cause financial bondage. The only way to free yourself is rebellion. When I joined the derivatives trading desk at a large European bank in 1997, I asked a colleague for advice on how to trade options. He told me to take my gut instinct, and do exactly the opposite. Financial freedom requires this same "contrarianism".
Thing 2: Dominate FIVE Key Disciplines
The pentathlon was one of the original sports in the ancient Olympic Games. Five sports were contested over one day: long jump, javelin, discus, a foot race and a wrestling match. The pentathlete was the most complete and skilled athlete at the games. Their training formed part of the military. The ability to run and hurl yourself into a pit of sand and wrestle your enemy armed with a sharp object and a disk superseded all other abilities. To attain financial freedom, the five disciplines you need to dominate are less physically demanding. They are investments, tax, accounting, business law, and selling.
Exercise
Go out and buy a leather-bound journal. The first step in the journey to financial freedom is to describe the most important relationship in your life. It is your relationship with money. According to the American Psychological Association (APA), money is the top cause of stress in the United States.
I want you to answer the following:
1)What does money mean to you?
a.Is it a goal in itself or a means to something else?
b.Do you believe that it will make you happy?
c.Is it a measure of your self-worth?
2)How do you see rich people?
a.Do you aspire to be like them?
b.Are you envious of their success?
3)What is your happiest money memory?
4)How important was money in your family?
5)Are you a saver or a spender?
6)Do you feel guilty when you buy an item of luxury?
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