Well another annual Real Estate Wealth Expo has made its way through my home town. This year some serious star power was on display. Baseball players, Pop Musicians, and Dragons were regaling attendees and their slightly open wallets with tales of how to escape the rat race and live the 6-49 lifestyle. One blogger did a pretty good job of trolling and live-tweeting the whole thing. People leaving these events usually seem to feel they are on their way to financial independence or at the very least got a good cardio workout.
Too bad it was a scam. There was nothing there of any substance that people could take away that could help them grow their savings. You only needed to read a few tweets to figure this out.
This isn’t surprising, these type of events have been in existence since the dawn of time and sadly they will continue and I think it is such a tragedy so see people get preyed upon year after year.
I’m not really interested in talking about the people who run these operations and their motivations. I don’t lose sleep over them. There will be a special place in you-know-where for them at some point.
Personal Finance Twitter…We have a problem
I’m more concerned with the people who go to these things. Who are they? Why do they do it? What really concerned me was when I reading these threads was how people were viewing it as entertainment. Let’s voyeuristically watch people get ripped off in real time. There was a lack of empathy for them which really bothered me. The tone was a too bad so sad/sucks to be you/you should know better vibe. Personal Finance Twitter is usually better than this, but to me I found it rather disconcerting. People are getting ripped off in real-time and apparently this is a good thing.
It’s easy to think that people with a lack of education go to these things, but I would subscribe that I think there is a critical mass of highly educated people that go to these Expos along with people with limited financial resources.
The easy/first level thinking answer on why people go to these events is the organizers/con-people have been able to successfully project a common value proposition. They promise you either immediate improvement in health or wealth with minimal effort. Follow the green arrows and you will make a killing in stocks while sipping Pina Coladas from the beach or drink this potion and all your ills will be cured. I think it’s a bit more complicated than this.
I think people go to these things because of greed but I think it's more like they are scared. They are scared their jobs are being outsourced or automated or they even hate their jobs and are looking at a career change. Permanent employment is shrinking. Wage gains are minimal and opportunities to save conservatively are non-existent thanks to a decade of near zero percent interest rate policies. Incomes are becoming polarized. They’re scared because they lost a major amount of savings from previous financial crises. People are feeling left behind.
I don’t think these people want to strike it rich as much as get back to even. People would rather put their money in the bank and get a half-decent interest rate but since that's not an option, the fast way to get back to break-even is doubling down and going up the risk ladder. These events are crowded with people practicing Loss Aversion behaviour.
People view their world from the lens of their peer groups (family, friends, colleagues) and just as much from the media. So when they see their peer group strike it rich on a real estate deal or Bitcoin, FOMO sets in. They want in. They want to be on the winning team. How do they get in?
They could go to the finance industry or financial advisers, but they are shutting them out as they fight tooth and nail for those high net worth folks. The industry doesn’t have any interest to educate and help them. They want to sell them and upsell them. Apparently we have a Financial Literacy Czar and regulatory watchdogs. Where are they while all this scamming is going on?
These folks go to Real Estate/Bitcoin Expo because the other avenues that should be there to support and guide them have blocked them out. So what happens when they see Pitbull and A-Rod and messaging that hits on all their pain points? They connect with that and once they’re in it’s a rah-rah here and a $1500 investment course there.
Can we change this?
As long as the human condition retains the condition of greediness and aspirations to be on the winning team there will always be more Cryptocurrency Get-Rich-Quick Woodstocks.
Social Media – Not Ready For Prime Time
Social media could play a role to change the tide but judging by the response to the recent event, it looks like it is more interested in making fun of the victims and talking down to them. It needs to do better. The financially literate making fun of the financially illiterate. This is not good. Under this dynamic it will make it harder for victims to reach out because they will feel intimated, shamed and fear that they will be swarmed by the personal finance illiterati. I don’t think it’s a stretch to say a lot of the populist angst that has clogged our social discord can attributed to this polarization and events like Real Estate Fan Expo crystalize this.
As someone who is an active participant in social media, I have been noticing the personal finance medium developing preachy tendencies. I see more content and viewpoints that tends to talk down to people than actively help them (oh yes and shilling for the financial industry at the same time). How many of those "You should be doing this in your 20's/30's/40's" etc posts have you come across? This recent Real Estate Wealth Expo was a flashpoint moment for me and it has changed how I consume content. I’m gravitating more to personal finance thought leaders that roll up their sleeves and practice saving and investing money than those that talk around, philosophize and pontificate about money matters.
We won’t eliminate tragedies like Real Estate Wealth Expo but we can at least give people the education and the confidence to be more street smart the next time the snake oil sales people come to town.