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Why Won't They Listen? Why Won't They Act? Steve Heller Unless you are a very new goldbug indeed, you have almost certainly run into a very puzzling phenomenon when talking to your friends who don't share your knowledge of and interest in hard money. I'm referring to the dreaded "hard of listening" syndrome. Let's look at a typical example of this problem. Suppose a friend of yours named John asks you a question about economics, such as why he has so much difficulty making ends meet every month, even though the government claims there is almost no inflation. You see an opening to get through to him how crooked our current paper money system is. You line up all of your arguments, with a definitive answer to every question that your friend asks. You explain exactly why a fiat money system is doomed to fail, along with plenty of historical references to Civil War greenbacks, the Continental dollar, and maybe even some foreign examples like the famous Austrian and German hyperinflations after World War I. You know your arguments are correct and unassailable, and therefore you are confident that John will understand and agree with you. After all, he is a reasonable and sensible person, and your arguments should therefore convince him. So when John says "That can't happen here", or "The government would never allow the money to become worthless", or just sits there without responding at all, you are terribly puzzled and upset. Or maybe you have what seems to be more success at first. John says "Yes, you're right. I really should do something to protect my investments in the stock market by buying some gold." So you hang up the phone, or go home, feeling that you have accomplished something. But the next time you talk to John, he still hasn't done anything. You try to impress upon him the gravity of the situation, and how it's really pretty important for him to do something fairly quickly, while he still can. He understands your concern, and promises that he will. The next time you talk to him, though, the status is still quo. He is still procrastinating, and can't explain why. What have you done wrong? Why hasn't John understood what you have said? Can't he see how much danger his retirement savings are in? It isn't your fault. This essay is to explain why this happens, and why you can't do anything about it. The Psychology of Sheep One of the hardest things in the world for most people to do is to admit that they are wrong. Another very difficult thing, for most people, is to come to the conclusion that everything they have been taught about a topic is uncertain and may very well be incorrect. Why is this? Isn't man the "rational animal"? After all, the name of our species is "Homo sapiens" (wise human). Yes, but unfortunately most people do not make decisions in a rational manner. They follow what "other people" think, what "leaders" tell them to think, or use some other similar means of avoiding responsibility for their own decisions. Of course, it is actually impossible to avoid responsibility in this way, because even following someone else's lead requires one to decide exactly whom to follow, and there's no reason to believe that is an easier decision than thinking for oneself about the issues. But it is an extremely popular approach nonetheless. You see, thinking for yourself is hard. It requires acquiring facts, organizing them into a rational pattern, and taking responsibility for the results. It's much easier just to follow along with what "everyone else" thinks... much like a herd of sheep following a shepherd. However, this easy, unconscious following of the rest of the herd can be disrupted by "troublemakers" who try to get people to analyze a problem rationally. Once you start thinking for yourself, there's no telling where you will wind up. So the simplest and safest solution is just to avoid any independent thinking whatsoever. The Irony of It All One of the most ironic aspects of this situation is that people like you, who take the responsibility for your own decisions, are often ridiculed for being "paranoid", "a conspiracy nut", and the like. That is no accident. Nor is it the result of independent thinking on the part of those making the accusation. It is the subtext of all the primary control mechanisms used by the Powers That Be: "There are no conspiracies, except of course by people outside the establishment." In fact, you could make it a rule that anyone who believes in the possibility of conspiracies (other than the officially recognized ones, like "white supremacists" and "terrorists") is not a sheep. He may be crazy, or he may be sane, but either way he hasn't bought the standard line. That is the only kind of person that you should even bother talking to about gold. The others won't listen, because it would be too disturbing to their worldview to do so. The Second Hurdle So let's say you have a few friends willing to listen to your "crazy" theories about the value of gold and/or silver as money. Does that mean they will actually do anything with this knowledge that you impart to them? Unfortunately, no. Let me tell you a couple of stories about people I know (details changed for obvious reasons). The Lottery Winner "Dan" acquired quite a few shares of an Internet stock before its initial public offering as payment for work he did for them, in lieu of cash. Since they were "insider" shares, he couldn't sell them at the IPO, when they would have been worth about $20 million. That's not his fault, of course, as he had no way to cash in on this windfall then. However, the lockup period expired a year later, and his stock was still worth about $10 million at that point. So you can imagine that when I ran into Dan during a trip to San Francisco, shortly after he was able to sell, I fully expected that he would have sold a bunch of those shares. We took time for lunch together, as we hadn't seen each other for a year or two and had plenty of things to talk over, especially his great good fortune. We discussed the economic situation, the Y2K problem (I thought it would be a lot more serious than he did), and the problems with the Internet bubble. Aside from the Y2K issue we were pretty much in agreement, having similar economic views overall. So you can imagine my surprise when he told me that he had only sold about $50,000 worth. I asked him why? Didn't he realize that if he sold just a quarter of his holding, he would never have to work again if he didn't want to? Didn't he realize that the ridiculously high price of his shares was a fleeting phenomenon caused by monetary excess that had induced a mania in the stock market? "Yes, I'm going to sell some more shares soon. Very soon.", he said. I responded by saying "I certainly hope you do that very soon, like tomorrow. In fact, why don't you sell all your shares? Surely you understand that there is no reason to believe that they will ever go back to the absurd height they reached last year?" You could have knocked me over with a feather when he told me that he thought they would go back up! The company had a great future. Besides, his relation with the company might be harmed if he sold all the stock that he had gotten at such a low price. It would be considered "disloyal". I reasoned with him, in vain. He just could not see that the economic principles he claimed to understand actually applied to his own personal situation. "This is different" was all I could get out of him. Now Dan is not stupid. His IQ is probably 140 or higher. He is economically literate. In theory he is more economically knowledgeable than 99 percent of the population. In theory, but not in practice. The company is bankrupt, its shares worthless. He never sold more than a few thousand additional shares. His great fortune is gone, or more accurately, never was. It is against all probability to expect he'll ever have another chance to be independently wealthy. What Could He Have Been Thinking? Nothing. That's exactly the problem: he wasn't thinking. He was just going along with the mindless Dotcom mania: profits don't matter; having real customers that can pay you with real money is just a detail; you don't want to become profitable too soon; this time it's different. No, it isn't different. Economic reality cannot be put off forever. Companies without earnings and without any way to produce earnings are worthless. Eventually, even the dimmest "investor" figures that out, too late of course. It could have been worse. Dan could've paid a lot of money for those shares at the height of the mania, losing real money that he had worked hard for. As it was, he sold enough shares to pay for his consulting work for the company, so he really wasn't any worse off afterwards than he was before he ever heard of it. He never borrowed against any of his phantom riches, but continued living in his previous lifestyle. He didn't end up with a gigantic tax bill and no way to pay it. And he is still successful in his consulting career, so he's not hurting for a way to make a living. But what must it feel like to throw away $10 million or so? I've tried to imagine it, but I can't. I haven't asked him, so as not to open up what must be a very unpleasant topic for him. Maybe I should, though. I don't know if there's anyone else he can tell who would be able to understand. I'm not even sure I can understand, but I would give it a try. Another Case of Procrastination This one isn't quite as dramatic, and may have a happy ending after all. But I think it is still instructive. I have another friend, "Bob", who is a successful architect. He and I enjoy talking with one another on the phone, which we do whenever he has the time. He works very hard, but enjoys his work and is generally pretty happy. One of the topics that I usually bring up when we do have one of our telephone discussions is the economy. I explain to him how the stock market bubble is just one of a series of absurd misallocations of capital, and far from the largest at that. I've told him about the gold manipulation conspiracy (oops, bad word), the gigantic short position, the derivatives insanity, and so on. He understands what I'm talking about, and agrees that the markets are acting very peculiarly, and that gold is probably a good way to protect his investment portfolio against some unexpected accident. At the end of every conversation, I say "You're going to get some gold soon, right?", and he always assures me that he will. This has been going on for at least a year. Now, whenever he answers the phone and hears my voice, he says "No, I haven't bought any gold yet, but I'm going to soon." before I have a chance to bring up the topic. I guess that's progress of a sort, but he still hasn't bought any gold yet. Bob is extremely intelligent. In fact, he got a 1600 on the SAT (when that was still hard). He understands the issues, and doesn't disagree with my concerns. He agrees that he should do something... but he still doesn't do it. Why not? A Failure of Imagination? I wish I knew. I wish I knew why Dan never sold enough shares to make any difference in his life. Is there a connection between these two stories? Maybe there is. It seems to me that both of these very intelligent and knowledgeable people have a flaw: a failure to be able to imagine the consequences of certain events. Just as I cannot imagine what it is like to let $10 million slip out of my hands when all it would take to capture it would be a telephone call and maybe signing a few pieces of paper, they cannot imagine that their comfortable worlds could be turned upside down overnight. So they always have "plenty of time" to take whatever actions they may need to take. Dan always had "plenty of time" to sell his stock, and Bob still has "plenty of time" to buy gold. There's always a higher priority on some other facet of life, so the theoretical possibility of a catastrophic loss never gets to the top of their to-do list. Of course, most of the time that doesn't matter, because the loss doesn't occur. But sometimes it does. Dan will never be fabulously wealthy, as he could have been. I tried to warn him, but he wouldn't listen and wouldn't act. Bob, by contrast, still does have time, assuming that the Mid-East war doesn't go nuclear over this weekend, or some such calamity. But how much time? No one knows. So the only prudent thing to do is to act while you still know you can. I hope Bob does. Conclusion I'm sure you have some of the same stories of your own. I suspect some of you probably have been beating yourself up unnecessarily over your inability to get through to your friends how much danger their life savings are in. Don't. It's not your fault. You can't make someone face reality if he doesn't want to. All you can do is make him aware of the situation, and hope that he acts before it is too late. And wish him good luck. He's going to need it... as are we all. Steve Heller May 28, 2002
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