Investosis

[Ego]

In medicine the suffix -osis signifies a degenerative process usually the result of age or overuse.

Investosis: a condition caused by overuse of the investment mindset where the patient experiences a gradual decline and eventual atrophy in the ability to see any perspective other than the market perspective.

Examples?

[Wharnock]

I like this "Investosis" term. I think this applies more to the individuals who let their investments (and thus the market) absorb their life. The specific crowd I would point to as having a particularly advanced case of Investosis would be anyone known as a day trader. Day traders let every uptick/downtick in the market consume their waking (and sometimes sleeping) lives.

However, the Dollar Cost averager or the index investor would reasonably called the antonym of Investosis. I'm not clever enough to come up with a fun name for that quickly!

[2Birds1Stone]

Examples?

In the online FIsphere this is exemplified by practitioners attempting to plan for/mitigate every possible scenario/risk with increased investments/financial capital. This is more prominent in some communities than others (ex; ??? > Bogleheads > MMM > ERE > ??? ) but we are not immune here either.

The peak of this mentality seems to be WL3/4, where many people end up stuck.

[Dave]

Very interesting!

Could you clarify what you mean by "the investment mindset"?

I find the model of considering the return on investment to be very useful in much of life, with the important note that it can (and should) be applied much more broadly than a strictly financial/monetary perspective. In other words, all relevant types of value and costs should be considered as opposed to just money.

Is investosis limited to those who frame everything from the perspective of money, or is it broader to include those who try to give thought to the whole range of value and costs related to a decision, perhaps in a futile effort to quantify everything?

[7Wannabe5]

I think it might often just be that we moderns make overuse of market dynamics as analogy. For instance, somebody might say “I am highly invested in my marriage.” rather than “I am devoted to my marriage.”

It seems to me that the urges towards commitment/investment/devotion and the urges towards exploration/trade/freedom predate money, because they both serve clear purposes towards survival/reproduction. (Of course, evolution being another model we moderns maybe push too hard on.)

[Laura Ingalls]

@Wharnock
Not sure I think many day traders have an investor mindset. More of a gambler mindset.

@Ego I see people daily trying to spend themselves out of problems that aren’t financial in nature. I also think people think they need money when they really need something else somewhere on the Maslow scale (human kindness, belonging, food, safety, protection from the elements). Just because spending money “might” be the most efficient doesn’t make it the only way.

[Ego]

Could you clarify what you mean by "the investment mindset"?

I think of the investment mindset as a way of thinking that can be useful when applied to investments. It can become a problem when it bleeds into other areas of life.

The act of thinking about a particular subject creates strong neuronal connections related to that subject. Those connections are the physical manifestation of the pattern of thought. Do it with enough frequency and that pattern can hard-wire so that it becomes habitual and if done enough, a compulsion. Automatic.

A persistent investment mindset causes the person to run that habitual, hard-wired program on areas of life where it does not belong. For instance, asking oneself, "How will this affect my portfolio?", makes sense when considering the possibility of inflation. It may not produce great results when considering whether to hug grandma, to dance at a wedding, to choose the healthy option when having dinner with the boss or to do the thing that brings great joy to your life.

In other words, (eta: As @Laura Ingalls pointed out above) there are things more important than money, things that have nothing to do with money and things that money can't buy. It is easy to lose sight of those facts. Or maybe it is more accurate to say that it is easy to lose the ability to see them.

[AxelHeyst]

Would doing something to a house you own that you don’t really like, or *not* doing something to a house that you would like to do, because of “resale value”, even though you aren’t necessarily planning on selling it in the near future, fall into this category? Examples: putting in a “weird” garden, painting it an unpopular color, doing a remodel that fits your idiosyncrasies but others would probably not like, etc.

[7Wannabe5]

It may not produce great results when considering whether to hug grandma, to dance at a wedding, to choose the healthy option when having dinner with the boss or to do the thing that brings great joy to your life.

It is my understanding that most current simplified take on how brain works is that situation is identified in primitive mind, “Grandma is in the room.”, then limbic center assigns emotion and instigates behavior, “I love Grandma.-> Hug”, then rational/communicative realms attaches explanation to our experience in a form that could be communicated to others, “I hugged Grandma, because I love Grandma.”

Getting stuck in “investment” (or “cleaning” or “counting”) mindset is erring on the side of “compulsive”, but many or most of us tend towards erring on the side of “impulsive.” For instance, the human who hugs Grandma but also sleeps with ex bad boyfriend (again), dances at the wedding but also rides on back of motorcycle with bare legs, chooses the delicious salad but also the delicious cookie, etc. etc. etc. So, up to a point, counting pennies, weighing yourself every day, and calculating risk/reward ratios habitually may prove beneficial against the limbic system tide of “yummy!, fun!, my lovey!, yummy!”

For instance, I have found my mid-life acquired practice of expressing myself in very clear and practical time and money terms when breaking up with significant others to be waaaaaay better than expressing myself in emotional terms. Sometimes you gotta bring out The Accountant.

IOW, humans have innate limbic system tendencies which are going to run more or less towards cold/closed, cool/reserved, warm/open, hot/spewing. Sometimes, thinking in terms of "investment" or other rational "calculations" will serve helpful function of moving a human from warm/open towards cool/reserved as appropriate, but OTOH it sometimes serves to just lock a human into rough ratchet between cold/closed and hot/spewing. So, it kind of depends on whether you would prefer to live in society with more cold/closed people or more hot/spewing people or maybe a culture where people spend money on therapy.

[jacob]

The most fundamental expression of the investment mindset is the marshmallow experiment: Give up something now to get more in the future. According to wiki deferring the marshmallow is associated with better SAT scores, lower BMI, and more competence. There are actual physical brain differences.

You can formalize this "investment-framework" using a time-discount rate (how much is time worth) along with expectation values (1 marshmallow, 2 marshmallows). This will calculate exactly what any investment is worth to you in the present.

One issue with "overdevelopment" along a narrow line is shown on this graph at 6:30. Focusing exclusively on going up the y-axis, which is the time-axis, may lead to much personal success, but it's not going to lead to much social success if one temperamentally use any ego development gains to lower time-discount even further. I discussed this more here: https://youtu.be/0MGQgQZHx1Q?t=395

This is probably not super-surprising. If you are treating everything with a very low time-discount even the average person will be too YOLO to relate much both in terms of process and in terms of outcomes. E.g. one will be out smoking cigarettes, the other will be home watching their portfolio grow.

Add: This also suggests you can find a similar affliction by looking at the space-discount rate along the x-axis.

[Jin+Guice]

I think there is a difference between the "investment mindset" and the "financial mindset." The financial mindset tries to solve everything in terms of financial assets, which I think is what "investosis" is referring to. The investment mindset is more broad in that it sees things in terms of expected payoff, risk and the interaction between the two. IMO, we live in a society which is obsessed with the financial, so we are used to viewing the investment mindset through the financial lens and it is how many of us first experience it. However, the investment mindset does not need to be used purely for financial investments, it can be used as a decision making tool for all choices. This can likely be over-applied too, but I think the investment mindset is much more flexible than the financial.

Said differently, the investment mindset can be used in a more multi-dimensional space, but the financial mindset is more unidimensional*.

To use the marshmallow experiment as an example, it uses the financial mindset (in this case the only asset is marshmallows) to imply a piece of the investment mindset (delayed gratification along one vector implies the ability to use delayed gratification in all vectors). Since it is science, it will attempt to limit variables. But since it is social science this limitation will necessarily be incomplete.

What if there is something I want even more than marshmallows that I know happens directly after the marshmallows so I eat one marshmallow in order to leave? What if I am used to an environment where promises by authority figures/ adults are not kept and therefore I am maximizing my personal expected return by eating the marshmallow in front of me because I view the 2nd marshmallow as too risky? (this one will also probably cause problems in our society).

For ERE, I think this is the famous WL5/6 crossover that is not always made. In order to achieve this, the dimensionality of the problem needs to be expanded beyond the financial.

*Astericked to note that if you are really into finance, there is multi-dimensionality among financial assets, but expanding beyond them will still include more dimensions.



ETA: For anyone not familiar with the dimensionality language, "expanding dimensionality" is the same as adding more variables. This was very confusing to me when I first encountered this language in grad school bc I was used to thinking of dimensionality only in spatial terms, where 1 and 3 dimensions is really more than I can grasp and 4 and/ or 5 dimensions is meaningless. Maybe this was only confusing to me?

[jacob]

For ERE, I think this is the famous WL5/6 crossover that is not always made. In order to achieve this, the dimensionality of the problem needs to be expanded beyond the financial.

Totally agree. Investosis ~ 1D comparative advantage thinking.

[Dave]

A persistent investment mindset causes the person to run that habitual, hard-wired program on areas of life where it does not belong. For instance, asking oneself, "How will this affect my portfolio?", makes sense when considering the possibility of inflation. It may not produce great results when considering whether to hug grandma, to dance at a wedding, to choose the healthy option when having dinner with the boss or to do the thing that brings great joy to your life.

Got it.

The reason I asked is because I am trying to tease out whether it is the chronic, persistent weighing of inputs vs. outputs that suggests one is suffering investosis, or if it's just weighing how individual actions affect one's financial portfolio.

Basically, I am trying to determine if I qualify as having investosis . I do give a lot of thought to ROI on many aspects of my life, but I don't simply apply a financial lens to it. Meaning - and to be clear this isn't super explicit, I'm just using words to describe - I look at having a financial portfolio, a "social portfolio", a "skills portfolio", a "happiness portfolio", etc. Basically, various collections of things I value in my life.

Tying it to your quote, I actually don't see how having a model of considering ROI on your examples as problematic if one is considering things like the love and connection and happiness benefits of hugging grandma (vs. the time spent/breaking a conversation with friends/a love interest), the fun and memories of dancing at a wedding (vs. the risks of looking like a fool), the short and long-term health benefits of a certain meal (vs. the taste satisfaction of the junk food or lack of comments of meal choice), or the lifetime satisfaction of doing something that makes you happy (at the expense of not optimizing financial results).

Since graduating college, I have been cognizant and acting on the knowledge that my parents/aunts/uncles/grandparents won't be around forever, and have been actively trying to spend more time with them than I felt the short-term desire to do so. This sometimes resulted in missing out on fun, more traditional things that 20 and 30 somethings do, time spent driving, etc. But as far as I was concerned, I was investing time on something that I only had access to for limited time, that would provide value to both of us at present, and for the rest of our lives. It sounds funny to say, but I basically used an investment framework that I was purchasing an asset only available for a short period of time that had lasting benefit to all of us forever. It sounds cold and dispassionate in these terms, but it was emotional to me as I was viscerally aware of my family's mortality and the time-limited nature of our remaining time together.

My point being that an investment framework is useful outside of the pillar of money and can be used to measure any sort of resource, and that considering the system-wide (money, happiness, love, connections, satisfaction, etc.) ROI of an action seems to be very rational to me.

Based on the the following quote,

In other words, (eta: As @Laura Ingalls pointed out above) there are things more important than money, things that have nothing to do with money and things that money can't buy. It is easy to lose sight of those facts. Or maybe it is more accurate to say that it is easy to lose the ability to see them.

I think you are getting at the use of applying a monetary filter to everything is the problem/investosis (correct me if I'm wrong!), and I agree this is a real problem for some people, and those who are in the early stages of reducing their spending are one group likely to fall prey to it.

Years ago I definitely fell into this trap, not attending certain social activities or types of trips and avoiding certain (healthy) foods because of the dollar cost. Every dollar not spent per year was $25-33 not needed to be saved, after all . This filter can definitely be limiting. Over time, as one develops more skills and learns what matters to them, it seems this is likely to be less of an issue.

Axel's example is another good one that you probably see in some people who are more mainstream in their spending but still with frugal bents - keeping a house/car a traditional way to retain resale value instead of altering it to their desires.

Not engaging in various forms of volunteer work or being around to help your family or friends with things because of the missed opportunity to further your career/save more money is another example.

I venture the Rx to investosis is a dose of varying parts (according to the patient's condition) self reflection to determine one's complete set of values and self-development to learn efficient and effective ways to go about living in accordance with those values.

[Dave]

I think there is a difference between the "investment mindset" and the "financial mindset." The financial mindset tries to solve everything in terms of financial assets, which I think is what "investosis" is referring to. The investment mindset is more broad in that it sees things in terms of expected payoff, risk and the interaction between the two. IMO, we live in a society which is obsessed with the financial, so we are used to viewing the investment mindset through the financial lens and it is how many of us first experience it. However, the investment mindset does not need to be used purely for financial investments, it can be used as a decision making tool for all choices. This can likely be over-applied too, but I think the investment mindset is much more flexible than the financial.

Said differently, the investment mindset can be used in a more multi-dimensional space, but the financial mindset is more unidimensional*.

Well said, this is basically what I was getting at, much less elegantly.

[Scott 2]

Marshmallow test was discredited. It is a proxy for affluence:

https://behavioralscientist.org/try-to- ... llow-test/

[jacob]

Marshmallow test was discredited. It is a proxy for affluence:

https://behavioralscientist.org/try-to- ... llow-test/

Baby, bathwater(*). Affluence is conversely a proxy for delayed gratification by construction. The circle is thus complete. This, therefore is a situation, where dependencies are complex (even as they're not very complicated) and like the great financial crisis people will single out causative factors according to the conclusion they wish to reach and overextrapolate the conclusion. In short, this reduces to a nature/nurture argument, alternatively a demonstration of projected attribution bias.

(*) A case of "expertosis", that is, trying to take a problem out of its context and reduce it to a universal law w/o irony.

[Ego]

Would doing something to a house you own that you don’t really like, or *not* doing something to a house that you would like to do, because of “resale value”, even though you aren’t necessarily planning on selling it in the near future....

Absolutely, yes. In fact, my resale mindset prompted me to post this. Mrs. Ego and I had a minor disagreement that revolved around our difference in perspectives. We received an offer for a painting we have hanging in the apartment. It was for less than half the asking price but still a lot of money. Enough to cover six months of living expenses. I wanted to sell. Mrs. Ego loves the painting and wants to keep it until we get a full price offer or something very close to that. In my mind, we should sell it if we wouldn't buy it for the offer amount. She has a different way of looking at things. We already own it. We paid very little for it. It has a cool history and an interesting story. It brings us joy.

Needless to say, we declined the offer.

I thought it would be interesting to apply the collective curiosity of the forum to this difference in perspectives.

[Alifelongme]

GARY BECKER, the University of Chicago economist is famous for, among other things, applying economic analysis to children as "durable consumer goods. "

Some other economists proposed a model that treats children as risky investment with highly uncertain, stochastic outcome.

And yet some others analyzed marriage market from call options perspective. That is when one is still dating one holds a marriage call option which can be exercised (getting married) before its expiration date. But if one waits too long it might expire worthless Fertility could be seen as a call option as well. Men’s and women’s fertility options have different expiration dates though.

Economists are a strange bunch. Professional deformation I guess

[Lemur]

Silly rabbit...^VIX are for kids.