No Free Lunch



My Sunday Washington Post Business Section column is out. This morning, we look at the very human habit of seeking something for nothing. Its a suckers play that leaves investors vulnerable to sharpies and clever salesmen.

There are numerous examples where pursuing a free lunch (not unlike Alpha) leads to losses.

Here’s an excerpt from the column:

last year, Americans spent more than $70 billion on state-run lotteries. To put that into context, that’s more money than Americans spent on sports tickets, books, video games, movie tickets and music plus all of the apps, games and programs bought from Apple’s iTunes App Store — combined. That is a whole lot of money, poorly spent . . .

The obvious truth is that people who buy a lottery ticket want the free lunch. They want riches and financial security and oodles of discretionary income — and with very little effort. What they do have, to paraphrase New York State’s lottery logo, is “a dollar and a dream.”

And of course, the money shot:

“If you want anything — especially something lots of other people want, too, like money — there is a simple formula that few really want to hear about. It’s no secret. In fact, it’s fairly obvious. All you need to do is work your tail off; be smarter or at least more insightful than your competition; treat every task as an opportunity to enhance your reputation; exercise good judgment; have great patience; be attentive to what matters and what doesn’t; develop social skills; learn what motivates people; avoid getting sidetracked by distractions and nonsense; continue to learn; have valuable, marketable skills; and occasionally, get lucky. Just apply some combination of the above for a few decades, becoming more efficient and productive and luckier as time goes on..”

Obvious, yes, but it needs to be said.



On the hunt for the financial free lunch? Don’t.
Barry Ritholtz
Washington Post, October 25,  2015


Print Friendly, PDF & Email

What's been said:

Discussions found on the web:
  1. BennyProfane commented on Oct 25

    Now you tell me. Of course, if I heard this at age 20, I would have smirked and then continued to be a fool.

  2. Lyle commented on Oct 25

    However when you consider that Jamestown was partly founded as a get rich quick scheme to get access to the gold that was supposed to just by lying around, that California and parts of many other western states were partly settled by get rich quick schemes called gold rushes (a gold rush is like a lottery a few win and many loose), my contention is that get rich quick is a base part of the DNA of the US. So in one sense history shows that americans fall quite easily for get rich quick schemes. Of course a few made it big in Ca (all be it on railroads not gold), and a few got very rich in Virgina City, NV. But even back then mines in the west were called holes in the ground you threw money into, but folks kept throwing more money and/or effort into these holes.

  3. Jojo commented on Oct 25

    Re: Lotteries

    State sponsored lotteries should be illegal. They falsely foster the expectation that winning a big prize is a reasonable expectation through prolific advertising. Ultimately, state lotteries are simply another way to generate tax revenue in a stealth manner on the backs of poorer, less educated people.

    State lotteries are not in the best interests of their citizens. Some enterprising lawyers should mount a class action suit against them on behalf of the citizens of some sate.

Posted Under