Investing & Retirement

Travis Scott’s Important Investing Reminder

On November 5th, there was a “crowd surge” at a Travis Scott concert in Houston. 

The crowd got out of control. People panicked. It was chaotic. People died.

It’s a terrible way to die. It’s a preventable way to die. 

Preventable because this has happened before. Not once, not twice, but hundreds of times.  

The Romans and Jews infamously suffered a deadly crowd trample incident. You know when that was? Hint: Romans and Jews!

Crowds cannot control themselves. Left to their own devices, crowds will overcrowd. They panic, stampede, and riot. And that leads to death. It’s terrible.

Humankind knows this. We know how crowds behave. Or we should know this. We should have learned this important lesson millennia before Travis Scott was a glimmer in his pappy’s eye.

But people need reminders. Without them, we repeat our past mistakes. 

It Gets Worse…

It’s the same for nightclub fires (I know it’s morbid. Stick with me and I’ll get to the investing content in a minute).

“The Station” Fire in Rhode Island killed 100 people. 230 were injured. 

When was it? 1800?

1900?

Maybe 1950, or 1970?

No. It was in 2003

The Station Fire was far from the first awful nightclub fire in the United States. We’ve had fires that killed more than 500 people – from one building!!!

But at The Station, they forgot, ignored, or never contemplated the lessons we’ve compiled from generations of fire safety.

People need reminders. Without them, we repeat our past mistakes.

Tragedy – The Ultimate Reminder

Both Travis Scott’s concert and The Station Fire make me want to grab someone by the collar and shake them: HOW DID YOU NOT KNOW BETTER?!”

But we already know the answer. 

People need reminders. It’s that simple. 

If we don’t actively choose to remember, then we forget. Entropy kicks in. We get lazy. We cut corners. Our safety systems lose their edge. 

Entropy: order tends towards disorder – never the opposite (unless you work to make it happen).

It’s a slippery slope downwards. Then tragedy strikes.

A tragedy jolts us. We suddenly remember, “This is why we had those safety measures in place. This is the bad outcome that can occur.” 

Tragedy – or if we’re lucky, a mere “close call” – is a highly effective reminder of rationality. But of course, it’s a tragedy. We don’t want to suffer a tragedy every time we need a reminder of rationality. 

The preferred choice is to maintain rationality before a painful reminder. 

Ok – Let’s Talk Investing

There is a direct analogy between the panic of a crowd and the panic of an investing market. 

Every investing bubble in history is marked by the fact that rationality was forgotten. Common sense became uncommon, and past lessons were ignored.

In fact, the language of market irrationality is the same as that of crowd irrationality.  

Yes – the psychology of markets is eerily analogous to that of physical crowds. 

The highs can be similarly euphoric. We’re all one soul, maaaaannn! The music is flowing through me!

The lows can be similarly destructive. 

And just like a fire or crowd surge, a market crash helps us remember that people need reminders. Without them, we repeat our past mistakes.

Charlie Munger – The Bitcoin Grinch

More rationality, more often. That’s the best preventative for avoiding crashes of all sorts.

If I had to guess, that’s is exactly why Charlie Munger says that cryptocurrency is “disgusting” and “contrary to the interests of civilization.” 

Good ol’ Charlie!

It’s because he sees crypto as a bubble. A bubble is equivalent to Travis Scott’s concert before the tragedy. It’s a powder keg waiting for a spark.

Munger doesn’t want to wait for what he thinks will be a future Bitcoin panic. He wants to call attention to it now.

In other words, Charlie remembers. He remembers the many bubbles that he’s read about before, and a few that he’s seen first-hand. He doesn’t want to forget or repeat past mistakes. 

Is Charlie right? I’m not wise enough to know. But I’m sure listening hard. 

Charlie is acting as a fire marshall. He’s seen the charred remains of too many buildings. He’s now walking into the Bitcoin Nightclub and calmly stating, “This is a fire hazard and a death trap. Period.” 

It’ll be hard to know if Munger is right. We might not know in a week, nor a month, nor a year. But if Charlie is correct and risk (the bubble) is present, then the law of large numbers mandates that tragedy will eventually strike. 

Charlie, to his credit, is famously a student of psychology. He knows how people tick—both individually and in crowds.

He knows that people need reminders. Without them, we repeat our past mistakes.

Thank you for reading! If you enjoyed this article and want to read more, check out my Archive or Subscribe to get future articles emailed to your inbox.

-Jesse

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About Jesse Cramer

Jesse Cramer created The Best Interest to explain personal finance and investing in simple terms. His writing has been featured by CNBC, MSN, The Motley Fool, and other national publications. He resides in Rochester, NY with his girlfriend and their dog. Follow him on Twitter: @BestInterest_JC
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3 thoughts on “Travis Scott’s Important Investing Reminder

  1. Thanks for this post – definitely helps me take a step back and be more conscious and ask myself the question of: “am I being rational being bullish, or am I swept up by the market’s mania?”

    I think crypto is most definitely a bubble as it stands, but I feel like in the long-run, there’ll be real utility for it. Some coins, like Ether/Solana have an economic backbone behind it already in the form of NFTs, so it isn’t like back in 2013 where it’s all ICOs and promises. I mean, I think NFTs in and of itself is a bubble, but the social value of ‘flexing’ I feel does have real monetary value tied to it and crypto in 2021 is much more of a real thing than it was back in 2017 or 2013.

    Might take another decade or so to play out, and maybe all the coins we know today will vanish into thin air, but I think digital currency/assets in the long-run will most definitely have its place in a world whose economy and productivity is mostly driven by tech.

  2. It is tragic that people need reminders and how, we repeat our past mistakes over and over again.

    https://en.wikipedia.org/wiki/List_of_human_stampedes_and_crushes

    My heart and prayers go out to the injured, to the families and friends that lost loved ones.

    I don’t like crowds and try to avoid them if possible. Always know your exits and escapes routes they say. Once you are in a tight place with limited movement you might not have much choice. Your best course of action might be to stay put or even go the opposite direction.

    That logic could work for investing “buy” when people are rushing for the exits selling their investments, and “sell” when everyone is rushing in to buy.

    I am not smart enough to know what individual stocks or crypto will survive a bubble, or be able to time the market when to sell or when to buy. So my investing strategy is just buying index funds and holding forever. Staying the course and trying to avoid crowds, and being happy with average returns.

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