Money is a measure. But it’s not the measure. 

We’ve just had an election in New Zealand. The state of the economy and economic growth are often central to elections. And when we talk about the economy, we often look at GDP and GDP growth.

But consider:

  • Bad things can happen which can increase GDP. For example, a natural disaster can spur economic activity and result in GDP increasing. Technically, when a person is diagnosed with cancer, GDP probably increases because there are a lot of services that need to be used to treat that person.
  • When we use GDP as the primary measure of looking at an economy’s well-being, people with significant wealth are over-represented, and economically vulnerable people are given less weight.
  • GDP ignores risks being swept under the rug. Is it really good if we have sustained growth but the risks aren’t worth it? For example, I could break the law and it might be lucrative for a while. But there is a good chance my actions will catch up with me. (Better to be a dentist with a $2 million net worth than a career criminal with a $2 million net worth…) In the same way, if growth results from an ever-increasing bubble in one or more asset classes (like, say, property…), and you’re running the risk of the bubble bursting in a catastrophic way, is this really a good thing?

At a personal level, when I die will my value be equal to the value of my estate? Most of the people I care about probably won’t know what I was (or am) worth to the nearest million dollars.

What I care about is whether I was a good father, a good husband, a good son, a good friend. Whether I created value for people in my professional life (rather than extracted value). Whether people enjoyed being in my presence. Whether I helped people learn things that were useful (and interesting). 

Money can facilitate these things. Especially from a certain baseline, where you are above subsistence, and living paycheck-to-paycheck. It gives you mental and emotional bandwidth. Having enough money, to a certain level, helps to be a good father/husband/son/friend.

It’s easy to get caught up with money, at a personal level and at the broader level. Money is a measure, but we’ve got something wrong with us if it’s the measure. 

Related:

  • Risk is not the measure (risk edition)

Sonnie Bailey

Sonnie is an Authorised Financial Adviser (AFA) and former lawyer with experience in the financial services and trustee industries. Sonnie operates Fairhaven Wealth (www.fairhavenwealth.co.nz).