Home' Trinidad and Tobago Guardian : March 16th 2017 Contents BG14 | FINANCE
BUSINESS GUARDIAN guardian.co.tt MARCH 16 • 2017
In late January, Warren Buffet repeated
a comment that he has made many
times. He indicated to his audience
that he "won the ovarian lottery." Be-
fore going on to explain this further
let's move to another popular term
in finance: "there is no free lunch."
In every sphere of life, the wise person will
accept there is no free lunch. Those that do not
accept it will come to realise it for themselves
sooner or later or remain living in a foolish bub-
ble. In a purely scientific context, the concept
of "no free lunch" is contained in Newton's
Third Law which states that "for every action
there is an equal and opposite reaction." In a
purely commercial context we recognise that
in order to have something of value you have
to pay a price to obtain it.
The bottom line is there is no way of obtain-
ing anything for free at least not consistently
anyway. There is always a cost or a reaction that
will create a degree of friction. Sometimes the
cost or the reaction is not instantaneous or di-
rectly correlated and so we may misunderstand
the scenario and feel we have gotten it for free
but on closer analysis this is ultimately not so.
A real time case in point is the issue of sub-
sidies in the local economy. The price of fuel
has been and, to some extent, continues to be
subsidised. The difference between the low
price and the market price (the subsidy) is what
we as consumers have been receiving for free
Today, the refinery that produces this free-
bie is having significant financial difficult and
there is a real risk of some type of intervention
that will come at the expense of the taxpayer.
In effect we will now be paying for what we
previously got for free, it's just now being paid
in a different way.
We can trace our foreign exchange woes to
the middle of the last decade when a signifi-
cant ramp up in spending saw an increase in
T&T dollar liquidity which remained trapped
because we always ran a managed floating
exchange rate. Over time that liquidity has
fuelled inflation which, in turn, made the
cost of imports ever cheaper relative to local
production that increased the demand for US
dollars exponentially. So now that we are in a
period of scarcity there is significant pressure
on the exchange rate.
So, while it has taken over a decade to man-
ifest we are now in part paying the price for
certain policies that have been implemented
and perpetuated over a prolonged period. The
price to pay is not always instantaneous, it is
not always visibly apparent either, but at the
end of the day we will all conclude that there
is no such thing as a free lunch.
Since there is always a consequence for an
action we should be very deliberate in our
decision making to ensure that our actions
add value as opposed to detract value from
any equation. When we add value, we are in
effect paying the price upfront in order to have
a more desired outcome as opposed to taking
what we can get and then leaving others to
settle the account some time down the road.
The term "pay it forward" is now very popular
and for good reason.
Paying it forward
This now brings us back to the concept of
the ovarian lottery. It may be clearer if this is
expressed in lottery terms, that is, via odds.
The odds of someone born in the US becom-
ing the President of the United States are 1 in
649,740. The odds of winning one of those
huge mega-million lottery jackpots in the US
is about 1 in 175,000,000 and the odds of you
being born in a particular place, time and cir-
cumstances is about 1 in 400,000,000,000.
If, therefore, you were born into a wealthy
family living in a mature democracy at a time
when the world has more wealth and oppor-
tunity than at any time in history and your
country is not at war in a way that directly
affects you then you can say you have won the
The odds of you winning are along the lines
quoted above. Simply put, you are very lucky.
Whether you ascribe it to God or pure chance
the outcome for a baby born today to a white
upper middle class sub urban household in the
United States is going to have a vastly differ-
ent life to one born amidst the rubble of an air
strike in Syria. Both children had no choice in
where they were being born, one of them won
the ovarian lottery the other did not.
Winning a traditional lottery does not make
you financial wealthy for life. It all depends
on what you do with your winnings. There
are many lottery winners who have ended up
broke. At the other end, not winning a lottery
does not doom you to a life of poverty you can
achieve financial success through hard work
The same principles apply to those who
won the ovarian lottery. It is not a guarantee
of success but it does significantly alter the
odds in your favour. Most of you reading this
have won a share in the ovarian lottery simply
by being born in T&T. Many have received an
even bigger share by being born into a certain
amount of wealth.
But winning in this lottery is more than just
where you were born. Who you were born to is
also important. Your nature and your nurture
impact the result that you see in the mirror
today. One of the key components of success
comes from the concept of deferred gratifica-
tion. The ability to sacrifice something today
for a better outcome tomorrow is touted as one
of the fundamental prerequisites for success.
In a financial context it speaks to the ability
to sacrifice spending now in order to save and
invest towards a future goal.
The marshmallow experiment is the classic
example of trying to identify the trait for de-
ferred gratification in children. Children were
given the option of taking the marshmallow
now or waiting, say, 15 minutes to get a second
one. The study concluded that those that wait
have a greater probability of success than those
that could not resist the temptation.
The factors that influence the ability to wait
are not just inherited it is also nurtured. Tradi-
tional society nurtures this through a concept
of a life after death and identifies things that
one needs to do in order to achieve a good place
in the after life. These activities gives rise to
reliable interactions amongst members of a
society which allow the mindset of deferred
gratification to take root.
Of course, religion is not the only way to
develop this mindset. In the modern world the
use and enforcement of laws and contract and
the building out of functional and transparent
institutions also fosters a similar mindset.
While we may have won the lottery in terms
of where we were born, we are doing precious
little with our winnings. We are systematically
destroying our institutions for personal gain.
Those that have benefited from the system are
caught up with self to the point where the en-
tire construct is not about giving, sharing or
uplifting but rather it is all about wanting more.
Warren Buffet and Bill Gates made their for-
tune but also recognised their good fortune and
have opted to give most of it away. Many other
wealthy people are doing the same. In their
view to whom much is given much is expected.
For many of us, especially after the self in-
dulgence that goes with Carnival, it is time to
reflect on what we have and how truly lucky
we have been. If we recognise that then we
will conclude that wealth is not something
to be flaunted but rather if we appreciate our
good fortune then it should be used to help
the broader society.
We can choose to pay it forward or to only
look out for ourselves. Either way, we must
appreciate that there is no free lunch and
somehow, somewhere we will have to pay a
price. The account will eventually be settled.
Ian Narine can be contacted at ian.narine@
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