Comments on: What Do Ancient Spice Traders and the Modern Financial Industry Have in Common?

By: Bret @ Hope to Prosper

Bret @ Hope to Prosper — Thu, 01 Apr 2010 05:34:19 +0000

@JakeIL7,

What I meant about the post office is that snail mail is finally starting to become obsolete. Between email, billpay, direct deposit and online greeting cards, paper mail is quickly being replaced. It’s just too slow, too expensive and too inefficient. Since I went to online billing, 95% of my mail is junk that I have to recycle.

Future generations will marvel that we actually wrote on pieces of paper and put it in a box. Then carriers drove around in carts and picked it up to put it in other people’s boxes. It’s like the Pony Express, the stage coach or Western Union’s telegram service. The writting is on the wall.

I don’t think the Post Office is bad or that it should go away. But, it will have to accept a reduced role in the future. And, if they don’t start to compete seriously with FedEx and UPS for packages, they may be in for a world of hurt.

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By: andymc

andymc — Mon, 29 Mar 2010 22:15:52 +0000

“Knowledge is power” so I guess lack of knowledge leaves you weak/powerless, able to be manipulated, etc..how true.

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By: Chett@5k5k.org

Chett@5k5k.org — Mon, 29 Mar 2010 21:39:36 +0000

Just a note regarding Dave Ramsey’s endorsed local providers with “the heart of a teacher” (Re: comment #1.) In the world of the internet, it is called affiliate marketing. About five years ago I called one of the ELPs when I had some interest in the profession of financial planning. One of Ramsey’s ELPs referred me to a multi level scam operation that fronted themselves as providing financial counseling, but really re-wrote mortgages for cash out equity loans to pay down a little debt and purchase really expensive insurance “investment” products. After that experience I don’t have a lot of faith regarding the “ELP” heart of a teacher concept. It seems like an easy way for Ramsey to use his brand and make some money referring financial “professionals” in your area. I’m sure there are some good ones on his list, but I’m not buying my cinnamon from Ramsey’s website. I’ll look for it on my own.

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By: Crystal

Crystal — Mon, 29 Mar 2010 19:02:14 +0000

The same thing is starting to happen with college educations. Why pay universities so much when knowledge is free if you chase it.
(for SOME professions, not all. I still demand to see a diploma on my surgan’s wall!)

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By: Daron

Daron — Mon, 29 Mar 2010 17:02:47 +0000

Let’s see, a lucrative money supply (high brokerage commissions) is vaporized due to technology, yet the lion wants more money. So undue risks are taken without house money (no downside), and we are all left holding the bag.

Cause and effect? Maybe, maybe not.

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By: Patrick

Patrick — Mon, 29 Mar 2010 14:34:31 +0000

Great post! Information will always sell, and often for a great price.

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By: JakeIL7

JakeIL7 — Mon, 29 Mar 2010 14:16:43 +0000

@Brett: The post office? I don’t see that. They provide an actual service (get your stuff from Point A to Point B) and not just control over information. However, you did forget to add Realtors to your list.

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By: Bret @ Hope to Prosper

Bret @ Hope to Prosper — Mon, 29 Mar 2010 05:15:50 +0000

It’s not only the stock brokers who have been making use of flying snakes. Travel agents, the post office and classified advertisers have all been recently disintermediated by the internet. I suspect real estate agents and mortgage brokers will be next.

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By: CB

CB — Mon, 29 Mar 2010 04:13:49 +0000

I am taking what I can from Phil Town’s books. We do have the basic information we need at hand via the internet. Just takes the will to manage one’s hard-earned funds (who has more of an investment in it than yourself) and some work.

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By: Smarter Spend

Smarter Spend — Sun, 28 Mar 2010 20:18:57 +0000

I don’t think you can compare the Arabic traders to brokers today because in the old days, information wasn’t available to the Western world even if people wanted to find it. Nowadays, there is so much information available, all a few clicks away.

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By: StackingCash

StackingCash — Sun, 28 Mar 2010 07:44:46 +0000

I like this post however I would have thought it might lead to more insight on how the financial industry plows so much money into advertising. Make sure you read those financial disclaimers and understand the risks regarding investing in ANYTHING. I was suckered in mutual funds, stocks, etc. Good thing I avoided the housing bubble…

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By: Chett @5k5k.org

Chett @5k5k.org — Sun, 28 Mar 2010 03:38:05 +0000

I can’t take the credit for the Dune reference, that was J.D.’s creative subheading.

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By: Paul@Quantisan

Paul@Quantisan — Sun, 28 Mar 2010 03:11:17 +0000

Still, not every Roman trekked to India every time they need spices.

Likewise, it’s true that trading is much more accessible now. But it doesn’t mean everyone (or even most people) should become a DIY investor.

This article is an interesting read, but I’m afraid it can be dangerously misinterpreted as well.

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By: EscapeVelocity

EscapeVelocity — Sun, 28 Mar 2010 02:48:26 +0000

I’m pretty sure there are still flying snakes involved.

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By: Steve

Steve — Sun, 28 Mar 2010 02:24:51 +0000

Love the (unstated) Dune reference – He who controls the spice controls the Universe.

Great site! Keep up the great work.

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By: J.B

J.B — Sun, 28 Mar 2010 02:24:39 +0000

You are absolutely right that today the need for a broker or advisor to make your trades at a high cost is totally unnecessary, but the trade in FX, Options and ETFs is truly set up to benefit the producers of these instruments and not the investor. So while stock investing has become democratized not all of modern finance has.

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By: Cleve

Cleve — Sun, 28 Mar 2010 01:46:04 +0000

Nice Dune reference!

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By: Dangerman

Dangerman — Sun, 28 Mar 2010 01:19:11 +0000

“Excellent post- the best one from the “guests”.”

Agreed!

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By: Neel V Kumar

Neel V Kumar — Sat, 27 Mar 2010 20:37:22 +0000

Ron (#2) said it best – information is power. Unfortunately, many of us are unable to wield information even when it is readily available – because we cannot understand the lingo.

Thanks to this blog, my financial education is continuing…

P.S. In York, England, there is a building that was built in the 15th century whose rent was 15 peppercorns a year.

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By: Jan

Jan — Sat, 27 Mar 2010 20:17:06 +0000

Excellent post- the best one from the “guests”.
The world is changing quickly BECAUSE people are slowly seeing that they can care for themselves. Now to get the lawyers out of the middle (after just spending three months and several thousand dollars to settle my MIL’s very meager estate).

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By: Ron

Ron — Sat, 27 Mar 2010 19:56:43 +0000

The moral of the story is that information is power and you shouldn’t allow “conventional wisdom” to dictate your beliefs and actions. There are quite a few industries that rely on the supposed ignorance of the masses — healthcare, government, construction come to mind. The fact is, there is very little information out there that isn’t readily available via the web.

That’s why the Internet needs to be left alone by governments.

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By: DreamChaser57

DreamChaser57 — Sat, 27 Mar 2010 17:28:45 +0000

Loved this post Chett, fantastic job! One of the reasons I found the post so intriguing is because prior to reading the post I had not heard this historical account of the spice trade – very mysterious and thought provoking.
I recall my Kindergarten teacher having what I believe is an old English proverb on her desk on a huge poster board – “Give a man a fish and he’ll get for a day, teach a man how to fish and he’ll eat for the rest of his life”. In my view, the financial industry is built on just giving men fish which results in every time they get hungry they need to go back to a ‘professional’. People can be lazy – some of this laziness is understandable the prevalence of dual income households, grueling schedules, overleveraged incomes, and sedentary lifestyles -all of these things can contribute to a person being overworked and perpetually stressed out. Because of this people want to abdicate control of their finances, pay someone a check, avoid learning about personal finance and hence assign accountability to the ‘professional’. Most professionals have a skewed perspective, and multiple conflicts of interests arise because of the profit margin, and commissioned sales. They are motivated by their check and not your fiscal security.
As tragic and unfortunate as the Madoff fiasco was – some many investors did not question anything; they never wandered why they did not have online access, etc. It gets to the point that you do not want to disturb, burden, or question the professional because you do not want to feel or look stupid – its your freakin’ money.
I believe The Millionaire Next Door had a story about a multi-millionaire screened advisors by asking them to show him their portfolio, and balances in their accounts – the advisors were horrified they felt completely confident in asking someone else to entrust their hard earned funds into them but recoiled at the idea of demonstrating their professional competence my showing how they are managing their money.
I believe most American households are a very long way off from even needing a professional. There are readily accepted personal finance benchmarks that everyone needs to meet and until you meet those professionals are not necessary in my view. ie., 6-8 months emergency funds, maxing out retirement accounts (Roth /& IRA), pay down all debt (including / excluding the house), college funds for kiddies. When my household gets to that point, we may go see a certified fee only professional, with “the heart of a teacher” (stole that from Dave Ramsey)

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