Aristotle, the classical Greek philosopher, once said:
Envy is pain at the good fortunes of others.
According to Bertrand Russell, envy is one of the fundamental causes of human suffering. This is because we tend to compare our situation to that of other people in our peer group and no matter how well we are doing, if other people are doing better, we feel discomfort.
However, envy can also be credited as one of the driving forces behind human progress. We compete harder when other people are ahead. We fight for equality. For this reason, envy could have been the motivating factor behind the rise of democracy. Warren Buffett puts it this way:
It’s not greed that drives the world, but envy.
For better or worse, this is probably true. This post will focus on how envy and jealousy cause us to act irrationality.
Suffering for no reward
Charlie Munger explains the irrationality of envy this way:
The idea of caring that someone is making money faster is one of the deadly sins. Envy is a really stupid sin because it’s the only one you could never possibly have any fun at. There’s a lot of pain and no fun. Why would you want to get on that trolley?
In a rational world, all that should matter is if we achieve our individual goals. But we do not live in a rational world. Not only do we let the success of others affect us, but we actively wish misfortune on them. The Germans have a word for this, “Schadenfreude”, which literally means “harm-joy”.
None of this makes any sense because, in the end, envy is futile. There will always be someone better than us. Seneca put it best:
What difference does it make how much you have? What you do not have will always amount too much more.
Kantian fairness tendency
The majority of people in a society base their moods on how well they are doing in relation to other people in that society. Study after study has shown this. We even reject rewards if they appear disproportionate to that of others. Even animals show this tendency:
During times of increased inequality, like today, this effect is magnified. The anger at the 1% is natural and shouldn’t be easily dismissed. But some people take a “let them eat cake” stance which argues that people should be appreciative of what they have. It is undeniable that standards of living have increased overtime; just look at the internet. But this argument completely ignores the fact that we do not measure our lives on an absolute scale. Instead, for better or worse, we measure our lives on a relative scale.
As it relates to investing
Charles Kindleberger, in his book Manias, Panics, and Crashes, argues that:
There is nothing so disturbing to one’s well-being and judgement as to see a friend get rich.
When we see other people making a fortune on internet stocks or real estate, we are naturally inclined to join the party. But “what the wise man does in the beginning, the fool does in the end”. Charlie Munger explains it this way:
We have a higher percentage of the intelligentsia engaged in buying and selling pieces of paper and promoting trading activity than in any past era. A lot of what I see now reminds me of Sodom and Gomorrah. You get activity feeding on itself, envy and imitation. It has happened in the past that there came bad consequences.
We shouldn’t envy someone who made a fortune by buying a tech IPO or a lottery ticket. Instead, what we should do is look for investments that make sense to us individually and completely ignore what is happening next door.
Envy and jealousy are dangerous tendencies. They can affect our judgement and cause us undue suffering. Worse, they can cause us to wish misfortune upon others. Envy manifests itself in all parts of life, but for our purposes we focused on investing. The fear of missing out, while others get rich, can cause our judgement to wane.
I’ll close with this wisdom from Munger:
Missing out on some opportunity never bothers us. What’s wrong with someone getting a little richer than you? It’s crazy to worry about.