Think greed’s bad? Take a look at envy?

David MoonBlog

In the 1987 film, Wall Street, Michael Douglas’ character gives a speech at a shareholder’s meeting in which he proclaims that greed is good. The scene, based on an actual 1986 University of California at Berkley commencement address by Wall Street thug Ivan Boesky, quickly became a symbol of anything wrong within American capitalism.

While both Boesky and Douglas’ Gordon Gekko deservedly ended up in prison, greed generally gets a bad rap.

Greed, however, is entirely different from its destructive cousin, envy.

Greed is repugnantly destructive when it is unprincipled; envy is always destructive. Always. Even the origin of the word is evil. It derives from the Latin word “invidere,” which means “to hate” or “cast an evil eye upon.”

Envy leads people to buy cars and houses they can’t afford, in an effort to compete with or impress people they generally don’t even like. It inspires people to invest in things they don’t understand, simply because of rumors that someone else is getting rich owning it.

It is the spiritual equivalent of a rusting soul and the financial equivalent of a rusting balance sheet.

Envy is, as Charlie Munger noted, the only sin that isn’t any fun.

Ponzi schemes, lotteries and casinos all rely on envy—not greed—to attract victims. There is a reason slot machines make a bunch of noise or the government has a big press conference when someone wins: it stirs a cancerous reaction of “I want that, too.”

By contrast, virtuous and principled greed is the driver behind most societal advances. It’s why we have schools and hospitals and pension plans and collision avoidance systems on our new cars.

At its amoral core, greed is simply the logical selection of the course of action with the highest expected value. A greedy person never buys lottery tickets, because he understands that the expected value of each transaction is a 99.9 percent loss.

The envious person looks at the lottery as a way to acquire all of the things that society or genetics have unfairly withheld from him.

Envy is captured in Mark Twain’s observation that few men can stand prosperity—another man’s, that is.

Investing is a naturally competitive activity, attracting naturally competitive people. But there is a significant difference between competitiveness and enviousness.  

A greed-inspired person will accept gains that are smaller-than-average gains in a period if, as a result, he expects to avoid certain losses and enjoy larger long-term gains.

An envious person will purchase almost anything, including lottery tickets or shares of a silly, unprofitable company, if he thinks it will position him in some desirable way relative others.

And by trying to outdo others or reposition himself relative to others, the envious ultimately cedes control of his thoughts, decisions and his happiness to others.