Tribes are fun. It’s why sports are so popular. We identify with a team.
It’s your team vs. my team. Or it’s our team vs. the world.
We call them our teams but we don’t play on the team or have ownership. We just watch the games.
Why they’re our team is rooted in something, usually emotional, but it’s not by ownership.
I’m a long suffering New York Jets fan because I grew up on Long Island. It’s the part of New York that loves underdog teams and stepping on rakes. In sports, we’re the Charlie Brown when Lucy is holding onto the football. All my friends were Jets fans, misery loves company after all. (and yes, also a long suffering New York Mets fan too – the two go hand-in-hand)
Tribes are fun when they involve entertainment. They make the experience a little richer.
They become dangerous when they involve something more significant – like politics. Or investing.
Tribalism in Investing
It’s easy to see tribes in sports, there are logos and uniforms. It’s easy to see tribes in politics, there are hats and pins.
It’s less obvious in other areas, like investing. But the signals are there.
Take bitcoin for example. People who love bitcoin, LOVE bitcoin. (they have laser eyes, remember those?)
They talk about how cryptocurrencies, especially bitcoin, are going to fundamentally change money.
Fiat currency is dead, love live bitcoin!
They become volunteer evangelists. Shouting from the rooftops – “Get more bitcoin!”
They are the loudest when bitcoin is at a high price. They get a little quieter when the price falls. It’s natural to be more enthusiastic when your “team is wining.”
We just went through a “crypto winter,” which is an extended period of time when cryptocurrency prices and trading volumes go down. When prices go down, people aren’t as excited about an asset. When your team isn’t as good, people are less enthusiastic about them.
But this isn’t a post slamming bitcoin. I’m neither pro or against bitcoin (I dislike it as an investment, but not as a technology). I think it’s a wonderful creation because it makes us think differently about the world.
But, in many ways, it’s a lot like gold.
Both are meant to be a store of value, a medium of exchange, and a unit of account. They’re also not controlled by a government (theoretically) and scarce.
Why is gold over $2,000 an ounce? It’s less useful than other precious metals but has value for historical and cultural reasons. As an investment, gold is more socially acceptable than bitcoin because it’s been around longer. Fast forward two hundred years and will people scoff at the yellow stuff?
Just as you have bitcoin evangelists, you have gold evangelists (known as goldbugs). Those are folks who hoard gold and want to go back on the gold standard.
Bitcoin is, in many ways, a modern digital version of gold.
Why Is Tribalism Bad?
You can invest in gold. You can invest in bitcoin. You can invest in whatever you want.
But the danger comes in when you identify as part of that tribe.
Don’t let the investment become your identity. Some people are so into bitcoin that it becomes part of their identity. Just like you may feel a certain type of way about people who run marathons or do Peloton or Orangetheory, people will feel the same way about you.
When you join a tribe and, sometimes, you sound a little too enthusiastic for people who don’t know or understand it. And when things go south, it can be hard to come to grips with it because it’s now become part of you.
Sometimes you join the tribe to feel a sense of belonging. It’s fun to be part of a movement, even if there isn’t really a movement.
Is bitcoin a movement? Only because the people in the movement believe it to be true. Are you really changing the financial system? Would you feel that way if bitcoin was worth only $1,000 and not over $50,000 a coin?
I have a Peloton and I enjoy the classes. I don’t think it’s a cult probably because I’m not in the cult. There are some folks who are really into it. To outsiders, it may seem like they’re in a cult.
To me, it’s just a bike and a treadmill with a big TV and really fun classes that have gotten me to run and bike more than I otherwise would have. I don’t invest in Peloton stock, I have a few shirts but I’m not always decked out in their gear, and for me it’s a piece of fitness equipment – not my identity.
While I do feel like part of the tribe, it’s not my identity.
You close your mind towards alternatives. If you take someone who is fervently a supporter of low cost index funds, they will never understand why someone would invest in a private equity fund.
But private equity funds exists because they cater to something different.
To understand it, you have to decouple your identity from the investment. You can be an index fund investor but also put money in a private equity fund doing something different because you want to do something different.
I’ve invested in a private equity fund. It’s run by someone I’ve known for years. I respect him both as a person and as an investor because he’s smart, careful, curious, and trustworthy. It’s a bet on him but also on the idea, which I found fascinating. I also believe in the thesis, because it’s been proven before.
The vast majority of our money is in index funds at Vanguard. I’ve written a million times about how we have mostly index funds at Vanguard and bunch of dividend stocks with Ally Invest. That’s where the bulk of our investments are but we have made investments in other non-index funds.
If I identified as a low cost index fund investor and that I don’t ever need anything other than a simple three fund portfolio, it becomes hard to review other investments with a clear eye.
Why would I invest in a farm on AcreTrader? Why pay them an annual administration fee of 0.75% each year when I can pick a Farmland REIT and pay less?
Don’t couple your emotions to the performance of the asset. When I started my first personal finance blog, I told all my friends because I wanted them to visit it. They didn’t. But a few did ask me about my “little website” in a way that made me feel a certain type of way.
If you couple your identity with an asset, your emotions will be tied to its performance. If people know you’re hardcore into bitcoin, they’ll needle you when the price is down. There’s a reason everyone knows what schadenfreude means… it’s because it’s their favorite feeling.
More importantly, when you couple your emotions to an asset, it becomes harder to make decisions with a clear head. That’s bad.
How Can Tribalism Be Good?
Tribalism isn’t all bad. Eons ago, tribes were necessary for survival. You were part of one tribe and one tribe only. To be ostracized meant little chance of survival.
Today, it’s important to be a part of many tribes.
Don’t allow one tribe to dominate your identity. I identify as an index fund investor but I also dabble in other areas for fun. I don’t own any bitcoin but I’m not in the “cryptocurrency is a scam!” tribe either. All things, especially tribes, in moderation.
Also, don’t be the most extreme member of your tribe. No one will tell you that you’re a little too extreme, but they will distance themselves from you. And sometimes the world will tell you in its own way.
We’ve all heard of marathons and some of us think marathoners are extreme. And then there are marathoners who think ultra-marathoners are extreme. Then there are the races billed as the toughest races in the world and those are the ones that some ultra marathoners think are insane. There’s always a more extreme version of the thing you’re into.
Then there are those who want the most extreme races that they start running poorly organized races whose only claim to fame is length and extreme-ness. That results in tragic stories like this one from Gansu, China.
It usually ends badly.
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