For anyone who has been out of the loop, there are a number of acronyms and memes that have popped up over the past decade that help commentators to capture contemporary zeitgeist. One of the most popular is FOMO – the Fear Of Missing Out. The basic idea here is that other people are doing something (having fun, getting rich, cheating the tax man) that others want to get in on.
Getting in on things is all fine and well, provided they are legal. Many aspects of FOMO are indeed legal and it should be obvious that there are social risks associated with wanting to do things that are not. The thing to note is that there’s strong social pressure to participate – largely because there is some form of social proof that makes it seem as though everyone else is doing it, too (and getting away with it). If there’s one thing that upwardly-mobile people hate, it’s the notion that they are not ‘keeping up with the Joneses’ when they quite easily could be – if they only did whatever it was the Joneses are doing to give them the status / income / happiness edge they have in the first place.
Of all the possible examples of FOMO, getting rich by playing the stock market may well be the most insidious and the most common. Anyone with seed money can do it. No matter how rich or poor you are, if there’s a sense that you can make (say) an “easy 15%” on your money by investing in security X or product Y and that Betty and Bob in marketing both did it (and showed you their quarter end statements to prove it), the pull is often irresistible. This can sometimes be fodder for something called “greater fool theory”. Most real investors say “buy low; sell high”, but it needs to be noted that there is a segment of the population that makes money by using the principle of “buy higher; sell higher”. As long as there’s a ‘greater fool’ out there who is prepared to pay even more than the outrageous price you paid for something, you can make money by paying an outrageously high price to begin with. This is a bit like a game of chicken or musical chairs. At some point, the market runs out of ‘fools’. In finance lingo, that’s when the bubble bursts.