06 Oct 2010

A Financial Riddle

All Posts 14 Comments

I was listening to talk radio when a commercial came on saying, “Do you know the 12 warning signs of a crumbling foundation?” (It was an ad for guys to fix your house.) I turned the radio off and chuckled, thinking that fear certainly sells products and services.

This then reminded me of someone who said that fear and greed were the two motivating forces in the stock market. I couldn’t deny the truth of this, even though it was deplorable. After all, greed and fear (as opposed to industry and prudence) are vices, at least for a Christian.

Then, in a moment of whimsy, I asked myself, “OK, what would it look like if investors were guided by love?” I couldn’t even imagine what that would mean, and I was just about to dismiss the question as absurd.

But then I remembered that an instructor had once told me (while taking a class), quite matter-of-factly and without irony, that a certain financial product could only be sold where there was love.

What is that financial product?

14 Responses to “A Financial Riddle”

  1. Paul says:

    wedding insurance?!

  2. Jacky says:

    Life insurance

  3. Sandre says:


  4. Marek says:

    What about life insurance?

    People buying life insurance for themselves show that they care about the people that will benefit from the policy.

  5. Connie says:

    life insurance?

  6. Bob Murphy says:

    Connie wins. Yes, when I was taking an insurance class (while working on my book with Carlos), the Kaplan instructor (who had been a life insurance agent) told us that you couldn’t possibly sell a policy without love. You were asking somebody (let’s say the husband) to pay money now, for a payoff that would only come after he died. So obviously that is a “bad deal” if he doesn’t put the welfare of his wife and kids above himself.

    • Doug says:

      Ah, but perhaps he’s just lazy and doesn’t want to work extra hard and save more money. Maybe he wants to spend more instead of saving more aggressively so he doesn’t need it.

  7. RG says:

    Sorry to be a stick in the proverbial mud, but people buy stuff all the time for different reasons. One may buy an object at point A for reason X and the same object at point B for reason Y. Couldn’t life insurance also hold the same objectivity? I could buy life insurance to give to the arch enemy of someone I absolutely loath. I could make the decision to purchase life insurance based on my own vanity: I want the money to go to a person or institution that would garauntee my legacy. I’m sure I could come up with a myriad of other reasons beside love (the definition of which is another debate) to buy life insurance.

  8. Mitchell Powell says:

    Or, to continue RG’s train of thought, one could buy life insurance to make someone think one loves them. Or one could buy life insurance as a demand-deposit contract because, as Jesus Huerta de Soto points out in Money, Bank Credit, and Economic Cycles, insurance companies have corrupted the original meaning of “life insurance” in order to participate in the credit-expansion process (English Edition, pp. 594-597).

  9. bobmurphy says:

    RG, that’s not a stick in the mud. That’s like a redwood in Yoda’s swamp.

    • RG says:

      …an Austrian craves not these things.

  10. Silas Barta says:

    Wait, Bob — isn’t the whole *other* point of your book that whole-life insurance also works from purely selfish standpoint?

    (I guess you could still be correct about term life.)

    • bobmurphy says:

      Right, the Kaplan instructor was not a Nelson Nash aficionado.

  11. Silas Barta says:

    No, I don’t have anything better to do today than criticize you. Why do you ask?