Why Young Ones Become Old Ones

Actors seemingly work forever. It can't always be "for the art, dear boy".

Investment advice alert

Friend,

As a stubborn bastard someone with a high internal locus of control, I’m not great at taking instructions. The Lovely Penelope (TLP) sometimes gets through the cranium but must persist. Fortunately, persistence is one of her many admirable qualities.

An example of my pigheadedness: I employ an external compliance consultancy to ensure I abide by the three million or so rules my regulator, The Financial Conduct Authority (FCA), has etched onto stone tablets that, laid end-to-end, could reach Berwick and back.

The consultancy audits my business annually and gives me suggestions for improving it. I do all the essentials well and am extremely compliant, but the consultancy nudges me to do other non-essential stuff that would be “nice” and “please” the regulator, which would apparently signal “best practice” or some other Horlicks.

To which I always say, “No, not doing it.” And as these words leave my mouth, a tiny part of my brain screams, “You’re paying for their advice. Take it, you complete moron.”

Influencers and all that

We are all wired differently. Many of us are open to new ideas and can take suggestions and run with them. This can be a good thing. However, it can be dangerous in a world where both old and new (social) media give seemingly everyone a loud, persistent voice on almost anything.

Especially where bad ideas and your money intersect.

I am unlikely to be influenced by financial pearls of wisdom uttered by an actor-comedian in the comic money section of a Dying Legacy Media newspaper (paywall)¹. Others-God help them-may be more susceptible.

Below is a screenshot from the offending article in which former Young Ones star Ade Edmondson is “interviewed” on his thoughts on money and investing. In his defence, he comes over as a decent egg². Just not someone whose views on money should be taken without a shedload of salt:

There is an awful lot of nonsense to unpack here

There it is again, hiding in plain sight

Central to the piece was Mr Edmondson’s cataclysmic misperception that pensions and investments are rip-offs and property is where you go to make money. He provides no evidence for the former and seems oblivious to how the holding time fallacy (the fact that we own properties for years and years) contributes to the latter.

Also, property is great because it’s “an actual thing.” So is syphilis, and I don’t see a mass clamour to own some of that.

Mr Edmondson’s house has doubled in value in 15 years. The holding time fallacy writ large: a compounded annual return of just 4.7%. As his “best investment”, that’s distinctly unimpressive. Granted, it doesn’t include the potential rent that could have been earned if the property had been let to tenants. But neither does it allow for wear and tear, renovations, mortgage interest repayments, Council Tax and all the seemingly endless bills that come with running a household.

What could his pension plan have achieved over that time, even allowing for “someone is screwing you over”? If he had invested his pension solely in The Great Companies of The World (GCOTW) via a massively diversified, low-cost global equity fund, he could have seen a return of around 11.9% per annum³.

Let’s adjust for an estimated ongoing annual advice and fund cost of 1.5%. We get an annual return of 10.4% over the last decade and a half. The result? While Mr Edmondson’s property doubled in value in 15 years, his pension fund would have more than quadrupled.

This ignores any tax relief he may have gotten on the way in. For a higher-rate taxpayer to get, say, £10,000 into her pension, her net outlay is just £6,000. Think about that: you can turn £6,000 into £10,000 (almost) overnight without doing a thing or risking anything. Rinse and repeat, year after year, invest the money sensibly, and lo: that distant thing on the horizon winking at you is financial salvation getting ever closer.

Mr Edmondson’s worldview is based on a disastrous misperception about pensions/investments, a misperception completely unchallenged in the article.

Just a bit of journalism, for once

Annoyingly, the “journalist” writing this piece is more of a note-taker. There is zero back and forth, with no pushback. Who is screwing you over? When? What spurious charges? Given this puff piece is sitting in the comic money section of what was once one of the world’s great newspapers, perhaps you’d expect the fallacies coming out of Mr Edmondson’s mouth to be questioned.

After all, the interweb gives even the laziest hack access to endless stock market information for free. Surely, he or she goes into these pieces armed with such information, ready to challenge lazy assumptions and, in so doing, educate the reader.

But there’s nothing. And so another misperception continues its transmogrification into actual fact (because with money myths, reality is what you make it). Worse, Mr Edmondson has passed the poison on to his grandson, who in turn is now likely to invest in property over a low-cost pension because “granddad”.

Perhaps decades ago, Mr Edmondson’s father did him the same disservice. The cycle repeats, and the poison gets passed on.

It’s not about making money for its own sake

“Yes, but Mr Edmondson’s happy and not obsessed with making more money.” I hear you.

I’ve worked with a few people only interested in making money. They were invariably miserable because “enough” is never “enough,” and we soon parted ways. The accretion of lucre for its own sake is criminal on two counts: like Keir Starmer, it’s sad and boring.

Money has one role: to enable choice. If you have money, you can make choices that align with your values. If you don’t have money, you’ll probably find choices made by others dictate your life. That is my idea of Hell.

Creatives like Ade Edmondson seem to suffer more from expensive money misperceptions than most (based on no empirical evidence whatsoever). Maybe it’s the right-brain, left-brain, Apollo-Dyonisius thing going on.

Perhaps not coincidentally, many actors seem to work forever. Some of this is because of “their calling,” their love of the craft. More is surely because they made poor money decisions based on misperceptions.

That’s fine. Let them crack on. Just don’t be influenced by their financial pearls of wisdom.

1. Thanks to Kusal Ariyawansa for his LinkedIn piece on this

2. I recommend you listen to his Desert Island discs appearance from last year, in which he breaks down when describing the death of long-time friend and collaborator Rik Mayall. Very moving

3. MSCI All-World Index. Source: Dimensional Fund Advisors (sic)