Impatience, Greed, and Fear and the Financial Crisis

Yesterday afternoon as I was sitting in the waiting room of a doctor's office, I picked up a March 2008 issue of Forbes magazine. While going through it I came across an article (I can't remember the author) that made a positive case for impatience and greed. Today, before I entered the blogosphere, I found an article, from the New York Times on my computer's home page written by Warren Buffet about when to be greedy and when to be fearful.

In the Forbes article the author said that both impatience and greed are, by themselves, good to the degree that, without them in society, there would be little progress. Impatience to have something better drives innovation and drives us to take actions that might improve our lives. Greed is what drives us to take actions that will benefit us financially. In other words, if we were to simply maintain the status quo we would never see never see any improvements in our lives.

Unfortunately, as we have seen in the recent months, unchecked impatience and greed worked poorly together to cause our current financial crises. People who were impatient to have a better home, took on loans they could not repay and the greed of the lending institutions that made all of those bad loans simply got out of hand and the bottom fell out of the financial market. When that happened, and it's continuing today, fear set in among many investors and they sold their stocks which further depressed the financial markets.

Warren Buffet said today he is now buying stock because he said, "A simple rule dictates my buying: Be fearful when others are greedy, and be greedy when others are fearful. And most certainly, fear is now widespread, gripping even seasoned investors." So, he says he is using other peoples' fears to his advantage because he can now buy stocks at a bargain because fear has driven the prices down. And, he says, "Fears regarding the long-term prosperity of the nation's many sound companies make no sense. Most major companies will be setting new profit records 5, 10 and 20 years from now." So, to Warren Buffet greed, at least in the circumstances he has described, is a good thing.

I think the important thing to be gained here is that controlled impatience and greed are motivators that move us forward and are good for society. Fear, on the other hand, is unhealthy for the fearful, and, in the case of the current financial crisis, has magnified to the point where it is unhealthy for all of us. And I think what Warren Buffet is really telling us is that it's not rational for us to be fearful, that the markets will come back, and that our fear will only contribute to the wealth of others, like him, who will take advantage of it.