I love this John Maynard Keynes Quote, though I don’t necessarily agree with the context in which he uses it.  However, I shall tip my cap to him because this quote has had broad-ranging and positive affects on my life. 

Keynes was an English Economist who worked in the British Treasury during World War 1.  He championed a monetary thesis, which at the time would had been considered to be a more liberal view of a governments role in managing the money supply.  It goes something like this:

A Nation’s optimal economic performance can be achieved by its government, deploying “economic mediating tools” to control aggregate demand.

I’m more of a Milton Friedman, ‘Monetarist Theory’ kinda guy, which is the belief that there should be controls on the amount of money in the system, but outside of that; let the ‘market’ be the arbiter of economic demand.

For a more nuanced difference between these philosophies, Investopedia articulates the contrast between Keynesian and Monetarist Theories this way:

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If both types of economists were equated to motorists, monetarists would be most concerned with adding gasoline to their tanks, while Keynesians would be most concerned with keeping their motors running. 

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Personally I think this John Maynard Keynes quote can have a dynamic range of meanings, not only monetarily speaking, but in so many life-related subjects as well.  For starters let’s look back at history and see how it can be applied during times of great economic strife. 

The Great Depression, forget about ‘Wants’

Today we live in a time where wants consistently outweigh needs.  There is so much opportunity today to have our ‘wants’ attended to.  The ability to have restaurant food delivered to our doorstep at 10 pm, or choosing a job simply for the ‘work from home’ option it offers are ‘wants’… or at the very least ‘prefers’.   

This hasn’t always been the case though.  It wasn’t too terribly long ago, when my grandparents were children, that World War II was winding down and the scarcity of things was ratcheting up.  Breadlines were normal, 1/4th of the U.S Working Age population was unemployed, and shortages in just about everything, suddenly caused the narrative to flip- Needs now outweighed Wants.  

In this case, the government’s reaction to the economic challenges after the War would be considered ‘roughly right’ by many of us.  Those of us by the way, who weren’t there at the time, get to judge ‘roughly right’ from the comfort of our own contemporary hubris.  While our judgment today, of how this situation was handled over 80 years ago may be a bit unfair, I think we can at least agree the decisions weren’t ‘precisely wrong’.  

Your financial future depends on ‘Roughly Right’.

Stocks, Real Estate, Crypto, Businesses, are all investments which if handled properly can positively impact our financial future.  Some of us seek FIRE.  Others want to build assets to give to charity or leave a significant family inheritance, while others simply want to live like a ‘baller’.  None of these choices are ‘precisely wrong’ but one or more may be roughly ‘right’er (made-up word) than another.  In a free society, we get to decide which is best for us, but we’re also relegated to live with the consequences of a poor decision.  

My ‘Roughly Right’ real estate investment.

My second investment property was this duplex in St. Louis. Missouri, which I bought in 2007.  It was located in a nice quiet area, with tree-lined streets and a diversity of people and property types.  My duplex was next-door to a single family home, and across the street from a six unit apartment.  Quite eclectic, I must say.

In 2007 real estate was hot, bank’s were giving out money to anyone with a pulse, and thankfully I happened to qualify.  

Most of us who are old enough can remember 2007, because it was the year before 2008….the year of the Great Financial Crisis.  As if, the covid financial collapse in the spring of 2020 or the current financial calamity are not ‘great financial crises’, but I digress.

Things were rolling along well in 2007, housing values were increasing and from my naive perspective, this was going to continue long-term.

But, then it didn’t.

Lehman fell, AIG became insolvent, and Bear Sterns went belly-up.  You know the rest of the story..

And my little duplex, well the value dropped precipitously, and the next thing I knew I was ‘underwater’.  

‘Underwater’ in real estate means you owe more than the property is worth.  I was so underwater, a snorkel wouldn’t have saved me.

I tried to sell it for the same $205,000 I bought it for.  But, so many buyers had exited the market during this time, that there were far less ‘greater fools’.  

I don’t mean any disrespect by calling any buyer a greater fool.  It really is a term used in the finance world.

Greater Fool Theory-States that their will always be a greater fool willing to pay a higher price for an already overvalued security due to his or her need or inflation.  Wallstreetmojo.com

There were however, the ‘bottom-feeders’ preying on many folks who were also ‘underwater’ in their loans.  Luckily I didn’t cross paths with them. 

I did end up selling my duplex but my ‘roughly right’ decision was to wait it out.  Fortunately, my tenants were both long-term, and were still paying their rent each month.  Two full years after the Great Financial Crash, I was able to get out of my duplex at about the same price I had paid for it 3 years prior.  

Call that ‘roughly right’ or just plain lucky.

Most people can look at their investing history and realize they’ve made a few ‘roughly right’ decisions in the past.  It’s the ‘precisely wrong’ one’s that will haunt us by setting our goals back years or even decades.  Thank you John Maynard Keynes for this great quote, I hope I’ve done you a ‘solid’ by using it in a different perspective.