Recently while sorting through some paperwork, I came across a transaction statement from a mutual fund company. The transaction? A small, inactive account had earned a penny, and the penny was automatically reinvested - thus, the statement. I wondered for a moment why a sensible company would spend their time and resources (and a stamp) on a transaction statement for a measly penny - particularly within a week of the end of the quarter, when the company would issue regular quarterly statements. There's gotta be a law protecting the consumer from the evil mutual fund company, I thought to myself, to shoehorn them into maintaining such an extraordinarily inefficient business practice.
How much time might various people have spent producing, processing, posting, and delivering this statement before it arrived on my desk for reviewing and filing? Between the costs of printing, postage, and handling labor, I'd estimate that the total costs incurred by this penny reinvested would add up to about a dollar. A little of that cost came out of numerous unsuspecting pockets, and I wonder if anyone else noticed or thought about it. Most investment accounts are considerably larger - many may be large enough to cover the costs generated by automatically issued transaction statements, but I'm sure many are not. Most investors would probably cash in an investment account small enough to be eventually eaten up by yearly maintenance fees - fees no doubt due in part to mandated types of inefficiency forced on companies by bureaucrats to "protect the consumer."
Several years ago, one of my co-workers seemed heartily incensed over the fact that his elderly mother had received a threatening letter from the IRS because she had underpaid her income taxes by a dollar. How many tax dollars might it have cost to put the fear of government into a frail little old lady for making a small, simple and unintentional error? Perhaps $10, perhaps $100 to pay various clerks who process the paperwork, the person who examined her tax forms closely enough to discover the inaccuracy, and the postman? A simple and polite request for the dollar would have cost as much to produce, but states don't thrive on polite requests - or they might be deluged with profusely apologetic thank you notes from civic minded little old ladies accompanied by tins of cookies, and "a little extra to make up for the inconvenience."
How much does it cost to prosecute and imprison victimless criminals like prostitutes or pot smokers, or to harass drivers who refuse to wear seat belts and parents who choose to home school their children? Where do politicians get the insane idea that society will be made safer by canvassing society with so many rules that nobody obeys or even keeps track of them all, and any random person may be innocently guilty of some unsuspected sort of convenient criminal activity if scrutinized narrowly enough? The more criminals that walk amongst us, the safer society will be… what kind of retrograde logic is that?
In essence, government as an entity seems to represent the sum total of all our ossified good intentions towards each other. None of us seem to want to recognize our personal fallibilities, so we keep ourselves busy recognizing and remedying everyone else's, all for their own good and "the good of society." We create imperfect and petty minded visions of cynical and self-obsessed utopias, and sally forth to take the world into our arms - by force, if need be, in pursuit of ideals. Yet the world seems to shrink from our passionate embraces, snub our kindly invitations, and spurn our sincere advances… gee, why is that?
Why do so many people believe that impoverishing the individual benefits the collective - or weakening all the individual parts creates a stronger whole of society - or that giving governments greater powers does anything but lessening people's power? I know many intelligent and warm-hearted people who still believe that government can best protect them by depriving we the individuals of the right to self-defense - as if gulags and gas chambers seem preferable risks to tolerating the practice of responsible arms ownership.
Once, years ago, I recall a conversation with an extended family member that veered off in a political direction, when I commented, "I have all sorts of solutions for the world's problems but nobody ever asks me." As I said that, I caught myself, and the underlying arrogance implicit in the assumption that I alone could solve the world's problems - that became an AHA moment for me in retrospect, as I began to realize how typical and even fundamentally universal such hubristic and absurd thinking seems among humans.
Now, I no longer aspire to solve the world's problems - then and there, it finally dawned on me that my perceptions had become a world problem, and suddenly I had my hands full of the one world problem that I might manage to solve - if I worked diligently at it.
Bottom line here: I'd like to invest my pennies in ways that enrich me - without making the world any poorer, or any less free. When the costs of a shrinking investment come directly out of an investor's pocket, he learns to pay attention to it without contributing his few cents to the world poverty level. Sadly, these days a conscientious investor might feel too preoccupied with relieving world poverty to notice his significant contributions to it, or appreciate their tragic irony. Small wonder if people don't trust themselves with custody of their retirement accounts anymore… it seems popular to believe that money is best handled by people with the least interest in preserving it. That's economic nonsense, and voodoo compassion. Perhaps it makes better economic sense to drop a penny into a wishing well or flatten it on the railroad tracks than to reinvest it these days.