King Cobra Farming

It’s been a weird couple years and there have been some unsettling stories about things like COVID-19, Murder Hornets, etc., and even as we’re moving past those bad headlines, I have my own scary BREAKING NEWS to release:

The town you live in is being overrun by King Cobra snakes.

Yes, you read that right…. and not ones like this who are just trying to get a drink on a hot day:

The town is flooded with mean ones like this who are a big problem for people like you and me:

Okay, so hang with me for a second on this, there’s a lesson, I swear.

Anytime King Cobras like this invade your town it’s bad news.

In fact, it’s so bad that the mayor stands up in the town square and proclaims “This is a BIG problem. We will pay $50 for every cobra you catch and bring to me.”

Sounds like a reasonable way to deal with the problem, right?

For a while, you go hunting cobras and catch a few, make some money, and feel pretty good about your new business.

One day you find a cobra who is sitting on a nest of 5 cobra eggs. Being a savvy businessperson, you allow those eggs to hatch so you can bring the mayor 6 total cobras and collect $300.

Then you get an idea: “What if I bred cobras at my house?” You could earn the money and not have to spend the time hunting the snakes.

You’re smart. you do it.

The town originally wanted less cobras and now they have people like you breeding them. The solution to the problem has now become part of the problem.

This is Goodhart’s Law….The cure helping to eventually add to the original issue.

From a financial perspective, one place I see this principle take hold is when the answer to all of our money problems becomes earn more.

When we make a goal as simple as “get more wealth” or “grow my income” this is akin to “bring me dead snakes for $50” and we run the risk of an adverse consequence emerging while we’re progressing toward that goal.

In the absence of rampant snakes running around town, many of us start out with an original urgent problem.

That problem = we need some money to pay for the things we need.

If this is our problem, then our solution naturally becomes earn more money.

Earning more money is a good thing, but it also comes with temptation to buy fancy cars and houses while getting accustomed to living a certain way.

The term for this is lifestyle inflation. This is where we make more money but then just end up needing more money to keep pace with our evolving wants. Lifestyle inflation is normal, but we need to keep it in check if we want to make progress.

You see, without a plan getting more money can lead to a bigger problem. That problem is that we may now become dependent on an even greater sum to keep our lives afloat.

(aka. More Snakes)

Goodhart’s Law has arrived and the solution has added to the problem.

Unintended consequences happen on the path to wealth and that’s okay. To mitigate these, my suggestion is to try and adopt goals that aren’t tied specifically to dollars but instead are tied to intent.

My favorite financial objective of all time is when clients tell me they strive to do what they want with whom they want for as long as they want.

Sounds great right?

If you remember what you’re trading by inflating your lifestyle then you might think twice.

That’s all I’ve got for this week. Below is a drawing I made of a Cobra wearing a crown.

Onward,

Adam Harding | CFP | Advisor | Owner @ Harding Wealth Inc. | Smartvestor
Mobile Number: 480-205-1743

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