Yeah, I said it. I’ve had enough of financial pornography. I’ve had enough of the bait and switch, the smoke and mirrors, and the blatant misrepresentations. The gloves are coming off on this one, because I can’t be silent any longer.

To start, you might be wondering, “What is financial pornography?”

Financial pornography is the normalization of exceptional financial circumstances in order to gain attention. Financial pornography takes the outliers of the personal finance/investing world and makes them seem ordinary for the purpose of attracting more eyeballs.

Just like real pornography tries to make specific sexual fantasies seem more common than they are, financial pornography tries to make specific financial outcomes seem more common than they are. The goal of both is to make the exceptions look like the rule.

Consider an article I read recently about a young woman living in Manhattan while making only $25 an hour. Since we all know that Manhattan is expensive, this kind of headline is tantalizing.

How does she live on so little? Does she have a savings secret? Yes she does. It’s called her parents who pay her rent, student loans, and phone bill for her.

You feel a little let down, don’t you? But that’s just softcore financial porn. Savings tips? Lol. Amateur stuff.

If you want some real financial pornography we are going to have to go find something a bit more…exhilarating. Consider this headline:

Wow, 10 rules and I am a millionaire? Not quite. After doing a little research, I discovered that this 26 year-old became a millionaire through real estate investing and the use of “100 percent financing.” Too bad leverage wasn’t one of his 10 rules.

Oh, do you feel tricked? This is the nature of financial pornography. It seduces you with the idea of something more, but, ultimately, provides nothing of substance.

Though all of the examples I have covered thus far are related to personal finance, the investing world has its fair share of financial pornography as well. Consider this tweet I saw recently:

What this tweet fails to mention is that to turn that $1,000 into $1.2 million you would have had to avoided your fear from selling on the downside and your greed from selling on the upside for over two decades.

Just look at how a $1,000 investment in Amazon since its IPO would have fared over time (Note: the y-axis is a log scale):

During the DotCom Bubble, the $1,000 investment would hit its peak on December 10, 1999 at $54,684. From this high it would eventually decline 94.4% to be worth only $3,047 on September 28, 2001.

It wouldn’t reach its December 1999 highs again until October 23, 2009, nearly a decade later.

As you can see, holding Amazon since its IPO was not an impossible task, but the number of non-Amazon employees that did it can likely be counted on two hands.

Yet, as bad as the Amazon IPO tweet was, Pomp, the grandmaster of crypto financial pornography took it to another level:

That could’ve been you, right? If you had just had the foresight to understand this esoteric internet money before anyone else knew about it and you had the will to hold through its bouts of insane volatility, you would’ve been rich.

But we all know this is pure fantasy. This is what defines financial pornography. It’s nice to think about, but it isn’t based on reality.

And financial pornography doesn’t have to be directed at getting rich or saving money. It can also be used to attack the investment decisions of others (Note: I call this financial revenge porn).

For example, a tweet I saw recently poked fun at Universal Music’s decision to sell their pre-IPO Uber shares, mentioning that those shares are now worth over 600 times more than what Universal sold them for:

The problem with Mr. Jackson’s logic is that Universal made 8x their money in 1 year! This is a phenomenal return in such a short time, yet Universal’s decision is being ridiculed because of the benefit of hindsight. (Note: Annie Duke calls this logical fallacy “resulting” in her book Thinking in Bets)

When it comes to financial pornography, my issue isn’t with the content, but the way it is marketed. If your financial success is based on luck or circumstances outside of your control (hint hint: rich parents) then just admit it.

I don’t discount someone’s advice because they were born with more advantages than others. I discount their advice when it tries to be something it isn’t.

All of the financial pornography we looked at today could have had a useful lesson, if it had just been caveated and presented in the right way.

The 25 year-old woman in Manhattan could’ve said, “My parents pay for a lot of my stuff, but here are some cool savings tips I use because of my limited income.”

The 26 year-old real estate millionaire could have warned about the dangers of leverage and how he used it to succeed.

Jon Erlichman and Pomp could’ve mentioned how difficult it is to hold volatile assets such as Amazon and Bitcoin.

Mr. Jackson could have discussed asymmetric bets and how it might have been wise for Universal to not sell all of their Uber shares after getting an 8x return in a year.

The problem isn’t the content, but the conclusion that is sold to us.

Why Financial Porn Isn’t Going Away

Though I wished the financial media would stop inundating us with so much financial pornography, I wouldn’t bet on it anytime soon. Why? Because of how we are wired.

In Atomic Habits, James Clear discusses how some animals respond quite strongly to particular kinds of stimuli. For example, researchers found that baby herring gulls will peck at a beak (even a fake one) when they want food, as long as the beak has red spots on it. And the larger the red spot, the harder they peck.

The same kind of reaction was found amongst mother greylag gooses who will roll any large, round object back to their nests, believing these object to be their eggs. One mother goose even managed to roll a volleyball back to its nest before sitting on it.

Clear goes on to explain why this occurs:

It’s like the brain of each animal is preloaded with certain rules for behavior, and when it come across an exaggerated version of that rule, it lights up like a Christmas tree. Scientists refer to these exaggerated cues as supernormal stimuli. A supernormal stimulus is a heightened version of reality—like a beak with three dots or an egg the size of a volleyball—and it elicits a stronger response than usual.

The same can be said of humans when it comes to financial pornography or actual pornography. Whether it is a quick path to riches or the pronounced “assets” of a pornographic entertainer, supernormal stimuli drives attention.

This is not going to change in the near term, but that doesn’t mean that you can’t fight back. So join me and stop the spread of financial pornography. Call it out when you see it and, with enough time, it may just make a difference. Thank you for reading!

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This is post 125. Any code I have related to this post can be found here with the same numbering: https://github.com/nmaggiulli/of-dollars-and-data