Years ago in the faculty break room of the last school where I taught, the head of the math department and I were talking about stocks and bonds and investing in the market. What I learned that day about money management I now think is applicable to poetry.
The head of the math department—let’s call him Dave—was an enthusiastic amateur investor and always interested in hearing “tips” about companies to invest in. It was the late 90s, and the internet had just opened up accounts for people like him to trade on their own. On the other hand, as a rich kid from Park Avenue, I grew up believing that my money (which isn’t really mine; I’m just living off of it for my lifetime before handing it off to the next generation) is best managed by the professionals with whom I have lunch once or twice a year in one of their Executive Dining Rooms.
We started talking about individual stocks, and Dave kept asking me “What kind of dividends does THAT pay?” I kept saying I didn’t know. He got more and more frustrated by my NOT knowing, so I asked him why that was so important to him. Dave’s response was telling: “How are you going to make any money in the market if your stock pays no dividend?!” Finally a question I could answer: “Through appreciation.”
If I buy some shares of stock for $100 and it does well one year, it might produce profits of $10, which it could pay as a dividend (a 10% return would be amazing!). But it could take some, or most, or ALL of that $10 and reinvest it in itself by expanding or modernizing or in some other way IMPROVING itself and becoming a better or BIGGER company. In a statistically perfect world, the stock I purchased for $100 has gained in value and is now worth $110. Or more. If it starts looking like a good investment, other people will buy it, and the price will go up even more. That’s how you make REAL money in the stock market: by buying low and selling high years later (sometimes decades later).
That’s the main difference between Dave and me: He looked at the stock market like it was a bank account with a fluctuating interest rate; I looked at like a rising tide. After 10 years in the market, his $100 stock might have paid him $10 every year but still be worth only $100. Mine might have paid out nothing in dividends, but it would be worth $259!
It’s like a life spent reading and writing and wrestling with poetry. The benefits are more long-term, more subtle, almost hidden. The language of business has infiltrated education in recent years, but the questions all seem to be short term questions like Dave’s. “Reading and writing poetry? What kind of dividend does that pay?” Not as much as others, but that’s the wrong question to ask. Appreciation and reinvestment and compounding interest: That’s how you become rich (in my family).