I think we can all agree that Brexit is a shambles.
Leave, remain — whatever outcome the people wanted, it certainly wasn’t this. The fact that it has now led to a snap election is almost laughable.
More than anything, I think Brexit is a cautionary tale. Not because of what it is, but because of how it is.
Separating the UK from the EU is no small feat. You can’t just sign a document and be done with it.
Despite retaining much of its sovereignty, the UK has still been influenced by the EU. It’s not necessarily obvious at face value, but the laws, culture, and ideals have bled into the region.
Like a messy divorce, there is no option to just walk away. There are procedures and processes to ensure an amicable split.
The trouble with Brexit however, unlike your average divorce, is that it is in the political realm. All the nuance and wisdom that is needed to make Brexit happen won’t be found in any parliament or senate.
It is far too complex for that, and this, dear reader, is the real problem.
A problem not just for Brexit, but for the world at large.
Our modern world and modern markets are full of complexity. Some of which is good, but most of which is needlessly burdening us.
Problem is, as people we don’t like simplicity. Complexity appeals to our subconscious, it entices us. Even to illogical lengths.
Just ask your GP or doctor about it. People will go to extraordinary lengths to ignore the simple truth of their ailments. More than likely because they don’t actually want to fix the problem.
It’s a flaw we all have at times. As the saying goes, we are our own worst enemy. And complexity is part of the problem.
Keep it simple
When it comes to investing, complexity has become a major problem.
Just look at the ASX. The sheer size and scope of companies listed on our national stock market is immense.
That’s why most people only care about the top 200 stocks. There are just far too many small and obscure listings to keep track of them all.
On its own, the stock market is complex enough. But, then you start actually digging into the individual companies and you find even more complexity!
Each and every stock presents a new layer of information to digest and unravel. Some of which are easier to comprehend, and others which are a nightmare.
Here are two examples to show you what I mean. These are the descriptions two separate ASX-listed companies used to define their purpose:
‘The Group sells an extensive range of consumer electronics, whitegoods, appliances and home entertainment at great prices combined with genuine personal service from our specialist staff.’
For the most part, this is pretty good. You can at least grasp what they do, even if details like ‘great prices’ and ‘specialist staff’ are a little vague.
This is probably about as simple a description for a company as you’ll find.
Especially in contrast to something like this:
‘[The Business] is a diverse group of companies that have a unified purpose to help people live more fulfilling and productive working lives and help organisations succeed.’
You can glean almost nothing from this sentence. It is a vague jumble of managerial buzzwords designed to seem appealing.
It is complex purely for the sake of being complex. There is no benefit.
They’re just trying to convince us they’re trustworthy by being complex. A trick to win people over subconsciously.
If you’re curious, JB Hi-Fi was the first example. A fairly good attempt at trying to keep things simple.
In contrast, the second company is SEEK. Kudos to you if you somehow managed to link that word vomit to a jobs site.
Dumb it down, way down
My point in all of this is to show you just to what extreme we’ve taken our complexity. And by that, I mean bad complexity.
There is still room for meaningful complexity. Many of our systems and societies are dependent on it.
The internet is a great example. It is a complex system that is built from many, many simple ideas.
But, for your average person, trying to understand how it works doesn’t matter all that much. All that matters to them, is that they can use it.
Under the hood it is complex, but it is simple to use.
Stocks and markets should be the same. It should be simple for people to engage with, even if the underlying system is complex.
Instead, we’ve got companies constantly trying to ‘out-complex’ one another. Through either words or actions.
Why do they do this? Simple, they’re trying to trick you. Take jargon for instance:
‘Jargon is an example of how complexity bias affects our communication and language usage. When we use jargon, especially out of context, we are putting up unnecessary semantic barriers that reduce the chances of someone’s challenging or refuting us.’
Now, that doesn’t mean it’s always malicious. But it is unhelpful.
We need more simplicity, not more complexity. Not just in markets and the economy, but in all aspects of our lives.
It’s too late for Brexit, god knows where that disaster will wind up. For the rest of us though, it’s a chance to learn.
When things get too complex, they’re probably going to turn to crap.
Editor, Money Weekend