Is the new money wisdom to stop saving?
‘Save money and money will save you.’ The pithy slogan of a major Swiss bank reflects the imparted wisdom of many generations: Money today is more valuable than money tomorrow. In a world of price inflation and multiple options to invest and grow your savings, this adage has served well. But a number of cases I’ve come across recently suggest that this may be changing.
Consider three recent examples:
1. A friend buying an apartment on paper was engaged in negotiation with the developer about the payment schedule. Typically, it’s the builder who wants as much money as possible up front, while the buyer is the one pushing to spread out payment. This time though, the buyer wanted to pay as much as possible up front — she had accrued savings and had no other plans for the money. And it was the developer wanted to delay the payments as much as possible, because the price of materials is going up consistently. In this case, both buyer and developer saw money today as less valuable than money tomorrow.
2. In conversation with SAFE investors I see a similar inversion. Traditionally, investors trying to access hard-to-get startup deals would end up doing a SAFE with a cap, or a SAFE with no cap but with a discount. Lately, I see more investors pushing for a SAFE with no cap and no discount. Their logic once again is based on skepticism about the future value of money: “I know I’ll be putting this money in at some point — I’d rather get it in now than later.”
3. A very successful investor I know is sitting on a fantastic business; he owns 100% with no debt. Each week he tells me, “A different potential purchaser approaches me, and the prices they are willing to offer me are just silly; never in my life did I think these multiples would make sense!” So why doesn’t he take these attractive offers? “The day after I sell, what will I do with the money? I’d be turning around to pay some insane price for something else. What would be the point?”
Is this part of a natural pendulum in which inflation will kick in, followed by an increase in the interest rate to restore the equilibrium? Or is it more of a tectonic shift? If the latter, how far can it go? Should I be teaching my children to spend while they can rather than the value of saving?
At least for now, one Swiss bank should be thinking about having a different slogan.
