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No Such Thing as a Free Lunch

“There ain’t no such thing as a free lunch.”

Of course King Solomon didn’t phrase the sentiment in quite the same vernacular but his intention was plain throughout several Proverbs. We’ll take Proverbs 13:4 for today’s discussion, which reads like this:

“Lazy people want much but get little, but those who work hard will prosper.”

In essence, the good king was reminding us that there really isn’t any such thing as a free lunch. Economists tell us that there is cost associated with ANY decision we make. To extrapolate the concept to the financial field, we can deduce this to mean that you should be very suspicious when a deal seems too good to be true. If you haven’t figured it out by now, let’s all say it together – if it seems to be too good to be true, it probably is.

While neither Jason Hartman nor any of the other folks on the Solomon Success team are silly enough to absolutely claim that ANY great deal has a hidden catch, the idea holds true in a large enough percentage of cases that we can safely declare it to be a truism.

For a little life lesson on this matter, let’s turn to a well-known hedge fund manager by the name of Bernie Madoff. For years this fine “gentleman” returned incredible profits to his investors. It seemed he had an almost preternatural ability to beat other managers no matter how the general market performed. Up year. Down year. Didn’t matter. With Bernie they were all up years. Celebrities and other people with loads of disposable income couldn’t give him their money fast enough. Ahh, life was good for those wealthy enough to invest with Mr. Madoff, until one day it was discovered the whole thing was a big old Ponzi Scheme and investors were taken to the tune of billions before the doomed strategy ran out of gas and collapsed under its own weight.

Like when Enron and Worldcom bit the dust, Madoff destroyed fortunes that took a lifetime to build in some cases. At least he’s rotting jail now and for the rest of natural life. What can we learn from this escapade? Seems like we’ve heard the refrain before but here it is again:

“There ain’t no such thing as a free lunch.”

If it’s good enough to put in the Bible, it’s good enough for us to follow. Though greed is often difficult to resist, the end result is often much, much more hideous than your worst dreams. (Top image: Flickr | @boetter)

The Solomon Success Team


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