An important principle of markets

In the file of "not how we invest but still pretty cool" goes Eileen Gu's Olympic gold medal performance. Eileen was coming up short on points for gold in the big air competition, so she went off script, tried to shoot the moon, and pulled off a "Left Double 1620 with a safety grab." It was the first time she had ever done it, and it worked.

For those of you who need to buff up your apres ski lingo, drop "Left Double 1620" into your conversation. I'm not sure about the "with a safety grab," if you watch one of these things safety doesn't come to mind.

It's breathtaking when you look back at the medium to long-term performance of market economies. You have to ask what is driving this - what principles created such a magical machine when so many other ideas have failed.

Property rights underpin a critical piece of the success. Property rights are the bedrock on which differing opinions rest. It always surprises me how much people's tastes differ. In normal times, when we are not all trying to tell each other how to behave, society functions surprisingly smoothly with all these differences. Part of the reason is that property rights protect your choices. You may agree with much of Vermont that a Subaru Outback is a logical car, but it doesn't mean the BMW convertible, which holds a tiny market share, is an incorrect choice.

With property rights defined, conflict is mitigated. If the past two years have taught us something, it is the value of a societal structure that allows differences without conflict.

But there is another important advantage, and it's one of the reasons market-based capitalism works so well. In most of your choices, and in most businesses, you are in the minority position. Let's focus on businesses for a moment. We hear a lot about the dominant players: Apple, Google, Microsoft, etc. But most businesses do not command dominance like that. Most of them work in a minority position, and property rights help protect them in doing so. The business uses its minority position, its smallness in the market, to differentiate itself.

And it turns out that minority positions can be a wonderful place to operate. You know what Geico's market share was at the end of 2020, after three decades of heavy national advertising? Just 13.6%.1

This is critical to a market economy - almost everyone is operating in some type of minority role. And because the structure of the system protects that right to do so, optimal decisions are allowed to take root and grow.

Dan Cunningham

1. Source: Geico market share

Return to Articles
How We Are Different
Understanding Your Financial Statement
Articles by Dan Cunningham
Investing with Low Cost Index Funds
Pay Yourself First
Why Use a Fiduciary Financial Advisor?
Vermont Financial Planning
Quarterly Booklets
Financial Planning
Investor Resources
Investment Tools
Financial Firm Comparison
The Investment Process
One Day In July in the Media
Local Financial Advisor
How to Switch Financial Advisors
Frequently Asked Questions
Book Recommendations
Types of Investors
One Day In July Careers
Prospect Booklet
Square Mailers
Fee Calculator
Types of Accounts We Manage
Options for Self-Employed Retirement Plans
Saving Strategies
What to do When Receiving a Pension
Investment Tax Strategy: Tax Loss Harvesting
Vermont Investment Management
How to Invest an Inheritance
Investment Tax Strategy: Tax Lot Optimization
Vermont Retirement Planning
How to Make the Best 401k Selections
Investing for Retirement: 401k and More
Vermont Wealth Management
How to Rollover a 401k to an IRA
Investing in Bennington, VT
Vermont Financial Advisors
Investing in Albany, NY
Investing in Saratoga Springs, NY
New Hampshire Financial Advisors
Should I Try to Time the Stock Market?
Mutual Funds vs. ETFs
The Cycle of Investor Emotion
Countering Arguments Against Index Funds
Annuities - Why We Don't Sell Them
Taxes on Investments
How Financial Firms Bill
Low Investment Fees
Retirement Financial Planning
Investing in a Bear Market
Investing in Gold
Is Your Investment Advisor Worth One Percent?
Active vs. Passive Investment Management
Investment Risk vs. Investment Return
Who Supports Index Funds?
Investing Concepts
Does Stock Picking Work?
The Growth and Importance of Female Investors
Behavioral Economics
The Forward P/E Ratio

Vergennes, VT Financial Advisors

206 Main Street, Suite 20

Vergennes, VT 05491

(802) 777-9768

Wayne, PA Financial Advisors

851 Duportail Rd, 2nd Floor

Chesterbrook, PA 19087

(610) 673-0074

Burlington, VT Financial Advisors

77 College Street, Suite 3A

Burlington, VT 05401

(802) 503-8280

Middlebury, VT Financial Advisors

79 Court Street, Suite 1

Middlebury, VT 05753

(802) 829-6954

Hanover, NH Financial Advisors

26 South Main Street, Suite 4

Hanover, NH 03755

(802) 341-0188

Rutland, VT Financial Advisors

734 E US Route 4, Suite 7

Rutland, VT 05701

(802) 829-6954

v 2.4.55 | © One Day In July LLC. All Rights Reserved.