Capitalism does not help the stupid

Should people as stupid as me be protected from losing money? In December I suffered the biggest single financial loss of my life. Years of my life savings were wiped out in one week when my Steinhoff shares dropped from R56 to R6. It was 10% of my small portfolio.

I don’t understand what went wrong. Nor does anybody else, although they pretend to. I don’t know if there was actual fraud. But there certainly was massive juggling, with big expansion not backed up properly and with huge liabilities shifted around in complicated ways. I bought Steinhoff because I thought it was based on a solid furniture business and had good assets (both true).

I was stupid not to see the impending disaster and more stupid to believe the investment experts who almost all cried “buy” until moments before it collapsed. I am enraged when I now hear them saying it was obvious that Steinhof was imploding. None said so beforehand.

Capitalism is by far the most successful economic system in history, especially for the poor. It has produced unprecedented prosperity, good health and happiness in the last three centuries. The best account of its marvellous productivity comes from Karl Marx in his Communist Manifesto. By contrast, Communism, inspired by Marx, has been a catastrophe, especially for the poor, leading to poverty, tyranny, starvation and inequality.

But parts of the system are complicated. I don’t understand modern money supply. However, it has been very successful, leading to only a few failures. Accounting rules and protocols are complex, dealing with intangibles such as “depreciation” and “contingency liabilities”. I want them simplified but I don’t know how.

All economic systems have risks. One of the greatest strengths of capitalism is that it allows companies to fail. They are replaced by better companies providing better goods and services.

I can’t see how stupid people like me can be better protected. In 1988 I was stupid enough to believe an insurance salesman selling a retirement annuity. I lost a fortune and would have lost more if I hadn’t surrendered the wretched RA. I put my money into the stock market in 2004 and made enough to see me through retirement. Then I believed Steinhof and have lost money again.

It is necessary to take risks. We must learn to judge them wisely.