I first heard the fable of the Mexican Fisherman on the Tim Ferris Show (which he quotes from The Four Hour Workweek) and I have heard it referenced several times since. It is typically used as a warning against focusing too much on money.
Focusing too much on money destroys people, but the premise itself reveals the typical short sightedness of humans – we only see the dangers immediately in front of us. Let’s retell the Fable of the Mexican Fisherman and then investigate the hidden flaw in the fable and add the addendums needed regarding dealing with risk as well as discussing the true purpose of cash.
The Fable of the Mexican Fisherman
A finance bro goes down to Mexico and spends a week on a boat fishing alongside the Mexican fisherman who captains the boat. After a glorious week enjoying the ocean and relaxing, the finance bro turns to the captain.
“You know, this is great, but if you bought another boat, you could have even more income.”
The partially interested Captain turns to the finance bro and humors him. “And then what would I do with two boats? I can only Captain one.”
The finance bro excitedly replies “You can hire someone for cheap here to run your second boat, take the profits and buy a third boat. Then eventually you could build up to an entire fleet of boats!”
The fisherman replies, “Wow, that… sounds impressive, but then what would I do after that?”
The finance bro proudly smiles at the fisherman and declares “You take the profits and hire someone else to run the business and then you can take one of the fishing boats and enjoy your own fishing every day!”
The Intended Lesson and the Missed Lessons
Of course, we must laugh at the short-sighted finance bro who wants someone to work much harder just to wind up doing the same thing they already do. The creator of the fable wants to mock the finance bros that pursue money relentlessly without seeing the paradise right under their noses.
They want us to understand the value of living in the moment like the Mexican fisherman. However, there are several hidden aspects of the story that reveal the short-sightness of most people.
The Finance Bro Has a Point
While the finance bro may focus on the money, there is wisdom in the recommendation of building a fleet because it offers more resilience for the Mexican fisherman. If the Mexican fisherman worked together with his fellow fishermen, they could form a fleet with a more formal organization and reap critical benefits.
Boats require a ton of maintenance, and the story ignores the significant time and money spent maintaining the boat. If the boat is unavailable due to maintenance, the Mexican fisherman will not only have no revenue, he also can’t fish.
A successful fleet manager with multiple boats can pay someone else to do the maintenance and switch to a different, fully maintained boat as needed to continue the revenue stream. They also can create a maintenance schedule to reduce the possibility of surprise failure and revenue loss.
Also a hurricane or even just a strong storm can sink or significantly damage a boat. A successful fleet manager can afford more insurance and can spread out damage risk over multiple boats.
The parable as written ignores the inherent risks to the business that a successful fleet of boats would minimize. In other words, it ignores the additional options available to a fleet owner that simply will be unavailable to a fisherman just barely scraping by.
The Fable Revised
Maintenance and hurricanes are very specific risks for a fleet manager, so let’s generalize the fable to create a more tangible addendum. The hidden assumption of the fable requires for the Captain’s health, crew, and boat to always be available to enjoy the fishing paradise now, and in the future.
The failure of any one of those risks a discontinuation or at least interruption of the business and some Mexican Fishermen don’t make enough money to have significant emergency funds. In short, the acquisition of that second boat, or even the fleet, provides insurance to protect the Captain’s future.
Therefore, let’s add the following addendum to the story of the Mexican Fisherman:
The Mexican Fisherman smiled slyly at the Finance Bro, “my friend, I may not own a fleet, but we have formed a collective in town that owns 80% of the boats as well as the two largest maintenance yards in our town. We may not seek the level of business that would make you interested, but we have enough to outsource many of our worries about maintenance, storm damage, and illness. I will take your suggestion to our board, I am chairman by the way, although growing our fleet too rapidly sounds like it would take too much time away from my family and my fishing.”
The Importance of Insurance
The original telling of the Mexican Fisherman ignores risk completely. Yet, the main benefits of the finance bro’s suggestions provide insurance against risk. Let’s explore the concept of insurance in a bit more depth.
When we first learn of insurance, an agent is usually trying to sell us a policy for life insurance, car insurance, or home insurance. These policies help us to recover from the very specific misfortune to our existence, vehicle, or home respectively.
What about insurance in a broader sense? After all, long ago, people had no insurance companies from which to buy an insurance policy.
In those days, people were self insured and kept extra cash for emergencies (or just suffered). Obviously, from my article on Emergency Funds, I still believe in the principle of self insurance for a variety of emergencies!
The true purpose of all insurance is to prepare against bad things happening. Insurance also doesn’t need to be a company policy or cash.
Are your parents coming to visit and you don’t want to be hassled by them? Cleaning the house and stocking up on toilet paper can be very effective insurance against some hassles.
Do you want to be able to walk and breathe comfortably in your 80s? Working out by running or taking long walks and avoiding smoking can provide good insurance against poor health.
Thoughtfully examine your life for possible disasters or struggles and find ways to insure yourself against the trouble. A little extra thinking now can help you stay calm and relaxed later even as misfortune tries to strike and your insurance deflects the worst of the blow.
The Underlying Purpose of Money
As for the main theme of the Parable of the Mexican Fisherman, if the finance bro actually has a good point, do we still need to laugh at his suggestion? Yes and no.
It depends upon how much the finance bro intended to help the Mexican fisherman to become more resilient and how much the finance bro just wanted the Mexican fisherman to share a love for chasing money. Chasing money for money’s sake is destructive and misses the point of money.
Money can be very satisfying. As my father says, “I have been poor and I have been rich. Rich is better.”
Of course, his level of “rich” is comfortable, but he isn’t buying jets, mansions, or fancy cars. His “rich” enables a simple life in the home he has had for over 40 years while driving his 20-year old car. His true wealth comes from the extra time he enjoys now and over the last three decades since he retired to spend on his hobbies and to enjoy time with his family.
On the surface, cash buys convenience and, as we noted above, some insurance. The convenience arises from the elimination of bartering.
Imagine the poor nail salon worker being asked to accept payment in the form of potatoes, real estate services when they don’t have a house, or in-home nursing when they are 50 years away from needing the services! Bartering worked when we had simple economies with simple needs, but our complex world requires cash to be an effective in-between.
Still, there is more. Underneath the simple convenience of what cash can buy for you now, or what insurance can buy for you later lay more fundamental benefits.
Cash buys security, expertise and time.
The security we covered through insurance and emergency funds although cash can also literally buy electronic or physical security as well. What I really mean is that having sufficient wealth can help you sleep better at night and worry less about what troubles tomorrow may bring.
Expertise comes in the form of what you can buy. You can build your own home without help or even build your own car, but it will take a ton of time as you also need to learn how each component works and fits together. Money skips the need for you to learn the underlying processes and directly obtain the final product.
Money allows us to specialize and develop an expertise that a jack-of-all-trades individual could never achieve. Just consider the person in the nail salon versus yourself.
You can do your own nails, but you probably only do your nails once a week or 52 times per year. The nail salon employee probably does 8 to 20 nail sessions per day five days a week or 2k to 5k nail sessions per week! They should know tips and methods to do a faster, better job and be able to afford high end materials when they can split those costs over hundreds of customers. You just can’t keep up to that level of experience.
The expertise examples also help to illustrate how cash saves time. Using experts or buying products skips the time needed for learning, building, and all of the other little time consuming aspects such as permits, certifications, testing, and more.
Money can also help to simply buy time itself. In the case of my wife and myself, we use our money, as limited as it is, to buy us time by eliminating the need to give our personal time to an employer so we can use all of our time for ourselves.
Pursue the Benefits of Money, Not Money Itself
Don’t ignore the intended lesson of the Fable of the Mexican Fisherman. Pursuing success or money for the purpose of ego or greed will create an appetite that may never be satisfied.
However, don’t ignore the hidden dangers of the fable either:
- Look for risk and find ways to minimize it
- Insure yourself against disaster
- Understand the true power of money doesn’t come from money itself, but what security, time, and expertise money can obtain for you
Balance your life so that you can enjoy it well and still pursue the funds needed to provide for your secure, comfortable future.
All of us can enjoy fishing… or maybe something more actively entertaining. Yet we should always keep an eye on the horizon so we can avoid future storms and keep our boats, houses, or whatever we cherish, intact and functional.