Have you ever noticed how much we like balance?
Da Vinci’s “Vitruvian Man.” Source: Wikipedia
We find symmetrical faces more attractive. Animals with asymmetric features – like flatfish with both eyes on one side of their heads – are disconcerting. We like music to have a sense of balance, with a theme, a variation, and a return to the original theme: A-B-A. Classical architecture appears symmetric as well. The Parthenon in Greece and Pantheon in Rome are beautiful examples.
And we like balance in our relationships. We exchange presents around the holidays. If someone invites me over for dinner, there’s a good chance I’ll invite them back. In fact, a person who always receives favors and never pays them back is often called a “sponge,” a notoriously asymmetric animal. Newton’s third law – that every action has an equal and opposite reaction – appears to apply to our personal interactions. It’s a reason why marketers often give “free” samples. They make us want to buy their product.
But markets aren’t symmetrical. As earnings rise across an economy, the value of the stock market does as well. When society adopts a transformative technology, there’s no going back. Smartphones are here to stay, as are streaming movies off the internet. That’s the promise behind self-driving cars – to make transportation cheaper and more convenient.
Perhaps this is one reason why people are suspicious of bull markets. They appear to be one-way bets, and they violate our sense of symmetry and balance. Recovery from the Financial Crisis was one thing; but the continued rise of the markets to record levels seems deeply disconcerting. We keep expecting some sort of payback.
S&P 500 since 1977. Source: Bloomberg
Finding and appreciating symmetry in nature, in art, and in our relationships is part of who we are. But evenness on the surface can mask an underlying imbalance. Our internal organs aren’t evenly laid out; rising markets still have winners and losers; those free samples in the store are there to encourage more significant purchases. The next time you feel the need to return a favor, think about why you accepted the favor in the first place.
Still, reciprocal behavior often represents the best part of us. And when there is an abiding asymmetry – a steadily rising market, or a favor given with nothing expected in return – that may be the greatest gift of all.
Douglas R. Tengdin, CFA