The rise of financial nihilism

A phrase has been gaining traction in the financial space called “financial nihilism”. Let’s look at what it means.

“They were nihilists, man. They kept saying they believe in nothing.”

The belief in nothing. That’s the general idea behind nihilism: that life is meaningless or that there is no justification for morality.

Now, in the 21st century, a new type of nihilism is being discussed: financial nihilism.

I’ve been guilty of using this phrase in past articles without ever really digging into what it means.

So let’s do it now in order to answer the questions:

• What is financial nihilism?
• Is financial nihilism justified?
• Do you subscribe to financial nihilism either in your actions or values?

What is financial nihilism?

Financial nihilism, at least in the way that the phrase is used, refers to the belief that nothing matters, financially, in one’s life. That the good habits no longer lead to good outcomes. That no matter how much you budget or save, you’ll never be able to buy a house, afford a comfortable lifestyle, or just get ahead.

A symptom, or perhaps a response, to this has been the rise in speculative financial products: crypto, sports betting, prediction markets. After all, if you’re not ever going to be able to afford a down payment on a home, then you might as well throw what little money you have on a big bet. A small chance at a big win is better than no chance at a small win, right?

At least, that’s the idea.

Origins of the term

I can trace the phrase “financial nihilism” to a podcast from 2021 where Demetri Kofinas defines the term, though he used the phrase “market nihilism” in his definition:

“I define market nihilism as a philosophy that…fully embraces the view that reality is entirely subjective…[T]hat idea came to me from watching markets repeatedly seem to discount anything related to the world, related to news, and just cease functioning as thought reality mattered, as though there was a relationship, regardless how tenuous, between the world and prices.”

And this was related, in his eyes, to a generational challenge:

“I think a lot of Millennials and now Zoomers and have been disenfranchised and locked out of the economic game.”

This assertion was picked up in a recent Wall Street Journal opinion piece called “Why My Generation Is Turning to ‘Financial Nihilism’“. In it, the author notes that all of the opportunities available to previous generations are more and more out of reach.

“[W]hen the rewards for prudence erode and the traditional path—a college degree, buying a house, working at the same job for decades—starts to become more and more difficult to achieve, economic risk becomes the baseline option instead of a choice…Faced with that reality, taking a gamble on Fartcoin or betting how many times Elon Musk tweets in a week can feel strangely rational. A small chance at a large return beats a near-certainty of a slow decline.”

The near-certainty of a slow decline?

The current statistics are indeed sobering. The typical age of a first-time home buyer is now over 40 years old, an all-time high. Student loan debt is now up to $1.8 trillion at the time of writing. And entry level jobs have been the hardest hit by the so-called “AI boom”, where companies believe they can replace massive amounts of workers with chatbots. Or something.

Faced with all this, I can certainly imagine that throwing up your hands and just placing bets online does start to sound no crazier than putting money in the stock market. It’s all a game, isn’t it?

A self-fulfilling prophesy?

And yet. I can’t help but feel that a “near-certainty” is still a possibility.

Yes, the median age of people buying a home for the first time is 40. But people are still buying homes for the first time.

Yes, people have more student loan debt than ever before. But people are still paying student loans off.

Yes, wage growth has been modest, but it’s not nothing. Wages saw a big boost during the Biden administration, and it might happen again if we are able to elect slightly less obviously corrupt billionaires.

I’m saying, there’s still a pathway for people of all walks of life to get on a solid financial footing. But not if you throw all your money away on crypto and prediction markets.

So I’d argue that the situation isn’t, as the opinion writer said above: “A small chance at a large return beats a near-certainty of a slow decline.” Rather, it’s “a small chance at a reasonable standard of living beats a near-certainty of financial ruin through gambling.”

Believe in the future

As someone who just missed the cutoff for Millennial and who is obviously not Gen Z, I don’t wish to talk down to people who are younger than me. That said, I can’t help but feel that there’s an element of financial nihilism that just feels, I don’t know, young. In the way that you thought you’d never recover from your high school breakup, not realizing that you’d have decades more love (and loss) in your future.

Just because things are bad now doesn’t mean they’ll stay bad forever. But throwing it all away now will almost certainly make it harder to recover later.

I believe that the future can be better than today. It’s not guaranteed, of course, but we all have to do the work to show up and make it as good as we can. If we don’t rise to that duty, we run the risk of making our belief in nothing come true.