Innovation’s lunatic fringe

What did you do with the placentas you ended up with when your children were born? With all the nutrients in one of these literal lifelines, maybe you made a stew?

In Peru, a few months ago, it was looking like you might have been able to use it as a downpayment on your child’s retirement. Instead of having it pickled, framed or turned into a keepsake, a Peruvian minister thought it might be a great idea to sell this connection between mother and child, and pop the payout in a pension fund for the infant. 

There was even a suggestion that if the parent failed to put the item up for sale, they could be fined. Yes, fined. It might sound Pythonesque, but this bizarre idea was making its way into law until (presumably) someone saw sense. Don’t believe me? Google it. Heaven only knows how they would have policed it. 

The rationale behind this bizarre approach is that people in Peru – like the rest of the world – are not saving enough for their retirement. They have also had successive episodes of pension policy mistakes and asset destruction that appear to be bordering on criminal, but this is not a geopolitical column, so I’ll move on. 

While bonkers, it is not the first time I have seen innovation tip into absurdity around pensions and investments. About a decade ago, when a bunch of Spanish banks were issuing shares to the country’s investors, some were offering such tempting rewards as toasters and coffee machines to the masses. The share issue took place amid the Eurozone crisis (remember that?), which was just after the financial crisis, so if you could find the money to buy shares in a bank and were one of the few people still trusting them, you could probably afford a kitchen appliance (and it might have made a better return in the short to medium term). 

I’m all for innovation. I really am. I love it. It is the future and it is going to bring more people into saving and investing and give them financial security. But we have to be clear about what is innovation and draw a line before it turns into the absurd. The absurd (in finance and investment at least) is not going to help anyone – in fact, it could even push people away. 

Once people lose faith in a gimmicky or downright weird system, their future path to financial security is in jeopardy. People’s lives are not something to play with by pushing the boundaries of what has been done before. Innovation must be focused entirely on the individual it is intended to help. 

Over the border in Chile, there was some genuine innovation a few years ago. A savings scheme would see those enrolled in it earn points on their weekly shopping and other items, which were converted into pension contributions. Another one in Australia rounded up spends on a specially issued debit card, to the nearest dollar, which went directly to a pension pot. 

Today, there are loads of little apps that individually do this and more. Even my bank account gives me tips on where I’m spending too much. But these are helpful little nudges rather than something that is going to dramatically change our saving habits – and we need something to do so quickly. 

Innovation is the one tool we can all use. Keeping the individual at the heart of things should keep us from tipping into the absurd. After all, do we really need to exhaust ourselves with unusable solutions? And what would we have done with a glut of Peruvian placentas anyway?

By Liz Pfeuti

© 2022 funds europe



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