Don’t put all your eggs in one basket

2022. 11. 23. 19:39
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The time has come for the two parties to change their survival strategies since their loyal supporters stopped backing them.

HAN YOUNG-IKThe author is the political news editor of the JoongAng Ilbo. The adage, “Don’t put all your eggs in one basket,” is an investment principle that former Yale University professor James Tobin said after winning the Nobel Prize in Economics in 1981. When asked to explain his portfolio theory easily, he replied that if you dropped a basket of eggs, all of them would break. This is considered common sense not only in investment but also in everyday life.

The “portfolio” Prof. Tobin contributed theoretically is a result of efforts to maximize profit while minimizing risks. The key is dispersing investment among high-risk and low-risk products. The ratio of variance would vary depending on the situation, but investing an entire fortune in one product is tabooed.

Ignoring this common sense would lead to trouble. Notably, those who purchased real estate or stocks by taking out excessive loans are in trouble as interest rates soar. “I regret getting a large loan and buying a house in Gyeonggi. I feel like I’m stuck in a dark tunnel.” “I took out every possible loan to invest in stocks and crypto and lost 40 million won [$30,000].” There are many such complains. They are paying the price for neglecting the strategy of dispersing the risks.

On the other hand, politicians are focusing on putting all their eggs in one basket these days. As Democratic Party leader Lee Jae-myung’s judicial risk becomes a reality, pro-Lee lawmakers have joined the candlelight rally calling for the president’s resignation and reinforced hardline strategies. A senior lawmaker said the escape is blocked. There are concerns that the entire party may suffer damage depending on the results of future investigations and trials.

The governing People Power Party (PPP) is just as vulnerable to risk dispersion as it is entirely pro-Yoon. While the state administration is faltering, the party is only focused on backing the Yoon administration. A considerable number of people in their 20s and 30s who voted for the PPP retracted their support. The party seems to have forgotten the crushing defeat in the parliamentary elections just two years ago, as it is isolated in every way across generations, regions and classes.

According to a Gallup Korea poll, the approval ratings of the two parties are around 32-35 percent for the fifth week, a close race within the margin of error. The time has come for the two parties to change their survival strategies since their loyal supporters stopped backing them.

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