I have many exchanges with people in power in finance, and surprisingly often, I get confronted with references to greed, without me ever having brought up that subject. Yay for a spark of morality, or is it?
Now, of course, there are many well-publicized instances of blatant greed in finance, of individual (Madoff) and collective (Wells Fargo) proportion. Almost every financial institution in the U.S. (and across the world) has been caught in unacceptable improprieties. To no surprise, because finance rules the world and directly or indirectly establishes its own rules, and more importantly, a lack thereof. Let me send you back to a photo of a single page in The Wall Street Journal investment section in 2013 I referenced to substantiate the widespread improprieties in finance.
Nothing has changed for the better since – trust me – I frequently get to see inside the finance kitchen. As I predicted, we have learned absolutely nothing from the cyclicality of our many financial crises. For we have not addressed the cause of the runaway train of finance, nor have we adjusted its tracks. We have merely put bandages on embarrassing discoveries of improprieties, established more downstream regulations, and we have moved on with life, hoping for the best. The newly emerging improprieties simply becoming more opaque, more complex, and more egregious in their ingenuity to evade societal responsibility.
The latest instance of finance deployed as a seemingly benign version of financial engineering is ESG. A wolf in sheep’s clothing of evolutionary deceit neatly dressed up and supported by self-aggrandizing populism.
The audacity to sell to greater-fools another new finance strategy hinging on a pretense of sustainability while being completely unaware, I found out from a leading investment firm in ESG, sustainability does not exist anywhere in the universe. Such is the mind-boggling ludicracy stemming from having financiers with no understanding of evolutionary biology or anthropology evaluate and rate the evolutionary excellence of investible assets, subsequently exacerbated by a retroactively applied index-of-self now claiming to outperform other asset allocation strategies.
The idiocracy in finance knows no bounds. Or in the words of Charlie Munger:
“Finance has gone bonkers” — Charlie Munger
That terse intro should make clear to you I am not letting finance off the hook easily. I believe there is lots of room for self-regulation in finance, with real leadership that does not wait for the public and then the government asleep at the wheel of creative destruction to find out the many rat-race practices in finance are not serving the evolution of humanity. Instead, the false-positive of ESG is another financial snake-oil ploy leading to an accelerated anthropogenic cascade.
Despite the gravitas of negativity about the role of finance, I am not a firm believer in conspiracy theories. For the simple reason that the theory determines what can be discovered, in the words of Albert Einstein. Let me unpack that conviction with a more commonly understood corollary.
If one expects a bunch of players to play soccer, one must first establish the rules and objectives of soccer. One must draw the lines in the sand, identify the placement of goalposts, and implement the rule not to touch the ball with your hands, etc. Without such specificity, do not expect to see a game of soccer to develop on its own. Some form of rough-neck rugby would be a more likely outcome.
In that vein, when we do not establish the humanitarian objectives and rules of finance, one ought not to expect the participants of finance to magically adhere to a set of unstated objectives and rules. Left unchecked, finance is now playing a game they themselves invented, closely resembling the rough and tumble rugby we see unfolding every day.
Leaving finance to make up its own rules makes for a pretty dangerous predicament considering the impact of finance eleven times the size of production as a contribution to GDP, with the rest of the world bowing down to our leaderboard position. Dangerous because none of the prevailing strategies in finance drive the renewable strengthening of humanity.
I am surprised when financiers themselves reference their practices as greedy, for they ought to be. It is a financier’s job to produce returns for their investors, in the same way, we expect the best soccer players to score the most goals. That is not where the problem of finance lies.
The problem with finance is that we, the people, have not identified the crucial humanitarian and evolutionary objectives of finance. We have failed to establish the objectives of why and how we deploy money in the first place. We have let finance rule our humanitarian roost without defining what constitutes the success of a goal scored in finance.
The challenge facing humanity is that our survival on this planet is dependent on our ability to adapt continually to the changes nature bestows upon us.
Since our bodies are weakening, with most of us desperately dependent on the bandaid of medicine to make it through another day (70% of US population), the only attribute that can improve human adaptability is our smarts. An ingenuity unlike any other species on the planet.
Hence, the role of finance should be to maximize the expanding fractal of human ingenuity leading to the regenerative strengthening of human wellness and renewal, sans medicine. Not quite the direction we are plotting with the current gameplay of finance.
Our current systems of finance are entirely detached from evolutionary relevance and damage the obligations we have to our offspring. Their built-in solipsism is endlessly honed to make financiers die the richest in the cemetery. All while their investible assets have managed to numb human excellence into widespread complacency and a lack of personal and collective responsibility.
Greed Is Good
And yet, despite the terrible consequences, we cannot blame the players on the field for playing rough-neck rugby when the rules of the game of soccer in the aforementioned corollary have never been established. Financiers cannot be blamed for playing the game that serves them well if they were never told what the rules of nature’s evolutionary gameplay dictate.
Greed is not what we must attempt to eradicate from finance – we cannot – but the role of finance must be redirected towards improving the excellence of human renewal. We must establish the evolutionary-compliant objectives of finance that strengthen, not weaken, the innate survivability of humanity. And then, the greed we are used to seeing in finance will be directed towards improving human adaptability, in sync with nature’s ever-changing equilibrium, so our species can live as long as humanly possible.
So, stop hating the greed in finance, and instead adjust the goalposts of finance, like so, to meet the evolutionary obligations we owe the next generation. All it takes is to put finance in its rightful place and have it subjugate to a new operating system for humanity, one – for the first time – in compliance with the undeniable rule of nature.