Why does everyone hate bankers and rich people when 99% of humans want to be rich?
In this Web 3.7 world, time to market is critical. I knew when I had the thought to portray Goldman Sachs as organizational Mr. Potter to the average American’s Bedford Falls citizenry, I had to act fast. Despite my intended quickness, several publications of varying degree of import beat me to the metaphorical punch.
But it’s not The Smatter’s role to report tainted timely news soaked with melodramatic metaphors. The Wall Street Journal does that from the Right, The New York Times does that from the Left, and then Jon Stewart makes fun of it all, from the safety and comfort of his customized left-leaning anti-swivel desk chair at The Daily Show. I respect and patiently listen to them all.
No, The Smatter exists to exploit this bifurcation of taint and foster intellectual debate toward an actual solution, which will almost always necessarily be somewhere in the Middle. In the case of SEC v. Goldman Sachs: Do exactly what you’re doing, people, and nothing more.
In our imperfect capitalistic system, BSDs take risks, and sometimes people get defrauded and/or screwed, whence our regulatory bodies swoop in to sue. Checks and balances. A little messy, but they usually do the trick.
I can’t fault the media for leaping all over a good story. We have a well-named French banker-villain (Fabulous Fab!), a monolithic financial superpower (Goldman), and millions of have-nots (everyone else) who are forced to bear witness to (gasp!) the wild success of others.
How can the most prosperous nation in the world be home to so many folks who have nothing? Nothing!
Oh, right, midterm elections are right around the corner. Bankers have been easy targets for nervous politicians for time immemorial, and that ain’t about to change.
So is this just a systematic vilification of rich people to sell papers (er, iPad apps)? If so, today’s media moguls are doing a lousy job. It used to be that you became a mogul to control the media and make sure only nice things were said about you and your rich banker pals. These days, moguls, your myrmidons are minting constant smear pieces about you and your powerful buddies. Damn the irony of technologically advanced democracy!
The issue, I think, is that common folk perceive bankers to profit nefariously from what we in the business call asymmetric information. That is, bankers know more than you do, and they profit from that knowledge. My response is a resounding so what? Bankers (and lawyers, carpenters, doctors, athletes, actors, electricians, entrepreneurs, etc.) invested their time and money to learn more about something and make some money. If you want more money, do the same. Don’t hate the player, or the game. Play the game (within the law).
Read yesterday’s WSJ opinion piece on Goldman. You’d think the SEC was populated solely with morons incapable of basic arithmetic. Goldman might not do God’s work exactly, but it is an important and valuable cog in the capitalist machine, and there’s a good chance all of this ballyhoo will result in the discovery that the firm properly played the game of CYA.
Despite its obvious bias, the Journal makes an important point. Synthetic collateralized debt obligations (CDOs), the investment instruments at the heart of the SEC’s lawsuit, are sold only to sophisticated investors who sign many pieces of paper attesting to said sophistication. The SEC came up with that very good idea, many moons ago. The SEC also says marketing materials and solicitations can’t be misleading, another helpful rule that will be enforced if Goldman did cross the line. So, why has this case become the poster child for more financial regulation?
What we need is encouragement—encourage investors of all experience levels to actually read about and understand what they’re buying as opposed to trusting the salesperson or rating agency. By definition, a “sophisticated” investor is a rich guy. Fab was just doing to guys richer than him what everyone else would love to do to Fab. An overheated modern Robin Hood, he simply wanted to take a few bucks out of pockets deeper than his. The scope of the problem widens of course when less sophisticated investors are ensnared via supposedly conservative investments in companies with insufficient risk controls (AIG, et al).
Now read the NYT piece from yesterday. It’s hard to believe that the two articles are about the same thing. The pure evil that is Goldman, with its dastardly code names and gun-slinging, overpaid traders, conspired to destroy America and maim kittens.
Anyone who bought Goldman’s stock in or around late 2008 has made a lot of money. The company’s main expense is human ingenuity, i.e., salaries. Goldman pays high salaries because the incredibly hardworking people attached to those salaries bring in much more revenue than robots or Rube Goldberg machines could. The firm’s investors know this and willingly gobble up shares in expectation of a positive return. Just ask the U.S. government, which was paid back, with hefty interest, on its investment (er, bailout) in Goldman.
I’m not condoning the behavior of every Goldman employee, especially the bad eggs idiotic enough to send arrogant emails touting their alleged shenanigans.
I am condoning the hardiness of our economic system and current level of government regulation. Things may seem like they go awry quite often, but I argue it’s really more a function of modern media’s ability to inform quickly and at scale without separating hype from truth. We’ve had some serious economic blow-ups in the past, but in the modern interconnected world, the impact of financial disasters is amplified and widely broadcast.
My advice: Stay calm, diligently and steadily pump funds into a diversified portfolio, and hold on tight for the long haul.
That way, you’ll someday end up as rich as Mr. Potter. But, being an Opie, you’ll put that fortune toward the social good and everyone will love you.