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The Premium

The golden rule of the finance industry dictates that the answer to “Why does it work that way?” is almost certainly “because it benefits Investment Banking.” Analyst price targets – always wrong – are a good example. While retail investors remain incredulous as to how the analyst can keep their jobs, and brokers tell them “they don’t know shit” and smile their smug, condescending old white man smiles, the analyst pockets a check for $400K after the secondary offering their optimism help create.

Research has to remain credible to be of any use, but the goal isn’t to correctly predict performance – they don’t even get paid to be correct on that (not directly anyway). Analysts DO get paid – a lot – for generating banking deals. The only real inexplicable thing is that retail investors keep falling for it. Every time a deal happens – and there’s been some doozies in the energy sector lately – they think “maybe this time, the target’s right and I’ll make a fortune.” They want to believe.

The relationship between politicians, the electorate, and economists is similar. Academic economists froth at the mouth in apoplexy when new economic policy is announced as if the pols’ priority #1 wasn’t getting elected. “More free stuff for you and someone else is paying” and “contribute to my campaign and keep your loopholes” are always going to be the most successful policy initiatives and this has next to nothing to do with economics. Each successful test of our collective gullibility – that someone wants to help – ends with the same answer.

Media’s a bit better but the same dynamic is still in play. Journoland is still valuable – without it Rob Ford would still be mayor and Hillary Clinton’s convenient interpretation of public sector transparency would be unknown. But these useful, investigative stories make up, what? 10% of content? 5?

Legacy media can’t afford to fund many of these prolonged investigative reports now that the classified ad revenue’s gone and Google took most of the rest. Revenue’s so thin that even top commentators need to publish four times a week or join their friends on the unemployment line.

Fox News is still “America’s most trusted news source”, through the judicious pulverizing of the days events into easy to swallow conservative pablum. Just like politicians, pandering seems the most profitable route to success. Advertisers hold their noses and pay up for 30 second spots.

Fox is an easy target but CNBC and the rest of the financial newsosphere are often little better, feeding investors’ base lottery impulses with a steady stream of “hot tips” from expertly-coiffed charlatans when everyone, EVERYONE knows at least 90% of investors should just buy the cheapest possible index ETF and get on with the more important parts of their lives.

There are a lot of ethical people in finance who profit from doing the right thing. There are media stories that are a necessary public good. I’m even willing to accept the theoretical possibility of an honest politician.

But when push come to shove in the daily grind, just follow the money and it’s clear that in each one of these cases there’s ongoing and pervasive bait and switch – a veneer of helpfulness masking bone deep self-interest. For an equity analyst, the premium is not on predicting stock prices but generating high margin banking business. He premium on political rhetoric is winning elections, not getting an A plus from Scott Sumner. The premium on media coverage is “time spent” and advertising revenue.

We’ve been asking the wrong questions.


For normal people, Teju Cole’s “The White Savior Industrial Complex” is about Africa. For tunnel-visioned obsessives like myself, only a few words need to be replaced to explain something deeply profound about investing.

The essay is a brilliant punch in the face and I can’t recommend it highly enough. Two excerpts:

“The White Savior Industrial Complex is not about justice. it is about having a big emotional experience that validates privilege.”

and further:

“One song we hear too often is the one in which Africa serves as a backdrop for white fantasies of conquest and heroism. From the colonial project to Out of Africa to The Constant Gardener and Kony 2012, Africa has provided a space onto which white egos can conveniently be projected. It is a liberated space in which the usual rules do not apply: a nobody from America or Europe can go to Africa and become a godlike savior or, at the very least, have his or her emotional needs satisfied.”

The two fragments to remember while I pivot here are “big emotional experience” and “a  space onto which white egos can conveniently be projected” only for my purposes, switch “white” to “rich”.

(How many of you see where I’m going already?)

There’s not a single trustworthy study that suggests that picking individual stocks is a good idea relative to indexing. Not a fucking one.

If Rational Agent were even remotely applicable to investing, and the only concern was generating the highest long term returns, then 90% of investment accounts would consist entirely of SPY and cash.

But there’s no “conquest and heroism”  in that, is there? Anybody can just go along for the ride, taking what’s given like an ovine, medieval peasant. There is no way to, in the immortal words of Ebby Calvin Nuke Laloosh, “announce my presence with authority.”

As with the mythical, colonial, delusional version of Africa described by Mr. Cole, the market offers the chance, albeit infinitesimal, to show up poor and end up not only rich, but powerful and famous. Either way, personal decisions have tangible, monetary outcomes – the ego is at stake and this is a rush in itself.

Icahn, Cooperman, Druckenmiller, Soros  – these are the Great White Bwanas of  Money Africa. The role of ignorant savages (again, we’re talking the fictional, self-aggrandizing Kipling version of Africa not the inconvenient real one) is played by retail investors who conveniently provide the late rally bids so the Bwanas can take profit.

The metaphor breaks down here, though. Given the chance, a real life poverty-stricken African would gladly opt out for a wealthier existence. But the average investor plays the stock picking game despite knowing that passive indexing is far more likely to generate higher returns. Why?

There’s the same aspirational delusion that sells lottery tickets, for sure. But i also suspect that investing has become Real World Las Vegas – a form of emotional pornography that satisfies the need for what Cole called “a big emotional experience”.

Pornography is the right term, i think – nothing except money can rival sex in the “things that can most fuck up your dopamine levels” category.

Investing is a much more convenient option that stowing away on a steamship bound for Cape Town, moreso because its pretty much the only form of adventure where you can sit on your ass the whole time.

In a virtual, sedentary sense the market does provide high stakes entertainment. The setbacks are truly disheartening and  big wins are truly ego-boosting – there is the feeling that you’ve outsmarted the majority, pitted yourself against the jungle and won.

But it’s a joke in the end. Pure chartists betting with their own money last two cycles at best. Long term, the vast majority of big winners are those most adept at convincing the shmucks to keep playing. Everyone jokes about “Where are the customers yachts?” while scanning charts for the next good set-up.

There has to be something deeply psychologically ingrained here. Cole’s White Saviour Industrial Complex is a grain of sand next to the scale of Financial Disneyland.

We all need adventure, I suppose. An endless cycle of waking up tired, commuting, pushing paper, commuting, eating, watching tv, sleeping, dying, is too bleak to bear.

“Every man”, wrote Saul Bellow, “has his own book of poems” in what is my favorite description of the basic need to mythologize and storify our lives to keep going. When it comes to investing though, another Bellow quote should also be kept in mind:

“A great deal of intelligence can be invested in ignorance when the need for illusion is deep.”

Teju Cole explains investor delusions while writing about Africa

Dimon’s travels through Lilliput

After the last post I received a bunch of responses along the lines of “why are you so bitter about finance?” and initially taken aback, I looked back at the content of the last few posts.


Oh. I see.


There is one point – good news makes boring copy. If I had written “the saints of finance” instead of “Scumbag Storytime” the page hits would have been cut by 75%. That said, I now accept that I might have a bit of an animosity problem where the industry is concerned.  


Autobiography is a form of narcissism so I won’t try your patience here. It is important, however, to note that my rise in the ranks of finance coincided with a crawl from a deep, dark personal hole. Particularly in the early stages, every promotion was not just a matter of personal finances but existential validation. I viewed the trading floor the way an undersized Division III football player views the NFL.  As an outlook this was twisted and sad, sure, but an accurate depiction.


When through luck and diligence the break finally came – a peripheral job on trading floor – I was not yet a lot stronger in the broken places. But I do remember vividly, half-terrified in my department store suit, swearing that the only way I was leaving that chair was on a stretcher.  I would work the hours, stammer through the humiliating process of learning how to give a presentation, kiss whatever ass was shiniest at any given moment. I would pay the ask.    


Nothing in life is as good or bad as expected so the process of my disillusionment was inevitable. The heroes, and there were a number, were too often pushed aside in favor of the shadiest sales guy elevated by commissions from PMs who would wind up in jail or in Israel to avoid extradition. The details are cliché by now.


To quote one of the funniest monologues in movie history “the details of my life are inconsequential.” The interesting point now is whether, as the details ooze out, the broader culture is undergoing the same process of de-rating the importance and status of the finance industry.


Look at Jack Welch, so stunned by his fall on the Fawn-o-meter that he only leaves his underground lair for the cozy embrace of Joe Kernan. Rubin, Dimon, Steve Cohen, all fighting off the steady assault of Lilliputians pulling on their $3000 pant legs to drag them off their pedestals.  


Much is made, correctly, of the public financial costs of TBTF. Before 2007, I suspect that part of the reason this was tolerated was the misguided belief that finance worked for the greater good, that when your broker or I-banker said they were working in your best interests they at least intended to do so.


In my experience, the vast majority of individuals in finance do try to help their clients although the process of rationalizing takes up steadily more brainpower as time goes on. But the vast majority of the money is controlled by a small percentage of finance employees. A significant percentage of this daily-commute-by-helicopter crowd must constantly, like the London Whale’s boss of the jackasses laundering al-Quaeda money at HSBC, hide what they’re doing and hedge themselves with pitchfork-proof vests.


As to the question as to whether finance is beginning a steady decline in cultural and economic importance in the same way many predict for the concussion-ridden NFL, I’m clearly biased. Odds are that if you’re reading this, you are part of the financial industry which suggests that so are you. So, let’s phrase things objectively in terms we all understand:


The finance industry is currently about 8% of GDP.  If I offer to sell you a 2035 call option on this number with a strike of 6.0%, are you buying?    



Social Hierarchy Economics: Twitter Followers as the New Money Supply

For all the ink and pixels wasted on media technology we’ve missed a once-in-500-years sea change who’s primary units of production are two fold: mobile data traffic and impotent rage.

Some will consider it heretical to discuss religion as media but it is impossible to argue that the bible did not provide the narratives around which pre-20th century life coalesced. A bad harvest invoked Job, suffering neighbors were assisted by Good Samaritan. Grace was spoken before meals. The rural population, mostly everybody, took a weekly bath on Saturday and headed to church the next day, the only time they would see non-family members.

The stories changed from the New Testament to Amos and Andy but the purpose and attraction– collective narratives – was the same. Movies, television, again, just an enhanced version of the same thing.

One can argue that internet-based entertainment is just an extension of this trend but one would be wrong.  Church, radio, television were all passive – the audience showed up or tuned in when they were told.  The Internet is a tool of self-selection.

The last time consumers were granted such an upward spike in empowerment – the printing press/Reformation – things did not go well for a couple hundred years. Importantly, the initial reaction was the same then: you lied to us.

But whatever, things will go the way they go. For our purposes let’s turn to what this new Internet-led empowerment was used for, best described in a brilliant essay by Freddie Deboer:


The internet has provided tremendous functionality, for facilitating commerce, communication, research, entertainment, and more. Yet for a comparatively small but influential group of its most dedicated users, its most important feature, the killer app, is its power as an all-purpose sorting mechanism, one that separates the worthy from the unworthy—and in doing so, gives some meager semblance of purpose to generations whose lives are largely defined by purposelessness.


This is why an increasingly virtual culture needs an economics of social hierarchy. The western world is now wealthy enough that the necessities of life – food, warmth, shelter etc – are provided in extremis and therefore have little economic value.  If practical utility is no longer important what does have value are things that make me feel better/of a higher social strata than you. The Water/Diamonds Conundrum goes away.

Let’s posit that the social hierarchy of the Internet (and particularly social media) is scored not by money but by attention and influence. Twitter followers are not just arbitrary votes of support in this reading – they are currency. So, if love and money are by popular consensus the root cause of all murders, and Twitter followers are the new currency, it is no wonder how vicious the shoutfest gets online.

“That’s stupid”, you say. “I can’t spend Twitter followers so the whole notion is stupid. They have no value”. Fair point – online influence carries no practical utility unless your name is Josh Brown or Joe Wiesenthal. New followers won’t get you fed, but that’s what the government’s for, no? The robots tuk’erjerbs, man. You’re not going to let me starve are you?

Denying  value to social media also understates the normal, human, Pavlovian response to interaction and acceptance. For one, the potential to more or less design a perfect, if virtual, version of ourselves completely independent of physical attractiveness is deeply, deeply tempting. RTs from television personalities are both largely pointless and a perfectly-designed machine for dopamine production. Most of us are just built that way.

Crap, this is getting too long. I intended to guess at more aggregate economic effects of the virtualization of human interaction. It dovetails nicely with Izabella Kaminska’s insanely good work on The New Abundance (will wealth move online?). Kids are already not bothering to get their driver’s lisence and Google has stolen 90% of the advertising revenue that used to go to print media. Mobile data traffic is still doubling every year. The Wii is only five or six steps away from a Holodeck. Jesus, what happens then?

Yelling about economics makes you irrelevant

Who’s team are you on:  Republican or Democrat, Hayek or Keynes?

According to The Last Psychiatrist – and he’s a doctor so we have to trust him – the faster you answered this question, the less your opinion matters:

media manipulates you to hate some things by linking them to other things: it polarizes you, which means it makes you irrelevant.  E.g. when an election “is determined by” one particular group of “swing” voters– whom you deride for being too stupid to have made up their minds yet– it doesn’t mean your vote has been factored in but that you are so predictable that you don’t count.  Power never thinks of you as an individual.  Power never thinks of you at all.

I quibble with the idea that “media” or “power” is an all-knowing Wizard of Oz controlling the levers of culture. My personal perception is that no one is in control but some, like surfers, can harness forces that are largely exogenous to their own benefit. Surfers don’t control waves, they just ride them in front of the cameras. Media doesn’t control behaviour, it tries to direct it – most often unsuccessfully – by appealing to base instinct.

But the point about polarization and irrelevance stands and, since polarization and intransigence are arguably the dominant traits of the current culture, we should try and figure out why.

Theory: The failure of scientific method is behind the recent lack of political progress.

You didn’t see that coming did you? Let’s go back a few hundred years to the beginning of the Era of Science and Reason. Technological and intellectual advancement, highlighted by Galileo, led to the widespread questioning of God and our place in the universe. The first order of business, like Adam in the garden of Eden, was to rename and categorize everything.

“Hey Chuck! Mr Darwin! Is this thing a mollusk or crustacean?”

“Two pairs of nerve cords? Mollusk”

“Chuck! WTF do we do with the Platypus? It lays eggs”

“Umm. Leave that one out”

And there’s the problem – leaving shit out. The scientific method proved insufficient to encompass everything, as economists are now painfully aware. Neat categorizations began to pull academics away from the real world rather than promote fuller understanding.

Consider the following model of scientific era thought, originally drawn up by the late professor James Leach, the Smartest of All Time (SOAT):

postmodern blog

The all-male thinking brigade of the 17th and 18th centuries assumed that because the natural world appeared to divide between male and female that this was the correct way to start. They shoehorned almost everything into this construct. Inconveniences, occurrences that did not clearly fit, were repressed and ostracized as “other”. To the bigoted minds of the time, homosexuals – who tested the male/female divide – were the obvious examples.

For professor Leach, post-modernism was a process of declassification and re-assembling. (He spent a lot of time on Freud who’s primary achievement was discovering that the mind worked in metaphor. Our brains actually classified things as this AND that, not this OR that).

What we should be thinking about is what post-modern economics would look like, blowing up the existing structures and re-assembling them. Is it possible to believe simultaneously in smaller government and huge stimulus? Of course – it just doesn’t fit the current template. There’s no team for that.

What we’re doing now – splitting into mobs and screaming at each other – is tragically stupid and unproductive. The banner quote on this blog only hints at the depth of my disgust at the modern shoutfest. The crucible of spirited opposition has rendered every side inflexible, unhappy and desperate enough to seriously consider trillion dollar coins or destroying the legislative process.

And the Last Psych is right – the louder you scream the more irrelevant you are. Not because you’re wrong but because you have fitted yourself so deeply into an outdated template that it is unlikely you are thinking as an individual. Quit it

Keynes and Cigarettes

Every important argument in investing can be reduced to time frame, the speed at which returns can be earned relative to the amount of risk accepted. The now-somewhat disgraced Charles Brandes had the perfect synopsis of this:

What growth investors pay in valuations, value investors pay in time

In other words, growth investors want their returns quicker and they are willing to take on more risk in terms of valuation levels to get it. Value investors, more risk averse, are willing to wait longer.

Psychologically we could build in a marshmallow test/delayed gratification/maturity equation from this, much to the glory of value investors. They would come out as the adults while technicians look like the little kids who refuse to eat their vegetables (fundamental analysis) and want to start the meal with dessert.

If we pull back from the comic dysfunction of Congress it is also possible to frame the fiscal cliff bunfight in terms of time horizon. The Keynesians are the ones in a hurry – the economy needs help now and anyone working to delay huge stimulus is cheering on the starvation and general dissolution of the unemployed. Europe, particularly Greece, is clear evidence that supporters of American austerity at this point are out of touch whackjobs. For most of them, unfortunately, “whackjobs”  seems a charitable description.

Not every opponent of mass fiscal and monetary stimulus are froth at the mouth morons  though. Ray Dalio, for one, thinks the Fed is tapped out and blowing up their balance sheet for diminishing returns is an exercise in economic tilting at windmills. Economist William White, whose criminally under-read paper Ultra-Easy Monetary Policy and the Law of Unintended Consequences got me thinking most about this issue, is another.

Unlike the Keynsians, Dalio and White are less concerned with economic growth next year than the sustainable growth rate five years from now. For them, and admittedly I’m extrapolating here, maximizing economic growth for 2014 through government spending will only increase the eventual hardship, for a far greater number of people, in 2018 or other later date.

For the more sensible of the non-Keynesians, more monetary policy that threatens government fiscal health can be compared to smoking cigarettes. (The Japanese fit in here hilariously – “I dont have to quit smoking, that old Asian guy down the street’s been smoking 2 packs a day for 50 years and he’s still alive.”). Entitlement spending needs to be reigned in in the same way a smoker knows they have to quit. But maybe next year.

Ok, so the metaphor’s not perfect. Unless you want to include the dopamine release that comes from nicotine addiction, cigarettes have no constructive benefit whatsoever while there is ample evidence that stimulative fiscal and monetary policy does. In some ways obesity would work better – food, after all is necessary and constructive in moderation and the current epidemic of fatness raises all kinds of attractive metaphorical possibilities. But the health risks of obesity lack the “wake up one morning and you’re fucked” immediacy of lung or throat cancer, and potentially, a lack of faith in greenback and/or Treasury market.

Honestly, I don’t feel qualified to argue either side here. White’s paper – which focused on the longer term sustainability of subsidies for the auto and agricultural industries – did get me to think about it more. But to side with White and other Hayekians feels too much like a moral “eat your vegetables” argument rather than an economic one.

I also read Dalio’s Principles recently, his general recipe for life success. He emphasized the importance of looking past “first order problems”, using the time sink of physical exercise as an example, and focusing on second order benefits – the added productivity of physical health. This thought as it applies to fiscal cliff economics is harder to shake.

Kevin Ferry wrote a great post equating the current American political debates, in economics, social policy and everywhere else, as indicative of America’s adolescent stage of aggregate maturity. With this in mind, I can’t help but remember that one of the primary signals of maturity is the ability to think longer term – Dalio’s urgency about second order benefits.

Again, I won’t suggest that i know enough to tell you what mature economic policy would look like in this sense although certainly entitlement reform is part of it. But I do know that adulthood involves difficult choices when you realize you can’t just do whatever you want.

The NFL, the Internet and Economic Inequality

[Note: There is an obvious response to comparing NFL players and the average laborer – the multiples of minimum wage made by professional athletes. Hold that thought – I will deal with it tomorrow]

The NFL concussion issue is bothering me more than I would have thought and I’m trying to think through its broader implications as a cultural and economic phenomenon, specifically in light of stagnant overall wage growth and also the evolution that technology has wrought on our broader conception of celebrity. The new ethics of watching football, best elucidated by @tanehisi, is a highly personal matter and I have no argument there – its for every fan to decide for themselves. For myself, I will never stop watching the NFL even if I am already questioning the extent of my preoccupation.

The fact that the NFL gained traction in the 50s and 60s well after the sustained popularity of college football, where the players received no salaries, is only one of the many indicators that the players have historically been treated more as equipment than labor. Every book written by insiders, Meggyesy’s Out of Their League, Gent’s North Dallas Forty, highlight the broad inhumanity (and also frequent, offsetting generosity) of coaches and management. The trade-off between pain and fame and the subjugation of personal goals for the good of the team is thus woven into the fabric of the game, a ruthlessness that for many provides more reason to watch.

Major League Baseball provided a strong reflection of the waxing power of organized labor in the 70s, beginning with the Curt Flood case in 1969. The NFL, as a league, has done a far better Reaganesque job of crushing player bargaining power and thus constitutes a worthwhile, through exaggeration, window into the current era of wage inequality. The NFL owners group provides an unequivocal depiction of the 1% as the investors of capital, only with even more stringent (for now) control over labor. I can see no remotely feasible circumstance under which 95% of NFL owners do not support Mitt Romney’s trickle-down, “I got mine” policies as a lot of us, whether we admit it or not, would in their place.

If the profit-oriented incentives of league owners are easily intelligible no matter what the issue, the mindset of huge segment of fans is much, much less so. The key factor here is that I’m a Detroit Lions fan, bred in the bone. One would think that the Rust Belty Lions fandom would, along with Browns and Steelers supporters, side vehemently and overwhelmingly with players and the NFLPA with respect to player safety and salary growth. Stunningly, this does not seem to be the case. My impression from Twitter is that Lions’ fans are divided on cases like that of Cliff Avril who is currently semi-holding out while negotiating a new long-term contract. More interestingly, the fans that do not support Avril’s position are angry, enough to tweet “get to work you ungrateful jackass” to a complete stranger who, if so inclined, has the physical tools necessary to pummel them into pink mist.

Initially mystified by this seemingly self-defeating outrage, I’ve come to credit the Internet and the marketing success of the NFL for much of it. The 24 hour coverage on the NFL Network, CNNSI, the amazing new camera angles, the (frequently abused) generosity of the players on Twitter, all of these allow for fans to become fully immersed in their favorite game.  This addiction, however, is completely sanitized and carefully designed for your consumption. As the Last Psychiatrist is fond of saying, “If you’re reading/watching, its for you.” My hair stands on end when before a big game the Steadycam and audio capture the ecstatic, warrior scream of the physically-colossal Ndamukong Suh as he runs out of the tunnel. There are no cameras, however, documenting the poor bastards living in storage lockers after being cut from the practice squad, unable to hold a job because of headaches and the spine of IED victim. Importantly, we wouldn’t watch the latter footage if it were available as it is a function of the web culture that we only see the version of reality we want to see. We do not confront, and in the same way an alcoholic is enraged by advice to cut down their drinking, we get pissed and circle the wagons if someone starts chipping away at any of our virtual cocoons.

To some extent, the same phenomenon is present in the broader economy with financial celebrities like Jamie Dimon and Steve Cohen replacing current NFL stars. The pornographic thrill of a BI slideshow of Dimon’s $8 million, rarely-visited Boston townhouse, is enough distract us from the unemployed who, like the suffering ex-NFL players, are unpalatable collateral damage that makes the pornography possible. The technology, combined with careful editing, has offered the seductive, drug-like option of projecting ourselves into a perfected form of the lives of our heroes, athletic or financial, and we have taken too-full advantage.

Higher Education as The Big Marshmallow Test

This is not going to be an easy post for me to write but I will commit off the top to avoid wallowing in personal travail. The issue however, the signaling component of higher education, is for a dropout like myself fraught with highly defensive emotional bias that will underpin everything I write. The extent to which my dropout status disqualifies me from providing an opinion on the matter is really the pivot around which I want this post to revolve. I should thank professor Cowen yet again for recent posts like this one that provide the window (or cover, depending on your perspective) to write this down and have even an outside chance of anyone reading it.

Some combination of a diligent guidance counselor and a hysterical mother meant that a weeklong battery of IQ testing at the University psych department accompanied my late-high school academic fall from grace. And although I have frequently wished this were not the case, the results were as expected for my psychopathically arrogant teen self. The point, in hindsight, is that the drug-addled misery that was to follow was entirely caused by a lack of maturity and general fuckedupedness.

It is my sincere belief that well over 50% of the population has the intellectual capacity to earn an undergrad degree, particularly if given direction as to where to focus. This is not to suggest that intelligence is not an important factor in the late-teen, early 20s streaming of the population. It does imply that for the middle of the bell curve, the overwhelmingly deciding factor is maturity that for the majority success or failure regarding higher education is in many ways one vast, complicated marshmallow test.

I assume that most people reading this have earned an undergrad and I’m highly curious as to their reaction to the above sentiments. Is it “Well, winners win” as my old friend JC used to say or more popularly “Do or do not. There is no try”? Fair enough, if so. None of this is to demean the consistent hard work and diligence that academics require. It should be a decisive advantage. But for how long?

My question in the end is whether there should be a statute of limitations on the importance of higher education in determining future wealth and status. The issue is entirely hypothetical admittedly – I’m not going to suggest a multi-trillion dollar “No Teen Left Behind” government program nor do I have any delusions that efforts will be made by the academically successful to drain the moat that protects their career advancement from the lesser-washed. But still, one wonders whether the increasing cynicism as to the tangible, ex-signaling benefits of higher education will result in recognition that talent lies elsewhere, with those that failed the Big Marshmallow Test and matured late. As the labor force shrinks, it is conceivable that two 35-year olds with similar work histories will be judged on largely equal footing, without respect to academic achievement that ended more than a decade previously.

As always, I’m exaggerating the case to make a point. I am well aware that hundreds of thousands of people without degrees have a net worth in the millions of dollars. Failure to get a degree is not a guarantee of lifelong poverty, although I can attest that it certainly feels like it at the time.  It is also not the case that I’m inviting readers to a pity party on my account – things have turned out pretty well for me and I have been insanely lucky in many regards. I do, however, retain a great deal of sympathy for those that for self-inflicted (my case) or other factors, were distracted at the exact point in time when the academic fork in the road that would go a long way to determine their future success was directly in front of them. I’m biased, clearly, and dramatically so. But I suspect and hope that the current hand-wringing regarding the limits of conventional higher education, combined with demographic factors and the need for constant workplace re-education, will result in more work environments where advancement is determined by proven ability, and less dependent on a maturity test that occurred at a specific point in time.

Good at Finance vs Good at Life

There are few constituencies more in need of a sustained market rally than recently-married females in the 28-32 age group in search of positions in finance. Managers faced with continued budget cuts and looming layoffs, including their own, will implement any necessary degree of rhetorical backflips and rationalizations to avoid selecting a candidate that, after enduring the assimilation process, could be lost to maternity leave.  This same manager, who may very well be female, will admit after a couple of drinks that this process is brutally unfair and illegal in most states. Unless they’re really stupid, no inkling of this decision making will ever be committed to physical or virtual paper.

There is no way I’m going to defend this – I only point it out as an example of sacrifices that are being made to uphold the primacy of bottom line thinking. When profits represent the only “good”, in periods where they are threatened the achievement of every other type of benefit must be tossed until the pressure declines.

Every ambitious employee in any industry is frequently forced to choose between career goals and adhering to societal frameworks of “winning at life”. The dilemma is best identified with discussions of “work/life balance”, a concept in finance which, like “sustainable alpha” is best grouped with unicorns and bipartisan legislation. In my experience, without exception the individuals emphasizing their skills at work/life balance A) had large underpaid staffs who did all the grunt work and B) were eventually fired. The same bottom line orientation that makes life difficult for 28 year old females is in effect applied by each individual to themselves, requiring the de-prioritization of most, if not all, other factors.

I can hear the “Oh, poor baby” comments from ex-financial readers already. You can save them – no one on the trading floor or in banking feels sorry for themselves. These sacrifices are made by and large willingly in return for the outsized pay checks available in few other industries. Many, and this is an underrated factor, love the adrenaline rush of moving big sums of money around enough that the pay package is an ancillary factor, at least until the pants come down and the rulers come out at bonus time.

The outgrowth of all of this is that the financial services industry is dominated by a specific, narrow personality type that either never considers social benefits at all or considers them a bizarre, misplaced affectation. Yes, the hitters do give a lot of money to charity but anyone who’s attended related functions or been “strongly encouraged” to give to the boss’ pet cause knows that it is just another form of competition, one that is really, really annoying and fraught with potential political disaster for mid-level employees forced to buy a Tom Ford tuxedo they can’t afford.

What we’ve learned from the GFC and its aftermath, I think, is that these people shouldn’t be in charge. There are obvious exceptions, but the most successful participants in finance have been forced to jettison the thought processes the majority of the populace believes make up “being good at life”. It is also entirely likely that the current captains of industry are largely unaware of their dearth of humanity in the same way an obese person is stunned to look in the mirror and discover that they are 100 pounds overweight – like many terrible things it happens by slowly by degrees, thousands of small, seemingly innocuous cheeseburger versus salad decisions. I doubt, for example, Governor Romney thought twice about strapping that poor dog to the car roof (until now, when popularity, not profit, becomes the bottom line) as it was clearly the most practical solution.

There are, it must be said, thousands of incredibly giving, ethical people working in finance. In my experience, however, they are swamped by the cynically profit-seeking and are, while listened to, carefully kept away from the meetings where policy is determined. This “keep the bleeding hearts out” trend is most notable during periods, like now, where revenues are more scarce.

I have no idea how to move the goal posts to allow more of “the better angels of our nature” to rise to prominent positions in finance, or even if it’s possible. I do believe, strongly, that the personality type that typically rises to the top of a global investment bank provides further evidence that the current control over legislation enjoyed by the financial lobby should be brutally curbed.

Impostor Syndrome

It seems you’ve been living…. two lives” – a Smith (The Matrix)

I want  to thank Steve Waldman (for pointing out THIS) and Barry Ritholz for “nudging” me into finally writing this post, one that I have considered and put off numerous times as basically “none of your fucking business” on one hand, and a series of personal and professional risks on the other. Its a personal story, although one I will try to tie in to general reader utility. If I do this right, my sincere hope is that it helps those with similar struggles in the same way other personal stories have helped me. If it turns out personally cathartic, so much the better.

There are a number of ways in which my life peaked at 17. To that point, the details were familiar to any serious Ivy League candidate – second smartest kid in the class (there’s was always, maddeningly, a freak), captain and starting quarterback for the JV football team, scouted to play professional baseball. Psychotically competitive from an early age, extracurriculars three times per week, completely addicted to drama and attention. And, importantly, a complete and utter pain-inflicting asshole.

I won’t bore you with the details of The Decline and Fall. It is sufficient to describe it as equal parts Holden Caulfield (at its best) and Sylvia Plath at its most sordid. Two specific events are relevant to this post. One, dropping out of a good school in third year with really good grades because I could physically not continue – it was taking three milligrams of Ativan to get me on the bus to class. Two, sitting in a clinic at 21 and finding out that the level of cortisol in my head (a marker for stress, depression-related in my case) was six times what it should have been.

Now, this is not a sob story – the vast majority of these wounds were self inflicted. I am, of course, sensitive to those afflicted by clinical depression who note genetic biochemical predispositions. It is also the case, however, that psych-related hormones are highly sensitive to external stimuli. Watching comedy, for instance, creates positive hormonal changes while an obsession with death metal has the reverse effect. Personal responsibility, in other words, is not cut and dried. To the extent that my issues were the result of refusing to accept the validity of anyone or anything that conflicted with an adolescent conviction of my own “specialness” and destiny to rule the world, the fault is mine.

To continue our story, at 22 I reenter society in a kind of debutante ball where no one else shows up. As a dropout the apparent prospects did not include corner offices and the resumption of discussions regarding my “limitless potential”. It appeared, however, that my luck had turned as a series of breaks, combined with market conditions, allowed me to drag my ass from a telemarketing boiler room, to Operations at a major firm, to the trading floor of a global investment bank offering advice to people that should already know better, but didn’t. In fits and starts, career progress continued for a decade after that, culminating in a prominent strategist role. But, the whole time….:

Impostor Syndrome: sometimes called impostor phenomenon or fraud syndrome, is a psychological phenomenon in which people are unable to internalize their accomplishments. (Wikipedia)

The Atlantic’s Ta-Nehisi Coates, (who if you are not reading you really should – if only to lament that some are blessed with writing talent far beyond our own) , probably doesn’t remember this, but we had an email exchange regarding the “two-headed coin” nature of Imposter Syndrome after he wrote about the phenomenon as a fellow dropout. Our suspicion (then, that is -TNC is big enough now he might be cured) was that it is impossible for the non-afflicted to understand how powerful it is as a motivating force. The anxiety that has you living in fear that some intern in HR will arbitrarily decide to audit CVs to fill downtime peaks every once in a while, but the same tendency to look over your shoulder has you also living in fear of “average”. For Imposters, average isn’t good enough – everything you do, every report, seminar, meeting, has to exceed the acceptable, exemplifying some skill or talent that not only proves you belong, but that no contrary evidence will be sufficient to justify your departure. I summarize this process as reaching for the “objectively good”, implying that even if Warren Buffet read your report, he would be forced to acknowledge its well-argued validity.

It is not difficult to see then that Imposters and biz school grads are inherently at odds. At their worst, biz grads interpret graduation as a kind of club membership or voucher ensuring that they will never have to work hard again. The easiest way to tweak the bizknobs is to ask them whether “Sense of Entitlement”  was a first or second year course in their program. Those that laugh tend to be the ones you want to work with and the ones that get pissed off are the people to avoid like the plague. This tweaking, however, is grounded in the most base kind of jealousy – the Wharton grad has the affirmation the Imposter craves most.

There we have it. I’m not sure what I’ve done here but at the very least those who’ve read this far will realize that the Interloper pseudonym was not lightly chosen. Certainly I’m concerned at this point that some readers, confronting my anonymity, have projected a back history that varies dramatically from what I’ve written here and are somehow disappointed. I can live with that if even one person is heartened by evidence that lives do have “second acts” on occasion.


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