Wednesday, July 22, 2009

The Machine That Is Greed

Concerning the recent financial meltdown, who are we to blame? Of course we must blame somebody or at least something. And how could we not? Isn't this one of humanity's most cherished and, dare I say, obligatory pastimes?

How about blaming “greedy” executives? O.K. Now we seem to be getting somewhere. But deep down I can't help but think much of their greed is motivated and fed by a collective greed which includes, I am afraid, all of us.

What presumably would be the primary motivation for these upper echelons we so readily pin the blame on to engage in “greedy” practices? To maintain their jobs. And what would be the most fundamental criteria by which to “grade”, say, a money manager? His or her character? Integrity? Attractiveness? Alma Mater? Intelligence? Political philosophy? Sense of humor? Favorite professional football team? Religion? Sex? Sexual orientation? Not likely!

The only thing the majority of us gives a damn about in this case is his or her ability to produce return on our investment. Why? Because we like money! And why would we not? Money is good! It is the love of it that is a sin, supposedly. But where does this “love of money” begin? It is just like “greed”. It brooks no discrete, definable answer! Needless to say, if not for “fat” returns, we would all too happily withdraw our money and put it in the hands of somebody more capable, or should I say “greedy”.

Before one blames “greedy” executives for the ills of the economy, I feel compelled to ask this: would you willingly accept an 8% return on investment if you could easily obtain a 10% return on investment given the same (purported) level of risk? If you say yes, you are either in the minority or a pathetic liar.

So the fact that the typical person would promptly take his money elsewhere will likely encourage money managers, greedy or not, to “push the envelope” so as to increase returns to the max and make their customers happy. I say greedy or not because, obviously, for the sake of remaining competitive, would not a money manager be almost obligated to play by similar standards lest he be run out of business?

And so ensues an “arms race”, in turn seducing money managers to take ever riskier chances to compete with “the guy next door”. Then, KABOOM! An explosion of biblical proportions splatters, ahem, shrapnel of the stinkiest kind all over everybody! The proverbial shit hits the fan!

Who will we blame? Whoever is caught with their pants down.

With this in mind, I often wonder how many of us might be at least as “greedy” as the ones caught naked? Perhaps the shit has not hit our fan just yet.

Who among us might be at least as greedy? How are we to know? Therefore, do not judge lest ye be judged!

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