26 apr

The third sin is greed. According to Christopher Jamison the third sin of the body and mind. They are the least serious ones. The sins of the heart are more worrisome and those of the soul are the worst. But they are all sins of course. A fulfilling life can only be achieved by minimizing every single one of them.
Greed is good, said Gordon Gekko in the movie Wall Street. If I am not mistaken the words are originally from Ivan Boesky, an infamous broker in the eighties who ended up in jail after the insider trade scandal around the junk bond market around Michael Milken.
There is clearly a lot of greed in the banking industry, or in capitalism in general. The fundamentals of our society, or at least the Western economies, are based on the that people prefer more over less. It’s hard to argue against, although when the more is only translated in materialistic terms, there tends to be a problem. At last according to Jamison. Given the exploitation of natural resources in the past 100 years I tend to agree.
I am reading this book Flash Boys. It is about financial innovation. Ten years ago the monopoly of stock exchanges was broken up. It was supposed to bring competition and lower costs. It just shifted money, Lewis claims, within the financial industry.
The social benefits of most financial innovation are at best unclear, and given the experience of the past decade, probably harmful.
Most people claim that the bonus culture in banks is the main driver behind the troubles. I never agreed. I think that decisions about the height of salaries and bonuses are the prerequisite of owners of companies. As long as they can vote about it, and make seemingly stupid decisions in the process, I can not see what the real problem is.
But I do think the whole performance driven payment structure within banks, but also most other companies is twisted. It is a bonus drive culture. If certain targets are reached, a bonus is generated. Although these performance targets are getting more sophisticated, it is the result that matters, and not the way the result is obtained. It is the end, not the means, that really matter. A more sin based approach would include a definition of the means that should be used to obtain the goal. Just to make it simple: greed should be avoided. It will, ultimately, backfire.
The industry hasn’t learned this lesson yet, the book by Lewis proofs. Society can reap the rewards in the form of billion dollar/euro settlements for decades to come.
The ultimate solution has to come from the shareholders of banks and companies. Which is, basically, us, in the form of our pension funds and insurers. Those are still the big holders of equity in the world, be it much more often not very concentrated.
Why do they accept that an enormous amount of money is being wasted on a financial industry that basically is interested in distributing more and more money among themselves, beats me. John Kay, the brilliant columnist from the Financial Times is writing a book about this subject. Hopefully it will gain a lot of attention. I will be the first to review it, and if he isn’t changing too much about the plans as he explained them to me last year, it should cause a revolution. Real power to the shareholder, which is the people.