Sunday, July 13, 2014

Too Bad to Be False

Let's say that I'm driving through Chicago late at night and I'm stopped at a traffic light.  A guy steps up to the side of my car, taps on the window and I look to see him pointing a Glock 9mm straight at my head.  He calmly tells me to get out of the car.  Looking around, I see two or three other shadowy figures each with guns drawn and I realize that stepping out is a risky proposition but staying in the car seems unlikely to end well either.  I step out of the car leaving behind my wallet with all my credit cards, my money, and my phone.  In a flash, the guys jump into the car and speed off into the night.  Only then do I look across the street and see a person slumped in the doorway of a convenience store.  He's bleeding but not fatally wounded.  At once I know that I've just provided armed robbers a getaway car and, in all likelihood they'll rob again. 

Pause.  Got the scene?

Let's say that I'm at a country club in Raleigh, NC.  I'm a basketball player with about $20 million in compensation and endorsements.  I've been invited to lunch with a wealth manager who I'm interviewing to be responsible for my investments.  "You really want to protect your hard earned wealth," one of the advisors says, "and we know that you're a responsible, conservative guy.  We think that you should probably put about 30% of your portfolio into fixed income, 25% in growth equities, 15% in value equities, 15% in real estate and the rest we'll put in a cash management account for you."  I don't know the difference between general revenue bonds, corporate high yield, short-term sovereigns.  While I eat my chicken Caesar salad, they don't stop and explain how they came up with the assets or proportional allocations other than to say that the last 5 guys they've worked with have done the same thing.  I wouldn't know the difference between "growth" or "value" anymore than these guys could dunk.  They've got a glossy brochure emblazoned with a logo of a bank that everyone knows.  And at the end of lunch, they tell me that they'll only charge 20 basis points to manage my money.  I've never heard the term 'basis points' but they explain that I'll be charged a fee for them insuring that my money is well-managed.  Sounds fair. 

What's the difference between the Glock and the Glossy?  The perps in the first story got away with $40,000.  The perps in the second story got away $400,000.  Both were opportunistic predators.  Both used fear and ignorance in a strange environment to destabilize good judgment.  Both will go on to rob again.

I met with a number of professional athletes this weekend.  We were engaging in an important conversation regarding financial literacy.  Like the work I do in community education in mining and energy extractive resource regions of the world, I have come to realize that the status quo economic system is incapable of acting in the absence of predation on fear and ignorance.  The wealth advisor in the second scenario and the armed robber in the first are indistinguishable save their - you guessed it - socio-economic status and selection of weapons.  But don't think for a minute that there's one shred of difference in the animating impulse between the two. 

Quick check: what's in your head?  Do you know the clothing each character is wearing?  Do you know their skin color?  Do you know the sound of their voice?  Do you know the scene and who else is around?  Why does this matter?  Just to be clear, the same thieves in the second story pull off the exact same heist with a few of the billionaires I know and it robs the billionaires of tens of millions of dollars that they're told is just the way the fickle market works. 

Now, here comes the tragic part.  We'd probably agree that in the first instance, I wouldn't track down the robbers, give them my cell phone, and tell them that I'm about to come into another few million bucks and that they should call again after I sign my next contract.  The truth is that in the second story - the real one - the player actually receives e-mails loaded with financial terms and jargon rife with phrases like, "you should feel good about how your portfolio is doing."  Once a quarter he gets a statement with pages upon pages of stocks, CUSIP numbers, and monetary amounts with gains and losses blurring down each page.  He's never been told that a geographic overweight to munis is not wise.  He's never been told what a benchmark to the MSCI Global means.  And in the few instances where new opportunities are presented, he's advised that investing in deals outside the careful management selection done by the manager's firm is "too risky" to consider. 

Deepening the tragedy, the fact that every other player in the league - well at least the ones who aren't just blowing their money on cars, women, luxury, and general hedonism - is basically working with the same advisors means that being exposed to the evidence of the theft triggers a remarkable and devastating reaction.  "I should probably set up a call with my investment advisor and see why they're doing this," is a frequent response.  That's right.  Call the thief and see if he'll confess to his crime!  Seriously?!

On more than one occasion I found out that being the bearer of facts and knowledge - both of which could actually emancipate individuals from their predators - is met with skepticism and mistrust.  "You're not asking for anything for this information," I was told with incredulity.  And here comes the kicker.  By the way - this is the reason why this post is a partial response to my dear friends and colleagues in the commercial spirituality and self-help business who are struggling with the monetary exchanges that make them feel uncomfortable and unsavory.  My life choices have been simple (albeit misunderstood). 

1.         If someone or a group of people is being harmed (or is inflicting self-harm), my intervention is not predicated upon a transaction for money.  I have not, nor do I ever intend to profit from interrupting the evil inflicted upon any person or group.  My reasoning is simple.  If you're engaging in a time of real or implied danger, expecting a counterparty to act in a fully informed fashion is impractical if not impossible.  Rational actors don't stay rational when they're in crisis.  I recall the evil of a church group I knew that agreed to build homes for victims of Hurricane Mitch in Honduras only for those who "accepted the Lord."  Blackmailing people into behavior with their own survival is consummate evil.  Charging admission to well-being and wholesome engagement is unjustifiable.

2.         I will not demand value before evidencing the ability to deliver it.  I've seldom encountered a situation in which I cannot provide something: knowledge, experience, resources, connections, etc.  When I choose to engage, I want to know that the counter-party with whom I'm working is fully informed of the expected outcome before I stipulate a value attribution to my involvement.  I can be entirely correct about the quality of an investment, for example, but if my insight cannot be enacted due to a lack of knowledge or an imposed incapacity, that insight is of no value in the impotent environment.

3.         I will not accept any value for investment or compensation unless I know that both the counterparty and I are equally aware of what I propose to do and what the expected outcome should be.  This means that I spend inordinate effort to educate those with whom I engage to make sure that I'm not running the risk of pulling the wool over someone's eyes.  In many instances, this means that I educate a person or group only to find out that they've elected to work with others - at times even expropriating what I've shared to my ultimate economic detriment.  That is a far more acceptable risk than being the perpetrator of abuses of information asymmetry. 

These three simple precepts are directly responsible for my success in my endeavors.  And, for the record, this means that much of my wealth comes in forms not denominated in monetary units.  In fact, it is my desire to never have my net worth more than 16.7% in monetary terms.  (For those of you who are puzzled here, read about Integral Accounting).  At the same time, living by these principles means that most people will chose to discount this alternative and embrace abuse through ignorance, fear, and scarcity because it's a more "understandable" path.

And it's this last point that leads to the title of this piece.  I've been accused of offering investments, corporate models, personal insights, and compassionate engagement that is "too good to be true."  It saddens me every time I see people experience kindness and generosity and then imagine that it must be coming with an ulterior motive leading to its derision and rejection.  This pain has attended most of my life and has been part of many relationships.  But I'll gladly wear this cloak rather than acquiescing to the tyranny of using my intellect, access, and experience to become another predator.  Whether it's a wealth manager in North Carolina, a thug with a Glock, a mining company corrupting governments to misappropriate mineral rights - they're all using the exact same modus operandi.  And until some of us step up to the plate and offer an alternative - equivalently accessed by ANYONE - we're guilty of complacency or complicity.  And both of those are too bad to be false. 


  1. I wonder if you have any thoughts on the new SDR system that seems to be coming in very soon. Best Wishes. Bill...

  2. First time here. You are my new hero.


Thank you for your comment. I look forward to considering this in the expanding dialogue. Dave