Sunday, April 14, 2013

By Any Other Name

'Tis but thy name that is my enemy;
Thou art thyself, though not a Montague.
What's Montague? it is nor hand, nor foot,
Nor arm, nor face, nor any other part
Belonging to a man. O, be some other name!
What's in a name? that which we call a rose
By any other name would smell as sweet;
So Romeo would, were he not Romeo call'd,
Retain that dear perfection which he owes
Without that title. Romeo, doff thy name,
And for that name which is no part of thee
Take all myself.

Act II, Scene II - Romeo and Juliet, Shakespeare

We are crossing that fateful anniversary of Edward Smith's command in the icy waters of the North Atlantic.  One hundred and one years ago at this moment, all of the necessary objects in motion were in motion to conspire to bring about maritime's most celebrated disaster.  Smith, known both as a "safe" and "the Millionaires'" captain was, by the turn of the last century one of the most renown captains sailing the upper class from Liverpool to destinations far flung across the Atlantic.  Having credentialed himself as the 'safe' choice for the aristocratic class of intrepid seafarers who wanted crystal and chandeliers rather than timber and grog, he sailed right past his little 1911 collision with the HMS Hawke in which he sheered the bow off of a warship.  While he damaged the RMS Olympic in the collision and nearly sunk the White Star Line financially, his reputation for safety among the monied elite put him on the collision course with history 101 year nights ago. 


Gold is the 'safe' investment in economic turbulence.  Treasuries are the 'safe' haven in the current cycle.  Why is it that after millenia of experience, the havens where the wealthy coalesce for 'safety' happen to be the same places where contagion and destruction are most cataclysmic?  With quantitative easing manipulating the price and supply of 'safe' assets and creating an El NiƱo superstorm-in-waiting, Bloomberg went as far as to suggest that we're seeing a "safety bubble" forming.  Once again blurring the ontology of "safety" and "risk", the market continues to see massive asset relocation into assets that are shrouded in near perfect market ignorance, laden with sovereign manipulation experience, and promoted as 'safe' and 'low risk'.  

What would happen if we called 'safety' what it actually is?  The 'safety' that the market seeks is a preservation of money so that an isolated individual can horde resources in the present to manage expectations about a future in which money will have equivalent utility.  Is it the individuated, miserly, hording impulse that seeks insure that self-interest will be financed at some point in time when distress happens?  'Safe' investments celebrate past performance rather than investing capital in productive engagement.  They represent capital holders disengaging from a expansive future; from geographies of heterogeneity; from financial products that invite broader participation and activism.  When will we realize that safety may actually attend those who build networks of shared trust and success in which mutual aligned interests are celebrated in success and resilient in times of want?  

What would happen if we actually took a step back and measured risk?  I have spent the past decade working with private wealth managers, families, and institutional investors.  To date, I've yet to meet a single one who can actually explain what they mean by risk with a definition that does not include: a) consensus beliefs unsubstantiated by data; and, b) complete lack of understanding regarding the conditions in which they could preemptively discern that the 'risk' would change.  In other words, 'risk' in the market is a barrier to inquiry - ignorance arbitrage as I've called it - rather than a quantifiable unit of expected loss.

If we called safe, low risk investments by their other name - reclusive miserly ignorance arbitrage - we'd celebrate it a lot less.  We'd also spend more time informing ourselves about the investments we make and the degree to which they build networks of resilience around our present engagement and future sustainability.  


  1. Thank you David. Networks of resilience. I very much like this idea. Integral accounting around present engagement and future sustainability.

    Question: Do you think our insight into investments that are resilient in the present and sustainable in the future are as opaque as other types of investments?

    People rush to "safe" investments out of tradition/ignorance (aka expertise). I personally do not have sufficient understanding/knowledge to gainsay this expertise. In the face of uncertainty, I also seek investments that will insure my self-interest when distress happens. I don't see an alternative. When is it prudence and when is it miserly?

  2. "When distress happens" is an externalized reality strongly supported by our individuated (and at times victimized) narratives. Ironically, as Joe Jaworski comments in Synchronicity, distress, in a healthy system is precisely when artifacts of deferred "stability" fail. For example, during a flood, a boat is helpful - not a bank account. How many ATMs will work when we have an East Coast blackout? With over 80% of our current 'safety' in electronic records, we won't need a run on the bank - just a blackout. The point is that the illusion of prudence should be invested in elasticity of networks, not in isolation defense mechanisms.

  3. Check out:

  4. The gold bugs including Paulson took a hit with this strategy today...

  5. Perhaps when the U.S. is no longer the worlds reserve currency the blackout won't seem so bad. A recent look back at the British pound in the 1970's should give us a heads up.Don't worry that wasn't an iceberg that passed us was it?


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