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The importance of being earnest, greed and investing.

September 2nd, 2009 · Greg Atkinson · 14 Comments

Whenever there is trouble in the financial markets or stocks tumble, those who occupy the high moral ground for a living start to lecture the rest of us about greed and the dangers that the pursuit of wealth can lead to. The irony is that many of the people who bombard us with such lectures are in fact themselves quite wealthy, yet they curiously appear to believe that they have not been greedy while they amassed their fortunes.

Whether or not a person is greedy is a very subjective thing, and as a society we are no consistent with the way the term is applied. A banker that earns a few million dollars is apparently greedy, but an actor who does is generally not considered to be so, especially if he or she is popular.

To the poor of Africa most of us in the Western nations would appear greedy, and we probably are. This is why I guess so many rich and famous people head to Africa, it must help them feel a little less guilty about being rich and famous. (but they never stay long and soon jet back to cocktails and caviar)

So whenever there is the debate about executive pay every few years you can be sure that sports stars, entertainers, media personalities, lawyers and politicians will escape the public’s gaze. It seems you can only be greedy if you work in the financial sector or are a company executive.

I am not defending bankers, in fact as person who has spent much of their working life in engineering I have an instinctive dislike for the profession, however before we start labelling people as greedy or blaming the global financial crisis entirely on Wall Street bankers let’s have a serious look at ourselves.

When any of us invest we are all generally tempted by the allure of a high return. If two investments we set out side by side and all things looked equal apart from the potential return, then we would probably lean towards the investment with the higher return. Is that greed? Maybe, maybe not.

Seeking the best return for your money make sense, the alternative is not to manage your finances well and run the risk of falling short of obtaining the resources you need to live a comfortable life in later years. So I would suggest that seeking investments with higher returns is not greedy at all….up to a point of course.

Our problems when investing can often be traced back to when we drift towards trying to speed up the wealth building process. When times are good there seems to be people amassing fortunes everywhere and when we look at how investments are tracking, we appear stuck in the slow lane.  So to try and “catch up” we might take on some more debt and therefore put ourselves at greater risk of racking up some big losses.

If our measures work and our investment returns soar then everyone seems happy, it is only when markets turn sour that everyone seems to become critical of capitalism, the banking system etc.  Even people who have made a living from the financial markets suddenly turn on them when they falter, a touch hypocritical isn’t it?

When investing I believe it is important to be earnest. If you treat investing as a quick path to glory and instant wealth then greed is probably driving your ambitions. But if you are prepared to plod away, do your research, plan carefully and accept that building up wealth takes time then you probably have greed under control.

If you are earnest you will hear the muted greed alarm going off in your head when some investment seems too good to be true. Being earnest will also better prepare you to spot scams and will hopefully help you avoid devastating losses.

But being clever is important too, isn’t it?

“I am sick to death of cleverness. Everybody is clever nowadays. You can’t go anywhere without meeting clever people. The thing has become an absolute public nuisance. I wish to goodness we had a few fools left.

From: The Importance of Being Earnest by Oscar Wilde.

Many people will tell you that clever people make all the money but what  is often overlooked is that many so called clever people lose large amounts of money as well, and sadly much of it was not theirs in the first place. The names Phil Green, David Coe, Eddy Groves, Phil Sullivan and Gordon Fell all spring to mind.

They might have been relatively clever, but were they earnest? Perhaps they simply pushed too far in seeking higher investment returns? Then again, greed may have got the better of them and this led them to be reckless with investors money. We may never know the true story. (or how clever they really were!)

Rather than judge those who have failed I believe it is more constructive to simply try and learn from their mistakes. Would you rather be the talk of the town for a years and then find yourself in the middle of a crumbling business empire, or are you prepared to live a fairly modest life knowing that you have not caused financial hardship for others? Personally the second option sounds more attractive to me.

The problem with what I am saying is that it is a fairly boring way of looking at investing and as I as read back what I have written I sound as interesting as room full of economists talking about the forecasting process. I also appreciate I am starting to sound like the Lou Mannheim character from the movie Wall Street. Sorry about that. But the boring view is often the more accurate one.

Finally on a lighter note I found this compilation of President George W. Bush’s bloopers, it is well worth watching. He may have left office with a popularity rating lower than Yoko Ono’s was amongst Beatles fans, but he sure was amusing.

Over to you George….


14 responses so far ↓

  • 1 Ned S // Oct 26, 2009 at 8:07 am

    This is a classic – “I shouldn’t have to pay off my $18m in property debts because I tell lies and am stupid”:

    http://www.smh.com.au/lifestyle/people/lenders-at-fault-over-18m-debt-says-upton-baker-20091025-heok.html

    Worked for the big American financials and all the jingle key brigade so why not a Sydney socialite I guess?

  • 2 Greg Atkinson // Oct 26, 2009 at 8:40 am

    Ned amazing isn’t it? She is on $360K a year, is a company MD and is basically admitting she does not read contracts!

  • 3 Ralph // Oct 26, 2009 at 9:04 am

    Nice find, Ned. That’s incredible. Surely it can’t be allowed to happen.

    If she wins it sets a precedent for every person who gets into financial difficulty. Every person who finds themselves behind in their mortgage repayments will be able to claim that they didn’t understand what they were doing.

  • 4 Ned S // Oct 26, 2009 at 9:06 am

    The bit about 360k pa wasn’t wasted on me either mate! I suppose in some ways it just illustrates the advantages of using a bit of commonsense and trying to apply a few of the basics in one’s life – The argument I’m trying to make elsewhere. But either way, you’ve got to laugh hey? (Unless of course Western society is really starting to think the lady has a point – In that case I’ll be real worried!)

  • 5 Ned S // Oct 26, 2009 at 9:23 am

    Ditto Ralph … Ditto!

  • 6 Ralph // Oct 26, 2009 at 1:11 pm

    But my parents/friends/workmates told me that house prices only ever go up! Real estate doubles in price every 7-10 years. Everyone knows that! I’m relying on my hard-earned equity to renovate my home and buy a new 4×4. No one told me that this could happen! Please judge, take mercy on me.

  • 7 Ned S // Oct 26, 2009 at 5:19 pm

    With a storey like that Ralph I can only hope you are young and handsome and get a female judge and jury foreperson who both REALLY fancy you.

    Hmmm … I reckon I’d have to pay the money back AND do life! 🙂

  • 8 Senator13 // Oct 26, 2009 at 6:48 pm

    What a joke… She is like those people that don’t take out insurance and then when something bad happens expect to get everything for free and for the government to bail them out.

    I hope the people who are paying her 300k a year to be stupid are happy.

  • 9 Greg Atkinson // Oct 26, 2009 at 9:10 pm

    Or those people who travel overseas and expect the government to be ready to chopper in a rescue team if they don’t have the cab fare to get back to their hotel 😉

  • 10 Pete // Oct 27, 2009 at 2:23 pm

    Haha, that is solid gold.

    I mean, if she was a poor single mum she’d be getting some sympathy.

    But an MD at 360kpa with millions of dollars worth of property? Hahaha.

    Hahaha. Haha!

  • 11 Senator13 // Oct 27, 2009 at 7:36 pm

    Oh boy, we debate macroeconomics, scrutinise policy, review history and analyse charts and trends to try and determine the root cause of the financial crisis when really it all just comes down to the stupidity of people like this lady…

  • 12 Ned S // Oct 27, 2009 at 8:22 pm

    You got that in one Senator! But having said same, if my missus was walking around with a silly grin on her face like that and a purple fur wrap, I’d have to cut my (or her?) throat regardless on the off chance we should happen to breed … Knowing that one has earned one’s daily bread in a vaguely honest way still has it’s own rewards for now I suspect?

  • 13 Senator13 // Oct 27, 2009 at 9:08 pm

    ahahaha your funny Ned!

    We all know what happened to the likes of Fast Eddie Groves of ABC… The Government does not help when it gives people with the same mentality a $900 chq and a pat on the back and told to go spend instead of save or pay off these debts they have…

    Still, this was not the first story like this and it is sure not going to be the last. Stupidity and this mentality are always going to be around. Even though the story of this lady is not unique I would still like to think that it is the minority of people who act like this… I would like to think that an honest days work is still going to leave most people in good shape and baring doing anything as stupid as this they should end up alright?

    Though, I do think that the number of people wanting money for nothing via govt handouts is on the rise. Let’s hope that this does not become the majority way of thinking…

  • 14 Greg Atkinson // Oct 28, 2009 at 7:38 am

    From time to time it appears there is a clean out of high flyers as some people are impatient to amass large sums of money and willing to take on high risk ventures. The early 1990’s destroyed the business empires of Alan Bond & Christopher Skase for example and we appear to be going through a pretty similar cycle this time around.

    Also when Gold Coast property developers start to run into trouble then this seems to be a good indicator that times will be tough for the high flyers, so maybe that is what we need to keep an eye on? I wonder if in the U.S. there is some similar connection with say Miami?

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