Showing posts with label virtue. Show all posts
Showing posts with label virtue. Show all posts

Friday, December 3, 2010

Pacifism and Objectivism for World Peace

Okay this is a direct product of finals week. The harder I study finance the more I want to think about big picture idea's instead. Below is an essay that roughly details a way of thinking that I think could solve a lot of the worlds problems.

The TL:DR is that by de-stressing the importance of patriotism and focusing on improving your immediate community you will naturally lead both a more fulfilling life, and conduct yourself in a manner in which all of your actions have pure intentions.


A Framework for Pacifism.

While studying in the US I have become cognizant of national pride, both American pride and my own pride of being a Canadian. While I have seen many of the traditional American values I am unconvinced of their superiority because they seem both shallow and conditional. Although I say this my overarching thought is that we are often taught to think of nations this way, better and worse. I propose that if we dehumanize our macro communities and focus on personalizing people instead of organizations/nations, we will live in a more harmonized world. 

Stepping back to my perception of America, an example of the weak foundation for its national pride is seen in the American dream. The idea of the American dream is a middle class living that is easily available to the masses; where the modern family lives fulfilling lives with modern conveniences. ‘Death of a Salesmen’ showed us the flaws in the 50’s, and the American dream is a total mockery today. The middle class is now obese children growing up on junk media to hit the further solidifying glass ceiling of class and wealth in adulthood. As adults they will come home to watch television channels that either pacify any real desire for personal achievement, or spin lies for them to repeat at the water cooler about how the world works, and what their government is doing for/to them. 

Canadians grow up in a very similar culture, but there is difference. First is the wealth split; “the have and have not’s” spreads beyond wage discrepancy, as vast swaths of the populous receive substandard education, healthcare, and have little opportunity for betterment in the states. The worst is that American’s still feel an entitlement to the rat race they’ve constructed as their lifestyle. In America man is either “taking what is rightfully mine”, or screaming bloody murder because someone “took what belonged to me”. This childhood mentality of righteousness plays out before our eyes on Fox News, The Wall Street Journal, Tea Party speeches or Republican Senators. Some Americans live a great life, and they have a great incentive to keep the party going, stooping to any level to protect it. Stooping hurts though, so through mass programming the rich get the little man to fight their battles for them.

The second difference with Canadians is we are a bit quieter about our pride of feeling we are the best. I think that doing away with this national pride altogether actually would bring a greater societal good.
This is where pacifism comes in. I think that a complete refusal to fight for your nations’ gains will lead to individual enlightenment and a global re-alignment of the human race’s goals and future achievements. If we downscope our sense of community to the people not the national framework, we will have much more clarity in our values because we will be focusing on a network we can conceptualize (you care about your close friends because you know them, you do not ‘know’ your nation).

Before I break the theory down in examples I need to flesh out a major identity change for this to work. We need to go back to tribal identification when we think about our personal roots. For example, I am not a Canadian; I just currently have legal residency status in Canada. I identify as a member of my parents clans, and my community is my family first, close friends second, and co-workers, professional network, and acquaintances last. I don’t identify with a faith, an organization, a country, I only identify with people. 

Now for why pacifism needs to be such root goal, we must think existentially. Death is unbelievably terrifying. Currently we all sit here, alive and conscious, with no idea how we got here or where we are going. This unbelievably bizarre event has spawned hundreds of religions, and huge factions of science and social studies that all seek to explore why. I think it is sufficient to say that before we know the why us, and what next, the thing that must be avoided at all cost is death. It is an unbelievable - in fact an unknowably extreme - evil to end someone’s life even an instant before it needed to end. One should be able to show the masses that to kill is the ultimate wrong, and to die in vain is the biggest loss. 

The last assumption needs to be how we make decisions. We need to be objectivists that chose paths in life based on value, and we need to value life above all else. We also need to value our own life above all else. All other decisions tradeoffs based on individual value judgments. Remember value is a function of both rationality and emotion and it is not naive. I don’t choose to go on vacation instead of taking care of my sick wife, because I value my time and my personal duty to my wife, more than the enjoyment that I would receive on the vacation. Group think, and long term planning still works because we rationally value the lives of our offspring and our closer community. For instance environment action is rational to the extent its’ harm on our quality of life is justified by its’ probability of helping our long term prospects - and to the extent we value our children - their long term prospects. 

I feel no value in ending my own life early in order to fight for the life of another. Martyrdom is irrational, because at the end of the day our time on earth is our own, and none of us can fathom the importance of our time spent conscious, beyond knowing that it is extremely important to us. Even in the best case scenario, where a soldier helps a community against a deluded killer, does the payoff from his humanitarian activities outweigh the loss of 40 years of life when killed. Think about 40 years of life in the context of all the time you have, and will end up, not living. Each iota of time is incredibly valuable. As I discuss below I firmly feel these ‘optimal’ war motivations are nearly never pure, mainly because the deluded killer is both almost never deluded, and very likely there because of the confrontational nature of foreign troop deployment.

First off let me say I think that war breeds war. When we go over to Afghanistan with the aim to protect the citizens from ‘bad guys’ and establish order we are really just stoking the fire. Less than 100 years ago war meant global conquest, as it did for thousands of years before that. We are just seeing a re-packaged form of the same thing. Everybody knows that on the individual level fighting never leads to successful terms negotiation, I can’t see why we fool ourselves into thinking it has any chance of working on a bigger scale. There are no bad people, just strong rational motivations and misguided thoughts of martyrdom. The only road to peace is through knowledge not suppression. We see this vividly in many macro examples, an obvious one being how much a family’s quality of life is improved when the mother is educated. War is barbaric, discoursed is civilized. We rarely wish ill on anyone we know, but somehow those we do not know are easy targets. If we stop thinking of people in collectives, in “them”, “the Taliban”, “the enemy”, and only think of people as people with lives, goals, families, and histories, then violence seems much eviler. The roots of pacifism lie in disaggregating our way of identifying strangers from a model of collective/national identification to personal or small community identification. If there is no sense of national identity, there is no nation to war against. 

So if the middleclass were to adopt this form of identity and a strict pacifism stance, foreign or domestic wars would get a lot tougher. The ruling rich (rich referring to wealth, knowledge, class, and opportunity) wouldn’t be able to protect their national interests because the citizens who usually join the army no longer find any value in that activity. So they would conscript. And we would leave. If the US wants war, then Americans draft dodge to Canada. If Canada wants war, we draft dodge to Brazil. We would move with those we value, to the extent that our values aligned. 

If I wanted to move to avoid the draft but my mother wanted to stay because she valued her surroundings more than being with me, then I would have to make a probability defined choice. I would weigh the value I have for my dear mom, against the probability of being forced into a circumstance of ultimate sacrifice. Obviously this gets complex, but remember you have a lifetime to make these decisions. However to make these decisions you need to base your decision off your personal values, not what the TV tells you to do. Thinking for one self is a tiresome task, but I think it’s worth it!

Staying big picture, I now propose that this form of thinking won’t just lead towards a life running away from national responsibilities, as we constantly move to ‘grass is always greener’ pastures. If the idea takes hold society will take a much more socially libertarian form, the model conceptualized by Switzerland, not bastardized by the States. Taxation won’t disappear because we will both appreciate the conveniences of the traditional state run infrastructure, and we will have a high appreciation for life so health care focused initiatives should have a high funding for all. With no national pride there is no hold on citizenship, countries simply become a conduit of value creation activities. If one country is receiving more citizens, other countries adapt to its policies, much like businesses respond to competition. Faith can be a rational value, but it must be for the sense of community, not to be a martyr for a greater cause, because that defeats the rational outlook individuals and society must have for the system to work. 

Although I talk about this on a large scale it really is an individual driven idea. It also fits very nicely with the current societal framework we have; following this line of thinking breaks no law. It’s also a concept well tread by philosophers, from Ayn Rand (dare I call her a philosopher?) to Murray Bookchin, and Robert Nozick. I’m sure there are still holes; an interesting argument would be what would happen to charity overseas with a narrow community mindset. I think generally if you value helping those most in need, it is a rational choice to do so. Just make sure you are doing it because you value it, not because you want recognition for doing such selfless work, or worse, because you wish to incite guilt in others with a display of altruism. The payoff must be intrinsically derived within, anything else is too risky. We’ve got one shot here; aim to make it a fully satisfying action packed journey.

Sunday, November 28, 2010

The Virtues of Finance

There has been a lot written lately about the insider trading scandals in the states, particularly the one involving Raj Rajaratnam and his old hedge fund Galleon Group. I did my 4th year business ethics term paper on Raj, and I have kept an eye on the events as they've unfolded. The big takeaways I've gathered are that: in business it often boils down to intent, and that although painted black and white these scandals are often very grey.

For instance think about the whole purpose of hedge funds. Their goal is to achieve returns above the market return. If they are able to do this with less risk then they have just disproven either Semi-Strong Form (SSF) or Weak Form efficency (ie. are they arb, valuation, or trading based). Market crashes aside, the market seems to be fairly SSF efficent, and so any hedge fund manager making ground must be cheating.

Galleon group had expert panels. This seems like an obvious must to a firm whose strategy is valuation. Talk to industry participants about where they think the industry is going, and then tailor your investments accordingly. If industry expert A says "I think that the semi conductor industry is ready for a comeback, data warehousing is going to bring in a huge demand force. If I were you, TriQuint would be a hot buy right now - they are really poised to sell into data warehouse demand.", then that's pretty above board advice. But what if expert A is telling you this and his firm is a data-warehousing firm, who is about to make a big play for a TriQuint. A lot shadier.  This is were it can come down to intent, and the court gets to decide your motives, not you.

In finance this is painted with a much broader brush against the whole industry, and I experience it in conversations all the time. People on the capital side of the business are seen as the fat cats, who care about nothing except personal gain. Why?

Umm what do you do exactly?
Focusing on investment banking, I think it gets it's reputation for several reasons. First it's confusing. The general public has very little concept of how a investment banker adds value. It's easy to think you understand what an astronaut, firefighter, tax accountant, surgeon, does in a day, or how a car company makes money. Even trading seems somewhat understandable, but what in the hell do those i-bankers do to make 6 figure salaries right out of college? The average joe either just envisions an open excel spreadsheet, or a golf course. They don't see any output, there is no product, it's just really really hard to think of what the work is.

When I began talking to my parents about roles I was considering, or where I landed, I saw first hand the difficulties in explaining the business. Now that we've switched over to Skype to ease the international phone bill, I can literally see their eyes gloss over when I talk about how I plan on valuing a target oil company for a Chinese bidding firm.

Now my laymen one liner is: "I attempt to put a price on a really large business by predicting, as accurately as possible, how much it will make from now to forever." or if I'm feeling quippy "I price the future", "I value things that are hard to value", and if I'm trying to pick up, "Come back to my place and I'll tell you what you're worth" (bet she's not imagining the excel filled night I am....).

Okay so how does this help anybody?
Or put bluntly by a friend, "explain to me why you're not increasing world suck". This is a bit harder to defend because you do hear about situations when you can be forced between a moral choice and a profitable choice. I conceed this point, but I'd point out that every job has the ability to hurt society from time to time. Think car mechanic. Sometimes your mechanic may overcharge you for the work, or replace things that don't need replacing. This is because there is a large information asymmetry - you know nothing about your car. The thing is some mechanics will do it the right way, and they'll quickly be recommended by their customers, so although you may know nothing about your car, you do end up getting to know who is a good mechanic. The mechanic may add to world suck everyonce in a while, but too many fraudulant transactions and he's lost his business.

It has to be the same way in the business world. If someone is going to pay me, I have to be helping someone. I see the M&A i-banking role contributing two things. The first big one is information. Through my days toiling at the office I am creating information where none existed, I am lessening the information asymmetry between the bidder and the target (or on the issuance side the investor and the company).  A creator of knowledge is a pretty good thing to be, and although I'm not curing cancer, I may be contributing to the process that gets the money to the person who does. And this is the second big point. Investment banking let's people invest. My team is tasked with lining up good ideas that need money, with money that needs good ideas.

I may not be producing energy efficient solar cells, rice bags for the poor, or biomedical advances, but I am part of a system that lets those things happen, and without that system, none of those things would be possible. The catch is every once in a while, I may inadvertently (or maybe even knowingly) help line up capital for an idea that is not a net good for society. My defense is that these idea's need demand, and people don't pay for what hurts them. Sometimes they do, but they do it unknowingly. I argue for the system to work, these bad idea's, bad mergers, bad companies, must be few and far between, because if they were common consumers would lose trust. When you lose trust, you lose consumption, which leads to layoffs, which leads to depression. We all work around the principle that everyone is contributing to society, not taking away from it. It's a sound principle and it guarantees virtue in every profession if it holds.

Why so much money?
I haven't developed a good explanation to this yet. I'd still pursue finance if it paid a fraction of what it does; I'm made for the trade, what is more fun than predicting the future! Finance is my plan A,professor B, and helicopter pilot plan C. After that I would start thinking about professions that were "jobs" that could pay for other things in life I enjoy, but for now I'm looking for a career that is the life I enjoy. Chris Rock explained it this way.

So why the money. Well economically it should be because supply of the job is much higher than demand. But this isn't true, thousands of people apply to 1 opening, statistically each applicant has 0% of getting in, the wage should be dead low, because if you don't want it the firm can just give it to the next applicant. Before we ditch economics lets drop the assumption that every applicant is the same. Maybe out of the 1000 applicants, there are only 50 that could do the job? I don't know the answer to this one, but I'm sure it plays a part of the story, there are 4 rounds of interviews after all.

The hours need to be factored in as well. If you are working 90 hour weeks for 51 weeks a year, you are making under $22.00 an hour. Averaging a 90 hour a week is a bit steep, but I'd wager most i-bankers are making less than $30.00 an hour before bonuses in their first 2 years.

And let's not forget what employers are asking for here. Quants with presentation skills. It's not that hard to find a very well spoken university grad from a liberal arts degree. It's not that hard to find a quantitatively sharp university math major. It is hard to find someone who has both. Many business students are good speakers, decent on the business skills but lack the fundamentals in statistics. I-banking is high powered sales, you need the best of both worlds if you are going to solve and explain business combination investment problems.

The Image
I'll admit, I've read the blogs (for example the leveraged sellout), and seen the movies (Wall Street... the first one), and I can concede that those with less than admirable intentions may flock to the profession of i-banking. But I will say that I plan on leading a life of virtue (maybe a bit on the Ayn Rand side of the definition sure), and after speaking to my to-be team in the interview rounds I'm left with the impression that they do as well. It's never like the movies anyways...