Untopia
“How does it all work?” A philosopher asks a financier about a career in the financial markets. It must all seem so abstract to people who do not ‘have skin in the game’, as we say in my industry. Though to call it an industry seems a misnomer, since rarely, if ever, is anything actually manufactured or produced. There is much talk of products and of course of value and returns. What exactly goes on in the financial markets? And what does it take to get involved? So began our conversation last summer, and so it continues.
One thing seems clear to my philosopher friend, as it does to everyone who cares to look closely: financial markets are everywhere, a common denominator of democracies and dictatorships. They are so pervasive as the undercarriage of our political and economic systems, that they come to seem a feature of all human exchange. It’s a small step from speaking of financial markets to speaking of The Market, which we often do, an all- encompassing, overarching, important thing. Our reality. It may feel negligent not to try to understand it, when it obviously calls the shots in so many areas of life. My philosopher friend is aware of its status as the playbook for all the dramas acted out in the pages of the daily press, though aren’t we all a bit mystified as to who came up with the rules of this playbook, and exactly what they are?
Chartered Financial Analyst – the war for talent (or the war on talent?)
The conversation begins with an explanation of sorts. Let’s start with financial analysis, since investment research is what I do for a living. It’s a uniquely powerful skill, a kind of lingua franca of our times that enables me to have lively, informed discussions with other practitioners the world over [Graham, Buffett, Marks]. You could airlift a financial analyst into the rural markets of Outer Mongolia, or the favelas of Rio, or indeed the local shopping mall, and in a matter of days she would be able to describe in considerable detail the workings of the local political economy. These techniques are employed at the corporate level, for what is a company but a political economy, a social organism, in microcosm? To a great extent, however, the logic of financial markets works for deciphering the workings of the nation- state, and certainly multi-national corporations, employing a different set of drill-bits and drivers in the toolkit in each case. We come up with the hypotheses and counterfactuals that we call financial models, which guide investment decisions. Financial markets are, at heart, a mechanism for allocating capital, society’s collective savings and resources, ideally toward productive uses [Kay]. I used to think of finance as a universal language, like mathematics or musical notation, that enables those who use it to accomplish extraordinary things with capital.
There’s no question, as an object of study and a professional qualification, financial analysis is compelling. What a skill! After all, it’s the code for understanding what makes the world go round, by which we mean the ‘real world’ of policy and deals and trade flows and foreign direct investment. Hanging over it is an aura of unquestionable authority. It’s simply how things work. How much more tantalising is the prospect of gaining fluency, or even just a conversational proficiency in this universal language, when its movers and shakers command six-digit, seven-digit salaries and more. This is the marker that can get you aboard the private jet, into the board room, onto to the upper decks of the superyachts. At the very least, it can earn you a decent wage, in an increasingly competitive and precarious global job market.
And so The Market draws in ambitious, curious, talented people from all over – philosophers, even! - like a gilded magnet for the iron filings of our universities, that engine block of the industrial economy, forged in the Fordist age of mass production. For many years I’ve taken part in the rites of passage involved in their selection and recruitment in the graduate training schemes of a ‘bulge bracket’ investment bank. Human capital is an investment bank’s principal asset, and so the ‘war for talent’ is waged relentlessly. Acolytes in time become experts, vying for a chance to become ‘masters of the universe’. The toolbox is turned on those who have been trained to use it, and they are used in turn, ‘human resources’ in an industry that produces nothing, but which is perhaps the pre-eminent commercial collective enterprise of our times [Thiel, Howard].
The Market and Meaning – signifying one thing and its opposite
The language of The Market has become the slide rule for evaluating practically all walks of life. For while physicists use mathematics to elaborate their theories, and composers use musical notation to create inspiration, the rhetoric of the financial markets – if not necessarily a ‘nuts and bolts’ understanding of its workings - extends well beyond a narrow professional field.
A painting’s aesthetic value is secondary to its auction price as an ‘alternative asset’ as a series of investments in a portfolio. What point is higher education if not to further one’s career prospects, without which the heavy financial burden of becoming an educated member of affluent society is anyway unmanageable. Musicians and mathematicians may each be tapping into the music of the spheres in their own way, while financial logic has come to regulate practically all spheres of our social lives, well beyond the marketplace.
As we’ve come to insist on the market’s ‘zero-sum’ logic, one’s wealth has come to signify one’s virtue. Money is conflated with value, and values recede from view [Sandell, Skidelsky]. This wholesale reorientation of our moral compass in the Western world toward the golden magnet of The Market has everything to do with the way the language of the market has penetrated and subverted our shared meanings for common words and expressions.
Take a simple example. A state-owned, state-run business may be privatized. Perhaps to make it more efficient, or to replenish government coffers. Ownership passes from the state to investors in what’s called an Initial Public Offering, or IPO. To be ‘privatized’ is to be taken ‘public’, which is to say that the business becomes a shareholder corporation. Yet it no way is a shareholder corporation a collective enterprise in the service of the public, or of society. On the contrary, its function is to generate positive investment returns for its shareholders. By extension, it seeks to minimise, or externalise costs to the greatest extent possible. It is the externalities which become public, while the returns remain private, in the common sense usage of these terms. It’s important to understand not only the usage, but the user.
I have spend a lot of my working time speaking with senior management of many of the world’s largest corporations. We can take it for granted that we understand what we’re saying to each other. Both sides of the table have been schooled in the lingua franca of finance. Yet analyse these conversations, or in fact the press releases, presentations and pronouncements of senior figures in finance and the corporate world, and it’s easy to see how disorienting much of the speech can be to those without ‘skin in the game’. The rhetoric of the marketplace has crowded out meaning from our civic discourse and public policy debate.
Time and again, we find examples of words used interchangeably to signify one thing and its opposite [Lanchester]. Fluent practitioners can appropriate meanings as it suits their purpose in any particular circumstances. While their activities are strictly speaking proscribed to their domain of activity, rhetorically their scope and therefore their influence is much greater, even as corporate executives claim to be merely doing their jobs in the service of their shareholders. ‘It is out in the field, on our projects, that our social responsibility is exercised with great attention’, the CEO of the world’s largest cement company wrote to me, ‘not through political debate, which is not our role’. In his view, this makes participating in the construction of Trump’s Mexican Wall entirely consistent with being Chairman of the corporate foundation which champions socially inclusive architecture.
We’ll be coming back to more case studies in our conversation to illustrate the way financial market logic enables the wholesale appropriation of meanings. Whether or not fluent finance types may be using doublespeak unconsciously, the logic of financial markets grants a laissez- faire license well beyond what was even envisaged in the classical economic theories of Adam Smith and champions of the invisible hand. At best, it may justify unproductive uses of capital. At worst, it may be outright destructive to capital, and the human and natural resources from which capital derives.
An Amoral Marketplace – an oxymoron
In a political context of constitutionally- recognised corporate personhood, such as we have in the US today, it’s disingenuous to insist that companies’ activity is somehow separate from the domain of political debate. It has become the very idiom of political debate. A corporation’s productive activities have real-world outcomes that have very real economic, social, political and ethical repercussions. These are not effects that can be dissociated from maximizing shareholder value, though we accept their classification and treatment as separate, dissociated things.
Companies may deserve many of the same rights as citizens, but only if they assume the same responsibilities. By granting corporations the latitude to claim their remit is limited to their narrow sphere of activity, while the impact of those activities is borne by society (or more likely still, the politically disenfranchised in societies in the emerging world), we collude in emptying our policy debate of significance. We also undermine our ability to keep corporations accountable for the productive use of capital, which after all stems from our collective savings and resources.
This rhetorical sleight of hand and the hollowing out of shared meanings in the marketplace (for which read society) may help to explain the shrillness of much political exchange. In the markets, you’re either on the right side of the trade or you are on the wrong side of the trade. The very foundation of economic theory is one of scarcity. Scarcity is the fundamental economic problem of having seemingly unlimited human wants and needs in a world of limited resources. It states that society has insufficient productive resources to fulfil all human wants and needs. This is an assertion, not a proof. It is taken to be self-evidently true, and this seeming truth has paved the way for The Market to become hegemonic.
Kantian Man – the ideal citizen and economic agent
How is it that the language of financial markets has come to be universal? This has everything to do with philosophy. “We are still living in the age of Kantian man”, wrote Iris Murdoch in 1971, and almost 50 years later, “this man is with us still, free, independent, lonely, powerful, rational, responsible, brave, the hero of so many novels and books of moral philosophy.... He is the offspring of the age of science, confidently rational and yet increasingly aware of his alienation from the material universe which his discoveries reveal.... He is the ideal citizen of the liberal state...” [Murdoch].
Economic theory is premised on an extreme and reductive individualism that is our heritage in an Anglo-Saxon intellectual tradition. “The centre of this type of post- Kantian moral philosophy is the notion of the will as the creator of value.... The idea of good remains indefinable and empty so that human choice may fill it”. The Market is a kaleidoscope of human choice, or it pretends to be. Classical economic theory holds that the markets are the sum of choices made by rational individuals, acting in their own self-interest. It’s only a short step then to seeing The Market as the supreme locus of value. Our moral philosophy, our view of human nature, from Kant through Existentialism to libertarianism and today’s free market orthodoxy demands it. “Economics is the study of human motivation with all the interesting bits left out.”
Moreover, The Market has bolstered its claims on society by cloaking itself in Scientism. Like the much-invoked rhetoric of science (as opposed to scientific method), it’s couched in terms of neutrality. It is this perceived neutrality which lends it authority. The Market does not take sides in an ethical debate. Or even in a political debate, “which is not our role”. It is championed as an amoral arbiter of outcomes stemming from rational choice. And even if Behavioural Economics has questioned the extent to which our choices are always, or even mostly rational, in much of our public and policy debate, this world-view is simply accepted as the way things are. Would-be neutral individuals as commercial agents merely
To the frustration of those who are not conversant in the lingua franca of our times, their criticisms falls on deaf ears. Even if they are conversant, it’s easy to dismiss their arguments if they are ‘on the wrong side of the trade’. That’s the tone of the response when the CEO of my former employer UBS dismisses regulators’ calls for a review of banker pay, when he says they are fuelled by envy. “I’m on the right side of the trade, and you are on the wrong side of the trade”, he is implicitly saying. In a winner-takes-all game, that makes you the loser. And you can have no claim on me, because I am evidently right by virtue of the position I occupy. It’s a formidable, if disingenuous, rhetorical device. Even those who find it unacceptable struggle to come up with a critique that avoids sounding like sour grapes. We have all come to accept The Market’s frame of reference.
We May All Be On The Wrong Side of the Trade – market theory undermines itself
Or have we? Even in financial circles, there seems to be a growing realisation that we may all be on the wrong side of the trade. Certainly, we all have ‘skin in the game’, when our collective enterprises degrade human dignity, devastate the environment, and erode the very asset base – human and natural resources – which are necessary to fuel economic growth. Apocalypse is a recurring theme of dinner-party conversations in circles of industry friends and our accomplices – journalists, lobbyists, politicians. These conversations are only partly tongue-in- cheek. Investment banking peers are desperate to ensure their children’s future is not compromised by the volatile practices that sustain our fragile livelihoods in the global economy. Many will do whatever it takes to maintain their unsteady footing in the upper echelons of the global 1%. All the while, that so-far serviceable fiction, the ‘terminal growth assumption’ which underpins the very methodology of assessing asset values in the marketplace, may prove to be an outright delusion, and we know it. Economic growth as our most prized collective goal seems more likely to draw us into terminal decline than some equilibrium state of ‘growth in perpetuity’, as the theoretical cornerstone, the Gordon Growth Model assumes [Gordon & Shapiro].
Questioning the theories we have all grown up with in the industry creates unease. When not looking at me askance like some hippie refusenik, industry friends ask “What’s the alternative?” The implication of the question is that there is none. On the one hand, we labour in the vain hope of fulfilling the empty utopian promise of greater spoils for everyone. The globalising growth model of late stage capitalism will save us all. Or will it? On the other hand, it seems we only have the all- too vivid dystopia of an apocalyptic future to contemplate. Already, many aspects of our collective present have the look and feel of the end of days.
Utopia vs Dystopia – more likely an unstable equilibrium
“This is The End”, is what I tell them. That’s the alternative. Simply because we struggle to imagine other ways of doing things, is not a compelling reason to continue unquestioningly as we are. As surely as feudalism gave way to capitalism, our prevailing social system will be eclipsed by other forms of organisation. Hopefully for the better!
Even as we ply our trade in the capital markets, there’s an undercurrent of disquiet, as if we all know that we’re in the twilight moment of late-stage capitalism. Social media and the political polarisation it has occasioned may only be amplifying a moment of extreme stress, a collective freakout, the death spasms of a patriarchal, post-colonial order that struggles to maintain its legitimacy, its hold on our imagination. But what is the alternative? “Now we talk all the time about the end of the world, but it is much easier for us to imagine the end of the world than a small change in the political system.” [Žižek] And so we veer from optimism to despair, from greed to fear, those foremost market emotions, or just try to tune out completely.
Historic precedent suggests that both utopia and dystopia are less likely outcomes than the messy stumbling that has characterised human history. Cyles of peace and prosperity alternate with periods of chaos and calamity. We superimpose historic narratives that help us to understand our heritage, or bend it to our agendas. Our storytelling capacity is what has enabled homo sapiens to become the apex species on the planet [Harari]. The concept of paradigm shifts as coined to explain the structure of scientific revolutions [Kuhn], but it is central to understanding the alternation of rival collective imaginings that we call politics, or economics, or culture.
Meanings We Share – whether we ‘talk the talk’ or not
New ideas are called for, but imagination is failing us. Why is that? Our democratic institutions, many the result of nineteenth- century cleavages in society, and still carrying the same banners of Left and Right, Democrat and Republican, Liberal and Conservative, could certainly use an overhaul. At a more fundamental level, we might examine the language we use to talk about these political matters to each other. We will find that The Market we have authorised to provide us with our vernacular, represents only a certain highly reductive and impoverished vision of humankind, as the model for citizenship. Its influence is so pervasive that not only has it come to dominate both the ‘party line’ of political elites, but to neutralise attempts at engaging it critically by co- opting the very language we use to discuss political philosophy, public policy, and ethical discourse. How to have an enlightened conversation about collective priorities, what we value in society, if we have ceded to the market the authority to declare what is of value? The Market is the ideology, or perhaps more fittingly the mythology of our age, eclipsing rival political philosophies.
Language derives its power from shared meanings. Those who tell the stories rule society [Plato]. Our vocabulary has been compromised, made captive to a political philosophy that may have outlived, and has certainly overreached, its social purpose, that of mobilising collective resources and managing risk [Kay, Bernstein]. The rhetoric of the G-20 Summit masquerades makes claim to be objective, and therefore authoritative. It is said to be empirically anchored in our tradition of liberal thought, though it is closer to an obtuse misreading of Charles Darwin’s theories of natural selection [Axelrod]. It pretends to be the only authority in matters of society and state, but in our conversations with my philosopher friend I hope we can identify it for what it is: the very partial frame of reference of the prevailing ideology of our times, and a very powerful and seductive one, at that.
It’s possible, even likely, that my vision has been blurred by countless hours in front of market monitors and stock prices, to the point where all I see is The Market, everywhere. I hope that our conversations will come to make these points persuasively, but they will also show the limits of our inquiry. Even with many years of travel looking for investment opportunities, I don’t claim to understand, or even have first-hand experience of how elites in Asia or even Silicon Valley speak to each other about the political philosophy of our times, if indeed they speak about it at all. These are not my tribe.
“An academic, a politician, a journalist, a film star, a nobleman and a banker walk into a bar,” runs a recent article in The Economist, about elites. “They order different drinks, and sit at separate tables each doing their own thing. There is no punchline; these people do not belong together in any sensible way.” Except that we do all literally sit at the same tables, at the same bars, speaking to each other in the lingua franca about our fraught present and alarming prospects for the future. Anecdotes that we will relate in our conversation revolve precisely around people who exemplify native speakers of the idiom of the pre-eminent political philosophy of our day. Each of these ‘types’ are people we have close working or personal relationships with, and who quite literally embody the actual dramatis personae that direct our policies, vie for leadership positions, interpret, comment on and legitimise the narrative arc of our collective lives. My circle is mostly Anglo-Saxon, and to varying degrees ‘neo-liberal’. It includes Oxbridge educated practitioners of ‘high finance’, and those they serve (corporations) or seek to influence (politicians). The rites and rituals of my tribe may make for some fun amateur anthropology.
Our hope is that we might arrive at some practical suggestions for escaping both free market utopianism and despair. What concretely can we do to restore meaning to our discussions of political philosophy, about the state of the world? Start with critical thinking, and an attitude of caveat emptor. Every purchase we make is effectively a vote to sustain or reorient The Market’s current trajectory. Some may be inclined to adopt radical solutions and go completely off-grid, grow your own food, unplug from a machine run amok. In this conversation we’re more motivated to explore ways in which capital can be redirected toward productive uses. The ambition is to go beyond the scope of Effective Altruism, for example [Singer], by looking outside charitable or humanitarian initiatives to question how we can restore meaning and social purpose to industry itself. What is the point of political philosophy if not to create conditions for human flourishing, in the many ways that we interpret and envisage this?
Recent, sometimes local instances where imagination trumped the status quo can give us solace, encouragement and a blueprint to follow. Some of these episodes have become sustained practices. Those of us with children have a duty to give them what tools we can muster for them to pursue enterprise in some thorough-going way: to search for solutions, engage honestly but critically with different perspectives and traditions, to create space for hope and imagination in the conversations we have with each other about the things that matter to our communities, our societies. To change the plotlines, first and foremost it will help to pay close attention to what we pay attention to. And here philosophy will come in handy.
We will look at the foundation texts of finance, and try to explain in plain terms what finance professionals do all day. What does the price of a security represent? How are decisions made at the corporate level? Why have we chosen certain forms of corporate association for our collective enterprises and not others? How does one become a finance professional? What does it take to become a CEO? Is ‘master of the universe’ a formal designation? What do the exams and evaluations tell us about our social priorities? How is it that politicians and executives have become so readily interchangeable in leadership positions? A close reading of press releases, strategy statements, public speeches and prospectuses will help us to answer these questions. We’ll combine financial analysis with textual analysis. Philosophy will help us to be clear about what is said, and what is meant about The Market.
“How does it all work?” Rhetorically, all too well. But the end is nigh.
18.12.2017
