Many of my life lessons come from overhearing conversations. And if they occur in the sauna, well, the pithiness is directly proportional to the sogginess of the speaker.
“I’ve tried Epsom salts for that. It works pretty well,” said the woman to her sweating companion. The temperature gauge showed 140 degrees Fahrenheit.
“I thought it was called Ibsen salts..?” pondered her companion.
“No, you’re thinking of Buddy Ibsen, the guy who played the patriarch of the Beverly Hillbillies”, she corrected him. “You know, the guy who missed his dinner but shot a hole in his land that gushed oil.”
“I loved that show!” he enthused. “We could learn something from those country simpletons, you know.”
And they were off. The discussion centered on the economic maladies our country and the world are facing. The common theme that keeps popping up when you hear people talking about it is the apparently egregious, selfish, single-minded pursuit of wealth at any cost, and without any moral limitations. And while the headlines decry the many millions of dollars senior bank executives are receiving as compensation while their failing institutions received billions of dollars from taxpayers, the larger story is that the same moral convenience that these executives might be accused of is to be found in the motives behind each of our 401K and IRA accounts.
The weakness in the face of temptation is found in every money manager who is offered high returns for ostensibly low risk. I once referred to it as the “imaginary trifecta” of investing: low risk, high returns, short term. Who wouldn’t want that combination, if it were truly possible? The truth is that these three investment qualities don’t hang out together. But that little fact didn’t stop money managers from wanting to believe they did. How else can we explain so many billions of institutional investment dollars being spent on interest rate swaps and sub-prime-loaded mortgage-backed securities?
The buyers wanted triple-A labels from the rating agencies, so that they could meet their investment policy guidelines. And if they could get apparently triple-A securities with 20-30% return on investment, along with cash-like liquidity, they’d be nuts not to go for it, right? Especially if their performance and compensation were tied directly to the investment results and the size of their managed funds. Here’s where “pay for performance” has an unintended dark side. Be careful what you ask for, what you measure and what you reward. Well, the “apparent” factors were not supported by the underlying economic facts, and the meltdown of 2008 ensued. The “sophisticated” investor took the bait, believed the pitch because it was attractive to do so, and after all, everybody else was doing it, so why shouldn’t they? “Mom, all the other kids are smoking crack! Why can’t I?!”
The investment bankers and securities dealers were making hundreds of millions of dollars in transaction fees, selling these “instruments” of Byzantine complexity and specious foundations. Why should they highlight the fact that the underlying investment was sketchy, instead holding up proudly the “AAA” emblazoned on the cover sheet? And, yes, all the other investment brokers were doing it.
The moral failure, committed by all of us at least to some degree over the last couple of decades or so, is that we felt we needed a certain amount of money to be happy, to feel secure and to consider our lives worthwhile. We calculated what amount would be necessary to have a lifestyle commensurate with our expectations of retirement, and for many people, it equaled a few million dollars. For some, the magic number could be a hundred million or more. And judging from the compensation of certain investment bank executives, some people feel strapped if they don’t have at least a billion in net assets. But whatever one’s starting point, that magic number kept getting larger. Happiness cost more and more and more, so we collectively reached to the stratosphere of financial achievement. We got to space, but we didn’t have enough juice to make orbit.
But some folks, like the Clampetts of that old TV show, don’t measure their wealth by square footage, the size of their personal fleet of vehicles, or their position on the Forbes Richest People roster. Our sauna philosophers explained.
“That’s what I liked about Jed and his family. Their money didn’t change who they were!” she concluded, admiring the fortitude of these simple country bumpkins who still called a swimming pool a “cement pond”.
“That’s right!” he agreed. “They wore the same clothes, drove the same truck, enjoyed the same possum pie and kept the same friends they had when they lived in a slanted shack in the middle of a swamp!”
“I don’t think you’d find Jed buying collateralized debt obligations, even if Miss Hathaway suggested it!” she said. “No, Jed wouldn’t buy something he couldn’t eat, wear, use as a tool or explain to Jethro in less than an hour!”
He pondered this, nodding slowly. “Yes. And it’s all because of Granny. She was the one to keep reminding everyone of the perspective of age and wisdom, from having seen so much of life and knowing what is really important. I know what she’d say about our current problems.”
“What would Granny say?” she asked, wiping her towel across her dripping forehead.
“She’d say ‘Well, if’n you keep chasin’ after what you don’t have, you’ll fergit what you done got!’”