It has been said that there are only two directions in life “the right way and the wrong way”. This is a simple and true statement. However, human nature being what it is, we perfect techniques of taking the simple and making it complicated. If this statement is true, and there are really only two roads, or perhaps it could be said two different directions on the same road, and we discover that we have gone down the wrong one, and that indeed no “fork in the road” lies ahead that will ultimately bring us back to the path we desired, then we come to the realization that we must retrace our steps and begin (seemingly painfully) at the beginning of the journey – it is all the more difficult when we have invited followers. As humans, we consider this a set-back, and often prefer in our vanity to be “far along” the road, albeit in the wrong direction, then to be merely at the beginning but facing the “right” way. Thus we continue on our journey, never quit at peace, yet willing to seek the glory of others who can witness “how far we have come” and who we continue to invite to follow us for a small fee – call it "2 and 20".
It is subtle but important to note, that because the path is at once one and the same road, it is only the direction which matters. Because of this simplicity it is much easier to allow others to be misled, by simply pointing out how far we have travelled, without mentioning that we are facing the wrong direction. It is often easy to make this argument because of the fact that we have trouble accepting things which are so simple - we expect complicated answers. The argument goes something like this:
“Our road must be the right one, because we have been able to travel very far along this path. You will discover this by examining the other roads – you will find others studying those roads as well. If you lose your way, for the other roads are many and complex, simply return and we will gladly allow you to follow us”
Allowing others to look for roads, where none exist, will allow the traveler (dealer), headed in the wrong direction, to be free of challenge. For the other “seekers” will forget all about asking about the right “direction” or even the conception that direction is a factor. However, the traveler/dealer will pause often to commend the hard work, high activity, and difficult task of the other seekers in carefully scrutinizing the other “roads”, which he knows do not exist. Often this advice and praise has only a “small” fee attached to it. Those looking also know on some fundamental level, if only in their hearts, that they are on a fools quest, but because of the praise they receive for embarking on the “difficult” task of examining other roads (something akin to “The Emperor’s New Clothes”), and because the activity is so wide spread and common, they are reticent to listen to their own heart until they have successfully stifled their own consciousness. Oddly, as in the fable by Hans Christian Anderson, it is often the most intelligent and able who are most susceptible to this sometimes life-long pursuit of seeking admiration rather than truth.
So a great many who would lead on the road come and go. They have many complex words and charts but are barren of ideas, they mesmerize those who can be kept ignorant of the game, and gain their confidence through the most basic of human desires.
The right direction on the road is wise investment policy oriented in wisdom and truth. The traveller headed in the wrong direction is a great many “investment managers” (they are like the “Dealers” in Three Card Monte), even some at very high levels, and who are widely esteemed. The other seekers are those who work hard but who for some reason would freely entrust their wealth to perfect strangers and are easily distracted from the road (they’re called “the mark” in 3CM). The other “roads” that are not real, are financial innovations such as derivatives which distract our gaze from realizing the most simple of truths; that there is only one road (in 3CM cards are used). You cannot win at 3CM, because there is no prize for “The Mark”. The other apperent “Seekers” are the media and commentators to who we finally acquiesce, “must know something that we don’t”, although there incantation and redundancy at some pure and early stage in our life seems absurd, we tell ourselves, “it must all makes sense somehow” (in 3CM, these actors are called the “the shills”). The “Dealer” and “The Shills” act as if they do not know each other, but in reality they share the spoils. The Shills make the “the Mark” feel either smart or lucky. They often act as if they have themselves placed a bet on the game of finding the right “road” or card in this case. Although in reality, they’re own money is never really at stake. So we know the counterpart of the “Dealer”, the “Shills”, and the “Cards” – you know who “the Mark” is.
The players are not all equally accountable, for where an imbalance of knowledge (and parenthetically power) exists, so too does an imbalance in accountability. Is it possible that the activities of countless players in great impressive financial metropolis’ may largely be involved in an activity no more creative than that which can be played on a street corner with a box and three playing cards?
Investing wisely is important. No matter how many permutations and “innovations” take place in financial markets, the fundamental principles don’t change any more than human nature changes and it is not at all clear that human nature evolves as much as we might like to think. Financial innovations then serve only to distract us from contemplating the seriousness of going in the wrong direction on the right road. For example, upon close examination, it is not verifiable that there exist real enhancements in the quality of life of the average human person in our society, over say, two thousand years ago, despite all the shiny new gadget that we think enhance the quality of our life. While indeed, we seem to have mitigated many a barbaric act, or at least recognized them as undesirable from what we considered “primitive” societies, it not the same as saying we have improved on the positive . What’s more, the apparent reduction in acts we consider “primitive” or “barbaric” may not have been reduced at all, but rather simply taken on a different form, perhaps one more subtle, to that end we may have actually succeeded at making the things even worse. In other words, street players with a box and three cards might be chased away by the police, yet the fifty story sleek glass building housing an “investment bank” we’ll call the fictional name “Sachsman Gold”, in front of which they plied their trade, will go completely unnoticed, although they utilize precisely the same means, and produce the same results as the common street player. Have we evolved?
When someone achieves great wealth, it is assured it comes from somewhere. The French poet Balzac correctly maintained that “behind every great fortune there is a great crime”. Disbelieving this could possibly be true; we carefully scrutinized many stories of the creation of great wealth. Sadly, we found no exceptions, and had to conclude that his pros are true. However, many of great wealth will deny this, pointing to the legitimacy of their operation. But very often this is nothing more than a sin of omission, for the fault lie not in the quality of their operation, but rather in the scope of their definition of “crime”. This is no different than protesting that you are on “the right road”, but failing to mention not only that there is only one road, but that you are facing the wrong direction.
For example, a man may by all accounts have amassed a great fortune through complete fidelity to only the highest standards of fair and honest conduct in his business dealings. However, if along the way he neglected his wife and children in the single-minded pursuit of this endeavor, then indeed he has committed an offense, though he will not include this failure to act in the preferred and finite definition of the term, for there is no law which measures or defines it. But because this law is written on his heart, he knows. He definitely knows.
In another example a man might build a large enterprise, which generates endless excitement for investors, and the banks selling his stock. The issue will be rushed from inception to “public offering”. He will know he is capitalizing off the ignorance or greed of the masses as part of the “spirit of the times”. The firm will sell endless promise in some new “technology” or other interesting aspect of the economy, but its share price will quickly rise to a level that can not be justified by its real asset backing or earnings. This operator will innovate nothing, but is quick to incorporate the innovations of others with far less resources – the justification for this involuntary intellectual property transfer will be “meeting consumer demand” or some other rationalization. When the stock price is sufficiently high, he will gradually have his “Shills”, (the underwriting investment bank), slowly and discreetly sell his ownership stake. This was the preferred manifestation of the card game during the internet boom years. However it’s a misconception that an overwhelming number of these operators just “disappeared”. They did not disappear any more than the wealth they appropriated from shareholders "disappeared". They now operate using a slightly different iteration of the same game – they like to call it “Venture Capital”, and they’ve traded in their “dot com” playing cards for other varieties which reflect a new vogue. The common one today is the “social networking” brand.
As far as we know there is no shipments of “wealth” from outer space, and in like fashion, wealth does not simply “disappear” on a return flight. Rather “Wealth Destruction” is a euphemism for “Wealth Transfer”. When there is an acute imbalance in the accounts of a few, against that of many, usually something spurious is at hand, though many will deny it rigorously either out of fear or perhaps deeply rooted self-deception. Humans are experts at putting out of mind unpleasant thoughts, particularly when it jeopardizes the foundations upon which their “comforts” rest. The achievement of this imbalance is about as valuable as lead to the spirit of the people of our society, but as the alchemists of old, it has been made to appear as if it were Gold. Unfortunatly Alchemy will never be true science or religion, no matter what outward appearances may hold.
Approaching the markets with the belief that one is playing in a “fair” game, is about as accurate as believing “Three Card Monte” is a fair game. There are many participants; many will appear to be on your side. Many will falsely indicate ignorance, while others will portend to have “special” or “secret” knowledge – just as in true science and religion there are many false prophets. This is no different than the basic psychology used in all gambling bets. It is designed to confuse, tire, coerce, inspire fear or greed, and finally fragment the mind. Under those circumstances a great many, including highly intelligent people, will hand over their money freely, as a participant in a sort of crime, without ever allowing themselves to see what they were truly involved in. Why is this reluctance so stubborn? Because nobody wants to admit they were “the mark”. They will simply walk away telling themselves they lost at an “honest” bet, in which they “knew” the risks – but this is far from the truth, whether they accept it or not.
The deck is in fact so “loaded” that it plays on another basic weakness of the human condition; denial. Denial is most dangerous, when it involves something so enormously wrong, as to simply negate contemplation, for it will seems to us outside the bounds of comfort and reality as we like to think of it in our efforts to preserve our view of the world. St. Thomas (could not believe) and Bernard Madoff (others could not believe) come to mind as examples of two very different sides of the same coin that illustrates our point. To his credit at least St. Thomas acknowledged the evidence once presented with his confession. It would be nice if we could say the same for those around Madoff, or the Wealth Transfer Operation commonly known as “Wall Street”.
The mind is as powerful as the tapestry of lies and denial it is capable of weaving. This is why many would choose to live in this matrix, even if foregoing the truth and selling out your friends is the price of admission. Although the illusion may be clear, and the experience of regression unkind, the rationalization invariable has something to do with "forgetting" in time and the comfort of thinking things will just go back to "the way they were”. Many of those who would give in to this path do not consider that while the direction is a choice, forgetting is not.
There are two reasons the human mind has this proclivity a) it is more palatable to tell ourselves that we are acting responsibly (even when we are not), especially if we can rationalize it in some way – it helps preserve a map of the world, or a world view which may have taken years to draw and create and which would otherwise require a great deal of energy to discard and remake – although the time requirements for this “redrawing” is typically exaggerated in our mind and b) a general absence in the knowledge of one’s meaning, calling or destiny in life; the result of perpetual distraction, noise, and general hyper activity which lends itself to a radical under-calculation of one’s true worth. It is because of this that for some, there is no noise so loud and uncomfortable as “silence”. So the process is surprisingly modest and goes something like this:
Step 1: “load” the deck. Make the truth so overwhelming and unbelievable that most will just laugh it off even if it is presented clearly to them (kind of like suggesting that the game played on the street corner is really no different than the operation carried out in the tall sleek high rise in front of which the street game is played). Could it possibly be true?
Step 2: Keep “the Mark” so busy and distracted that that they become confused about their purpose (this will keep them working long hours for no real remuneration, and indeed they’ll even pay for the honor). The hoped for outcome, is that eventually, “the Mark” will even forget what they were looking for in the first place and resort to mindlessly following the “slight of hand” of the seasoned dealer or traveller on the road, who knows “all the right words” and their cryptic meaning.
In more structured terms it serves to move the seeker from the beauty, symmetry and logic of deductive reasoning (the solitary intellectual pursuit where abstraction reigns supreme) where he can gain knowledge, into the murky waters of “inductive reasoning” (or in popular expression “Pattern Recognition”) that cannot be rationally justified. The means becomes the end, and the seeker, not able to find or know his perfection is left frustrated. The exercise designed to uncover the truth becomes the object, and the truth is forgotten. The result is a preference for action over thought, transactions over ideas and activity over contemplation. To the practitioner of inductive reasoning, sadly, the force and frequency of the activity lends nothing to its truthfulness.
It is a reason to marvel at how those close to the truth have a way of providing simple answers to simple questions, and which set the questioner free. While, blind guides give lengthy and complex answers to the same simple questions, leading only to further questions and ultimately confusion. The later of the two conversations usually conclude with a prescription for a follow up visit for “further clarification” for a small fee of course. There is no easier way to make money than to have others just give it to you “no strings attached”. So would you like to play a simple game of cards? The odds look pretty good and everyone else is playing.
Disclosure: No stocks mentioned
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.