In finance there is a lot of speculation going on - but nothing real is being created.

I want to say that speculation by itself is nothing bad. However I see there are some few phenomenons in and around the finance culture which I want to criticise here.

The Good part of Finance

First let me briefly dump this here: There is something really important we get out of finance.
It is Liquidity.

Super simplified I would say that on every expectation that a specific project may yield a positive return, it enables us to take on money to realize said project.

This is great.

Generally said - this is what enables us to realize projects of huge scale. This possibility plus our skills in coordinating such huge projects is what we need to reach the next level of our civilization.

I see us being there already - well half-way, just with one of our feet. The other is stuck in some nasty quicksand. And exactly this quicksand I want to talk about here.

I see these phenomenons destroying great ways of our progress - and could even turn more devastating in their fallout if we donot find our ways.

The Destructive Phenomenons

Image of a dirty empty chair in front of a damaged wall.

I dare to go straight to the main one...

Loss of Morals

The worst of these phenomenons is this lost of Moral values. It often comes in the shape of a sort of nihilism.

Some people take on this perspective in which life isn't really about anything. There is no point there, there is no meaning, there is no general goal.

"The people are stupid. We cannot help them - even if we wanted to."
So the most intelligent thing to do is to enrich onself and make the best of ones' own life.

YOLO without any care about the future.

Why would we put effort into building something to improve something? Kids, Grandkids? Mostly effort and expensive.
We want to be rich - then everything is good. When we are rich, we are the masters of this world.

Leonardo DiCaprio celebrating as Jordan Belfort in "Wolf of Wallstreet"

If you know many people working in finance I suppose you already had contact with this perspective.

Actually you may also find it elsewhere even in popculture. I dare to say: it is spreading for a long time now. However I think there is a hotspot in finance culture.
I theorize finance culture is ground zero then there are many further infections of related strains.

The Movie "Wolf of Wallstreet" is the greatest portrait of this.

And portraid in a way we may empathize well with the perpetrator. And this is the point. From a human perspective this kind of perspective makes sense.
If you look at the world from a person who makes money off stocks and investment deals with the main goal to earn money.
Everybody wants to earn good money.
One version is to provide something to others - this requires learning a rare skill or rare knowledge, being one of the best at it and then it does not scale well.
Another version is to go directly to finance and learn whatever es required to directly earn money from money. Potentially - especially if you are one of the best - this scales extremely well.

Usually we as human beings evolve our perspective in such a way that we function more optimally within our environment. If the money is missing anxiety rises. Do we earn good money - we might get conquered by some enthusiastic greed.

Moral values are easily perceived as a burden to become rich. Especially for those who don't dare to take advantage of others or makes these small "cheats" to get ahead - those who feel better doing "honest work".

It is easier to claim something is profitable then really having something which is profitable and reasonable safe.
It is easier to find investors if you the profits seem higher and the risks seem less.
It is easier to take advantage of somebody in a dire situation than actually helping them out.

And everybody wants to be rich, right? Isn't earning big money reality of success?
Also if you are rich, that actually makes you free, right?

Person streching out their hand, as if they say: stop!

Enough!

If we are not actually drained in this nihilism without any responsibilities then life actually is about something. We are not living as a neutral nothing inside a vacuum. We are living as human beings within a whole world of other human beings.

Our further evolution is very relevant to us. The farther we set our horizon the more relevant the further evolution of the other human beings become for us. If we look at the evolution past our great great grand children then it seems very clear that their quality of life is very much tied to how we all manage to evolve.

The decision made in finance have direct impact on which processes of the real world will continue and which less.
If these Decisions are made by greedy nihilists the generated liquidity might easily flow off into useless self-enrichment.

Our push towards unlimited progress turns into a net-negative tragedy as the forever battle of: greed vs greed.

So the point is that the spread of this nihilistic and easily amoral culture - especially in finance - is causing great damage to our further evolution.

Okay, next is a related and often rather underrated phenomenon:

Marketing for Investors

Person presenting his new App in front of a big audience.

Especially when regarding these disruptive startups: A genius idea or new technology shall change the whole world.

A new market field for growth might open up. However first it must be feed with huge quantities of various capital.

Here the immediate profit is of second order priority. Highest priority is building the project - at best up to being the ultimate monopol within this new market field.

This will take long time. Time which allows fantasies to go crazy without taming by reality.
This is the perfect opportunity to create illusions of great progress, certainty and profitability. Sell the highest of expectations. Create hypes.
The marketing tools are available.
Selling the idea and the vision with optimistic expectations is the goal.

So the marketing for the investors is rolling.

Maybe one dares to say: The point is that early investors or founders may cash out or even take a profit already.

Especially when the insiders should be aware of the real progress of the project while this progress looks not very great.

A open book with the text written: "Storytelling rules the world."

Usually everything stays within the range of "plausible deniability" thus there won't be any legal consequences.

Independent of this - this behaviour is wrong and damaging.

Investors need to make the right decisions on where it really makes sense to invest - being persuaded and deceived with every trick is not optimal for this decision making.

The most extreme examples we may find in crypto.

Some VCs use a successful set of marketing strategies to draw exorbitant profits from naive retail-investors. Mostly one might say it's their own fault to fall for the hypes, while being hopeful and greedy.

So usually Lawsuits will not happen.
Stricter regulations will not solve the issue, as it there are too ways to avoid them. Often they will burden the honest projects.

So let's continue to another very interesting phenomenon which adds nicely to the others and acts like some grease for the damage spreading machine.

Collusion among profiteers

Two people wearing a suit in the darkness with scary drawings on their face.

Especially in those situation when there is no immediate danger of legal consequences plus everyone involved also profits from the situation - this often leads to an implicit collusion of the involved.

This furtherly leads to colluding groups to furtherly extend their halfway-legal businesses in grey areas without any oversight.
These often parasitic business activities may work over very long time without raising attention or getting caught.

I suppose the majority of such half-legal schemes will never lead to any legal repercussions.

As this is almost inevitable when you have people without much of any moral values coming together with greed as their common denominator. Especially if you add knowledge about finance products, technology, bureaucratic processes and a pinch of creativity into the mix.

Also as a natural consequence sometimes they take too much risk and commit to fully illegal schemes and sometimes get caught.

Scandals, Fraud and Corruption

This is a small list of examples of known scandals. The stories around them speak for themselves - especially because sometimes there are no adequate consequences.

  • Cum-Ex Scandal
  • The manipulated credit ratings in relation to the 2008 financial crisis
  • Theranos Scandal
  • Madoff Fraud
  • Wirecard Scandal
  • The real story behind "Wolf of Wallstreet"
  • The Libor Manipulations
  • The Failure of Greensill
  • The Failure of Archegos Capital
  • Fraud by Peregrine Financial Group
  • Wells Fargo Scandals about unauthorized Account activities
  • 1MDB Scandal
  • The Failure of MF Global
  • Toshiba Scandal
  • "Deutche Bank" Scandal about "Mirror Trades"
  • Scandal about Greek Credit swaps
  • The many Scandals of Goldman Sachs
  • The many Scandals of Credit Suisse
  • The Nicola Motors Scandal
  • The Nikkei-LTCM Crisis
  • The Fraud ripping off 600M € EU-Subsidies

Another Scandal worth mentioning here where the justice system sided with the perpetrators was the Case between Some Hedge Funds and Argentinia.
After the default of the government and a decision agreement between argentinia and other investors to make a debt cut they bought up the defaulted on debt. To then demand and successfully sue for full repayment.

This kind of behaviour without any sense of decency - focusing on drawing profits out of anything possible, because we can - is poison for the economy and severely damaging.

The Extend of the Damage

A burning car at night - probably set on fire during a protest.

The Money which has been defrauded or lost is just the tip of the iceberg.
The real damage regarding the economy and society is reaching deeper.

First we have the people who are doing their "honest" work. Usually they are skeptical about the people in finance anyways. Every of these scandals is worseing the negative perspective they have.
As a result we have less people with a healthy sense of morals who are inclined to turn to finance. Which is furtherly skewing towards this culture.

Second we have the economy. The economy in the big picture is based on trust.
Trust grows over a time of honest behaviour and is easily destroyed. Another thing which is great of our economy is the optimistic sense of us as a collective shaping our future together through all skills and trades.

Is this sense missing people turn to the idea of being in a rat-race "the cattle" for the elite who have all the money and power. Adding the picture of this elite being corrupt and without morals create a major resentment. The enthusiasim for life and work vanishes - demoralized the people might start to dream about - just being rich by themselves, retiring early and never work again. They might even resent their own morals as burden which prevents them to pull off these daring scams by themselves.

Is the trust in the marktets broken, the liquidity hesitates and might even stop flowing. In severe cases Governements need to step in take on huge debt to keep the markets going. Debt which is not an investment into the future - rather it dampens the severe fallout stemming from this irresponsible behaviour of greed and corruption.

This is a damage to everyone. Especially a damage for the future.

The worst damage is the loss of trust and the growing inner societal tensions.
Adding to this is the effects on the economy and the governement budgets.

Looking regarding the inner societal tensions, we always have them as people are living in different wealth situations. However the tensions increase when the people of lesser wealth are feeling severely betrayed and look at the people with greater wealth as enemies. In more optimal conditions they could be respectfully cooperating instead of fighting.

The people with lesser wealth the the first who feel the downturn of the economy. However they are in no position to change the course of the economy. Frustrated they intuitively call out the responsibility of the wealthier people - most often fall into the narrative of the 1% who are responsible and that the inequality is the problem.
The only "solution" I see so far stemming from this narrative is that we should "tax the rich".

However I think the tax issue is off-topic here. In any case the real issue is a issue of morals and behaviour in a subset of people. And the general hate towards rich people is part of the damage.

If the flows of generated liquidity do not find their way to where they are needed - the whole economy suffers - it reduces the quality of life for all of us.

My theory is simply that this severe missmanagement of the money flows is pushing towards stagflation.

Stagnating economy is not simply due to less consumption.
Inflation is not simply due to a growing money supply.

When we feel good about the growing economy because the people pick up more credit card debt - then this is not very sustainable.

If the economy is doing well then people consume more because they have more money and decide to consume higher value products.
Inflation is a really complicated thing. However I dare to say that one significant part is the cost of material and energy.
The other important part which I want to point out here is the human behaviour.
People are working the markets from every side. Greedy collusion of some profiteers alone might cause inflation, as long people are paying the price.

The best-case scenario is: Growing money supply + low inflation.

I feel like with just normal decent moral behaviour plus some bit of optimistic future vision - as we already have every thing what we need - we could easily go there at any time.

However... To many people are being blinded or knocked out by greed and nihilism or resentment. Most people don't even seriously think about what actually is the right thing to do.

So the damage is accumulating over time. Also the destructive phenomenons seem to amplify themselves over time.

In a Nutshell

  • Damage to Society Today - misstrust, hate
  • Damage to Economy Today - money is missing at the relevant places, less opportunity for "honest" people to work on real progress
  • Damage to Society Tomorrow - resentment
  • Damage to Economy Tomorrow - reduced investor confidence, piles of debt call for higher taxation

Now this does almost look a bit too doomy. So we cannot keep it like this :-)


Wisdom instead of Hate and Resentment

An old tree on a beautiful grass field

We need an optimistic perspective on the errors of ourselves and the other people. We need to accept this human failure and aside of that we might still see how we can improve the situation regardless of these failures.

First of all the hatred towards these "amoral nihilists" is part of the damage. If we just let it be - we already prevented one part of the damage ;-)

This criticism is not for attacking people. Rather it is an attempt at uncovering the root where our issues come from.

Generally these phenomenons are very human and may occur naturally just by people working in certain environments, and learning specific things. Most all of the environmental factors which create these perspectives are human made.

I want people to reflect upon this criticism - Do these phenomenons really exist? Does it have these effects? How is it related to my life?

If you see this criticism in a similar way then the next thing to go for is the great question:

What can we do?

A person pointing on a post-it, maybe the person has some plan?

What is certain: We may criticise amoral behaviour, but we cannot prevent it.

Most important is self-hygiene - staying strong - never forget the reason for moral behaviour. Don't lose your optimisim that we may improve towards the future.

Healthy mindsets, which actually work, need to be kept - improved upon and rewarded.

What we need to do is to adjust our systems - the environmental factors - in such a way that moral behaviour is rewarded more than amoral behaviour.

Depending on the profit:risk ratio the people adjust their behaviour and mindsets automatically.
If corruption and crime does not pay, it will disappear.

Now achieving this is very difficult - also I will not provide further details here - they are not so certain.

Though only going the through process will get us there.

Talking with people.
Keeping our own integrity in our push to greater moral integrity.
We decide for whom we work and whom we give our money to.
Discussing ideas about finance and decision-making processes to make them more resistant to human corruption.
Diving into research about what the real situation looks like.
Understanding and accepting our flawd human behaviour.

Particularily discussions about concrete solutions are important - creating designs and working through scenarios - simulations??
Then taking steps to implement what proofs worthy.

Maybe start an experiment in your next DAO?

Bear in mind: we don't have to be too radical or too perfect. In the best case we may tolerate and ignore some minor level of amoral behaviour. As long as the system is making it hard enough to be successful in this way the amoral behaviour will not be growing out of bounds.

For now it seems that we have this tendency. The infection of amoral behaviour is spreading through our culture.

So we need to do something now.

This text is one part of it - please give me your opinions. Thank you!