April 14, 2009

• Schadenfruede

  The reactions the general public have had to the financial crisis has been varied and relatively peaceful.  Yet it doesn't take a long walk through history to find situations where the financially elite are publicly defamed, pilloried and even executed.  The communist revolutions in any given country, the French revolution, ethnic unrest of an antisemitic sort in western Europe... violence against ethnic Chinese in Thailand, Indonesia, Vietnam, Philippines, Burma...

  The list goes on.

  When the people go hungry, it's tempting to find people to blame -- and, if they were doing relatively well previously, it might actually be gratifying to see them taken down a peg.

  Satisfaction derived from observing the suffering from others is neatly termed Schadenfruede - or pity-joy.

  Law and Medicine have long played second fiddle to the enormous compensations available to finance (all of whom avail themselves to far less lucre than successful entrepreneurship!).  From the vantage of these two former professions, we oft see the meteoric rise of our classmates with some mixture of envy and respect.  They work very very hard, and with some luck, are rewarded handsomely.  The long, dreadful hours and potentially abusive relationships in finance yield golden fruit. 

  In education, law or health-care, practitioners often can point to the intangibles of service -- the satisfaction of seeing a pupil grow, a patient recover, or justice served -- and console oneself while working with the under-served, for low compensation, or in an environment that is, for whatever reason, inhospitable. That's harder to do in traditional investment banking.  And yet, more than a few likely have wondered at the trade -- would you work harder for possibly a bigger monetary pay-off?

  In hale economic times, the trade financiers made seemed a good one, and the expanding credit pools allowed all income brackets to enjoy more material gain.  You might look over with envy at times, but there's a lot of respect of some sort.

  In harrowing economic climes, however, it's harder to feel quite the same.  The furor over AIG bailouts and bonuses, the anger at wealth misuse at the Big Three all were elicited because there is far less tolerance for conspicuous wealth as the nation and world groan under newly felt financial strain.

  So, I would not be surprised that many now feel some Schadenfreude at the thought of the once infallible finance community being brought to its anthropomorphic knees.

  I must admit that the thought had crossed my mind.

  And yet, it's too much.

  While I've long argued with some of my friends that capital market management will eventually be commodified in some way -- more regulated perhaps, I never expected this current environment.  Having spoken with many a friend in finance fields, I can say that it's very hard for many.  Perhaps at the upper echelons, they can walk away not much poorer than they had started -- perhaps even richer, but much of that workforce now wonders at where to find work and what to do.  Heavily exposed to financial instruments and risk, there is no doubt that many find themselves in much more precarious financial straits than they could have anticipated.

  That's stressful -- especially since their financial commitments were predicated on a much more robust outlook on the future.  If one's skillset is invested in this very particular niche, it is not easy to retool.  One might be tempted to encourage financiers to find other modes of employment -- and given that they tend to be quite bright, it should be doable.  The irony is that finance is necessary and a rebound in the need for financial expertise is inevitable.  Thus, leaving the job market for finance may not be the best long term bet.

  The framework within this group functions will undoubtedly change, but it's the same sort of mind and skillset that will be required to navigate within that new rubrik.  The same sort of talents will be necessary in any new regime.

  Financial markets are necessary and do society a lot of good.  The ability to move capital to a promising enterprise rapidly is of great use to a country.  Businesses can grow very rapidly indeed with the right kind of investment.  Analysing and mobilizing such resources is a great benefit derived from modern investment banking.

  It's a function that is of great use, and shouldn't be thrown out with the mistakes that were made.

  Many in finance are bystanders, though part of a system that failed.  Heaping abuse on them isn't helpful... They are suffering too.  Ironically, this thinking helps me understand a bit more what auto-workers have been going through these past 2-3 decades.

  The labour market really does change, and sometimes, it's a one way pathway.  It's hard to adjust to a world where what you did so brilliantly is no longer able to pass mustard.  Yet maintaining outmoded models is a sure fire way for eventual catastrophic collapse.  Adjusting those labour models earliers might have saved some serious pain in the mid west.

  There will be a lot more pain during this season in finance, I have no doubt.  

  Yet which ever side of the tracks we sit on, it might be wise to exhibit less antagonism and more real sympathy -- in both times of prosperity and contraction.  Like it or not, the finance industry helped fuel much of our apparent growth in the past decade.  That some of it was predicated on false assumptions is to be expected.  As a society we enjoyed in the better parts of that period... it is unjust to desire retribution in some fashion, when we (as a society) quietly assented to their practices, and abetted by funding it with our stock purchasing and investing.  If one joined in in investing in mutual funds, REITS and what not, hoping to catch some of the rising prices of financial instruments, then one was trying to make use of the very distortions that we now decry.

  That's hypocricy.

  So, how about it?
  Less Schadenfruede, shall we?

  • 5:06 pm
  • 7 Comments