Ethical financing

I was recently in Turku during a student-oriented binge drinking spree. The idea was that people would go around the bar boats in the river Aura and have a drink in each one and collect stamps to obtain a small cloth patch that they can then stitch onto their student overalls. My freshman year came and went a long time ago, but some friends of mine were still able to abduct me from the office and drag me to Turku, so there I was...

After a couple of hours of crawling through bars, we ended up meeting some casual acquaintances from Helsinki. Amongst the group that we met was a person studying economics and finance at Helsinki. I found her quite interesting as she obviously disliked my blatant way of firing opinions and my perception of the world. She insisted that she would become an ethical financier once she graduated. This sparked my interest as the issue is very topical, but I don't think that the finance world will ever change. In my view people will remain greedy and the people on Wall Street will continue to see the world as a zero-sum game. Somebody wins and somebody loses. I don't think there's inherently anything wrong with that: as an analogy we could look at boxing. I don't think the boxers in the ring have any sort of ethical problems when they go head on and try to knock the other guy out. It's only if they come out of the ring and start punching bypassers that it turns somewhat questionable; everyone knows that it's not too nice to punch random bypassers on the street.

Similarily I think financiers and the lot will act extremely rationally in the future and attempt to optimize against their own gain. And that there isn't inherently anything wrong with this: more money is better. Saying that you are an ethical financier is sort of like going in the boxing ring and saying that you'll only use your left hand: you're doing a stupid move and giving the other guy a very big advantage over you. What's the point? I personally won't be giving any of my money to a person who is going to most likely make a loss with it because of some personal agenda and ethical beliefs that they advocate. Instead I want the person investing my money to maximize my money against the timeframe that I'm working.

Now, the observant reader will notice that we completely omitted the definition for "ethical" investing/financing in this context. That's something that my ethical financier and I didn't get around to talking, perhaps because of the many beers that I'd already had. But regardless, I don't think that's the real issue at hand. I would say that within the boxing ring and within the markets, the only unethical things are the things that are made illegal by law. It's not nice to manipulate the markets and use inside information, and so on. But the thing here is that in my opinion the ethical issues should be tackled by the regulator. They should act as the referee and determine what should be allowed and what shouldn't be allowed. One thing that should have become clear from this financial meltdown is that the free markets very rarely are able to moderate themselves over a longer period of time. They always get greedy and the game gets tougher. That's when the regulator should step in and the referee should separate the boxers and make sure that the situation doesn't get out of hand.

The argument I'm trying to provoke here is that if your job is winning, you should not hesitate to use the angles and destroy the opponent. If you look at star athletes, I don't think they go into competition thinking about whether or not it's ethical to beat the opponent. They work within the boundaries that are set by the rules and they do their utmost to win. It's very difficult to start making rules if you're the one who is competing: you can't remain objective enough. And you shouldn't bother yourself with stuff like that. It should be the regulator who needs to understand what the rules are and how they should be developed.

Interestingly enough I don't personally, for instance, engage in derivatives trading. Not because of any ethical reasons as such, but because I feel that I don't right now need derivatives to protect my portfolio and on the other hand I don't want to engage in speculative behavior with derivatives as the risks are too high for me. But derivatives are good for some things and less good for other things. The million dollar question, I guess, is how the regulators will tackle the question about speculative behavior with derivatives: is it ok or should it be regulated? And other such questions...

The new BMW Z4

... it is also a paint brush, so how convenient is that? Aspirational over rational arguments every day of the week, when it comes to cars. You should never get a car that you're merely satisfied with; you should get a car that you actually want. And right now I want quite a few different cars... You know, for different occasions...