The day that KISS released their 11th album, Lick it Up, they appeared on MTV without their over-the-top, signature makeup they’d long been known for. It was 1982 and it was the first public appearance by the band where they didn’t don the demonic faces that they’d gone through such hell to wear on every occasion. This change broke the 4th wall for a lot of fans. These long-admired musicians became overly relatable to some, if even subconsciously. You were more aware of their blemishes, both literally and psychologically—like seeing with a sharper lens. These transformations happen a lot in life, frequently on a larger scale. Perception changes with the things you learn, whether that’s abandoning your favorite restaurant for a single bad experience or falling in love with a stranger because they have the same favorite movie. Knowledge evolves perception and that evolution helps to steer your micro and macro path, sometimes derailing them entirely.
My shudder from the finance game wasn’t the result of decades spent on the trading floor, watching people crumble en masse. I knew about the prevalence and destruction of high-frequency trading. I wasn’t sour from one event and I didn’t burn bridges or any holes in my pockets. My decision was a result of observations made during the final years of my finance undergrad and a few more spent working at a large investment firm. It came from reading headlines and seeing market reactions firsthand, not crunching numbers and drinking whiskey with the good ol’ boys. I wasn’t the 60-something Wall Street guru that resigns with a farewell in the Journal but, the thing is, you don’t need much experience (of any type) to recognize b.s. when you see it and I found examples every damn day.
A disheartening one is Goldman Sachs manipulation of the aluminum market. The gist is that they keep ~25% of the worlds aluminum supply in a giant warehouse in Detroit, drip-feeding it into the market to control price. Ya, it’s fucked up. No, it’s not illegal. Ya, it works:
Madden estimates that the U.S. benchmark physical aluminum price is $20 to $40 a tonne higher because of the backlog at the Detroit warehouses
Similarly, it’s estimated that around 60% of crude oil’s price is tacked on by pure speculation. That’s a whole ‘nother beast worth looking into, if you have the stomach.
Examples of everyday operations, like those mentioned above, are innumerable—not just because they’re so frequent— but because a lot of the activity is masked behind skewed financial reports, both legally (Facebook IPO pending investigation) and illegally (Enron). Something that anyone could have watched develop was the Comcast/NBC merger. The contested deal was eventually approved by the FCC and, in one of the most questionable moves of all time, ended with an FCC commissioner (who voted on the deal) quitting from the FCC and joining Comcast’s lobbying office.
But I trudged on:“The majority of high-level business is ethical,” I said. “Otherwise, we’d have seen some master reveal of this underground mafia conspiracy ring,” I harped. I was naive.
I was still working in finance when I read about the Chinese ghost cities too. Large, multi-billion dollar operations to erect pointless, overpriced, and uninhabited facilities all over the country, all in the name of boosting GDP. They send out armies of workers to create structures that nobody can live in (because rent is so high) and it’s unclear how much of the development is actually accounted for in their fiscal statements. I’m not getting into the plethora of issues with China’s books but, if ever there were a perfect example of an economic facade, this is it:
Kangbashi, which was built in just five years, was meant to be the urban centre for Ordos City - a wealthy coal-mining hub home to 1.5million people.
It was filled with office towers, administrative centres, museums, theatres and sports facilities as well as thousands of homes, but remains virtually deserted.
Unfortunately, there are plenty of other examples that still worry me because of their impact on the public. Take, for instance, Goldman Sachs’ rigging of eToys’ IPO or all of the ongoing developments in the multi-billion dollar LCD price-fixing scheme. I haven’t even gone searching—these are just the examples that I know of off the top of my head—I only looked up the links. If you pay close enough attention to the times when a company or individual is caught red-handed doing something illegal, you’ll notice any associated fines are a fraction of the incurred revenue/benefit. It’s truly maddening to climb a ladder from the bottom, only to see that the top ends up in a storm cloud. Some folks at the top are riding around in F-14s and invisible brooms, dropping mustard gas on the rest of us. Others are clenching for dear life, hoping they can grab onto another rung for a slightly better view. As soon as I noticed, I started finding another ladder.
At the end of 2011, the wear-and-tear broke through and I decided to find a path out of finance, all the while hearing more reinforcing stories of questionable integrity. The idea of applying my hard-earned knowledge and money in an environment of shady dealings and falsified information just seemed wrong. Testing it against a drama-queen-market just seemed dumb too, considering the news has a real impact on stock prices and no amount of hedging will protect against the market’s penchant for being a negative Nancy if you can suck confidence from the market with a tweet. It was like observing a twisted Prisoner’s dilemma and I didn’t like the idea of someone else determining when I failed, whether they were scandal-ridden VPs or overeager investors, “protecting” their 401k.
I still have a hard time justifying most purchases (and would probably argue with any future fiancés about the issues with a diamond) but I’m not an over-paranoid contrarian. I don’t take extra measures to drive an all-electric car or make sure I’m only buying local (though, I’d like to, if you know of a frictionless way). I’m just saying that, as a career, finance is not for me. I’d still toss some money in the market, if I wanted to. Only, I’d know that I’m tossing it onto a roulette table and not a chessboard.