I ALWAYS enjoy Fareed Zakaria’s show, GPS, and watch or tape it every Sunday. It never disappoints and certainly didn’t today. One of the guests, Michael Lewis, has written about Wall Street for the past two decades making notoriety with his first book, Liar’s Poker, about the bond scandal which he predicted would bring down “The Street”. He was admittedly wrong then and has hope that the new regulatory movement and measures will protect consumers from themselves.
What caught my attention was what he said about our inability to protect our self-interests. He went on to say that for some reason people are not good at protecting their self-interests when it comes to money. In all of his work and focus on the financial industry, he has observed people making inappropriate decisions in their inability to figure out complex financial issues. Because of this weakness, they need to be protected.
The greed of Wall Street and their inherent conflict of interest only compounds the situation; i.e. the same people trading their own accounts are selling financial products and advice to consumers. In his opinion, these interests do not serve the financial consumer in an unbiased way.
He predicts that there will be a new Wall Street because the old cannot sustain itself. The only way for it to prevail is to protect people from Wall Street excesses, greed, and conflict of interest. Consumers have proved that they cannot do it for themselves.
I must say that I agree after almost three decades of working with both financial consumers and the financial industry. While I have experienced individuals breaking out, movements of fee-only advisers growing in numbers and influence, the industry is still product-driven vs. client-oriented. The jury is still out whether these proposed regulations will make a significant impact in altering the long history of Wall St.
In his most recent book, The Big Short, Lewis tells the story of the few dozen or so odd-balls or heroes that were able to perceive the absurdity and fatality of the herd of villains on Wall Street betting on their ultimate demise and the destruction of the American financial system bringing down the U.S. and the rest of the world. When asked what characteristics they had in common that helped them not only perceive the problems and contribute to their courage to bet against the herd; Lewis said it was individualistic for the most part so it was difficult to say but they were always outsiders/oddballs who didn’t have a strong need for social approval unlike their colleagues.
I, for one, will be a reader of his new book and I hope his predictions will prove to alter the course Wall St. has been on helping it survive but in a mutually beneficial way for consumers as well as financial players. So the bottom line is again “buyer beware” – know your individual situation and your personal blind spots that trip you up in making the most suitable decisions for your individual situation. For more information, see http://blog.kathleengurney.com/?p=35 and http://blog.kathleengurney.com/?p=3.