The investment world’s obsession with “power” says a lot about our lameness as a society

S&P Capital IQ ad

When I first started working in New York, I would often walk by the NewsCorp headquarters on 6th Avenue on the way to my office and see a huge banner outside for the Fox Business channel. “The Power to Prosper”, the channel’s slogan, was emblazoned in huge letters on the ad along with the serious, stoic faces of the channel’s flagship personalities.

As time went on I noticed that this “power” theme is pretty ubiquitous in the investment world. Not coincidentally, CNBC, Fox Business’s chief rival, has a show called “Power Lunch” that also features recurring segments called “Power Pitch”, “Power Summit”, and “Power Summit”. For about a month my train was covered in ads for something called S&P Capital IQ, a research and analytics product for investors whose marketing tag lines were similarly power-centric. “The power to globalize your capital”, along with the image of an expressionless woman’s face, hovered over me one afternoon as I sleepily rumbled home from work. Never before has diversifying one’s investment portfolio felt so much like Game of Thrones.

What’s going on here? I would guess some of it would be that providers of market information and intelligence — and I use those terms extremely loosely in the case of CNBC and Fox Business — have figured out that investors want to feel in control. That especially applies to the “retail” investor, typically middle-aged viewers busy with their own jobs but who actively manage their investments on the side, and who imagine that listening to so-called experts on financial TV will help them outperform the stock market. Considering the notoriously fickle and unpredictable nature of financial markets, I don’t blame anyone for gravitating towards the notion of control. Of course, that control is mostly an illusion; the evidence suggests that even hedge funds, armed with immense intellectual firepower, experience, and guts, still have trouble consistently beating the market.

But the other thing this obsession with power in investing might be reflective of is our society’s hyper-competitive, winning-obsessed culture. I feel old bringing up things like this — get off my lawn, by the way — but I just can’t resist.

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The fine line between risk and patriotism

NYSE American flagWhen my dad asks me what he should invest in, I answer as I would for any man in his early 70s: Anyone of retirement age (in my dad’s case, gradually easing into a kind of semi-retirement) should take very little risk. If you’ve worked your whole life to build enough money for your golden years, the last thing you want to do is risk it all. So safe things like short-term Treasury bills make a lot more sense than going all in on stocks.

I learned this basic truth when I was a twenty-year-old one summer working for a retail brokerage office. I also learned that if a financial advisor failed to recognize his client’s proper risk profile and was too reckless with his recommendations, that financial advisor and his firm could be sued for damages. This point was further pounded into my brain several years later as I earned my regulatory certifications to work in the financial industry, and went through tireless bank compliance modules. You get the point: It’s kind of a big deal not to take risks with the money of a person who doesn’t fit the risky profile.

For that reason, when I overheard the following conversation on a financial news show one morning, blaring in the background from one of the trading floor TV monitors as I settled in to work, something didn’t feel quite right. The conversation was between one of the show’s regular anchors and its guest for the day, a former top executive of a major American auto manufacturer who was preaching optimism over the US stock market.

Host: How old are you?

Guest: 82.

Host: You’re 82 and you’re investing in equities! Every financial advisor in the world, right, says that you’ve gotta buy bonds when your sixty-plus because, God forbid, you lose your capital. Eighty-two years old and you’re confident enough to invest in the stock market.

Guest: I’ve got a very good investment advisor, my father lived well into his mid-90s, I’m healthier at this point than my dad was…

Host: You’re not afraid of the capital risk?

Guest: No, hell no. Nothing ventured, nothing gained. I have a fairly expensive lifestyle. I’ve own airplanes and a lot of cars, stuff like that, so I’ve gotta keep the money flowing.

Host: I’m gonna rip my shirt off and paint an American flag on my chest right now. That’s great.

The most remarkable thing about this conversation is not that a man in his early 80s with, I assume, hundreds of millions of dollars in net worth, feels he has to stay invested in risky assets to fund his “fairly expensive lifestyle”. No, the most remarkable thing is the host’s “American flag on my chest” response. What, exactly, does an old man taking on an unusual amount of financial risk have to do with America?

I suppose there is a spirit of risk-taking and pushing the envelope that’s part of our historical narrative as a country — from Colombus, to the Puritans, to the Western settlers, to Neil Armstrong, to Steve Jobs. But at what point does good-old-fashioned American risk-taking become good-old-fashioned American financial recklessness?