The events of the last decade have forever changed the global economy.The Long-Term Capital Management crisis, the Technology stock bubble, September 11, and the most recent economic crisis have brought a heightened awareness and prudence towards investing, and the consequences will invariably affect the future flow of capital and change business models across the world.
Therefore, if one is to be successful in this new world of investing, he will need to possess a sense of the past, intelligent grasp of the present, and foresight for the trends of the future in not just economic terms, but cultural, social, and political.
The new world investor in the new economy will need to be a multi-disciplinarian, and the more he can assimilate and synthesize information and understand the new forms of capital directing investment trends and shaping ideas, the better positioned he will be to capitalise on the opportunities of the new economy.
Investing requires a broader lens than a purely financial one. Investment decisions are driven by more than just this one discipline. Therefore, it is the managers and thinkers that can view their investments in the context of a rapidly protean, multi-disciplinary world that ultimately will be positioned for more success than the ones who merely profit from a micro trading strategy.
While one might be able to turn micro analysis into a lucrative career, the issues that are facing our world today are not merely micro in nature—micro issues are framed by the larger macro influences—and therefore, if one really wants to affect the world broadly, he will need to understand the macro forces shaping the cultural, social, and economic landscapes of the time and profit from that study in the global unfolding of our world.
It has become evident from the machinations and oversight of the past few decades that “expertise” and “wisdom” are futile if they are not kept current. That is, if the steward of those qualities does not have a contemporary view of how his “wisdom” and “expertise” fit into the contemporary and future politics and economics of the world, then he might as well not have any claim to expertise or wisdom at all.
A major gaffe of our society is complacency, hubris, and a “this-time-is-different” mentality. Our own comfort with the status quo inevitably uproots the status quo in which we believe thus rendering it an archaic fossil of socio-economic history. The pseudo-virtues and values of the past several decades that fuelled the ultra-levered global economy must change, and the values that will replace them will be much more humanistic, altruistic, and prudent.
That is not to say that the present is not revealed in different variations of the past or that human nature lacks an ontological home, but I sense an emergence of a new kind of economy, a new kind of business leader, and a new kind of successful company.
Nor is it to say that these values and forces will automatically appear as a benevolent knee-jerk reaction to our own cupidity of the last few decades, but rather that sensitive business people will sense that the new way to conduct business is in learning from the irrational excesses of recent markets and embracing a more humanistic approach to capitalism. Therefore, I see the next wave of business and investing less about a typical hard, tangible commodity (gold, oil, copper) than about emotive capital, a new kind of burgeoning commodity.
behavioural commodities such as empathy, compassion, and ethical intellect will differentiate yesterday’s business leaders from the leaders of tomorrow. Business and investing will no longer be merely about deploying capital or exploiting relationships. Capital will have a moral compass and seek areas, enterprises, and people that have an awareness and appreciation for cultural differences and moral opportunity.
Return on investment will not be enough to satisfy the new world investor, but rather that investments will follow a moral high-ground and contribute not merely to increasing bank-account balances, but also to a restoration of moral standards and cultural sensitivities. And this is what will prevent globalization from turning the world into a completely homogeneous playground, or battleground, for that matter—the notion that we need difference and contrast, sensitivity and sensibility in order to survive.
The hope for a harmonious world is also the reason why I believe apocalyptic thought experiments must not prevail as investment strategies or pedagogy. They have a place in investment dialogue, but to profit from a strategy that ultimately predicts an end of history is both misguided and feckless.
The advent of globalization will have its limitations. While globalization as a way of business is probably here to stay, sometimes its presence will be more of a symbolic frame than a viable paradigm of commerce and trade. Currently, globalization serves temporarily as a backdrop to the financial stagnation of the world, the seizure of capital flows, and the freeze of global and local credit alike.
The framework of globalization is merely that: a framework; but the actors sense a sickness, and until de-leveraging happens in entirety, leadership emerges, and credibility is restored, we will continue to look more and more like an early-20th-century image of our English-speaking ally, Great Britain, only what colonialism and over-extension was to their demise, over-leverage and fiscal recklessness will be to ours.
And the panacea will not be a mere financial re-leveraging of the system, despite the leveraging of the U.S. balance sheet. One will need real dollars and real assets to borrow against, and until we can determine what is “real,” that is, having lasting perceived value, there will be nothing to borrow from except for history.
Leverage will take on a whole new meaning. It will apply far more towards coming to an understanding of our present and future through a borrowing from the lessons of our past. In fact, the study of history is a valuable example of leverage: to take what has unfolded in previous years to make sense of what we are up against right now. It will be a layering, stacking, and leveraging of the history of the human experience, because as alluded to above, there is an essence of human nature that does not change. So regardless of the difference in economic, social and political constructs between the frameworks of the future, the globalization trends of the present, and the paradigms of the past, it is still human beings that have operated and will be operating within those parameters.
New leverage will be about combining intellect with vision in a global context. The flow of intellectual capital must precede the flow of monetary capital. The de-leveraging of the economic system eroded wealth of epic proportions. Money is not only scarcer, but it is scared. The blind investing of much of the new millennium will not occur anymore because we do not have that luxury.
We will need a new cadre of business leaders to set the standard for a new model of investing, capital distribution, wealth creation and most importantly value determination. Therefore, the economic leaders of the “new world” will be the ones who establish a new value system (values such as empathy, morality, passion, human connection, and enlightenment, which must lead us in the business ventures and social interactions of the new economy) and who can most wholly and adeptly connect with the emotive needs of humanity and identify which investments will not merely satisfy people’s personal portfolios, but also their souls.
We must have a higher calling than borrowing money to create money. Life was not meant to be lived always at the edge of irreversible avarice and greed, but this does not mean we cannot create prosperity. The invisible hand of man’s best interest will continue to guide us and inevitably create the marketplace in which we conduct our affairs, but I think we have also learned that our own self-interest is not necessarily always in the best interest of the collective “ourselves.”
That sometimes, laissez-faire capitalism needs an ethical check-up, for if mankind is capable of creating the recent destruction that we have seen, then perhaps his “invisible hand” needs to be tempered, and that guide of the invisible hand shall be a governing body of intellectual business visionaries to establish a new framework for business whose moral compass is aligned to the needs of both the people and the individual.
So, in essence, this new way of investing becomes somewhat of a self-fulfilling prophecy: Instead of searching the globe for the next best investment idea or capital arbitrage, the new leaders must steer and direct the next big economic movement towards the investment ethos that they will have ideologically created.
The new value investing will not be about investing in companies that are “under-valued” from the perspective of financial valuation, but about investing in companies run and built by people with “values”—values that are calling to be established and promulgated in the new world forum by leaders with the sensitivity, acumen, and vision to embrace, nurture, and share them with the rest of the world.
Nor will investing be merely about “mindless” black-box models that spit out 5-standard deviation moves through thousands of computerized iterations without taking regard of the “tails.” The models of the new investing world will be constructed by living, breathing people and whose iterations will be run not in a micro-processing universe, but through real human conversation.
These Monte-Carlo thought experiments will not lack the human element of their marginalized predecessors. We can no longer rely on computer programs to determine the fate of our human existence, nor imply that God’s limitation or plan for us is confined to a 5 standard deviation move. The world is far too complex, far too human, and far too inchoate and chaotic to rely on a device that is so good at making chaos look so contained and neat. Models serve a purpose, but they should only be relied upon so far.
The human phenomenon is one that defies the capabilities and scope of the machine—a phenomenon that we humans should be relied upon to understand. Technology will not reverse the human mistakes of the past. It will only be through real human qualities such as empathy, community, and compassion that will restore our humanity and return our confidence.
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