How to Restore Confidence In World Finance

Debt clocks are racking up more numbers than Joey Tribbiani on Spring Break. Huge bonuses continue to be given to those who contribute to failure. Regulators and prosecutors seem powerless and apathetic when it comes to holding to account those who’ve lead us here. And our biggest corporations pay next to no tax on their vast revenues.

We – and the free market – live in interesting times.

The free market isn’t a new idea, evolving as a result of the agricultural revolution around the 18th and 19th centuries, rolling through the industrial revolution and beyond.

I wasn’t there so I can’t say for sure, but those advances in science and economics shifted Western thinking from needing to work tirelessly and benevolently to feed and take care of its populace – a full-time gig if ever there was one – to a place where an excess labor force could start to begin to be rewarded for their own ingenuity.

For the first time in our history, people could begin to specialise. They had the incentive to invest in their own ideas, skills, talents and desires, with the aim of selling products and services to others who could buy them.

The focus shifted from individuals needing to service society and community to the individual having choice as to what they build, how they build it and what they charge for it.

The free market philosophy has emerged over hundreds of years. A self-correcting, supply and demand balancing, no-intervention needed, decentralised system of trade.

Some pretty smart stuff right there. Nice job people. Take the rest of day off.

Zoom forward a couple of hundred years, via the Great Depression, bouncing off Randian objectivism and through deregualtion, and here we are.

Up shit creek without a paddle.

Or a boat.

Who Invited These Guys?

I have nothing against the free market, I really don’t. I have no intention of coming across as a “down with the system”, placard waving goon jumping on the anti-corporate bandwagon.

But on the road towards individual ingenuity, individual reward and individual profit (which in turn has shifted towards corporate ingenuity, corporate reward and corporate profit) there are a couple of extra passengers in the back seat who we didn’t invite along.

Fear and Greed.

There are deep-rooted motivations for fear and greed that are woven into the brains of individuals – we fear uncertainty and risk, and we seek to accumulate things to protect ourselves from the tough times. These same motivations are clearly demonstrated through the behaviour of the modern free market.

Fear and greed have altered the nature of the game, so that the “winner” is the one who accumulates more than the next guy and reacts swiftly to protect themselves when threats approach.

Far from being the self-regulating, self-correcting and risk-protected system it’s supposed to be, todays financial markets are driven by the very human emotions of fear and greed – the fear of losing money, share, profit, pride, status, certainty, control or autonomy, and greed in order to horde those things to ensure safety.

Somewhere, somehow, the machine changed.

On Building Confidence…

We hear every day about how we need to get confidence back in the markets. How people are getting jittery. Pundits talk about how we need to restore confidence in the system and its institutions, and how positively the “markets” would respond.

But any system or entity whose primary drivers are growth and self-preservation will always act in its own self-interest, with scant regard for anything else. Just imagine if you had a friend whose thoughts and behaviour were driven primarily by fear and greed. The description “selfish asshole” springs to mind.

Confidence can never be built on a system that’s driven by fear and greed

Same goes for you – you can never feel naturally confident while you’re driven primarily by fear and greed.

Confidence in something founded on the worst traits of humanity is arrogance and hubris, not confidence.

It’s like building a house on quicksand. A plot that was sold to you as being prime real estate for building a solid family home, only for you to find out on moving day that it’s most certainly not solid ground. It’s not even quicksand. You have in fact built your home on shit creek.

And the local paddle business just folded.

Real confidence – natural confidence – is founded on the values that are woven through you. The things that live ten thousand feet down inside you that matter most. The things that make you feel alive. The cornerstones for who you are and the building blocks for what brings out the best in you.

Your values are the only ground that natural confidence can be built on, and for the world to have sustainable, natural confidence in the free market economy I think there needs to be a systemic shift away from fear and greed towards something else, something better, something that represent our best motivations rather than our worst.

In the comments I’d love to hear what you think that shift might be towards. Or am I just being woefully naive?

  • It is as if you wrote this article for the poker player in me.

    I agree that fear and greed should not be the reasons we build our financial systems upon. Instead it would be on something more meaningful. For everyone that is different. Maybe it is the 40something who wants to invest for her children’s college fund or the 20something who wants to have smart passive income via rentals. But each person should find a reason other than “I want more money”, it should “why do I want more money.”

    Money for money’s sake is no way to live.

    • The value of money is something that’s missing for sure – not simply about accumulating money but asking the question “What difference can I make with this money“…

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