Everything I Know About Investing I Learned from Karl Marx and Johnny Rotten
By Greg Fields
Every Burning Man Week, I’m reminded how punks and hippies generally don’t mix well. Yet before passing away last year, the event’s founder Larry Harvey (baby boomer/hippie) pin-pointed a key problem with his generation. Boomers’ intention to upend society was hindered by their propensity to be avid consumers. It was Gen X-er punks, Harvey observed, who finally identified the key barrier to social change: commodification. Peace, love, music – all touchstones of the psychedelic generation - were ultimately reduced to stenciled t-shirts filling discount bins at Walmart. As a result, the underlying revolutionary concepts were depleted of their meaning.
In the 1970s, when peace and love metastasized into hate and war, punk agitators The Sex Pistols radicalized music by genuinely not caring if anyone liked or even wanted to buy their albums at all. Fame was the place where artistic originality went to die. Cynical front man Johnny Rotten (aka John Lydon), famously quipped “Don’t accept the old order; get rid of it”. Refusing to become a commodity was the most shocking act of rebellion imaginable in an age when bands like Queen and Boston were filling stadiums and guzzling Dom Perignon out of solid gold goblets.
Blah Blah Blasé
Punks hate commodification because it is the definition of “sameness”. Economists understand that if your product isn’t distinct from any another, it not only loses meaning, it eventually loses value. At the birth of modern capitalism 150 years ago, Karl Marx observed that the wealthy, propertied class had successfully commoditized labor, and could thereby continually drive down wages and conditions for the working class. If you just need bodies to do the same task over and over, what difference did it make if you hired a Jim, James or Gina? The skillset was the same.
Financial Advisors should sit down right now, dial-up Anarchy In the UK on Spotify and Das Kapital on Kindle. Most brokers can’t even begin to navigate digital platforms, but that’s just the start of their problems.
The existential threat to today’s creaky financial services industry is the creeping commodification of services that once possessed unique (and much higher) value. Who needs a broker when you can key in a trade on your iPhone? Why pay for mediocre financial advice when the internet spits out all sorts of free stock tips daily? Besides, investors have wised up. They understand how they have been commoditized by the big bank/investment houses. The JP Morgans of the world toss together cookie-cutter portfolios, throw all their clients into them and call it a “strategy”. When I worked for The Bigs, I genuinely couldn’t distinguish our investment models from Schwab and TD Ameritrade. “What are investors paying us 2% for?” I wondered, “Free logo swag?!” No wonder people went running for robots.
Game of Drones
Commodification makes things cheap and accessible, and that’s great. But it also discourages customization. What if you don’t fall into a demographic category determined by some MBA nerd in Manhattan? Well sorry, Oddball. Everyone has quirks and unique needs. We all aspire to a work-free lifestyle, but the how, when, where the combination of getting there is as individual as DNA. Everyone needs their own bespoke parachute plan. Otherwise, what’s the point?!
A bot can aggregate MorningStar data, but that’s only a single slice of your financial pie. When you get dressed in the morning, do you put your shoes on first, then shut your eyes and blindly pick out your clothes? That’s the template for Robo-investing. Your portfolio is just your footing; your base. If you don’t account for your tax situation, your income, future financial outlays, etc., you could end up pairing striped shoes with a polka dot suit. Maybe clown clothes work for you (I doubt it), but the point is, every facet of your financial life needs to mesh; not clash. A human financial planner will stitch these separate-yet-complimentary pieces together into a coherent strategy. Getting your financial ensemble right is often the difference between daylight and disaster.
It’s impossible to commodify caring and kindness by leveraging technology alone. Most people are emotionally overwhelmed by their finances. You can talk data points all day, but at the end of it, all that, what happens if you get it wrong? Too much real estate versus stocks? Hmm. Not sure. Putting enough money away to live on later? Uh. Maybe?? You can’t have a discussion with an online tool about how these potential choices make you feel.
Hopefully your financial advisor – who should be the most intimate professional in your life outside of your doctor - understands you beyond your balance sheets. When the market corrects, as it inevitably does, don’t you want to talk to a person who can empathize with the stress you’re feeling? Automation is ideal for executing specific orders over and over, but most people’s financial needs don’t work like that. Life changes and periodic adjustments need to be made. The market tilts a specific way and investment tweaks need to be implemented. Not to mention, clients want to be treated like human beings; not lines of algorithmic code.
Commodification isn’t inherently evil, it’s just that we’ve been conditioned to think that it’s always in our best interests. But in finance, commodification actually favors big lazy institutions; not individual investors. Sameness is great for cheap shoes and t-shirts, but for individualized financial advice? Not so much.
And that is the unlikely lesson gleaned from punk rock and Marxism.
Greg Fields is a Financial Advisor of Santa Monica, Calif-based Gerber Kawasaki Inc., an SEC-registered investment firm with approximately $859 million in assets under management as of 4/30/19. The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. To determine which course of action may be appropriate for you, consult your financial advisor. No strategy assures the success or protects against loss. Readers shouldn’t buy any investment without doing their own research to determine if the investments are suitable for their situation. “All investments involve risk and one should consult a financial advisor before making any investments. Past performance is not indicative of future results.”