The Human Crisis in Finance

When the electronic age was ushered into financial markets, no one really knew what the knock on effects would be.  The Big Bang happened in London in 1987.  Ten years later, CME introduced the e-mini S&P.  It was ridiculed at first.  By 2003, it was pretty easy to tell that every single contract in every single financial market would be electronic.

My friend Josh Brown tweeted out a link to a very good article.  The electronic invasion is finally starting to hit Wall Street where they care.  Active money managers are being put out of business.  Linette Lopez hits the nail on the head.  She says, “You’d think that with stocks moving higher and a tax cut on the way, the state of the Wall Street dad bro-the one who still goes to his lacrosse reunion at Dartmouth and gets a new set of irons whenever he pleases-would be strong, but it’s not.”

Yes, a very different fear is casting its shadow over finance.

I know that fear.  I have dealt with that fear.  It’s not pretty.  It’s gut wrenching.  It’s disabling.  In the futures industry, as the shadow goes deeper, I am seeing more and more people have to confront it.

To his credit, Brad Feld has been very open about his battle with depression.  I haven’t been too open with what I went through but it wasn’t exactly depression.  I never had to be treated with drugs and never saw a psychiatrist.  But, the wounds were just as deep.  In the course of my trading career, I can count 15-20 people I knew who took their own life.  I cannot count the number of marriages that have ended because it’s too numerous.  When the money runs out and your purpose for life ends, things get really really hard. No one knows how lucky I was when I married my wife.  Ms. Lopez identified it perfectly in her column.

Ms. Lopez identified Anomic Despair.  Her column resonated with me.  It is an existential crisis that happens when you lose your purpose and the community around that purpose.  On the trading floor, we never saw that happening.  At its core, the pit was a community.  Going to work you had a purpose, a network.

Networks are powerful things.  What happens when they are destroyed and gone?

I have written about this before but it fits here.  As an undergrad in college, I took a class from Professor Greg Oldham.  He developed a theory of motivation, Hackman-Oldham theory.  In class, I got very angry with him because I was convinced people were motivated by receiving more money.  He disagreed and had his theory to back him up.  Years later after trading in the pit I telephoned him and told him he was right.  I was motivated by intrinsic job design factors, not just money.

I was also a part of something bigger than myself, a community, an exclusive club with rights of passage and cultural norms.  It was almost cult like.  Intense.  Insanely competitive.  At my core, when I was in Professor Ron Burt’s class during my MBA, I understood every single thing he was talking about.  His class was visceral to me. Putting on that trading jacket every day gave you an identity magnified by the badge you wore.  If I get a shirt made, instead of putting my initials on the cuff I use the letters from my badge.  A part of me will always be “CR”.

When friends of mine from the floor died, I used to go to the coat room and get their trading jacket.  I’d give it to their family.  You cannot imagine how appreciative they were.  It was a part of the person that passed away that they could hold on to.

Extrapolating all this information that I lived through and applying it to other groups it is pretty easy to see why a lot of stuff most people see as crazy is going on.

If you think about the way startup companies get built it’s very similar to a trading pit.  A community and a company culture form.  When companies struggle, that culture is threatened.  When they fail, it could mean disaster for individuals inside that company.  Not because they lost money, but they lost their purpose for living.

The work Jerry Colonna is doing with his Reboot podcast is important.  The effort that Raman Chadha is making with The Junto Institute is huge for startups.  It’s not just that startups going through Raman’s program are more successful.  What I think we will see is when they go through the program and fail, there will be an emotional net that might help stop or soften the fall.

The answer to this is not basic income. Basic income would suck.  It’s soul sucking.  It’s warehousing people until they die.  It’s looking at people as liabilities rather than assets.  Ignore the fact our country could never afford it.  Focus instead on the real psychological liability and the fact it’s a band-aid where we need a tourniquet.  I can see the tidal wave on the horizon and basic income isn’t going to help us be prepared to deal with the consequences when it hits.  Supporters of basic income feel good about themselves but basic income does little or nothing to the real problems behind why those people think we need it.

Many of my former trader friends have turned to real estate.  Investing in it.  Selling it. Developing it.  It’s a relatively easy transition and allows the independent trader to maintain their independent streak.  Some want to get into venture, but venture is a very different animal.  There is no liquidity and outcomes are binary.

Some try to drink away or drug away the hurt.  They become self-destructive.

I started Hyde Park Angels, and that didn’t work out for me the way I wanted.  Not only did I lose my community on the floor, but the community I started and was active in helping build for myself off wasn’t there.  Turns out what I did there is meaningless to my target market.  Double anomic despair.  When I reached out to people who I thought could help, there was no one.  When I mean no one, I mean no one.  When I asked for help, doors were shuttered.  I had to wade through piles of phonies and people who lied and tried to take advantage.  Some people even actively discriminated because of politics!  Then, when I tried to remake myself again, everyone told me “You can’t.”

You have to find a deep resilience and grit inside yourself to power through.  I was very lucky to find a partner who was similar to me in many ways with a far different skillset.  We found we had the same goals.  People tried to extinguish the furnace that burns deep inside.  The fuel turned to embers, but the new fire burns hotter.

I am seeing trading firms starting to become startup investors.  They better realize what they are in for.  It’s super hard work if you want to be successful at it.  Most trading firms are not cut out for it.  Better off allocating capital to a fund because the way I see a lot of them doing it is guaranteed to fail.

If I look across America, I see a lot of the same anomic despair infecting other groups. We know who they are.  In some cases, it is technology that is putting them on the street.  In other occupations, it’s horribly designed government policy that artificially puts them on the street.

Perhaps this is why Arthur Brooks book, “The Conservative Heart” resonated with me.  I suggest you read it.

You might think Trump is a savior, he’s not.  You might have an irrational hate for Trump.  You might see Brexit, Le Pen, Trump and other things happening around the world and wonder if we will ever be “normal” again.  Anomic despair is a very powerful thing. Especially when it affects large groups that can mobilize.  Read Arthur’s book.  Think about it hard.

The answer to our problems is creating public policy that empowers individuals. Individual liberty and freedom and choice are core to being human.  Then we have to let individuals create communities where other individuals can feel like they have a purpose.

I know their pain.  Kenny and I are trying to create a new Fin Tech community where people can find that purpose and help other people find theirs.  Hope you can find a way to join us for the ride.

 

 

  • Dave O

    Great read, been there and still evolving…

    • Stick to it. You know from the floor, there is no try. We just do it. Keep competing and searching. Try on a few uniforms. See what feels right.
      Eventually you will find it and you will win.

  • Jk

    Missing from your good article however is religion. Your core purpose is not your job/work/profession but to help other people in the truest sense. You’re missing that – good luck and God Bless.

    • Thanks. You can or can not be religious and have the same issues. God/Jesus/Mohommed/Buddha etc might give you comfort; but you still have to work through the issues.

  • JLM

    .
    The only “normal” people are the ones you don’t know very well.

    I suspect we have a flawed sense of what life should be and when we are “depressed” it may be — not always, but sometimes — because we are comparing our lives to a mythical standard.

    I was in a line of work — soldiering — wherein men were killed both in the line of duty and in training. The draft was on and many of the soldiers I commanded were there against their will. I could not fathom the rage they must have felt at having their lives jerked like that.

    Still, they made it through.

    Our volunteer army is the best we have ever fielded — not even close when comparing it to any army since the Revolution, but, still, the basic dangers are attendant at all times.

    But, in the process, we have lost a sense of duty and an informed opinion as to what it means to serve the country. In many ways, I think society was better served when we had the draft. The burdens were more evenly shared.

    Every time I hear of a suicide I am moved and wonder how someone can — at an instant in time — be so unhinged that they decide to end their lives. I hope that does not sound judgmental as I mean it in a quizzical way.

    In the struggle we find ourselves and we find a person who is far better than we ever thought him/her to be.

    JLM
    http://www.themusingsofthebigredcar.com

  • awaldstein

    From the heart my friend.

    I reject that despair is in the most part a response to the loss of normalcy and the inability to accept change.

    I also reject the idea that my hatred of Trump is irrational and that my belief in ethics a misguided criteria for belief for that is what that implies

    I accept wholeheartedly that without community and friendship life is bleak.

    I think you will find that you have more of this than you imagine.

    • My point is not Trump. My point is that if you were a coal miner, your entire community and everything surrounding it was absolutely destroyed-intentionally destroyed by the last President and his administration.

      I think the linked author nailed it when she identified the after effect of a lost community.

      Floor traders certainly felt it (although it was the march of technology not a deliberate policy by a political person). Would love to see more floor traders weigh in here on what they felt, and what they did to overcome. Other people in other long gone communities might learn.

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  • I just had a chance to read this great post, Jeff.

    The “just reinvent yourself” narrative is a tough one — the ability to do so, friction free, hasn’t worked its way into the market. So to speak.

    Folks who find themselves without a job and community find that many employers don’t value their potential to translate their skills to other domains. And age discrimination is definitely a very real factor here.

    This affects everyone: coal miners, veterans, Wall Street finance folks. (Though for the latter, a friend me told a story about interviewing a finance guy for a job in industry: the finance guy couldn’t get his mind around the inability to bring his Wall Street salary with him to industry. His so-called market value didn’t hold up to the broader market.)

    And not everyone is cut out to be an entrepreneur. I don’t see basic income as a solution, nor do I think that it’s in the schools or in training programs.

    It seems to me that an attitude shift in our culture is called for, one around people and their potential.

    • Yup. It is going to get worse in finance with the implementation of blockchain

  • Dreamer

    First,let me agree I was very fortunate to marry the woman I did.
    The sense of community you describe is similar to former athletes ,who know their skills have diminished,but miss the camaraderie,the locker room,the dugout banter,the pregame practice.Those are the things it’s hard to find at other jobs.
    I also always believed we were providing a valuable service to the economy.I think it was Volcker who said without bond futures,mortgage rates would have been a full point higher.Sure,there was money to be made,but it was the shared experiences,and my background in academics and with primary dealers that gave me a sense I was helping more people buy homes,not just some crazy,money-hungry,porsche-driving gambler.And all the others-the majority-that were there to support a family and put their kids through college,not just get rich and retire young.
    Keep ’em coming,Jeff.