Here are some things I think I am thinking about:
1) Why does the world hate Martin Shkreli? Christmas came a few days early for the 90% of the world that completely despises Martin Shkreli, the hedge fund manager and pharma CEO who allegedly ripped off investors. An interesting discussion has surrounded the hatred of Shkreli. Ezra Klein says he’s a symptom of the system and not the problem. In essence, Klein argues that there will always be people like Shkreli because the system breeds people like him who are greedy, evil, self promoters.
I have to admit that I hate this kind of negative thinking. Economic systems are only as good or bad as their participants. Capitalism is often portrayed as this inherently greedy system, but that is terribly misleading. After all, capitalism is nothing more than a system in which people who produce much are rewarded monetarily. Invent the iPhone, get lots of money. Give great back rubs, get lots of money. It’s more complex than that and there are always bad apples, but you get the point. Whether those capitalists are “good” or “bad” is not a function of the system itself but the participants and their scruples.
But this gets to a much simpler point that makes Shkreli so reviled. A friend of mine once asked me what my “purpose” in life was. I said that I would like to be remembered as someone who gives more than they take – someone who lives a “life deficit”. There are two types of capitalists in this world in my view; those who run life deficits and those who run life surpluses. Those who run life surpluses want to take, take, take from the system. They want to be rewarded for the output they contribute AND they want to keep that monetary reward for themselves. The capitalist who runs a life deficit wants to be rewarded for their output, but also gives a good deal of their monetary reward back (willingly) to those who weren’t as fortunate to have the skills or situation in life to achieve what they did.
Shkreli represents the worst type of life surplus. Not only does he (allegedly) steal from others, but he’s the type of person who spends $2MM on something millions of other people would love to have and doesn’t even use it. Shkreli is precisely the type of person who makes people like Ezra Klein believe that capitalism is inherently greedy as opposed to being a system that is only as greedy as its participants choose for it to be. Shkreli is a symptom of his own misunderstandings about the system we reside in, not an inherently dominant feature of it.
2) Tren Griffin wins the market timing call of the year. Not much to say here other than this was amazing. Tren Griffin, who is very awesome by the way, posted this the night before Shkreli was arrested:
3) Hedge funds (still) (mostly) suck. Since his arrest yesterday several reports have come out discussing Shkreli’s lackluster hedge fund performance. But this isn’t just a Shkreli phenomenon. Hedge funds have been broadly terrible this year as this Fortune report shows.
Now, in fairness, everything has pretty much sucked this year. It’s been very hard to find any asset class that was positive on the year. Even the Global Financial Asset Portfolio is down over 1% this year which is highly unusual given its heavy bond allocations. But still, it’s one thing to pay low fees for broadly poor performance like most indexers are seeing this year. It’s a whole different story to be paying high fees for bad performance….
Mr. Roche is the Founder and Chief Investment Officer of Discipline Funds.Discipline Funds is a low fee financial advisory firm with a focus on helping people be more disciplined with their finances.
He is also the author of Pragmatic Capitalism: What Every Investor Needs to Understand About Money and Finance, Understanding the Modern Monetary System and Understanding Modern Portfolio Construction.