A recent piece by Ryan Avent in the Economist asked a wonderful question:
“The question is not why Apple doesn’t employ more Americans. The question is why there aren’t more Apples. Maybe it’s insufficient demand. Maybe it’s technological stagnation. Maybe it’s a dearth of qualified workers, and maybe it’s poor regulatory policy. There’s little harm in trying to do better on all of those counts. What is harmful is to look at one of the great American corporate success stories and fret over its audacity in providing good jobs for workers in America and in China. How dare they!”
Avent was discussing the fact that Apple employs twice as many foreign workers as domestic workers. The usual talking point is that this is the result of a decline in American competitiveness and the shipping of workers overseas. But that misses the point as Avent notes. The real question is not why Apple is shipping jobs overseas. The real question is why there aren’t more Apples?
I have a rather simple opinion on this one. The modern day Steve Jobs doesn’t start an Apple. He starts a hedge fund. We don’t ship our best and brightest into productive lines of work en masse anymore. We ship them to Wall Street. Hence, the financialization that we have all come to know and hate becomes self perpetuating. Unfortunately, this is part of the curse of wealth. As we have become such an enormously wealthy nation we have seen a boom in the demand for Wall Street’s services as wealth needs to be protected and nurtured.
It’s not a horrible problem to have. But I believe Wall Street has exploited this surge in demand via products and services that add little to no value. I attribute this in large part to the ignorance of the common man/woman. And how can you blame them? Most people are too busy doing what they do best to ever worry about their investment portfolio. It’s easier to outsource that to an “investment professional”. Unfortunately, that “investment professional” isn’t always concerned about your best interests, but is often times more concerned with fee maximization and maximizing the revenues for a firm that is only interested in maximizing shareholder value.
This country needs a very serious shift in what it values. While it is important to value wealth and those who can protect it, I think we need to better educate ourselves about the various forms of wealth protection that are available. This doesn’t mean that Wall Street is necessarily all evil. It just means that Wall Street as a proportion of the total US economy has become disproportionately important in the minds of most Americans and the fees and revenues generated by these firms have allowed them to attract the very best and brightest minds. What we need is a Wall Street that adds real value and is leaner and meaner. I think the financial crisis was the markets attempt to impose this self correcting mechanism on this industry, but the government and the Fed clearly had no interest in allowing that to happen. And so here we are back where we started with a crisis wasted and little resolved….
There’s an obvious cannibalization of capitalism that is occurring here and it is an incredibly serious risk to the US economy and our way of life. We have allowed the power to concentrate itself in one largely unproductive industry which we refuse to allow fail. That is the antithesis of the democratic and capitalist world that has made America so great. While better regulation can help to some degree, the only real sustainable fix is via education and better understanding of the financial world in which we live so that the average American can reduce their dependence on Wall Street.
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.