Capitalism & Enough

Is that an oxymoron? I am currently listening to ENOUGH by William J. Bernstein from audible. I did not expect that it was by one of Wall streets foremost leaders when I ordered it. Nor did I think that it would spend so much time talking about the problem with the Mutual fund industry or the soaring costs and diminishing returns of the finance industry in so much detail - not exactly easy listening a few miles into a run. Having said that if there is anybody who can talk about the concept of ‘enough’ without seeming naive or in some way weak or conflicted from a business perspective it would be a Wall Street finance business leader.  

The key principles as I see them in my half baked over simplified interpretation are...

-The finance system has grown almost exponentially to become the biggest sector in the economy
-Despite the many justifications the finance industry extracts value from the productive part of the economy rather than creates value
-It creates a fake reality based on share price rather than intrinsic company value.
-In this fake reality it needs and promotes instability; otherwise the value of shares could only ever grow in line with the overall growth in GDP - For all of the artificial peaks and troughs the true performance of the market is highly predictable.
-It does this through a number of self serving activities...
 -Focusing on speculation which detaches the financial market from the real world of business
 -Creating a myriad of confusing products that investors cant understand
 -By encouraging investors to keep moving their money around detracting them from any real interest in stock that they buy.
 -Focusing on sales and marketing for money alone rather than acting like a professional industry offering stewardship to its clients.
-The result of this is that companies focus on short term stock price strategies to play the game created by this artifical situation. 
-This is compounded by rewarding CEO’s through share options that are linked to stock price.
-Accountability is removed as shareholders have little interest in corporate governance as their stake is so transitory. 
-This in turn means that management is driven by numbers and accountancy rather than leadership and business character. Everything is reduced to a number that could be used to affect the short term share price up or down.
-For this reason the unmeasurable qualitative life of business is largely ignored - the value that can not be measured on a balance sheet like Ethics, principles, vision, character, spirit of innovation, professionalism, etc... 
-These are the things that are far more likely to affect the intrinsic value of the company over the longer term rather than the share price in the short term despite the wider benefits to society
-Due to this investors as well as other stakeholders are actually getting ripped off.

In other words the failing of the finance industry is far more profound than causing booms and busts i.e. making the numbers shoot up and then shoot down. It is to miss-direct the energy of business as a whole to chase those numbers despite their illusionary nature. Or if you want the really quick version then it would be this.... When the finance industry embraces the concept of ‘enough’ reality will set back in and business at large can start to think about the concept of what really matters for real success on every measure.  

The big lesson learned is that its not really a question of for profit or not for profit but its more a case of the real world which is likely to help everyone versus the phoney one that helps noone bar the finance industry.