The Sex In The Sensex

Sex, lies & the markets There is a unique e-mail id I have for my students from various lecturing assignments and a “knowledge network” I run, which exchanges insights about various things among intelligent people I have picked up through my career. Because of the heavy traffic on that e-mail id, it is a target for a lot of spam. Yahoo filters out some spam automatically, making it a somewhat accurate repository of spam collected ‘randomly’. I know this does not count as scientific research, but below is a list of 10 representative spam messages I found on the Yahoo spam filter on a given (random) day. I have put down the title of the mail, expected subject (as derived from the subject heading, because I never open these mails): Sl Subject Heading of Spam Subject 1 Great rise is coming in this (stock) Stocks 2 Many men were skeptical at first but after they gave our penis enlargement pills………. Sex 3 Recent stuff: no exam or classes required Coaching 4 Fuel for this increased metabolic rate can be found from stored body fat Sex/ Slimming 5 Join thousands of satisfied customers and experience…. Sex 6 Do you wish to increase your volume by upto 500%……? Sex 7 This stock combines a no-hype situation with serious promise of a rise? Stocks 8 This stock shows amazing earning potential Stocks 9 You always cumm during a sexual performance….. Sex 10 Without doubt, this stock opens up great possibilities for a trader… Stocks It goes on like this, so I don’t need to give you the full details. Like I said above, this is just anecdotal evidence, so let me make my point: on average, spam is 50% about Sex, 40% about money/ stocks and just 10% about others. If the above count mimics how the world is stimulated, let me offer a conjecture: on average, people are motivated 50% of the time by Sex, 40% of the time by money and the rest is too boring to talk about. The numbers are approximate, and the variances would be high, so let me say this more carefully: sex and stocks (a.k.a. “easy, unearned money”) are the two great natural obsessions of mankind… what else do people spend their time thinking about? Which would mean that this magazine ranks along with “Stardust” and “Playboy” as feeding one of the two great obsessions of mankind. Makes me feel rather humble, what?! For all my jargon and erudite intelligence, is that all I do? …….bring a sophisticated sheen to an essentially primeval motivation. So just like Mr. Hugh Hefner guarantees you a “rise”, well, so do I promise you a raise. …… ! Just that we focus on different places! Early in my career in the late eighties, a Finance company I used to work for (that later went on to become one of the best in its industry) commissioned an exercise to locate typical behaviour patterns that offer leading indicators of potential defaulters. One of the highest correlation was found to be with the broad indicators of ‘sexual obsession’. In other words, a tendency towards sexual depravity turned out to be the clearest leading indicator of a potential defaulter, REGARDLESS of “ability to pay”. This study applies to retail borrowers, of course. Of course, maybe this does sound a little far-fetched, so let me quote Warren Buffet on this. Good investors have “low arousal levels”, or words to that effect, he often says. Of course, he does not mean to be taken literally, but do you get the picture? Ok, you still don’t get it, so let me try another route. Sex is consumption (in spirit), and so is over-borrowing………both represent a tendency to prepone consumption/ pleasure. Both put self-gratification above celibacy/ postponement. Both represent a tendency to be hedonistic, consumerist…….enjoy life rather than produce, save, invest, take risks . Another point…..you can save, if you have forbearance & fortitude. But you still can’t invest/ take risks, if you care too much about money. Hence, the key to wealth-building is NOT just the ability to save (which women have in plenty, for example) but the ability to lose money, a.k.a. the ability to take risks. Yet stock prices are supposed to track the ability to create wealth, i.e., the ability to produce. That seems to be the explanation why most people, particularly the retail crowd are such poor investors. How can a person, who is intrinsically consumerist/ hedonistic, be able to locate in someone else the ability to create wealth? He would have to look for someone who is just not like him, and whose behaviour and value systems he cannot relate to? Which brings me to the need for “morality” as the defining characteristic of a good investor. A ‘moral’ investor is philosophically a producer (as opposed to a consumer), restrained as opposed to hedonistic…….he seeks to maximize ‘profit’ (also known as ‘producer surplus’), rather than consumption. He is usually a good saver, who understands saving behaviour. He chooses “people-like-us” (i.e. like himself), attracted to those who outperform (competition) in small increments, then compound such behaviour over long periods of time, to create wealth through virtuosity and frugality. The Power of Compounding works for such people. Let me take you deep into “Moral Philosophy”, the original name of the dismal science. John Stuart Mill wrote a lot about hedonism in Economics. He called it Utilitarianism; philosophical Hedonism has sexual and libidinal connotations: • One school argues a quantitative approach. They believe that the value of a pleasure could be quantitatively understood. Essentially, the value of a pleasure is its intensity multiplied by its duration - so it was not just the number of pleasures, but their intensity and how long they lasted that must be taken into account. The wag in me is tempted to point out that pigs, therefore, must the happiest specie on earth. After all, they have sexual climaxes that go on for around 45 minutes, don’t they? Oh, to be a pig…….!!! • Other proponents, like John Stuart Mill argue a qualitative approach. Mill believed that there can be different levels of pleasure - higher quality pleasure is better than lower quality pleasure. Mill also argues that simpler beings (he also mentions pigs) have an easier access to the simpler pleasures; since they do not see other aspects of life, they can simply indulge in their pleasures. The more elaborate beings tend to spend more thought on other matters and hence lessen the time for simple pleasures. I have often wondered why NONE of the great investors have ever attracted media attention for a varied and eventful sex life. I mean, of the kind that Donald Trump, Rod Stewart or Michael Jackson are known for. Why the flamboyance of a Richard Branson is not to be seen in a George Soros, for example. By sheer density of population, the great investors make up a disproportionate share of the world’s super rich by far. It is a well-accepted fact that good investing contributes the largest chunk of the Forbes 100 Individuals’ Rich List. Yet, if big money obtains a well-talked-about sex life, why is it that NOT ONE of these people find their names in the (hypothetical) Playboy 100? Do a similar comparative listing with film stars, sports stars, even industry stalwarts and you will find some correlation between the money people make and the sex they have. Why is investing a unique exception? In all other ‘industries’, good hunting skills lead to great sex lives, which is how Nature meant it to be, I suppose. My surmise is that good investing needs you to be a good ‘economist’. I don’t mean the quantitative, financial and data-based skills that pass off for Economics in our Business Schools, but real “Moral Philosophy” of the kind that John Stuart Mill sought to focus on. This moral dimension has ceased to find mention in today’s literature. This is a very deep subject, not really meant for a 2-page column. But my limited purpose is to remind you: before you set out to become a great investor, examine your level of ‘human-ness’ before you seek to conquer “greed and fear”. That at least, I am sure you have heard before…..!!! Sanjeev Pandiya works in the auto sector, trades, invests and teaches. If you have some intelligent, original thoughts, do write in at spandiya@hotmail.com.