The End of Wealth

Unless you have been living under a rock, you will know there are some major problems in the world’s financial markets at the moment. Working for a global bank, I guess you could say I have a front row seat for this debacle that in recent days has worsened with the stunning collapse of Bear Stearns.

Much of what I have read has blamed Wall Street for turning the problems related to subprime lending into a major global problem. But I also recently read this Newsweek article where a former mortgage broker shares his insights into the fraud and greed that has plagued his former industry:

Lenders… which underwrote loans offered up by brokers and resold them to giants like Countrywide, spent much of their workdays trying to spot the stupid tricks brokers routinely used to get unqualified borrowers approved for loans. They’d say a buyer intended to live in a house when it was really an investment property. They’d falsify the buyer’s income by having a relative pose as his employer, or use scanners and software to forge W-2 forms. They’d find ways to hide debts (like a car payment) by looking for a credit report that omitted key data. They also routinely gamed the appraisal system, encouraging appraisers to look for “comparables” that were far nicer homes in better neighborhoods—all in an effort to drive up the appraised value of the home they were mortgaging.

Perhaps because I know a lot of people in this industry, this article really got me thinking about wealth and the ways in which we go about trying to accumulate it.

Greed and shady business dealings are obviously nothing new, but what are we to make of them? And how does it relate to self improvement?

Ends and Means

Now, the last thing I want to do in this article is come across as self-righteous in the moral advice that follows. Let me state here that I am far from perfect, and I am not always proud of the ways I act. But this current chaos in the world’s financial markets, and other recent examples of greed (eg Enron), reminded me of Gandhi’s teachings of the seven things that will destroy us. These are:

  • Wealth without work
  • Pleasure without conscience
  • Knowledge without character
  • Commerce without morality
  • Science without humanity
  • Worship without sacrifice
  • Politics without principle

As Stephen R. Covey points out in The 8th Habit, each of these admirable ends (eg wealth and commerce) can be accomplished through an unprincipled or unworthy means.

Many people give little attention to the means as their ego tells them the ends justify the means. This approach was infamously promoted by Machiavelli in The Prince, which suggested, amongst other things, the shrewd methods an aspiring prince could use to acquire the throne (remind you of any modern day politicians?).

If you live according to this philosophy, I would like to invite you to consider a very different way of looking at ends, and the means in which you go about accomplishing them. If we are to quell our ego, and instead live a life where we follow our conscience, then the ends and means become inseparable.

According to Stephen R. Covey, if you reach an admirable end through the wrong means, the ends ultimately turn to dust in your hands. It may appear that you can, but there are unintended consequences that are not seen or evident at first that will eventually destroy the end. The example he gives in The 8th Habit is:

  • The parent who yells at their kids to clean their rooms will accomplish the end of having a clean room. But this very means has the potential to negatively affect relationships, and it is unlikely the room will stay clean when the parent leaves town for a few days.

Now, to return to the topic of wealth, I think it is possible to see much of the world’s current financial problems as stemming from people who wrongly believe the ends justify the means.

My advice? It is wonderful to aspire to wealth, but don’t lose sight of the means of accomplishing it as you go about your journey.

What do you think? We would love to hear your thoughts on anything discussed in this article. As a small incentive, we have a $20 Amazon gift certificate to give to one person who shares their thoughts.

Peter writes about how to enjoy life at The Change Blog. If you enjoyed this article, you may wish to download his free e-book, A Year of Change.

27 Responses to The End of Wealth

  1. Rick says:

    A non-government entity having control over the public money supply doesn’t help either… because when ultimately it is their goal to make money, they’ll do so with the ultimate insider trading… knowing the boom-bust cycle that they cause by controlling the interest rate to pump in funny money.

    Sorry if I sound jaded! :)

  2. Thanks Peter for connected the dizzy hights of the finance world to the step by step of what we do on a daily basis.

    Put another way: we should start living the way we want right now, not one day when (fill in your own preconditions).

    Albert (http://thoughtsintime.co.za)

  3. Matt says:

    I think too many people are living for the moment, and lacking the foresight to see the long term consequences of their actions. If I recall correctly in 1998, Alan Greenspan talked about the stock market bubble would burst, years before the downturn. But people were too caught up in the insanity that was the 1990’s with people becoming millionaires and billionaires overnight, and everyone wanted to get rich quick. Oblivious to risk involved with their actions, not realizing how fragile their wealth that strictly existed on paper was.

  4. John Bullock says:

    I always remember that phrase “short term gain, long term pain, short term pain, long term gain”.

    may sound simplistic, but most great truths do.

  5. Thanks for the great article Peter.

    I believe we are turning a corner. After two decades of working 80 hours per week to have the nicest house, car, clothes – a lot of people are just tired and empty.

    It is my (possibly overly optimistic) belief that there is a true movement toward responsibility and values. I think we see this both in terms of increased interest in both spirituality and conservation. I think a lot of us have awakened after a couple of decades of materialism to a hangover, and realize that we aren’t kids anymore.


  6. Peter says:

    Thanks Bruce.

    I think we are seeing a change too. Despite all the uncertainty that exists in the world at the moment, I am excited and optimistic about what the future will bring.

  7. Maura says:

    This was an excellent way to start my day – real food for thought.

    I think that in large organizations it can be all too easy to let your actions be dictated by the lowest common demonenator. Some of those brokers no doubt felt a twinge of conscience when they were using shaddy practices to get loans for unqualified buyers, but they were able to ignore it because of the poor actions of others.

    A great reminder to bring and use your ethics everywhere; just because you are at work doesn’t mean your values get the day off.

  8. Andrew says:

    It has been depressing me too that much of America’s riches has been created by ripping off other people in one-way or another. I’m told that this is how capitalism works though.

    Just a couple examples that quickly spring to mind: Facebook founder Mark Zuckerberg was being paid to help create the same system he later stole the idea for and grew rich on. Even Bill Gates essentially conned someone into selling him DOS extremely cheap and resold it to IBM (along with numerous other morally-questionable moves, destroying competition, etc.).

    I’ve experienced this same thing myself, copying others and also having my own ideas stolen, seeing online marketing filled with deceptive practices, on and on.

    It’s not a very healthy environment. Getting to the top seems to mean often acting as a liar and cheat (Maybe Warren Buffet is a great exception?).


  9. The lenders and loan officers did not have any real “skin in the game” because they would end up selling off the mortgages to investors in the secondary market. In other words, they had great incentive to deceive and, as you infer, were trained to do so…

    I must say that the people buying homes were not forced against their will to buy the homes and finance them at 100%…

    What we have is what I call the “Cycle of Greed” that all begins with lavish desires: Home buyer to Lender to Investors in Secondary Market to “Monetary Lines” insuring the credit and on and on and on until it comes full circle to affect the entire economy. It’s relative to the proverbial “house of cards.” Pun intended…

    “There is no calamity greater than lavish desires. There is no greater guilt than discontent. And there is no greater disaster than greed.” ~ Lau-tzu

    “If thou wilt make a man happy, add not unto his riches but take away from his desires.” ~ Epicurus

  10. The seductive lure of money can make it very easy to block out considerations of morality: we seem conditioned (by the media, the government, the education system) to believe that the highest purpose in life is to make money.

    (For instance, routine argument for the costs of higher education is that having a degree = having a better job and thus being able to earn more money. I rarely hear any discussion of all the other life-enhancing benefits of university-level study.)

    Breaking down people’s lives and interactions into monetary terms inevitably has a distancing, dehumanising effect. We need to think about the people behind the figures whenever ugly phrases like “the bottom line” crop up…


  11. Richard says:

    The Ends don’t justify the Means lecture is great, but what about morality? I’m sure many of us have heard the hypothetical situation: If you could get the cure to all diseases, cancers, and so forth, for the price of one innocent child’s life, would you still take the cure?

    What happens when it’s not so extreme? Where do we draw the line? How about a cure to just one disease, for just one child’s life? For ANYone’s life?

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  13. Brad Baggett says:

    Great insight Peter! I really believe in our (America’s) system and economy, but here at home and around the World there is far to much greed. It is essential to be transparent and honest. It is not wrong to want and pursue a good living or even a lavish living, but to do so at the expense of others is wrong.

    I have always been a firm believer in, “It’s not how much you make, it’s how much you spend.” If can not control your greed and desire, you will never get ahead.

  14. Peter,

    From the comments here – it seems a mixed bag of optimism and pessimism!

    As a follow up for your readers – I would highly recommend Jason Jennings’ wonderful book “Think Big, Act Small.” After researching the top public and private companies in the US, he and his team narrowed the field to 10 companies that had achieved 10% increases in profit every year for 10 or more consecutive years. The extraordinary thing is that the common factor in all these companies were exceptionally high values!

    It seems that doing the right thing pays the best over the long term…

    Thanks again!


  15. Elizabeth says:

    Another take on the greed factor from someone who was in the mortgage business for 30 years…most – maybe ALL – people with savings, stocks, other financial investments seem to want to get the highest possible earnings for their investments. Then, they haggle and barter down the fees on the mortgages they get. So people want to “earn” 8% but only pay 6% on their mortgage. How is that gonna work?

  16. Michelle J. says:

    I agree that it’s important to focus on the means as well as the ends. I talked with someone yesterday who has worked 14 years for a large discount retailer with a controversial record on many fronts. While she discussed that she often has difficult conversations with others about her work for that corporation, she said “the company has been good to me and my family.” Is it okay to work for a company that is negatively impacting others as long as it’s good for you (and your family)? I know that many people have to make tough choices in that regard. I feel fortunate that I’ve been able to have a career where I haven’t had to sacrifice part of my values as part of my choice of employer.

  17. Brian says:

    I think everyone should read the Ultimate Cheapskates Guide: road to true riches. Its message is simple, the chase for money isn’t what is important. It’s our time and our belief in how we spend our time. It’s better to spend it with time and friends and living life rather than in the endless pursuit of “more.” Wealth is an individual definition.

    Let’s live life now. Enough is enough.

  18. Mike says:

    Too many people clearly miss the concept that life is not about the destination but the journey. It is really no wonder so many people miss out and frequently find themselves disappointed about where they end up.

  19. Dale Fildes says:

    Just as in the Law of Attraction affects us individually, it will also affect the giant companies and banking institutions. If greed is what you desire, then losing it all will be at the end of that journey. This same concept can be applied to businesses that are contantly only focused on the bottom dollar (layoffs – poor raises) and not the quality of the employee, the result down the road is shabby work and production loss resulting in less profit. When I teach my marketing courses, the one point I like to make is for people to look at the quality of life and what you give it, not the making of the bottom dollar. To get more, we have to become more as a person.

  20. Karen says:

    What is worship without sacrifice?

  21. I read dozens of blog entries each day and this was one of the better posts I’ve seen in quite some time.

    You hit this nail RIGHT on the head. I too work in the real estate industry, so I’ve seen lots of the problems you talked about first hand. I’ve worked on putting together large deals, all the while wondering if the economics of the deal could support it. Apparently, the economics of many deals are not cutting it these days.

    The lesson to take from this is that the ends do NOT always justify the means.

    Mr Positioning
    Stanley F. Bronstein
    Attorney, CPA, Author and
    Professional Speaker

  22. Lana says:

    I do believe, that banks had started the process. Under the banner “Housing for all”, they lowered the standards of qualifying for the loan: things like not enough income, no down payment, no credit history were acceptable. (Even to rent an apartment you have to come up with 2 to 3 months rent). Too many people liked the lure of moving into a nice new house: no money down with a creative financing 20/80 (nothing to lose) and waiting for a couple of years before selling with a profit and before the teaser rate ends sounded good. When the time came, all these homeowners put up “For Sale” signs and flooded the RE market. The supply was greater, then the demand; the homes would not sell, sellers would file for the foreclosure and walk (easy: no down payment – nothing to lose. They would’ve paid rent somewhere else anyway, right?). Whose greed is a bigger factor here? The banks paved the way by offering the money. Media was happy to devour the affordable housing fairytale. The poor uneducated and unqualified masses accepted the offer.
    Nobody without an adequate income could buy a house 8 or more years ago. 10%(with PMI) to 25%(with no docs on income) down payment and 8% or more interest on the loan held the RE market in check. People accepted the responsibility and had something to loose. Only major event (the faulting economy, etc) triggered the foreclosure). This time the scenario is a bit different.
    Too bad, that many, who honestly came up with the down payment and qualified for the loan this time around, got entangled in this mess, too.

  23. Tyro says:

    “Limited liability” corporations seem like they’re expressly designed to promote actions that are immoral or reckless since individuals face no consequences for poor decisions and potentially reap large rewards if they luck out and things go their way. BSC is a good example, made all the worse by a massive government bailout. Some individuals made very poor decisions with their investing and lending, yet no one that made those decisions faces has to deal with the consequences of their actions.

    We as individuals may bow out of the system, but we’ll probably still be victims of the next Bear Sterns or other corporate shenanigan.

  24. CJ says:

    The underlying problem is that most people are de-facto slaves. The bases of life used to be independence of a family unit, or a village. In other words, you could take care of yourself and those around you, God willing and the creek doesn’t rise.

    Now, we are all interdependent. If something goes wrong anywhere, it affects you. You don’t grow your own food, etc. Nor does anyone around you. If milk goes up to $50 a gallon, do you have a cow of your own to get it from ? If gas goes to $75/gallon, do you own a refinery?

    The end result is a vast multitude of people who do not have control over their lives. This makes it relatively easy for the few in powerful positions to manipulate the entire multitude.

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