Luxe, Calme et Volupté

Henri Matisse was born in 1869, the year the Cutty Sark was launched. The year he died, 1954, the first hydrogen bomb exploded at Bikini Atoll. Not only did he live on, literally, from one world into another; he lived through some of the most traumatic political events in recorded history, the worst wars, the greatest slaughters, the most demented rivalries of ideology, without, it seems, turning a hair. Matisse never made a didactic painting or signed a manifesto, and there is scarcely one reference to a political event—let alone an expression of political opinion—to be found anywhere in his writings. Perhaps Matisse did suffer from fear and loathing like the rest of us, but there is no trace of them in his work. His studio was a world within the world: a place of equilibrium that, for sixty continuous years, produced images of comfort, refuge, and balanced satisfaction. Nowhere in Matisse's work does one feel a trace of the alienation and conflict which modernism, the mirror of our century, has so often reflected. His paintings are the equivalent to that ideal place, scaled away from the assaults and erosions of history, that Baudelaire imagined in his poem L'Invitation au Voyage:

Furniture gleaming with the sheen of years would grace our bedroom; the rarest flowers, mingling their odours with vague whiffs of amber, the painted ceilings, the fathomless mirrors, the splendour of the East... all of that would speak, in secret, to our souls, in its gentle language. There, everything is order and beauty, luxury, calm and pleasure.

— Robert Hughes, The Shock of the New

Matisse was an artist Epicurus would have admired. Matisse is an artist we all should admire.

For while there is merit in engaging with the troubles and passions of one's times, that is not the only path of merit, whether in art, intellect, or emotion. There is much to be said for the calm, measured investigation of what is immutable and unvarying in the nature of things, if only because these are father and mother, in part, to our ephemera. It is not too much to say there may be lessons to be learned in how to conduct oneself from the way sunlight paints shadows on a tablecloth.

* * *

Besides, Matisse could paint circles around Picasso six ways from Sunday.


© 2011 The Epicurean Dealmaker. All rights reserved.

Weekend Interlude

Body of a woman, white hills, white thighs,
you look like a world, lying in surrender.
My rough peasant's body digs into you
and makes the son leap from the depth of the earth.

I was alone like a tunnel. The birds fled from me,
and night swamped me with its crushing invasion.
To survive myself I forged you like a weapon,
like an arrow in my bow, a stone in my sling.

But the hour of vengeance falls, and I love you.
Body of skin, of moss, of eager and firm milk.
Oh the goblets of the breast! Oh the eyes of absence!
Oh the roses of the pubis! Oh your voice, slow and sad!

Body of my woman, I will persist in your grace.
My thirst, my boundless desire, my shifting road!
Dark river-beds where the eternal thirst flows
and weariness follows, and the infinite ache.

— Pablo Neruda, "Body of a Woman"

For Pablo, il miglior fabbro.


© 2011 The Epicurean Dealmaker. All rights reserved.

Run and Find Out

"There are more things to find out about in this house," he said to himself, "than all my family could find out in all their lives. I shall certainly stay and find out."

— Rudyard Kipling, Rikki-Tikki-Tavi

Aline van Duyn posted an interesting column in the FT Weekend about financial regulation. In it, she cites Alan Greenspan, who issued what she calls a "scathing critique" of the Dodd-Frank financial reforms in an earlier FT editorial:

"The financial system on which Dodd-Frank is being imposed is far more complex than the lawmakers, and even most regulators, apparently contemplate," wrote Mr Greenspan.

"We will almost certainly end up with a number of regulatory inconsistencies whose consequences cannot be readily anticipated...  These 'tips of the iceberg' suggest a broader concern about the act: that it fails to capture the degree of global interconnectedness of recent decades which has not been substantially altered by the crisis of 2008."

These are valid and worrisome criticisms. Unintended consequences are sure to be rife from such poorly-thought-out and hastily written legislation. Beholden to justifiable public outrage and the resulting political imperative to "just do something," Congress has defaulted to its all-too-common practice of Ready, Fire, Aim.

And yet, Mr. Greenspan seems to intend much more than a simple cataloging of potential weaknesses with Dodd-Frank:

The problem is that regulators, and for that matter everyone else, can never get more than a glimpse at the internal workings of the simplest of modern financial systems. Today’s competitive markets, whether we seek to recognise it or not, are driven by an international version of Adam Smith’s "invisible hand" that is unredeemably [sic] opaque. With notably rare exceptions (2008, for example), the global "invisible hand" has created relatively stable exchange rates, interest rates, prices, and wage rates.

In the most regulated financial markets, the overwhelming set of interactions is never visible. This is the reason that interpretation of contemporaneous financial market behaviour is subject to so wide a variety of "explanations", especially in contrast to the physical sciences where cause and effect is much more soundly grounded.

The force of his remarks—and the implication of the phrase "unredeemably opaque"—is clear: we will never understand how markets work, and therefore we should give up trying and go back to the unregulated state of nature Mr. Greenspan and his fellow Randian and quasi-Randian travellers cultivated so carefully in preceding decades.¹ But this is nonsense.

* * *

Few people of sense would suggest that we will ever understand the inner workings of the global financial markets with any level of completeness or rigor. Certainly not to the extent we could predict their behavior under all circumstances, like we can in certain of the physical sciences. (For one thing, the components, interrelationships, and forces in financial markets are always changing, a substantial additional impediment to accurate prediction which most complex physical systems do not suffer from.) But that concession is miles removed from the belief which Mr. Greenspan seems to advocate, which is that we shouldn't even bother to try.

Scientists do not flatter themselves that they will ever be able to comprehensively model fluid flows in a turbulent stream, yet hydrodynamics remains an active and vibrant field of ongoing study. More to the point, geologists, meteorologists, and ocean scientists do not pretend they will ever be able to predict the sources and evolution of earthquakes, hurricanes, or tsunamis to the level of Newtonian mechanics, but that does not prevent them from trying to understand these phenomena better. Putting aside the claims of human curiosity, we try to understand such phenomena because they can have hugely destructive effects on our societies and persons. The analogy with a global financial crisis is exact.

* * *

So it pleases me to learn from Ms van Duyn that some people are trying to remedy our ignorance:

John Liechty, a professor of marketing and statistics at Pennsylvania State University, helped create the Office of Financial Research, a new agency created by the Dodd-Frank Act that is charged with identifying systemic risk in the financial sector. He first got the idea when he met regulators at a workshop after the crisis.

"It really was surprising to me," he said. "Regulators had a complete lack of real information about how the markets work, the size of positions and exposures among institutions."

He believes there is a "national need" to gather the data and do the research to understand markets better, just as was done to better model hurricanes and their impact. It took decades – and was a serious project.

This is exactly what we need: a well-funded, serious, permanent agency devoted to understanding as much as we can about the elements, interconnections, and vulnerabilities of financial markets and their participants. In addition, I would suggest that the constant mutability of this system argues strenuously for the implementation of a plan like that suggested some time ago by Economics of Contempt. Stationing a sufficient number of experienced, knowledgeable ex-market participants in regulatory oversight positions at the largest and most systemically important financial institutions would not only provide necessary close supervision (and perhaps help nip developing crises in the bud), but would also support the development of true boots-on-the-ground insight into the day-to-day workings of financial entities and markets. This type of knowledge would be invaluable to helping regulators develop a robust, dynamic understanding of global financial networks and players.

* * *

So let us have no more willful ignorance, no more worship at the self-interested shrine of laissez-faire Know-Nothingism. The acknowledged difficulty of getting to grips with the global financial system is no argument against trying to do so. Rather, it is an argument for the urgency of beginning forthwith.

The Pecora Commission investigation into the sources of the 1929 stock market crash began two and one-half years after the event, lasted over two years, and helped shape the regulatory environment for decades. In contrast, the underfunded, marginalized Financial Crisis Inquiry Commission lasted one year, at a time when the size, complexity, and interconnectedness of the global financial system has grown exponentially from 1934. In terms of academic interest, regulatory concern, and social impact, understanding the sources of the recent financial crisis must rank as one of the most important socioeconomic research projects of our time. From my perspective, it's time to stop dicking around and start trying to understand it.

In early human history, the shaman or medicine man was tasked with intermediating the needs and objectives of his tribe with the mysterious forces of nature. He developed a primitive understanding of cause and effect and was effective to the extent his beliefs and actions corresponded to underlying reality. Eventually, he became a sort of scientist, albeit one intellectually hobbled by superstition. As general knowledge advanced, some shamans must have realized that their position and authority in the tribe depended less on their true understanding of reality than on their ability to keep the mysteries of life secret from their charges. This, I am sure I need not tell you, was not in the best interest of those tribes.

So let's bow and scrape obsequiously to Alan Greenspan as he swans away in his buffalo robe and bear claw necklace. After he's gone, we can turn back to our microscopes and chemistry sets and begin to try to understand things for a change.

Here's your headdress, Alan. What's your hurry?

* * *

UPDATE: Writing in the FT today, Congressman Barney Frank more or less agrees with me:

When technology can track billions of transactions in real time, a failure to pierce the opaqueness of the system is mostly a question of will, not capacity.

I suppose Barney has been disinvited from Alan Greenspan's Christmas pow-wow, too.


¹ I will not sport with your intelligence in the body of my remarks by drawing attention to the groaner for which Mr. Greenspan has been widely and humorously pilloried—"notably rare exceptions"—other than to note the irredeemable [sic] cluelessness and tone-deafness of its author reminds me of the no-doubt apocryphal remarks of the Ford Theatre stage manager after the assassination of President Lincoln: "Other than that, Mrs. Lincoln, how did you enjoy the play?"

© 2011 The Epicurean Dealmaker. All rights reserved.

This Is Not a Blog Post

Thomas Jefferson: "Hi, Ben!"
Benjamin Franklin: "Tom."
Jefferson: "Ya got a minute?"
Franklin: "Well, I tell you the truth, heh... we were just going out of town for the weekend. Heh-heh."
Jefferson: "But it's only Wednesday."
Franklin: "Yeah... Well, you know: 'A penny saved is a penny earned.'"
Jefferson: "What has that got to do with anything, Franklin?"
Franklin: "I dunno. It's the first thing that came into my head. Heh. I was just making conversation. 'An idle brain is the Devil's playground,' you know."
Jefferson: "Say, you're pretty good at that, aren't you?"
Franklin: "Yeah, they're some new wise sayings I just made up."
Jefferson: "Wise sayings?"
Franklin: "Yeah, I call 'em 'Wise Sayings.'"

— Stan Freberg, Stan Freberg Presents The United States of America: Volume 1, The Early Years

I hereby proffer my humblest apologies to those Loyal Readers among you who forlornly frequent these pages in search of trenchant commentary and analysis on all things financial. You might have noticed that such has been rather thin on the ground for some time now, replaced instead by desultory pontificating on divers topics social, philosophical, and non-numerate. Some of you may even view this to be a case of false advertising, given the banner emblazoned at the top of this site.

There are a number of reasons for my reticence. The primary and best one is that I am actually busy doing my day job of raising funds and merging companies. This gainful employ not only cuts into the time I would otherwise selflessly employ to educate and entertain the masses huddling on the other side of this computer screen but also prohibits it. For, if you could find anyone at the SEC not otherwise engaged in surfing porn sites or persecuting $25,000-a-year brokers in Wichita, Kansas, they would no doubt tell you that anything concrete I might say here about my current transactions would be looked upon with a very unfriendly eye. In a word, spilling the beans about ongoing deals is considered very naughty. (Not to mention being harmful to the interests of my clients and the contractual promises of confidentiality I have made to them.)¹ Sadly, from your perspective, those confidential beans are about the only financial legumes I have to spill at present.

Entirely aside from these impediments, I make it a practice to shy away from too much specificity in my scribblings here, for reasons both competitive and personal. My ilk are a secretive bunch, since we have learned from long experience that the slightest clue, in combination with a host of other apparently trivial data, can enable a bitter competitor to sniff out the client, deal, or opportunity we are working on at the moment and therefore jeopardize it. For such reasons our personal assistants never volunteer our whereabouts to incoming callers, but rather say "Mr. Dealmaker is traveling" or "out of the office." Even the name of a city can—under the right combination of circumstances—reveal critical intelligence about a pending transaction or opportunity I would not want my competitors to discover.

By the same token, illustrating my remarks with too many details or personal anecdotes is guaranteed, over time, to allow the curious and ill-intentioned to suss out my identity. This is an outcome I resolutely oppose, for reasons too obvious to mention to you delightful and intelligent people. Furthermore, if secrecy begets tyranny, its opposite must surely engender banality. This is a state of affairs too horrible for Your Humble Diarist to even contemplate.

* * *

In summary: I have no time to write thorough, well-thought-out dissertations on general finance topics or issues; I have no license, right, or permission to write about specific transactions or clients I am involved with; and I have no interest in airing my personal laundry before a hostile and indifferent world. It's a bit of a pickle, since this means I must violate the primary precepts of interesting writing: write about what you know and use specifics.

Instead, I scratch my intermittent writing itch here by excerpting interesting bits from the great works of others and nattering on about topics over which I hold no special command, intelligence, or authority. I refuse to be too apologetic, however. After all, blogging is and always has been at least partially a exercise in vanity and self-indulgence. Anyone who tells you otherwise is self-delusional.

Upon reflection, the cynic in me does find it ironic that it's easier to write about wider ideas and social issues than the daily substance of my own life. One of these days I just might have to write a blog post about that.


¹ Naturally, I listed the regulatory impediments to disclosure before the legal, contractual, and (implied) moral and ethical ones, since I do not want to disabuse anyone reading these words of their prejudice that all investment bankers routinely flout and ignore all but the first of these. Heaven knows I do not want to tear anyone away from their fondly held preconceived notions.

© 2011 The Epicurean Dealmaker. All rights reserved.

Stranger in a Strange Land

There was so much to grok, so little to grok from.

— Robert A. Heinlein, Stranger in a Strange Land

Simon Kuper has a lovely little piece in the weekend Financial Times today, talking about his experiences as an expatriate living in Paris these past nine years. He captures beautifully the freedom that someone living in a culture not natively their own naturally enjoys:

As an expat, you are freed from two blights that afflict people who live in their own countries: the “status dance” and the “media bubble”.

As Mr. Kuper points out, the media bubble works largely to report on and support what he calls the status dance—where everyone stands in relation to everyone else in a particular, bounded society—so they are different aspects of the same thing.

Freedom from a society's status matrix can be immensely liberating:

I can still see if someone is good-looking or nice or funny, but I don’t know what it means if they live in a certain neighbourhood or went to a certain school or know someone who is purportedly famous in France. Here, I can only dimly infer somebody’s status from their self-importance, and from the reactions of other people. I see who people look at during a conversation, whose jokes they laugh at, and I presume that’s where status lies. But I don’t care.

Nobody in Paris knows if I have status either (though they can probably guess). I think that’s what the American writer James Baldwin meant when he said he was always grateful to Paris for the utter indifference with which it treated him.

In addition, I can testify from the time I spent in London as an expat that standing outside the defined social structure makes one that much more approachable by those within it. The Brits have a well-earned reputation for being highly sensitive to class and status, and they are stereotyped as extremely reluctant to socialize outside the tight circle of friends and acquaintances they grew up with. Yet my family found most locals friendly and approachable, and we developed lasting friendships with a number of British families. Of course, it's easy to overstate this: the majority of friends we made during our stay were non-American expats, rather than Brits or other American families. It's just easier for everyone involved to establish new relationships when there are no status preconceptions or consequences on either side.

* * *

Of course, no state of social utopia can last forever. Human beings are social animals. All of us want, sooner or later, to be able to understand both our own place in society and those of the people around us. I had far more social mobility and freedom as an expat in London that I did or do in New York City, but had I stayed longer it would have dissipated. Novelty wears off. Most people prefer, over time, to discard the frisson of intercourse with the unranked and free-floating and replace it with a settled view of just exactly where everyone belongs in the social structure. I am somewhat amazed Mr. Kuper seems to have avoided this for nine years, although he may simply have become marginalized in Parisian society in ways even he is not aware of.

Newly formed social groupings follow the same dynamic. The beginning is all freedom and lack of restraint, high talking to low, strange talking to stranger. It is very exciting and liberating at first, if a bit unsettling. But sooner or later members sort themselves out, and social interactions become routinized according to proclivity, preference, and rank. Status emerges as a—if not the—dominant organizing principle of any social group, and people behave accordingly. You can see it happen to incoming freshman classes at university, new recruits at large corporations, and military inductees. You can even see such principles driving the evolution of online virtual communities like Facebook and Twitter.

It's all a bit sad, really, at least for us novelty junkies. But the social niceties must be observed.

Or so Mother told me.

© 2011 The Epicurean Dealmaker. All rights reserved.