Trader vs. Investor
On Bloomberg news recently, a professor of finance from NYU was pointing out the difference between a trader and investor. A trader is a person who looks solely at the potential for the price of a stock to move up or down, and makes a profit based on how well he can predict (or manipulate) these movements in the market. His perspective is short term, focused on the next quarterly report. An investor, by contrast, looks at the fundamentals of a company – its management, its net assets, its cash flow, its competition, and its long-term prospects.
A company’s valuation in the stock market, however, is determined by analysts with a trader mentality. They decide how they think a stock should be performing in the next quarter, and then mark it down if it doesn’t meet their expectations, even though the company may have delivered perfectly respectable results. The valuation of a company is based on the amount of profit it can generate for investors, and maximizing returns for shareholders has become accepted as the primary purpose of a company. Valuation has been completely divorced from values like serving the community, caring for employees, minimizing the carbon footprint, or even investing in development for the long term. Short-term profit drives everything, especially CEO salaries. (It was announced during the same broadcast that the compensation of the CEO of Citibank was $16.5 million in 2015!)
This aggressive, opportunistic thinking was behind the stock market crash of 2008, and it struck me that this same mind-set is playing out in the political arena, and forcing the candidates vying for the presidency to adopt a short-term, trader mentality. Values and integrity seem to be readily sacrificed on the altar of poll numbers, and “rallying the base” is often done by manipulation ranging from cynical to hypocritical, appealing to – or arousing – fear and prejudice. I believe that all sides are filled with good people responding with their hearts and truly wanting what’s best for their families and their country, but it is easy to give up critical thinking when swept up in the rhetoric of faith and nationalism.
Yet those who brandish their religion like a sword seem to ignore the moral values set out in the Bible, like feeding the hungry, clothing the poor, caring for the sick, welcoming strangers, and loving one’s neighbor. Respect for life seems curiously selective, and readily overridden by fear-driven calls for carpet-bombing and torture. Disrespect for others with different views is actively encouraged, heedless of the damage it may be causing to the social fabric of our country. This harks back to the trader mentality, where profit and power are seen as the only worthwhile objectives, but it can come with a heavy cost.
“For what shall it profit a man, if he shall gain the whole world and lose his own soul?” (Mark 8: 36)
If you think like an investor, however, you want to build real wealth for the long term. People like Anna Borgeryd, who is the fifth generation CEO of her family’s business, is a passionate example of and spokesperson for sustainability, corporate responsibility and good governance. She recently led a group of business people in a Call-to-Action to the Swedish government and to the world! [Click here to read.] Just think what the world could look like if we all were to invest more than we consume, act more than react, build more than we destroy, unite more than we divide, appreciate more than we criticize, and love more than we hate. The current political discourse in America illustrates that it has never been more urgent to focus on the values that bind us, rather than the issues that divide us.
We would do well to contemplate this warning in the Great Law of the Iroquois that states, “Look and listen for the welfare of the whole people and have always in view not only the present but also the coming generations, even those whose faces are yet beneath the surface of the ground – the unborn of the future Nation.”