Greed isn’t always Good

 One of the greatest lines from a movie comes from Michael Douglas’s most “infamous” character, Gordon Gekko in the movie “Wall Street.” Mr. Gecko became the poster boy for the 1980s “money” culture when he announced “Greed is Good.”

To be fair, there is a logic in what Mr. Gekko says. People who want to get things generally go out and work for them. The more people want things and chase for them, the more economic activity you get, which in turn drives that most precious of things – economic growth.

However, Mr. Gekko has been proven wrong on quite a number of occasions. The “greed” that he praised in the 1980s has been the foundation of some of the most prominent screw ups, such as the recent collapse of FTX. Greed, it turns out, has the power to dull the ability of otherwise intelligent and logical people into making rational decisions.

The case of FTX is the prime example of how greed isn’t good. One of the most prominent points about this case is the fact that a group of highly intelligent and experienced professionals like the folks at Temasek Holdings getting screwed by an obvious con job. As a Singaporean, the only small comfort available to me is the fact that Temasek was in distinguished company. Blackrock, the world’s most famous investment fund was also involved.

What makes the “con” at FTX so interesting is the fact that all the warning signs were there. The company, one of my current employer’s former directors said on a Linkedin post, had no controls”

 

The following Youtube video elaborates on the “mess” that was FTX’s financial controls and it explains how “investors” was sold on something that looked very glitzy but was in fact a complete mess:

https://www.youtube.com/watch?v=yJn6IiYid6A

 

 If “pension” money of the elderly wasn’t at stake, this would be funny. A young kid managed to take a lot of money from institutions with not just money but with centuries worth of knowledge about investing.

Let’s take the most obvious. There was no one doing accounts. No CFO or Financial Controller. Sure, its understandable if a mom-and-pop shop don’t engage doing a professional accountant. However, this wasn’t a mom-and-pop shop but a multibillion-dollar organisation. Surely, you would expect them to have someone in management who was responsible for the accounts.

The warning signs were there and you don’t actually need a degree to know that they were warning signs. Let’s face it, the two most basic functions of any business are the accounts (someone has to got to know what’s going in and going out) and the human resources (you need people to do things). Yet this multibillion enterprise didn’t have either department. You don’t need a spread sheet to know that something is wrong.

Yet, institutions like Blackrock and Temasek went ahead and plonked their money with something that should have screamed “scam.” It becomes even more unforgivable in the case of Temasek Holdings in as much as the Monetary Authority of Singapore (MAS) did not give FXT a license to operate.

This is currently an ongoing case and we are discovering more. What has already been said is that this is probably one of the worst frauds ever, as the following report says:

https://www.afr.com/technology/a-complete-failure-of-corporate-controls-ftx-s-new-boss-20221118-p5bzb4?utm_medium=social&utm_campaign=nc&utm_source=LinkedIn#Echobox=1668748567

There was an obvious lack on controls in FXT’s side. However, the question should be on the lack of controls in Blackrock and Temasek. Didn’t one of the bright young things in these organisations spot that there was something screamingly wrong? Or was it a case of management choosing to ignore warnings from underlings because the figures being presented looked wonderful?

Greed is not good. It has been the cause of lost fortunes. Greed has the power to make successful and powerful people disregard the intelligence they must have made to become successful and powerful. Greed then makes the gullible even more so. Lives have been ruined by this very worst of emotions.

We should always remember that while Mr. Gekko was a great character in a movie and embodied many of the things we’ve been told to aspire to, he ended up in jail for worshiping greed.