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Why 95% of Traders Fail

Doug Casey on the Morality of Money

Politics / Fiat Currency Dec 26, 2012 - 11:29 AM GMT

By: Casey_Research

Politics

Editor's note: Doug Casey is known around the world for many very good reasons. Among investors, he's well known for being a very successful speculator and author. More broadly, his unwavering support of human liberty and his criticism of institutions based on coercion as well as those who support them have made Doug a hero to many... and perhaps public enemy number one to some of those whom he criticizes.

Whether one agrees with him or not, Doug almost always has a singular take on issues and ideas, making his essays and talks highly stimulating. As we approach the end of the year – a time when people often reflect on their progress or lack thereof over the past year across all areas of life – this February 2011 interview of Doug Casey by Louis James on the morality of money seems especially trenchant. We hope it helps you reflect on your relationship with money and investing, and brings a renewed sense of clarity and purpose to your financial activities in 2013.


Doug Casey on the Morality of Money

Interviewed by Casey Research Chief Metals & Mining Investment Strategist Louis James
Louis: Doug, every time we have a conversation, I ask you about the investment implications of your ideas, and we consider ways to turn the trends you see into profits. The assumption is that's what people want to hear from you, since you're the guru of financial speculation.

But this, your known status as a wealthy man, the fact that you have no children, and other things may lead some people to form an incorrect conclusion about you – that "all you care about is money." So let's talk about money. Is it all you care about?

Doug: I think anyone who has read our conversation giving advice to people just starting out in life (or re-starting) knows that the answer is no. Or the conversation we had in which we discussed Scrooge McDuck, one of the great heroes of literature. However, I have to stop before we start and push back: If money were all I cared about, so what? Would that really make me a bad person?

L: I've grokked Ayn Rand's "money speech," so you know I won't say yes, but maybe you should expand on that for readers who haven't absorbed Rand's ideas…

Doug: I'm a huge fan of Rand. She was an original and a genius. But just because someone like her, or me, sees the high moral value of money, that doesn't mean it's all-important to us. In fact, I find money less and less important as time goes by, the older I get. Perhaps that's a function of Maslow's hierarchy: If you're hungry, food is all you really care about; if you're freezing, then it's warmth; and so forth. If you have enough money, these basics aren't likely to be problems.

My most enjoyable times have had absolutely nothing to do with money. Like a couple times in the past when I hopped freight trains with a friend, once to Portland and once to Sacramento. Each trip took three days and nights, each was full of adventure and weird experiences, and each cost about zero. It was liberating to be out of the money world for a few days. But it was an illusion. Somebody had to get the money to buy the food we ate at missions. Still, it's nice to live in a dream world for a while.

Sure, I'd like more money, if only for the same genetic reason a squirrel wants more nuts to store for the winter. The one common denominator of all living creatures is one word: Survive! And, as a medium of exchange and store of value, money represents survival… it's much more practical than nuts.

L: Some people might say that if money were your highest value, you might become a thief or murderer to get it.

Doug: Not likely. I have personal ethics, and there are things I won't do.

Besides, crime – real crime, taking from or harming others, not law-breaking, which is an entirely different thing – is for the lazy, short-sighted, and incompetent. In point of fact, I believe crime doesn't pay, notwithstanding the fact that Jon Corzine of MF Global is still at large. Criminals are self-destructive.

Anyway, what's the most someone could take, robbing their local bank? Perhaps $10,000? That's only enough to make a wager with Mitt Romney. But that leads me to think about the subject. In the old days, when Jesse James or other thieves robbed a bank, all the citizens would turn out to engage them in a gun battle in the streets. Why? Because it was actually their money being stored in the bank, not the bankers' money.

A robbed bank had immense personal consequences for everyone in town. Today, nobody gives a damn if a bank is robbed. They'll get their money back from a US government agency. The bank has become impersonal; most aren't locally owned. And your deposit has been packaged up into some unfathomable security nobody is responsible for.

The whole system has become corrupt. It degrades the very concept of money. This relates to why kids don't save coins in piggy banks anymore – it's because they're no longer coins with value; they're just tokens that are constantly depreciating and essentially worthless. All of US society is about as sound as the dollar now.

Actually, it can be argued that robbing a bank isn't nearly as serious a crime today as robbing a candy store of $5. Why? Nobody in particular loses in the robbery of today's socialized banks. But the candy merchant has to absorb the $5 loss personally. Anyway, if you want to rob a bank today, you don't use a gun. You become part of management and loot the shareholders through outrageous salaries, stock options, and bonuses, among other things. I truly dislike the empty suits that fill most boardrooms today.

But most people are mostly honest – it's the 80/20 rule again. So, no, I think this argument is a straw man. The best way to make money is to create value.

If I personally owned Apple as a private company, I'd be making more money – completely honestly – than many governments… and they are the biggest thieves in the world.

L: No argument.

Doug: Notice one more thing: making money honestly means creating something other people value, not necessarily what you value. The more money I want, the more I have to think about what other people want, and find better, faster, cheaper ways of delivering it to them. The reason someone is poor – and, yes, I know all the excuses for poverty – is that the poor do not produce more than they consume. Or if they do, they don't save the surplus.

L: The productive make things other people want: Adam Smith's invisible hand.

Doug: Exactly. Selfishness, in the form of the profit motive, guides people to serve the needs of others far more reliably, effectively, and efficiently than any amount of haranguing from priests, poets, or politicians. Those people tend to be profoundly anti-human, actually.

L: People say money makes the world go around, and they are right. Or as I tell my students, there are two basic ways to motivate and coordinate human behavior on a large scale: coercion and persuasion. Government is the human institution based on coercion. The market is the one based on persuasion. Individuals can sometimes persuade others to do things for love, charity, or other reasons, but to coordinate voluntary cooperation society-wide, you need the price system of a profit-driven market economy.

Doug: And that's why it doesn't matter how smart or well-intended politicians may be. Political solutions are always detrimental to society over the long run, because they are based on coercion. If governments lacked the power to compel obedience, they would cease to be governments. No matter how liberal, there's always a point at which it comes down to force – especially if anyone tries to opt out and live by their own rules.

Even if people try that in the most peaceful and harmonious way with regard to their neighbors, the state cannot allow separatists to secede. The moment the state grants that right, every different religious, political, social, or even artistic group might move to form its own enclave, and the state disintegrates. That's wonderful – for everybody but the parasites who rely on the state (which is why secession movements always become violent).

I'm actually mystified at why most people not only just tolerate the state but seem to love it. They're enthusiastic about it. Sometimes that makes me pessimistic about the future…

L: Reminds me of the conversation we had on Europe disintegrating. But let's stay on topic. So you're saying that money is a positive moral good in society because the pursuit of it motivates the creation of value. It's the bridge between selfishness and social good, and it's the basis for voluntary cooperation, rather than coerced interaction. Anything else?

Doug: Yes, but first, let me say one more thing about the issue of selfishness – the virtue of selfishness – and the vice of altruism. Ayn Rand might never forgive me for saying this, but if you take the two concepts – ethical self-interest and concern for others – to their logical conclusions, they are actually the same.

It's in your selfish best interest to provide the maximum amount of value to the maximum number of people – that's how Apple became the giant company it is. Conversely, it is not altruistic to help other people. I want all the people around me to be strong and successful. It makes life better and easier for me if they're all doing well. So it's selfish, not altruistic, when I help them.

To weaken others, to degrade them by making them dependent upon generosity, as we discussed in our conversation on charity, is not doing those people any good. If you really care about others, the best thing you can do for them is to push for totally freeing all markets. That makes it both necessary and rewarding for them to learn valuable skills and to become creators of value and not burdens on society. It's a win-win all around.

L: That'll bend some people's minds… So, what was the other thing?

Doug: Well, referring again to our conversation on charity, the accumulation of wealth is in and of itself an important social as well as a personal good.

L: Remind us.

Doug: The good to individuals of accumulating wealth is obvious, but the social good often goes unrecognized. Put simply, progress requires capital. Major new undertakings, from hydropower dams to spaceships, to new medical devices and treatments, require huge amounts of capital. If you're not willing to extract that capital from the population via the coercion of taxes, i.e., steal it, you need wealth to accumulate in private hands to pay for these things. In other words, if the world is going to improve, we need huge pools of capital, intelligently invested. We need as many "obscenely" rich people as possible.

L: Right then… so, money is all good – nothing bad about it at all?

Doug: Unfortunately, many of the rich people in the world today didn't get their money by real production. They got it by using political connections and slopping at the trough of the state. That's bad. When I look at how some people have gotten their money – Clinton, Pelosi, and all the politically connected bankers and brokers, just for a start – I can understand why the poor want to eat the rich.

But money itself isn't the problem. Money is just a store of value and a means of exchange. What is bad about that? Gold, as we've discussed many times, happens to be the best form of money the market has ever produced: It's convenient, consistent, durable, divisible, has intrinsic value (it's the second-most reflective and conductive metal, the most nonreactive, the most ductile, and the most malleable of all metals), and can't be created out of thin air.

Those are gold's attributes. People attribute all sorts of other silly things to gold, and poetic critics talk about the evils of the lust for gold. But it's not the gold itself that's evil – it's the psychological aberrations and weaknesses of unethical people that are the problem. The critics are fixating on what is merely a tool, rather than the ethical merits or failures of the people who use the tool and are responsible for the consequences of their actions.

L: Sort of like the people who repeat foolish slogans like "guns kill" – as though guns sprout little feet when no one is looking and run around shooting people all by themselves.

Doug: Exactly. They're the same personality type – busybodies who want to enforce their opinions on everyone else. They're dangerous and despicable. Yet they somehow posture as if they had the high moral ground.

L: OK, so even if you cared only for money, that could be seen as a good thing. But you do care for more – like what?

Doug: Well, money is a tool – the means to achieve various goals. For me, those goals include fine art, wine, cars, homes, horses, cigars, and many other physical things. But it also gives me the ability to do things I enjoy or value – like spend time with friends, go to the gym, lie in the sun, read books, and do pretty much what I want when I want. Let's just call it as philosophers do: "the good life." It's why my partners and I built La Estancia de Cafayate [in Argentina]. We have regular events down there I welcome readers to attend.

But I don't take money too seriously. It's just something you have. It's much less important than what you do, and trivial in comparison to what you are. I could be happy being a hobo. As I said in the conversation on fresh starts, there have been times when I felt my life was just as good and I was just as happy without much money at all. That said, you can't be too rich or too thin.

L: Very good. Investment implications?

Doug: This may all seem rather philosophical, but it's actually extremely important to investors. What is the purpose of investing or speculating? To make money. How can anyone hope to do that well if they feel that there is something immoral or distasteful about making money?

Someone who pinches his or her nose and tries anyway because making money is a necessary evil will never do as well as those who throw themselves into the fray with gusto and delight in doing something valuable – and doing it well.

L: The law of attraction.

Doug: Yes, but I don't view the law of attraction as a metaphysical force – rather as a psychological reality. If you have a negative attitude about something, you're unlikely to attract it… even if you try to talk yourself into thinking the opposite.

L: OK, but that's not a stock pick…

Doug: Sure. We're talking basics here. No stock picks today, just a Public Service Announcement: If you think money is evil, don't bother trying to accumulate wealth. On the other hand, if you want to become wealthy, you'd better think long and hard about your attitudes about money, work through the thoughts above and those you can find in the rest of our conversations… Cultivate a positive attitude about money, which is right up there with language as one of the most valuable tools man has ever invented. Think about it, and give yourself permission to become rich. It's a good thing.

L: Very well. Thanks for what I hope will prove to be a very thought-provoking conversation!

Doug: My pleasure. Talk to you next week.

A successful investing strategy requires much more than choosing the right stocks: it requires an understanding of cultural, political, and economic trends as well as being able to analyze a sector and the companies in it. Doug Casey's decades of successful speculation show that he's "the real deal" – and now you can have deeper access into his mind, in one convenient location. Doug has recently written a book, Totally Incorrect, which offers his thoughts and investment implications on topics as wide-ranging as NASA, paying taxes, ethics, why college education is a waste of resources, the immorality of voting, and much more. It's available as an e-book as well as in physical format – get all the details here.

© 2012 Copyright Casey Research - All Rights Reserved

Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.

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