THE HEIGHT OF DISINGENUOUSNESS : INVESTMENT BANKS "MAKING A DIFFERENCE"

OESTERHOUDT STRIKES

Last week, I took a walk in Brooklyn. As I made my way up Tillary Street past Flatbush Avenue, I noticed an incredible commercial message from Charles Schwab adorning a bus stop: "We want to make a difference, not just a buck. Let's make a difference together."

I beg your pardon? Do investment houses really care about making anything more than a buck? Why do people invest money in the first place? To turn one buck into two or more bucks. It's all about making bucks. If investing makes any "difference," it's a differential between the amount invested and the amount returned. And everyone wants that differential to be positive.

But let's leave investors aside for a moment. Let's focus on the institutional guys. You know, the investment bankers who craft bewildering "portfolios" designed to churn fees and hopefully yield a nifty profit for the client. Now, an investment banker exists to do two things: (1) To maximize the monetary return on a client's investment; and (2) To maximize his own fees by selecting appropriate transactions. To be blunt, it is all about money. In fact, investment bankers are more than mere employees; they are fiduciaries. They must subordinate their own interests to their clients' interests. They can even be sued for failing to make enough money, because that shows "they did not sufficiently have their clients interests at heart."

In that light, it is preposterous for Charles Schwab to suggest that investment bankers care about anything more than "making a buck." If they cared about anything else--like "making a difference"--they would lose their jobs, clients and everything else they value.

And what does "making a difference" really mean? Have investment houses suddenly lost their collective minds? Do they want to open soup kitchens or something? Do they want to build houses for the homeless? How about pay for health care for indigents? Is that the kind of "social difference" they want to make? The phrase "making a difference" implies broader service to the public, or even ethical purity. It rings with selfless nobility. Yet such things are completely antithetical to an investment house's primary mission: To make profits for themselves and their private clients. There is nothing "public" or "noble" about that enterprise.

Recent stock market scandals only weaken Charles Schwab's pitiful attempt to appear altruistic. Did Lehman Bros. care about "making a difference" when they lured investors into placing money on a housing market they bet would fail? The bottom line is that people expect investment bankers to engage in dirty dealing. It is par for the course. Worse, most investors would prefer their bankers to engage in the most barely legal conduct possible so long as that conduct yields a maximal return. That is what it means to "make a buck," not "a difference."

Commerce is about making bucks, not a difference. That is just the way it works. And it is the height of disingenuousness for anyone to suggest otherwise, let alone massive investment banks that personify the commercial spirit. If investment banks choose to "make a difference," chances are they do so in order to gain tax advantages, not to soothe their conscience.

Put thematically, the clash between "making a buck" and "making a difference" is a clash between commerce and ethics. It is also a clash between ends and means. Commerce is about ends; ethics is about means. A commercial man only cares about the bottom line, no matter how he gets there (provided he does not risk criminal sanction). An ethical man cares about the way he achieves his goal. When a person commits to making bucks, he has a distinctly result-oriented motive. But when a person wishes to make a difference in the ethical sense, he is as much concerned about the way he brings about positive change as he is concerned about the change itself.

In commerce, means are secondary. Investment houses like Charles Schwab know that. If it suddenly adopted "making a difference" as its primary business model, its clients would leave in droves. And the company's shareholders would angrily vote off the "insane" directors who approved such an idiotic way to do business. In their place, the shareholders would quickly appoint directors with a more sensible business model, namely: "Making a buck."

And the new directors would immediately yank those ridiculous posters from the bus stops.

Hey, at least they would be honest.