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I spoke this afternoon on the BBC NewsHour show, along with the author of a think tank publication advocating “Virtuous Banking.” The whitepaper can be downloaded from Res Publica’s site here.
The premise of the paper, which I largely disagree with, is that we can put “virtue” at the center of the finance and banking industry, rather than, presumably, private profit. Not that its a bad sentiment, mind you, only that it seems outside of the realm of possibility.
I don’t mean to imply that people I worked with in finance are not themselves privately virtuous – many of them were, and are. I mean that institutionally, it just doesn’t really work that way. You can make ‘the public good’ or ‘diversity’ or ‘access’ or ‘helping society’ the main goal, but that’s fundamentally changing the game.
The analogy I wanted to use on the program (but didn’t) is that if you replace ‘profit’ with something more virtuous it would be like telling a professional soccer team that the plan is no longer to score the most goals, but rather to ensure the most passes between teammates. Or touches of the ball. Or to get everyone on the bench a few minutes of playing time. Or to encouage audience participation. These are great intentions, and they work well in a scrimmage for my daughter’s soccer league, but it doesn’t necessarily lead to victory in a real match. If your Premier League team decided to concentrate on maximizing touches rather than scoring goals, they’d get relegated to a lower league. Quickly.
Furthermore, individual finance professionals in for-profit banking institutions who replace the profit motive with a kindler, gentler motive probably don’t get promoted. They probably don’t move into management. They probably end up leaving the business. And starting a finance blog, or something.
The audio streams if you click the little button at the top of this post. My part starts at minute 34:00.
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