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Does Wall Street Add Value?

Posted by Larry Doyle on June 21, 2010 8:52 AM |

How does one make progress while navigating the economic landscape?

In my opinion, the key that unlocks the door to real, long term progress is the ability of an individual or an enterprise to continually and increasingly “add value.” How does one do that? Initially, one needs to develop skills and relationships. From there, one needs to hone those skills and expand those relationships. Ultimately, one can leverage and ‘sell’ this ability to ‘add value’ to an ever wider audience. In the process, the individual, firm, enterprise, or industry that can drive this process should and typically does flourish.

During the course of my career on Wall Street, I never wanted to plateau in terms of adding value. I was convinced that I needed to continually grow my skills and relationships. I encourage those whom I mentor to take this approach to their careers.

Against this backdrop, the question begs “does Wall Street as an industry truly add value?”

Does Wall Street utilize information and relationships to truly add economic value to our nation, or has Wall Street abused its bully pulpit in terms of processing information and managing relationships to detract value?

Volumes could be written on this question and topic. The massive number of quality individuals in the financial industry should not be indicted by the transgressions of those who abused information and relationships to create structured transactions which led to our economic crisis. All this said, the question remains whether those destructive elements overwhelm the positive individuals and forces at work on Wall Street.

So, I repeat my question: “Does Wall Street add value?”

Let’s check in with an individual who towers over Wall Street. This individual commands unquestioned respect and embodies true integrity. I speak of none other than John Bogle:

Founder of The Vanguard Group, Inc., and President of Vanguard’s Bogle Financial Markets Research Center.

In 2004, TIME magazine named Mr. Bogle as one of the world’s 100 most powerful and influential people and Institutional Investor presented him with its Lifetime Achievement Award. In 1999, FORTUNE designated him as one of the investment industry’s four “Giants of the 20th Century.” In the same year, he received the Woodrow Wilson Award from Princeton University for “distinguished achievement in the nation’s service.” In 1997, he was named one of the “Financial Leaders of the 20th Century” in Leadership in Financial Services (Macmillan Press Ltd., 1997).

In 1998, Mr. Bogle was presented the Award for Professional Excellence from the Association for Investment Management and Research, and in 1999 he was inducted into the Hall of Fame of the Fixed Income Analysts Society, Inc. In 1993, he received the Philadelphia Investment Achievement Award from the Financial Analysts of Philadelphia.

Little doubt Mr. Bogle is more than eminently qualified to opine on the question of whether Wall Street adds value. What does he have to say on this topic? In the midst of a Bloomberg story, Failed AAA Rated Rembrandt on Wall Street Spurs Opacity Outcry, we learn:

John C. Bogle the 81-year-old founder of the Vanguard Group of mutual funds who has argued for tougher financial oversight, said investors have been fooled into believing they benefit from Wall Street innovations rather than bear the cost.

“The financial system subtracts value from society,” said Bogle. “Wall Street represents a cost that takes away from the proven long-term returns available in the market. That’s the reality.”

That statement is a strong indictment of Wall Street by one of the industry’s “giants,” but it is reality. It is also a whole lot of sense on cents.


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  • coe

    I think the critique offered by Bogle is a bit harsh..certainly, most would agree that financial product innovation is one by-product of the engineers on Wall St – and not all of these products are intrinsically toxic and/or lethal to my opinion, there is and should be a basic difference between the criteria applied to institutional vs retail investors; there should be tighter regulation of the origination and distribution process governing each in terms of requirements, suitability et al..and when these safeguards are violated, there should be swift and clear civil and criminal consequences..

    I do agree with the premise, however, that in a zero-sum game, someone wins and someone loses..and, unfortunately, in recent history, it has been that exact scenario that has played out – so my opinion is less that the Wall Street crowd is a cost, but rather that they have transfer priced the gain from investors to their own account..that’s what greed, poor management, inadequate regulation, misaligned risk/reward incentives, and sadly, a systemic rejection of our country’s moral and ethical compass all converge to deliver..

    Where is the shock, where is the outrage? Why has this behavior come to be expected in all walks of society – especially so in the cult of celebrity – athletes cheat while on steroids, politicians line their pockets with special interest donations, movie and rock stars flaunt their chemical dependencies and outrageous behavior as part of their image advertising, and Wall St exults in excesses..Does Wall St add value – yes it has, and yes it should – but that value should be paid for appropriately, and not vacuumed out egregiously, don’t you think?

  • Very interesting site. ‘ll Come again!

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