YourMorals Blog

I’ve been meaning to write this post for awhile, not just in response to the recent tragedy in Connecticut, but anytime I read an article about homelessness or people who are mentally disturbed.  Many people wonder what we can do to address the mentally ill, whether it is to prevent them from engaging in violence or prevent them from lapsing into homelessness.  Medical professionals have many tools to help those with chemical imbalances, but the reality that the medical model of mental illness fails to capture, is that many (though not all) mental illnesses are qualitatively different than many physical illnesses.  Mental illnesses are often matters of degree rather than of the categorical presence or absence of a condition, despite the categorical nature of mental health diagnoses.  You either have AIDS or Malaria or you don’t, whereas many of us have some degree of anxiety, depression, mania, addiction, hyperactivity and other conditions, rather than being clearly normal or ill.  Because we often think of mental illness using this medical model, we often think two things that are often untrue:

1.  We believe that we can’t do anything about mental illness and only experts can help.

2.  We believe that the mentally ill are “others” and that the people we know are categorically different.

Sometimes people break.  All types of people break, but you can help.  On occasion, I have spent some time at Dorothy’s Place, a shelter in Salinas where they care for a lot of the local homeless and the director would often tell visiting students about how people break.  Imagine being a teenager who is dropped off at the shelter because your parents don’t want you any more.  Imagine spending day after day in Iraq, looking around corners for snipers and explosives, one of which happened to kill several of your friends, and then trying to enter normal society without retaining the vestiges of that experience.  Some mentally ill individuals certainly have brain chemistry issues, but others are people who would otherwise live relatively normal lives, save for an experience or series of experiences that break them.

What are these stressful life experiences?  Below is a common, though perhaps outdated (from 1967!) ranked list of common life stressors that psychologists sometimes use to diagnose how much life stress people are undergoing, based on which of these events have been experienced recently.

How can you prevent mental illness?  Many of your friends have the potential for mental illness and when they undergo the inevitable stresses of life, they need the support of their friends and family, before things get serious enough for a medical diagnosis and a prescription.  You can be that support to the people around you, especially when you notice events such as divorce, breakups, and death that are especially strong stressors.

Consider the times in your life when you felt like you might break.  Perhaps they involved the loss of someone you cared about, whether through a death or through a breakup.  As an ultra-social species, these are deeply painful events.  Consider how you got through those events.  Why didn’t you break?  I know that in my own life, the support of my friends and family helped me in those times.  It is that social support that perhaps explains why mental illness is more prevalent in individualistic societies and less so in collectivist nations.

How can you prevent mental illness?  Be the change you want to see in the world and help those around you when they go through life’s inevitable ups and downs.  When you notice one of the events in the above list in someone’s life, even someone you aren’t that close to, make the effort to go out of your way to show them that you care and they are not alone.

– Ravi Iyer

On Thanksgiving evening, I started reading Greg Smith’s book, Why I left Goldman Sachs late in the afternoon.  I finished it around midnight.  It’s a relatively easy read with a relatively straightforward message: That Wall Street, as exemplified by Goldman Sachs’ evolution, has increasingly become a place where we send many of our brightest students to outwit the people who manage our pensions and retirement accounts.

Greg Smith is famous for resigning from Goldman Sachs via an op-ed published in the New York Times, accusing Goldman of evolving from a firm that serves its customers to one that often profits by taking advantage of them.  Nothing illegal is documented in the book, but it does show how employees are encouraged to sell ever more complex products to customers in the hope of generating more fees, without consideration of whether these products make their customers’ lives better.  Who are these customers?  They are the people who manage the money in our retirement accounts, pension funds, and the wealth of philanthropic organizations.  Like many Americans, they look to investment bankers like Goldman Sachs for advice on how to help their money grow.

There is little dispute about this, but not everyone believes it is morally wrong.  The CEO of Goldman Sachs asserts that they have no obligation to tell customers when they sell them something that they believe will lose money.  The Wall St. Journal’s review of the book essentially says that he should have known that Goldman Sachs was not built on selflessness, but rather on “tawdry commerce” and the “sometimes morally ambiguous business of sales”.  Bloomberg News seems more interested in tearing him down personally than examining the morality of what he says in the book, asking “Hasn’t it always been about making money and isn’t it okay to be a bank that makes money?”

At the heart of this, is the question that recent financial reforms were designed to change.  Specifically, should investment professionals have a fiduciary responsibility to their clients?  More simply, should they be required to put their clients’ interests over their own, when making recommendations?  I can’t say objectively whether it is morally wrong to take advantage of clients lack of knowledge, but I can examine our data from YourMorals.org to see which individuals believe that it is ok to conduct a “negotiation where not everyone completely understands the process” involved (e.g. opaque fees hidden in the fine print of investment products).  The below table shows correlations of Schwartz Values Scale scores and demographics with belief that negotiations with information assymetries are wrong, with positive correlations first.

Correlations of information assymetry "wrongness" with values/demographics

Clearly, people disagree about how wrong it is to conduct a negotiation without complete understanding by all parties.  People who hold self-transcendent values such as benevolence and universalism are the most likely to believe that such conduct is wrong.  People who hold traditional values are also likely to believe that this is wrong.  In contrast, younger, educated, more conservative males who tend to value power, of the type that populate most investment banks, are less likely to feel that such information asymmetry is wrong.  As such, it is perhaps not surprising that the reaction of many in the business world to Smith’s book is a collective “so what?”

Those of us who are mere consumers of financial services, via our 401ks, pensions, and college funds, would do well to understand what is behind this collective yawn.  What some in the finance world are telling us is that the primary goal of these financial companies is to make themselves money, not serve clients, and given that the average money manager fails to beat the market, we would all probably be better off simply buying broad, transparent index funds, rather than taking their sales calls.  We should urge our city officials, counties, and pension managers to stop trying to beat the market with the advice of ostensibly wise finance professionals, who don’t really have their clients interests at heart, lest they suffer the fate of the city of Oakland or Jefferson County, Alabama who both ended up on the wrong side of deals with Goldman Sachs.  And if there ends up being less demand for their products, perhaps we can move some of the genius that creates arcane financial products into creating things that people actually need.

– Ravi Iyer