Virtue
SEEKING
IN FINANCE
By JC de Swaan
A recurring concern for my first-year undergraduate students contemplating a career in finance is that they will turn into hypocrites : spend several years in college being exhorted to act in the service of humanity — perhaps studying great thinkers , absorbing humanistic values and devising solutions for a better society — and , as soon as they leave their idealized intellectual community , become cogs in a gigantic machine optimized to generate short-term profits .
In a bid to counter that narrative of finance professionals perpetuating a selfserving industry , I set out to identify role models who could help define what constitutes virtuous behavior in a conflicted industry . I looked for finance professionals we could learn from : self-interested , ambitious and successful individuals , each in their own way , who were able to balance their own interest with the collective interest , despite the relentless pressure to conform to norms anchored on the narrow pursuit of self-interest . From the study of their behavior , a few patterns can be teased out : they serve their customers faithfully , with their customers ’ interest in mind ; they do so without extracting value from other stakeholders , and , ideally , by creating value for the rest of society ; they treat their colleagues with dignity , help develop them and promote diversity within their firms and the industry ; and they utilize their financial skills and networks to pursue social goals outside of their careers in finance .
The vast majority of virtuous finance professionals who contribute to society are anonymous and unheralded . They comprise professionals at all levels of the organization who , for instance , diligently score credit to extend loans at the appropriate price , guide customers toward the saving instruments that are best suited to their profile and circumstances , oversee the operational minutiae of replicating market indices with virtually no tracking error or identify the best product to insure a family ’ s assets . By engaging in core financial services which support real economic activities with their clients ’ interest in mind , they help people achieve their goals and , in doing so , benefit society .
My research has focused on individuals who merit our attention for having deviated from the path of least resistance , the one that would have maximized their own material wealth by simply going along with their peers . At times , they stand out less because of the bravura of their action — diligently penny-pinching expenses on behalf of customers or promoting diversity in the workplace may strike readers as pedestrian — than for the simple fact that so few people in the industry take that path . Being involved in the industry and familiar with the countless pressure points that lead finance professionals to conform , I have found myself inspired by their example .
Among these role models , there are those who exercise self-restraint — a deceptively simple goal made complicated by the fact that it typically entails lower profits in the short-term , often going against the grain of corporate priorities and colleagues ’ own financial goals . They leave money on the table , in an industry where doing so is often perceived by peers as a sign of either incompetence or confused logic .
Jack Bogle , founder of pioneer indexing firm Vanguard and as close to a wise man as the industry will ever have , perhaps said it best by titling one of his most thoughtful books Enough . Among the scourges of modern times , he bemoaned the primacy of maximizing wealth , which increasingly trumps other considerations and places business objectives above professional values .
In a reversal of industry practices , Andy Okun and his partner Stephen Modzelewski , co-founders of The Watermark Group , a hedge fund , set up terms that skew in favor of their clients , even when those terms are not particularly valued or even known by these clients . The Japanese “ herbivores ” are endeavoring to introduce a low-cost active asset management model to Japan and sway their peers toward lower fees . Highly successful endowment managers , such as David Swensen and Andy
14 FINANCIAL HISTORY | Winter 2021 | www . MoAF . org