Wall Street has no moral conscience. No public values. Zero. Will never change. Why? Wall Street insiders have one goal: get personally rich.
How? Wall Street gets rich by stealing money from America’s 95 million investors. Yes, they steal, skim, scam, siphon off your money, using the neurosciences that a decade ago promised to level the playing field for investors. But today it’s worse.
Too harsh? No. Vanguard’s Jack Bogle has been comparing Wall Street to Vegas for decades. He sees gambling casinos with a million “croupiers” manipulating Wall Street’s gaming tables 24/7, skimming a third of your returns off the top.
You can’t win. They get richer pocketing millions by betting against average Americans who work all day. Yes, the games are fixed. They have zero morals. The house always wins. Always.
And we should go easy on Wall Street? No, they are crooks, stealing your life savings, skimming, siphoning, scamming you. In his classic on neuroeconomics and brain science, “Thinking, Fast and Slow,” Nobel economist Daniel Kahneman uses similar gambling imagery: “50 years of research” proves the stock-picking skills of fund managers are “more like rolling dice than like playing poker.” Most underperform. The few winners rarely repeat.
Worse, Wall Street brain scientists — all the neuroeconomists, quants and behavioral-finance experts — all believe they’re “making sensible, educated guesses.” But they “are not more accurate than blind guesses,” says Kahneman. “This is true for nearly all stock pickers, whether they know it or not … and most do not.”
Get it? Wall Street insiders don’t even know they are not beating the market. They are in denial, lying to themselves and to you.
Brain science feeds Wall Street’s addiction, killing its moral conscience
Wall Street’s million insiders are so blinded by their addiction to getting richer they’ve lost their moral compass. They’re so deep in denial, so convinced they’re beating the market even when they’re not, that they must project the lies hidden deep in their brain’s dark shadows.
So they must manipulate data, hiding the truth from the outer world, lying in an endless barrage of PR material to the 95 million investors who are risking (and losing a third of) their hard-earned retirement money to the croupiers running the casinos.
Folks, behavioral science is not complicated. And the DNA guiding Wall Street’s brain is simple: Markets go up. Markets go down. Their DNA loves the action. And they know how to get rich in markets, up and down. Yes, the casino makes money skimming a third off the top … on the way up, and on the way down. And the house always wins. They pocket millions skimming a third off average Americans. Just ask Bogle.
But you already know all of this, right? Wrong. You forgot. Your brain’s on overload. Wall Street knows you’re vulnerable, takes advantage of you. Yes, all of today’s “smart technology” is just giving investors an illusion they’re smarter.
Wrong. Wall Street’s lying to us, transforming us into the dumbest investors in history. You even forget you’re being scammed, that Bogle and Kahneman are right: Wall Street is stealing a third of your money.
Wall Street’s decade-long brain-science “revolution” really has accelerated the investor’s worst nightmare, with broken promises, deceit and betrayal. This “new science of irrationality” is a combo scam/snow job/cover-up. Since 2002, Wall Street’s new neuroscience tools have failed America in six ways, with dire moral consequences:
1. Wall Street uses brain science to gain even more control of investors
Back in 2002 when Kahneman won the Nobel Prize in economics we had hopes for a level playing field. It’s worse today. Kahneman exposed Wall Street’s centuries-long myth of the “rational investor.” Gave us hope investors could change, hope the brain sciences would give investors new tools, new technologies, teach new behaviors, that Wall Street might even help.
Just the opposite. Casinos and their cohorts were the “first adapters” of neuroscience advances like high-frequency trading algorithms and investor profiling in marketing. Plus neuroscientists got paid big bucks to come work for Wall Street banks, Corporate America, for politicians … to manipulate investors, consumers, savers, voters and taxpayers.
2. Brain scientists keep investors predictably irrational for Wall Street
Kahneman proved investors have always been irrational. But note, he also proved investors brains will always be irrational. Always. So Wall Street can control our irrational brains using their high-tech neuroeconomic data, strategies and algorithms.
As University of Chicago Prof. Richard Thaler writes in “Advances in Behavioral Finance II”: Wall Street “needs investors who are irrational, woefully uninformed, endowed with strange preferences.”
Why? Wall Street’s a money machine generating hundreds of billions in fees, commissions, bonuses, options for insiders. Their casinos will always be one step ahead of you, monitoring your action, mapping, manipulating your behavior with algorithms that guarantee you can never beat the market with your perpetually irrational brain.
3. Brain scientists will never deliver on Kahneman’s promise in 2002
When Kahneman, a psychologist, won the Nobel Prize in economics, there was an implied promise that if investors, taxpayers, voters simply followed the advice of the new brain sciences, they would prosper because behavioral economists promised this new science would make you “less irrational,” in control, and a successful investor.
Get it? Yes, brain science would give all investors the right tools to become “less irrational,” and more successful investors … but that would obviously hurt Wall Street’s bottom line.
Sorry, but that will never happen. Never. Neuroeconomics is based on a false premise: That “irrational investors” can teach themselves to become “less irrational.” No way, the human brain is — and always will be — irrational, genetically “irrational,” and incapable of reprogramming itself. No can do.
And ironically, the more we learn about our irrational brains, the more we’re just kidding ourselves (with the help of the casino’s neuroscientists) into believing we’re in control, acting rationally. We’re not.
Remember, 88% of our behavior is driven by the subconscious, stuff we don’t grasp but quants control with their algorithms. So they can manipulate you into making irrational decisions. Amazing isn’t it: Your brain really is your worst enemy.
4. Brain scientists mislead investors, only help the super-rich get richer
In congressional testimony a few years ago, former Fed Chairman Alan Greenspan admitted that his capitalist ideology had failed America: “I made a mistake in presuming that the self-interests of organizations, specifically banks and others, were such as that they were best capable of protecting their own shareholders and their equity.” But there was a huge “flaw in the model … that defines how the world works.” Except nothing’s change.
Greenspan admitted: “Those of us who have looked to the self-interest of lending institutions to protect shareholders’ equity, myself included, are in a state of shocked disbelief,” he told Congress. Unregulated markets “held sway for decades,” then “the whole intellectual edifice, however, collapsed.”
Capitalism failed because it lost its moral compass, and there was America’s long-term monetary head confessing his guilt. Unfortunately, it’s worse today.
5. Brain scientists are partisan mercenaries with political biases
Bloomberg BusinessWeek put it this way: All economists, including neuroeconomists, are political animals whose opinions are up for sale: “No surprise, the equilibrium school mainly leans Republican, and the interventionist school seems to be crawling with Democrats.”
In short, all economists are mercenaries for hire who can “prove” either ideology, prompting “Black Swan” author Nassim Nicholas Taleb to predict that the 2008 crash will happen again unless we “build a society that doesn’t depend on forecasts by idiotic economists.” We didn’t.
6. Brain-science books are useless self-help pop-psychology solutions
But investors keep asking: Aren’t there some of their books that will help investors become “less irrational?” Well, the promise of neuroscience is imbedded in all their books. And they’re by the best-of-the-best. But don’t be misled by the titles: “Blind Spots: Why Smart People Do Dumb Things”; “Blunder: Why Smart People Make Bad Decisions”; “Sway: The Irresistible Pull of Irrational Behavior”; “Drunkard’s Walk: How Randomness Rules Our Lives”; “The Logic of Life: Rational Economics in an Irrational World”; “Nudge: Improving Decisions About Health, Wealth and Happiness”; or “Predictably Irrational: Hidden Forces That Shape Our Decisions.”
Unfortunately, no book can ever teach investors how to make their brains “less irrational.” It’s impossible, because Wall Street’s brain scientists will always be way ahead of that illusion … constantly inventing new technologies, algorithms and marketing tools that’ll run circles around America’s 95 million “predictably irrational” investors.
So you can’t change. Only Wall Street can change … but won’t. They have no moral conscience. You should never expect Wall Street to give up its addiction to getting rich off others … at least till after the coming collapse, a market megacrash bigger than 1929, 2000 and 2008 combined.
So forget about making your brain “less irrational.” As Thaler put it, Wall Street “needs investors who are irrational, woefully uninformed” … and that’s you.
Paul B. Farrell is a MarketWatch columnist based in San Luis Obispo, Calif. Follow him on Twitter @MKTWFarrell.