En mi primer día en el negocio de la gestión monetaria, mi nueva jefa me invitó a su gran despacho esquinero con amplias vistas. Era la Directora de Investigación Macroeconómica, y su actitud alegre, amable y sabia había sido un factor importante para que aceptara el puesto de Macroanalista de Asia ex Japón, a pesar de no haber visitado nunca Asia, ni estudiado macroeconomía, ni invertido en acciones o bonos. Estaba ansioso por recibir cualquier orientación que pudiera ofrecerme. Aquel día me dio una lista de personas con las que debía reunirme y me entregó un grueso paquete en el que se detallaban mis prestaciones. Me dio un consejo: Ponga todos sus ahorros de jubilación en el mercado de valores y déjelos ahí porque el mercado sube con el tiempo.
Ese último consejo me pareció peculiar. Por un lado, era amable por su parte guiarme, velar por mi bienestar financiero. Por otro, ¿no estaba yo allí para averiguar si los mercados iban a subir o a bajar? Había pasado la docena de años anteriores en entornos mucho menos glamurosos aprendiendo cómo y por qué algunas organizaciones, ciudades, mercados y países enteros habían ido terriblemente mal. Pensé que estas experiencias serían útiles para mis colegas y los clientes de la empresa. Pero si los mercados iban a subir de todos modos, ¿qué hacía yo allí? Esta actitud optimista de "todo saldrá bien" me dejaba perplejo. Parecía demasiado buena para ser verdad, pero ¿qué sabía yo? Era 1999 y me sentía como si acabara de llegar a una agradable fiesta llena de gente que se había tomado una o dos copas.
Como llegué a apreciar en los años siguientes, ese pequeño consejo personal fue una poderosa visión de la mentalidad y el modelo de negocio, no sólo de la empresa para la que trabajaba, sino de la industria estadounidense de gestión de dinero desde la década de 1990: El mercado de valores va a subir pase lo que pase, pero uno puede hacerse muy rico intentando que los buenos tiempos sean aún mejores.
He estado revisando esta época recientemente porque estoy muy preocupado por el futuro y observo que los mercados financieros no lo están. Se supone que las finanzas son uno de los pocos sectores de la sociedad que se centra por completo en lo que está por venir, pero si la gente, las instituciones, los productos y las normativas del sector, y especialmente su cultura, se inclinan hacia la suposición de que todo va a ir bien, esperar a que los mercados señalen el peligro que se avecina es una mala estrategia. No es sensato esperar que personas que sólo han experimentado la buena fortuna prevean la desgracia.
Durante 25 años, me alegré de haber seguido el consejo de mi jefe: La bolsa subió, y mi fortuna subió con ella. Pero toda esa buena fortuna se construyó sobre un clima estable, un entorno político benigno y una estructura institucional inherentemente optimista. ¿Y ahora? Es hora de pensar de forma más crítica e imaginativa. Tengo algunas historias que pueden ayudar.
Otro lado de las vías
The first time I went to Russia, I had to bribe my way in.
From 1987 to 1991, I researched the declining state of American manufacturing, worked in two dysfunctional factories, and walked through and studied the histories of some of the worst public housing in Chicago. Those experiences sent me on a quest to find places where life was orderly instead of chaotic, manufactured goods were reliable, and everyone could expect to join a robust middle class. So I learned German and applied for a research grant. In Germany, I made friends with Paul and Josh, two similarly restless Americans who had also received research grants (Paul to study the German Romantics; Josh to learn how Germans taught their children about the Holocaust). After a few months of German predictability, we were tempted to experience Russia as the Soviet Union transmuted into something unpredictable. We just needed visas and train tickets.
Visas required a formal invitation from a Russian citizen who would vouch for the applicants and be responsible for their good behavior when in Russia. We didn’t know any such Russian citizens, but Josh’s stepfather was volunteering in Moscow helping Jewish people brutally suppressed under Soviet rule to reestablish synagogues. He was happy to write a letter of invitation but made no promise that it would do the trick. I lived nearest to the Russian embassy in Bonn, so Paul and Josh mailed me their passports and the letter of invitation. I was nervous as I walked up to the embassy counter when my number was called.
In hindsight, I feel great sympathy for the man behind that counter. It must have been a bewildering time for him. He had been educated and trained in the USSR, had joined the Soviet diplomatic corps to serve the state, had been a gatekeeper on the front lines of the Cold War, and now was doing what exactly? Representing a country that wasn’t sure what it stood for or who was really in charge? What was his mission? Whom should he keep out, and whom should he let in? More fundamentally, would the nearly bankrupt Russian state be able to pay for him to keep living in Bonn? I can’t imagine how trivial he would have found my anxiety.
At that time, however, I doubt that I had very emotionally intelligent thoughts about his interior life. I was a 22-year-old American bringing three U.S. passports and a dubious letter to a Russian authority behind bulletproof glass. I explained in my best formal German that my friends and I wanted to visit Russia for a month and that we had a letter of invitation. He silently pointed to the opening in the glass, and I slid the four documents through to the other side. He looked at the passports, looked at the letter (which was written in English), and looked at me with what I interpreted as bureaucratic disinterest. “Is everything in order?” I asked. He shook his head. I then discreetly revealed the 200 Deutschmarks (about $120) I had hidden in my left hand and asked if there was anything I could do to make it in order. He pointed to the opening in the glass. Ten minutes later I had the visas and felt about as cool as I ever had. I was a grownup. I was doing something dangerous. I had bribed a Russian diplomat! In my self-congratulatory state, I accidentally left the case containing our passports on the train when I disembarked, only to be saved by a trustworthy German who gave them to a train official, who put them in what was probably the world’s best-run lost and found. I retrieved them a couple of hours later, humiliated both by having screwed up and by the reminder that my most distinguishing characteristic was not courage but good fortune.
We bought tickets as far as Warsaw because tickets to Poland were inexpensive. Understandably, the cash-strapped Russian rail system was charging high prices to German buyers, but Josh had heard a rumor that every Russian railcar had a kind of steward who managed the car and could be bribed to give passage much more cheaply. Given the success of my first bribe, this sounded great to me. (I didn’t tell either of them about the lost passport snafu.)
In the Warsaw station, we found a train bound for Moscow and, after one or two unsuccessful attempts, seemed to reach an understanding with a kind woman standing next to a railcar entrance who spoke none of the languages that we spoke. Looking over both shoulders, she quickly led us into a sleeper compartment, took our money, and made signals that we understood to mean “stay quiet and keep the door closed.” A little while later, the train started rolling. We were giddy with a sense of adventure.
Around 2 a.m., when the train stopped at the Poland-Belarus border, armed Russian soldiers came to our cabin and took our passports, closed the door, and left. Shortly thereafter, our car was hoisted up about 10 feet so that the undercarriage could be changed from the 4’8½” European gauge to the 5’ gauge that the Russian Tsar chose in 1842 on the recommendation of American engineer George Washington Whistler. We dangled in the air, and from that vantage point we could see that there was some kind of unruly commerce going on outside. People were buying, selling, and shouting at each other in the dim light of the border railyard. We surmised that it was a kind of informal night market to avoid customs duties. We worried that we would soon be kicked off the train into this scene, possibly without our passports.
Paul, Josh, and I were not kicked off the train; the soldiers came back to our cabin and gave us our documents; and we wound up having an amazing, memorable adventure thanks to people who were clearly taking risks by offering us hospitality. Russia taught me that the spectrum of hardship, confusion, anxiety, and bewilderment was far wider than any recent American experience. I hadn’t yet read any Tolstoy, but this trip would be my first exposure to the opening line of Anna Karenina, “All happy families are alike; each unhappy family is unhappy in its own way.”
This experience was crucial to my understanding of the world as it is and, more importantly, as it could be. One of the most valuable skills a person can have is the ability to imagine how things can go badly. Optimism is a winning strategy during good times, but when we assume that they’ll keep rolling, we grow complacent, unimaginative, and vulnerable to lean futures.
La vida dentro de la caja
Aquella aventura juvenil en Rusia me motivó a ampliar mi campo de interés para incluir la tragedia, la corrupción y el mal. Pero cuando me establecí en el negocio de las inversiones a principios del siglo XXI, me di cuenta de que los intereses de la gente eran unilaterales: Les interesaban casi exclusivamente las cosas que subirían de precio. Tengo un pequeño recuerdo. Alrededor de 2002, aparecieron por la empresa docenas de ejemplares de un libro de tapa dura. Nunca supe de dónde venían, pero durante años los vi en lugares extraños, como si un Johnny Appleseed financiero los hubiera tirado por ahí. El libro se titulaba El triunfo de los optimistas: 101 años de rentabilidad de la inversión mundial.
El libro estaba repleto de tablas, cuadros y gráficos que dividían los mercados financieros en subcomponentes, impulsores y correlaciones. La mera masa de cifras ofrecía lo que parecía ser una prueba abrumadora de que el arco de la historia se inclina hacia la riqueza. Si no hubiera estado dentro de los mercados financieros, lo habría considerado simplemente un texto aburrido, pero entre finales de los 90 y mediados de los 20, el sector de la gestión de inversiones experimentó una extraña y mágica transformación: Se volvió como el libro. Los mercados de capitales y sus profesionales se redujeron a una colección de tablas y gráficos, fragmentados en puntos de referencia cada vez más estrechos que luego se "producían" en "betas" específicas -cajas fuera de las cuales ni los ordenadores ni los analistas humanos tenían ningún incentivo para pensar. Dirigido por consultores y herramientas digitales, el mundo de la inversión se hizo cada vez más autorreferencial: el rendimiento de la inversión no se medía principalmente por el riesgo y el rendimiento, sino por el rendimiento en relación con un punto de referencia y en relación con los competidores. A medida que los mercados alcistas se convirtieron en un supuesto, y a medida que triunfaban los optimistas, la fuerza motriz del negocio se convirtió en el FOMO financiero.
Estos cambios en el sector fueron acompañados de cambios en la cultura y la mentalidad de los responsables. La subida de los mercados empujó a los optimistas a la cima del sector, mientras que los preocupados y las personas que pensaban con imaginación sobre el futuro fueron relegados a los márgenes. Las mayores gestoras de activos del mundo, Blackrock, Vanguard y Fidelity, crecieron ofreciendo cada vez más productos financieros que empaquetaban activos optimistas para los clientes. Como le dije una vez al consejero delegado de Blackrock, Larry Fink: "Enhorabuena por hacerte rico en el momento más fácil de la historia de la humanidad para hacerlo".
Mi predecesor en la empresa de inversión fue contratado en medio de lo que entonces se conocía como el Milagro del Sudeste Asiático. Los mercados bursátiles, desde Indonesia a Corea del Sur, alcanzaron cotas apasionantes, y él se convirtió en un animador de su continuo ascenso.
Cuando empezó la crisis financiera asiática, dijo a la empresa que no vendiera. Cuando el baht tailandés se desplomó, dijo que había sido un breve pánico y que los tigres asiáticos pronto volverían a rugir. La cosa empeoró. Llegaba pronto al trabajo, cerraba la puerta y se quedaba allí todo el día, enviando de vez en cuando correos electrónicos en los que insistía en que la crisis no estaba ocurriendo realmente, y sólo salía de la oficina cuando todo el mundo se iba a casa. Había llevado el optimismo a su conclusión ilógica extrema: la negación rotunda de la realidad. Últimamente pienso en él cuando veo a otros optimistas enfrentarse a riesgos que llevan años creciendo.
Las finanzas son supuestamente una industria objetiva, impasible, que sopesa riesgos y beneficios, pero los mercados alcistas hacen cosas extrañas a la gente. Estar asociado a una acción, a una clase de activos o a toda una región del mundo cuyos precios están subiendo hace que los inversores de esas zonas se sientan especiales. Hace que otras personas los vean de forma diferente. Atrae a nuevas personas hacia ellos. Les da un aire de autoridad incluso fuera de su dominio. Tienden a preocuparse más por su estatus entre los demás inversores cuya fortuna ha aumentado. Se hace más difícil prever los malos tiempos, incluso después de que se hagan visibles. Durante décadas, los mercados estadounidenses han seguido subiendo, las apuestas arriesgadas han parecido cada vez más inteligentes y se ha prestado cada vez más atención a los supuestos genios asociados a los mayores ganadores. No es de extrañar que nuevas personas acudieran en masa a las finanzas, ya que ¿qué podría ser mejor que enriquecerse apostando el dinero de otras personas en un juego que siempre producía ganancias?
Montañas de migas doradas
It wasn’t always so. Before that first day in my new office as Asia ex-Japan Macroanalyst, most of what I knew about the bond market came from Tom Wolfe’s The Bonfire of the Vanities, a tale of 1980s New York City finance, social stratification, justice, and injustice. Recently, I reread it. It’s juicy and brash, full of broad stereotypes and sharp observations about human nature. But the thing that strikes me now is the looming sense of peril in society in general and the financial markets in particular. Wolfe’s wealthy characters are keenly aware of the surrounding risks posed by a New York City full of poverty and crime, and the bond market looks like a wild game of chance.
The main character is Sherman McCoy, a bond salesman at fictional New York investment bank Pierce & Pierce. Bond salespeople make money by helping investors who own bonds sell them to another investor or by buying bonds speculatively and selling them quickly at a higher price. At one point Pierce & Pierce buys $6 billion worth of U.S. government bonds at $99.62643 per $100 and sells $2.4 billion of them at $99.75062 later the same day. The $0.12419 difference made them a fortune.
To Pierce & Pierce, it meant a profit of almost $3 million for an afternoon’s work. And it wouldn’t stop there. The market was holding firm and edging up. Within the next week, they might easily make another $5 to $10 million on the 3.6 billion bonds remaining.
By five o’clock, Sherman was surging on adrenaline. He was part of the pulverizing might of Pierce & Pierce, Masters of the Universe.
Squeezing out those 12.419 cents on the dollar is interpreted on the trading floor as an act of skill and daring. Yet “the market was holding firm and edging up” is finance speak for “interest rates are going down,” which is a technical way of saying that virtually every asset is rising in value. Wolfe, his fictional characters, and all of the actual people in finance had no idea that interest rates would fall for the next 40 years. 40 years! The market was essentially a one-way bet for entire careers. Starting in the early 1980s, people in finance kept experiencing one windfall after another, only briefly interrupted by what gradually became known as “dips.” Even the so-called Global Financial Crisis of 2008 proved to be a buying opportunity once the government bailed out the banks and insurance companies. Over and over again, the investors who bet on the upside were rewarded—and promoted.
The feeling of power, might, and superiority that Sherman and the other members of this group’s real-life inspiration felt at this time has had a lasting impact on our society. When we meet Sherman, he has started referring to himself as a “Master of the Universe” because of the large sums of money he makes in commissions. In truth, though, the job of bond salesman is a mix of middleman and short-term speculator dealing in decimal places. During a family outing on a beautiful day in the Hamptons, Sherman’s six-year-old daughter Campbell asks him a pointed question, “Daddy, what do you do?” She has just learned that the daddy of her playmate MacKenzie makes books and employs 80 people (he runs a publishing house), which causes Campbell to realize that she doesn’t know what her daddy does. She is eager to learn so that she can have the same daughterly pride as MacKenzie.
What follows is painful for both Sherman and Campbell. He’s not sure where to begin and immediately uses arcane terminology. Campbell starts to get the uneasy impression that her father’s employment doesn’t make any sense. Eventually, he manages to say:
“A bond is a way of loaning people money. Let’s say you want to build a road, and it’s not a little road but a big highway, like the highway we took up to Maine last summer. Or you want to build a big hospital. Well, that requires a lot of money, more money than you could ever get by just going to a bank. So what you do is, you issue what are called bonds.”
“You build roads and hospitals, Daddy? That’s what you do?”
“Well, in a way.”
“Which ones?”
“Which ones?”
To calm her increasingly distraught daughter, Sherman’s wife, Judy, steps in.
“Darling, Daddy doesn’t build roads or hospitals, and he doesn’t help build them, but he does handle the bonds for the people who raise the money.”
“Bonds?”
“Yes. Just imagine that a bond is a slice of cake, and you didn’t bake the cake, but every time you hand somebody a slice of the cake a tiny little bit comes off, like a little crumb, and you can keep that… If you pass around enough slices of cake, then pretty soon you have enough crumbs to make a gigantic cake.”
As interest rates fell, communism collapsed, markets expanded, and the Baby Boomers plowed their money into markets, the golden cake grew so huge that the millions that excited Sherman McCoy stopped being so impressive. Blackrock now manages about $12 trillion, Vanguard $10T, and Fidelity $5T. One would think, with assets in the trillions, these companies must have a lot of power. But those numbers are deceptive. As the cake grew, the slices got more orthodox and precise, and the clients (the people whose money the firms invest) changed their behavior. Instead of handing over their money to a guy in a suit and saying, “Invest as you see fit,” most chose to diversify and focus on fees. The big winners in the asset management industry excelled at technology, marketing, and product innovation, selling index funds, exchange-traded funds (ETFs), and thematic funds. Many people look to these companies’ leaders for guidance, but their companies sell market access, not insight, and certainly not foresight. To them, the market—its investors, its companies, its risks—is a set of statistics housed in databases, expressed in spreadsheets, and informed by the recent past. It’s all very orderly, logical, and sterile.
Hojas de cálculo y Gogol
The second time I went to Russia, it was because someone else had accepted a bribe.
After my year in orderly Germany, I moved back to Chicago and looked for opportunities to work with people who were trying to turn around urban decline. I was exceptionally lucky to get a job at the South Shore Bank as a credit analyst. The bank had served a largely Jewish community in the South Shore neighborhood for decades, following traditional bank practices: open only from 10 a.m. to 3 p.m. on weekdays with a half day on Wednesday. After Black families started moving into the South Shore in the 1970s and ’80s and the Jewish families moved out, the owners of the bank put it up for sale. A private equity firm offered to buy the bank on the condition that they could move it to downtown Chicago. In a surprising move, the U.S. Federal Reserve, the regulator of American banks, rejected the application. Black people in Chicago had been denied access to financial services for decades due to explicit discrimination (e.g., redlining) and implicit discrimination (e.g., ATMs in Black neighborhoods tended to only dispense cash, not accept deposits), and the regulator, recognizing the risk of this happening again, ruled that any buyer would have to keep the bank in the neighborhood. A group of bankers and socially minded investors seized the opportunity and bought the bank.
My job at the bank was to help commercial loan applicants get their paperwork together and prepare forms for the loan committee. Every week I would meet people who wanted to build or grow a business: Owners of restaurants, muffler shops, used car dealerships, and small manufacturing operations came in with their plans, their ledgers and accounts, and their hopes and dreams. Some were organized and crisp, others were more enthusiastic and impressionistic, and still others were fantastical. No matter how they came in, my job was to translate their story into spreadsheets for U.S. Small Business Association loan applications.
Shortly before I was hired at the bank, it started getting media attention. Bill Clinton and others pointed to it as a model of how business could provide vital social services. It was an inspiring story, and there was a good amount of truth to it, especially in the real estate department, but the commercial lending operations revealed a key challenge of modern business: Spreadsheets leave out—indeed often rule out—the unruly.
I worked with applicants who wanted loans to finance everything from new shops to new hot sauces, but the loans that were approved were almost always for fast-food franchises. McDonald’s, Hardee’s, Domino’s, and the rest provided orderly forms to potential franchise owners that made it easier to start a business. Better yet, the risk to the lender was minimized. The trade-off was that the resulting businesses were not very good for the neighborhood—or even located in the neighborhood at all.
The bank’s positive story kept growing, however, and one day, people from the European Bank for Reconstruction and Development (EBRD) called and asked, “Could you set up a program like this in Russia?” My boss’s boss’s boss, the head of lending, a man named Dick, absolutely should have said no. But if things have been going well, if people are coming your way, it’s easy to be optimistic, to wonder how things could get even better. And so, instead of saying no, Dick asked, “Could I get an all-expenses paid trip to Russia out of this?”
I worked for the loan officers, smart Black bankers who were dedicated to the neighborhood. When Dick asked them if they’d like to move to Russia in a month’s time, they all said no. Instead of going back to EBRD and admitting that this neighborhood Chicago bank wouldn’t be able to kick-start small business lending in Russia, Dick asked me if I would be interested in moving to Nizhny Novgorod, Russia. The job started in three weeks.
The first few years of Russia’s transition away from Soviet life had been bumpy. In hopes of spurring commercial activity and prosperity in former Soviet lands, the EU and G7 had created the EBRD. But after a few years, the only obvious money-making investments in Russia—the ones that made sense on spreadsheets—were in oil and minerals, so by 1994, the money that had been raised to convince formerly communist people of the merits of capitalism had all gone to big corporations and their owners who were becoming known as oligarchs. The EBRD was desperate to demonstrate that it could raise the fortunes of everyday Russians, for which their best strategy, apparently, was calling a small bank in Chicago that rewarded their confidence by sending me—a 24-year-old who had never made a loan but had learned the language of American investors: the spreadsheet.
If I was finding it hard to communicate the potential of non-franchise small businesses in the Chicagoland area, imagine trying to do it in 1994 for brand-new small businesses in a Russian city far from Moscow where the high on an average January day was -20°F. My colleagues and I would say to the business owners who came in to apply, “Fill out what you expect your revenues and itemized costs to be over the next five years on this form.” Many of the applicants would take the papers, give an earnest nod, and go fill them out. Some, however, would stare at the rectangular spreadsheet with its orderly rows and columns, its crisp lines and right angles, and look at us with a weary, wry smile that captured how foolish our request was. Their lives had already included radical changes in authority, safety, and political ideology, on top of hard economic times. It wasn’t clear if they even legally owned their businesses or if the state could seize them at a moment’s notice. How could they possibly predict what would happen to anything five years from now? Some of them simply handed back the form and said, “You should just put whatever numbers you want in those boxes. I have no idea.”
I don’t think it’s possible to overstate how much spreadsheets and simple databases have shaped the world, especially American business culture. To a modern investor, the purpose of a corporation is to generate earnings, and earnings are captured on spreadsheets. Therefore, in essence, businesses exist to populate spreadsheets. A friend of mine who used to run a construction company and now teaches at a business school offered me a perfect illustration of this. He explained that there are two kinds of real estate courses at business schools: ones that teach about actual, physical buildings, and ones that only discuss financial models of buildings. The latter course is the more popular one.
A couple of years ago, I was invited by the chief risk officer of one of the world’s largest banks to give a talk about the impacts of climate change on financial markets. He had assembled the heads of each asset class at his bank. I detailed how risks would rise in low-lying places, in hot, humid places, in places that would become more prone to drought or fire or both, and in global financial systems like insurance, sovereign bonds, municipal bonds, and securitized lending. I explained that these risks were unprecedented because the climate had been so stable for the past several millennia and that every asset class would face new challenges. The people on the Zoom call nodded along, asked good questions, and were clearly concerned. Then we got to the crux of the matter. The head of mortgage-backed securities said, “This is all interesting, but I need to know what to put into my spreadsheets.” I explained that there was no one number, no one special column to add to capture climate risk, that it would require thinking in scenarios and dealing with genuine uncertainty. I had lost him. “If I can’t put it in the spreadsheet, it doesn’t exist,” he said.
In the winter of 1994, snow was piled so high that many of Nizhny Novgorod’s roads felt like canyons, which meant that come spring everything would be covered in slippery mud. One April day, my Russian colleagues and I set out to see an applicant who ran a brick factory. The driver, an enormous man whom I had often seen carrying a huge gun at the bank (this local bank was openly run by the mafia), drove the black, rear wheel drive Volga sedan with astonishing speed and control over roads that would have left Americans in Range Rovers calling for a tow truck. The owner of the factory, a clearly bright man in his mid-40s, gave us a tour of the rough but functional facility and answered our questions. As we got ready to leave, I asked him if there was anything else he wanted us to know. He smiled a smile I now associate with Russian spreadsheets and said, “Your decision is very simple. It’s like Gogol said, ‘Russia only has two problems: fools and bad roads.’ You have seen that my road is shit, so you only have to decide if I’m a fool.” We approved his loan.
Mala competencia
Our financial institutions are run by extraordinarily fortunate people. During their careers, the best strategy has almost always been to take the risk, buy on the dips, and be optimistic. Yes, they still monitor risk, but the concept of risk grew ever more abstract, expressed in correlation matrices and deviations from a benchmark (what’s called tracking risk). In essence, virtually all of the risk in finance is now career risk: It’s not your money, and your investment is only a part of your clients’ assets, and you’re sticking close to the benchmark, so the big risk if you’re wrong about something is losing your bonus or maybe your job. In a setting like that, talking about the likelihood of mass extinction or even rising seas is akin to starting a watercooler conversation about death: The other person is either going to walk away or things are going to get deep. Indeed, the more I talked in investment meetings about climate change, the more colleagues and clients would come to me privately to talk about their kids, the farm in upstate New York that they were rewilding, their childhood memories, or their acceptance that their place on Cape Cod would be taken over by the ocean, not their descendants. Climate change was on their minds, but it wasn’t in portfolios they managed or sold to clients.
I finally gave up on finance in 2015 after I heard former Goldman Sachs Managing Partner and U.S. Treasury Secretary Hank Paulson passionately tell a group of investors that “climate change could be as bad as the 2008 Great Financial Crisis.” He was comparing the likely death of hundreds of millions or billions of people, the dislocation of billions more, the death of trillions of other living organisms, and a very real risk that the changing climate will radically reshape all life on earth with an episode of excessive issuance of mortgages and collateralized bonds. Statements like these so dilute our sense of extremes (“crisis”) that every comparison is flattened. Also, the people in that room were certainly richer in 2015 than they were in 2007. For them, 2008 had presented yet another great buying opportunity.
I recently participated in a good conference put on by a climate-focused investment firm whose managing director set the tone with a series of dramatic PowerPoint slides. He made references to drought and fire, but the audience was a bunch of investors. They wanted numbers. And the number he offered them was $200B. The digits must have been 10 feet high on the huge screen next to the stage. The small print explained that this was an estimate of annual GDP losses if the atmosphere warmed to 3.0°C above the preindustrial average. But global GDP is already over $100 trillion. $200B in a few decades barely counts as a pile of prospective crumbs. The recent Los Angeles fires cost $200B. Numbers like these are the dangerous result of a well-meaning, dutiful effort to portray the future in spreadsheets and simple databases. I wish I could offer a more precise, insightful, realistic estimate of future economic costs of climate change, but the past offers scant statistical insight into the future we now face.
Virtually all investment decisions and economic analyses are based on two-dimensional models. An analyst, investor, or economist creating such a model takes estimates from what he or she deems to be a comparable situation (a comp) in the recent past and applies those estimates into a slightly different context. Then comes the spreadsheet magic: Almost all such models take Year 1’s estimates of revenues and itemized costs and project them out into the future with the equation: [This year’s value] = [Last year’s value] x 1.02. In other words, every category of revenue and expenditure is expected to grow gradually, by about the level that inflation stayed during the glory years of falling interest rates. Some analysts might use 1.025 or 1.03 instead of 1.02, but the future of every variable in the spreadsheet is always smooth.
This means that a cash flow model of a portfolio of assisted living facilities across coastal Texas, Florida, Georgia, and North Carolina that was created in 2020 took insurance costs from 2019 and projected them out to 2049 with small annual increases that remained proportional to all the other costs. What happens to that spreadsheet when insurance simply isn’t available any longer in those places? We are starting to find out. After I made a presentation to investors, the CEO of a company that managed exactly that kind of portfolio asked me, “Is climate change why I have to go to Lloyd’s of London in person to get insurance now?”
Climate science tells us that the future will be very different from the past. Thanks to paleo climate science, we know that from about 10000 BCE until about 2012, the global atmosphere was in a stable, narrow temperature range around what is known as the preindustrial average. This range was bounded on the bottom by -1.0°C and on the top by +1.0°C, and its stability and narrowness made forecasting easy. Climate stability is the reason that the same plants grew in the same places for thousands of years and that we have bond markets. In essence, all the past economic and financial data, all those upward trends in prices, were enabled by the low volatility of the climate.
A little more than a decade ago, we broke out of that range, and climate volatility began rising. Last year we crossed 1.5°C, and we can already see how natural and human systems are straining. The next 0.5°C of warming—which we should expect over the coming 10 to 15 years—will bring substantially more disruption and suffering. The probability of drought and deluge will rise substantially; it will be too hot and humid to be outside in places where hundreds of millions of people currently live; pests will be on the move, and plants will be struggling. It’s easy to foresee that these changes will eventually wreck many beautiful, smooth spreadsheets. I’ve talked to hundreds of investors who shake their heads when they see maps of these phenomena and nod their heads when I say it will have massive financial implications, but almost without exception investors then say that it’s not in their universe.
Mi universo
Creo que la principal razón por la que no deberíamos buscar advertencias sobre el futuro en los inversores es que la industria de la inversión moderna distorsiona la forma en que los profesionales de la inversión ven el mundo y lo que les preocupa. Recuerdo mis casi 20 años en el negocio de la inversión y no estoy seguro de que ningún análisis o recomendación que haya hecho haya tenido realmente importancia. Estoy seguro, sin embargo, de que me despertaba cada día y consultaba las noticias y los mercados, aterrorizado de haber metido la pata en mi (a menudo irregular) sueño. Si una de las recomendaciones de inversión que hacía a mis colegas salía mal, agonizaba. En una ocasión, sólo medio en broma comparé mi incapacidad para anticipar las implicaciones financieras de unas elecciones en Taiwán con la mortífera batalla de Dien Bien Phu de 1954.
Mis errores fueron pocos y rara vez se notaron porque cubría China justo cuando se convirtió en un motor masivo de rentabilidad para los mercados de todo el mundo. Iba un poco por delante, sobre todo porque mi jefe me había puesto allí. Pero independientemente de la razón, recibía elogios y migajas de oro, y ser "el chico de China" se convirtió en algo genial. Podría pensarse que mi buena suerte me tranquilizaría, pero en los años siguientes, a medida que bajaban los tipos de interés, subían los mercados y aumentaban los sueldos, me sentía tan ansioso como siempre, al igual que mis colegas. La razón es sencilla: El ser humano es capaz de poner en juego cualquier cosa. Ningún ámbito es demasiado estrecho o aislado para sentirse como un mundo entero. Tom Wolfe probablemente no tenía ni idea de cómo el negocio de las inversiones en el mundo real emplearía la palabra "universo".
A pesar de que la palabra "universo" se acuñó explícitamente para abarcar la totalidad de todas las cosas existentes, no sólo en este planeta sino en todas partes, los inversores modernos suelen decir cosas como: "Mi universo son las acciones de crecimiento de pequeña capitalización" o "Todos los bonos están sobrevalorados en mi universo". Durante años me pregunté por qué un término algo menos grandilocuente como "sistema solar" o "galaxia" no había sido suficiente para captar su sentido de la realidad, pero al cabo de un tiempo, llegué a aceptar que utilizaban "universo" con bastante precisión: Pasaban cada hora que estaban despiertos obsesionados con los valores de su porción del Russell 200 o del S&P 500 o del MSCI World Index. Los clientes no les pagaban para que descubrieran el mundo, sino para que eligieran entre una acción y otra dentro de un índice, y no poseer suficientes acciones de NVIDIA cuando subían de 3 dólares/acción a 140 dólares/acción podía parecer el fin del mundo.
Este es el pequeño y aburrido secreto de casi todas las finanzas: La gran mayoría de los inversores modernos no dominan nada. Pasan su tiempo centrados en un estrecho campo de visión, y sin embargo, para ellos, se siente como un universo entero. Sus batallas, sus luchas, sus victorias y sus derrotas se cobran un peaje emocional. Puede ser muy agotador replicar (o hacerlo ligeramente mejor o peor que) un índice que un ordenador podría producir sin emociones y llevándose muchas menos migajas. Es un trabajo duro entrevistar constantemente a los solicitantes de financiación de capital riesgo, sin saber cuál será "el próximo Airbnb" o un completo fracaso. Puede ser enloquecedor predecir si los tipos de interés subirán o bajarán ahora que han pasado 40 años de tipos a la baja. No es de extrañar que a los inversores les cueste imaginar que el planeta pueda estar en peligro. Ese tipo de cosas están fuera de su universo.
Ricos y poderosos no son lo mismo
La última vez que fui a Rusia, los oligarcas eran increíblemente ricos, los sobornos estaban por todas partes y todo el mundo miraba por encima del hombro.
La fortuna de Rusia creció a medida que el auge económico de China impulsaba la demanda -y el aumento de los precios- de materias primas como el petróleo, el níquel y otros minerales. En 2007, mi programa de investigación en la empresa se había ampliado y sentía curiosidad por saber cómo había afectado la afluencia de efectivo al país en el que había entrado 15 años antes a base de sobornos.
Los primeros préstamos que concedimos mi equipo y yo se amortizaron en su mayor parte, pero cada vez era más difícil encontrar prestatarios que pudieran soportar el tumulto y la incertidumbre causados por la inestabilidad económica y política de Rusia, por lo que el BERD cerró el programa. Las empresas monopolísticas de materias primas dirigidas por la nueva oligarquía rusa eran las únicas apuestas seguras. Sin embargo, cuando aterricé en Moscú, estaba claro que ni siquiera los oligarcas eran dueños de mucho. Mijaíl Jodorkovski había pasado con éxito de organizador de las juventudes leninistas a propietario de enormes yacimientos petrolíferos, pero cuando sugirió que debería existir un partido de la oposición sano y que quizá Vladimir Putin debería tener poderes limitados, fue encarcelado. Los demás oligarcas tomaron nota y se alinearon.
Cuando vi a los oligarcas tecnológicos estadounidenses alinearse detrás de Donald Trump en la toma de posesión en enero, pensé: "Realmente desearía que estos tecnooptimistas hubieran estado menos seducidos por el señuelo del infinito y más interesados en cómo las cosas iban mal en otros lugares". Una vez que te metes en el negocio del soborno, suele ser más rentable pelearse por trozos de tarta que hacer tartas más grandes. Cada uno de los broligarcas estadounidenses ofreció sus sobornos con la esperanza de recibir favores individuales para sus empresas en lugar de abogar por una mejor gobernanza, mejores normas, mejor regulación.
El cambio climático está empeorando, y necesitamos más desesperadamente liderazgo y limitaciones que nos impidan adentrarnos incluso en los peligros visibles que se avecinan. Pero nuestros líderes no tienen experiencia ni imaginación para los malos resultados. Durante unos años, fue popular entre las empresas financieras hablar con entusiasmo del cambio climático porque tenían una historia optimista y podían ofrecer nuevos productos "verdes" a los clientes. Pero al enfrentarse por primera vez a la amenaza de la presión política y a la realidad de que el cambio climático es una cuestión de riesgo, no una oportunidad de negocio beneficiosa para todos, casi todas han reculado rápidamente.
Sigo pensando en un evento de trabajo fuera de horario unos meses antes de dejar el negocio de la inversión. Se me acercó un gestor de carteras de la empresa que se consideraba más sensato, paciente y abierto que sus colegas. Estaba claro que había bebido más de dos copas. Se acercó bastante a mí, estableció un profundo contacto visual y me dijo: "Escucho lo que dices sobre el cambio climático, pero es difícil. Si es verdad, estamos arruinando el planeta para nuestros hijos". Le dije que me había oído bien y que eso era lo que estaba en juego. Entonces sacudió la cabeza y dijo: "Nunca he tenido que tomar una decisión verdaderamente difícil en mi vida". Le dije: "Sé cómo te sientes".
Imaginación actuarial
Mientras las finanzas desarrollaban definiciones cada vez más restringidas del riesgo, otro grupo de expertos se centraba en el verdadero significado de la palabra. Estos expertos no se hicieron ricos con la caída de los tipos de interés, y nunca se les ha llamado "Maestros del Universo", pero ellos y sus predecesores se han encargado durante siglos de averiguar la probabilidad de que se produjeran malos resultados, cuáles podrían ser sus repercusiones y cómo podrían evitarlos las organizaciones y las sociedades. Estas personas son actuarios.
En enero de este año, el Instituto y la Facultad de Actuarios publicaron una evaluación del riesgo climático. En ella, no sólo evalúan los riesgos, sino también las valoraciones ofrecidas por economistas y modelizadores financieros.
En el caso del cambio climático, aunque tendrá toda una serie de repercusiones sociales, se suele prestar especial atención a las consecuencias económicas, tratando de responder a la pregunta: ¿Cuál sería el impacto del cambio climático sobre el PIB?
Desgraciadamente, muchas evaluaciones públicas de alto nivel sobre el riesgo del cambio climático están subestimando significativamente el riesgo porque excluyen muchos de los impactos del cambio climático en el mundo real.
Estas evaluaciones del riesgo son precisamente erróneas, en lugar de ser aproximadamente correctas. Los resultados, benignos pero erróneos, pueden reforzar la narrativa de que se trata de riesgos de evolución lenta con repercusiones limitadas, en lugar de riesgos graves que exigen medidas inmediatas.
Este planteamiento no cumple los requisitos de los principios para la gestión de riesgos... [ya que excluye de los modelos] sucesos inciertos y de gran gravedad, en lugar de hacer las mejores estimaciones y adoptar el principio de precaución.
Un enfoque prudente sería tomar la estimación más alta de pérdidas económicas y reducirla cuando se disponga de pruebas de que está sobreestimada, y no al revés.
La estimación de pérdidas económicas que consideran una estimación de partida razonable se sitúa entre el 50% y el 67% del PIB mundial. Sin embargo, ponen más énfasis en los resultados que no caben en las hojas de cálculo, como las migraciones masivas, la mortalidad masiva, los fenómenos de extinción masiva y los trastornos políticos, todos ellos excluidos de los modelos económicos y financieros de los impactos climáticos. En un lenguaje sorprendentemente colorista, los actuarios describen los modelos utilizados en finanzas y economía como:
Análogo a llevar a cabo una evaluación del riesgo del impacto del Titanic al chocar con un iceberg, pero excluyendo del modelo la posibilidad de que el barco se hunda, la escasez de botes salvavidas y la muerte por ahogamiento o hipotermia.
Recomiendo encarecidamente el informe, no sólo por lo que tiene que decir sobre el cambio climático. Es un manual sobre cómo ser un pensador de riesgos eficaz. Y en el centro está la importancia de considerar las cosas que pueden suceder, imaginar sus consecuencias potenciales y hacer un plan. No es una hoja de cálculo ni un producto financiero, es un proceso.
Mejores modelos, mejores prácticas y mejores planes
The main thing I learned in my nearly 20 years in the investment business is that everyone has a model of the world, including you, right now. Each of us takes in information about the world and translates it into a set of feelings, intuitions, and reasoning to inform our decisions. Some people may have more predictive models and other people have less predictive ones; some people have complex analytics and huge databases, while others have gut feelings. But having a better model is of limited value. What matters most is how you plan. I don’t think the 2008 Financial Crisis is a useful analogy for the kinds of damage that climate change will cause, but a particular investment story from 2008 illustrates what I mean. I wish it were about me, but it’s about a competitor.
Mohamed El-Arian was born in 1958 in New York City to Egyptian parents, and as a child lived in Egypt, Europe, New York, and England. His father was an international lawyer and diplomat, and El-Arian worked at the International Monetary Fund before going into the investment business in 1998. By that time, he had seen many ways things could go wrong. He joined Pacific Investment Management Company, more commonly known as PIMCO, and helped its clients avoid Argentina’s debt default in 2001. PIMCO distinguished itself in the 2008 financial crisis, and the word on the street and in the press was that PIMCO had better models, understood the world better, and could see what was coming. They predicted that Lehman Brothers was going to fail. El-Arian, the company’s CEO, and its CIO, Bill Gross, were geniuses.
Except that’s not true. Here are El-Arian’s own words from a recent interview:
So on the weekend in which Lehman Brothers failed, we were sitting in the investment committee room, and we were trying to predict what was going to happen. The history books keep on saying that PIMCO predicted the disorderly failure of Lehman because most of PIMCO’s clients made money after the financial crisis… That is simply the wrong interpretation. We never predicted a financial crisis. Let me explain to you what happened.
We had three scenarios on the board, and we had voted on the probabilities that we individually attach to each of those scenarios.
Scenario A, 85 percent probability. That’s the combined probability given that Lehman would not fail, that Lehman would be a repeat of Bear Stearns. A stronger bank would come in, take over the weak Lehman Brothers, and there would be no counterparty risk on Monday morning...
Scenario B, 12 percent probability, Lehman fails but fails in an orderly fashion. Why? Because no regulator would put the payments and settlement system in play. That is paralyzing to the real economy. That is destructive to livelihoods. Surely, if they allow Lehman to fail, it will fail in an orderly fashion.
3 percent was the probability we gave to Lehman failing in a disorderly fashion—the outcome.
So the notion that we predicted Lehman was completely wrong.
But why is it that we were able to completely reposition ourselves? Because we had a very detailed action plan for each of these scenarios. We knew who would be doing what when. Simple things like delivering the notice of failure so that you can re-establish positions, to other things like informing clients and trying to change your portfolio postures before others work out their own action plan.
And I say this because when you face unusual uncertainty, it doesn’t mean you get paralyzed. Nor does it mean you stick to one outcome that may happen, but you ignore everything else. It means that you do the hard work of saying, here are possible scenarios, and let me try and figure out what I would do if these scenarios materialized. And let me keep open-minded and know what data I’m supposed to follow, rather than get stuck to a baseline that ends up to be wrong.
It’s a lot of work, yes. But the cost of that work pales in comparison to the cost of not being ready for an outcome that you did not plan for.
I felt pretty lousy when I heard El-Arian say this. I had been in a senior leadership position at a competitor of PIMCO’s. I had gone with colleagues to the US Federal Reserve to warn the Fed about the bad things that were likely to happen. In fact, I think my colleagues and I had a better estimate of the likelihood of a disruptive outcome, a better model. And yet I didn’t push for a plan. The firm did okay, but we could have done better for our clients.
Some earnest people are trying to create better models to precisely predict how climate change will affect the economy and markets so that they can convince the markets to convince the public to convince politicians to steer us away from danger, much like how people in the past few months have waited for markets to tell us whether random tariffs that undermine international relations are going to raise or lower next year’s corporate earnings. I think this focus on models and market signals is mostly a waste of time and often counterproductive. Instead, we can think in scenarios and assess which outcomes we most want to avoid then figure out what work we can do to achieve that goal. What we must not do is trust the optimists.
Por qué escribo
Empecé a escribir ensayos sobre los solsticios y equinoccios hace más de cinco años. No intenté publicar en revistas de economía, ni en la prensa financiera, ni en medios especializados en climatología. Tenía la firme convicción de que cualquiera podía entender los fundamentos de la ciencia del clima y que el camino a seguir era que todo el mundo empezara a planificar, sin esperar a que el sector financiero mostrara el camino. El alcance de la incertidumbre política y profesional en el mundo se ha ampliado desde mis primeros ensayos, mientras que el abanico de posibles resultados climáticos ha cambiado a peor. Estamos en 1,5°C, es probable que estemos en 2,0°C en una década más o menos. Las emisiones en 2024 fueron más altas que nunca. Y los inversores están distraídos por una granizada de información que sus modelos apenas pueden procesar.
Antes de subir al escenario en la reciente conferencia sobre el clima con la etiqueta del precio del clima de 200.000 millones de dólares, estuve charlando con un hombre que iba a participar en el panel posterior a mis observaciones. Había trabajado para empresas y gobiernos de todo el mundo como ingeniero petrolero y gestor de grandes proyectos de infraestructuras como ferrocarriles y parques eólicos. Ahora supervisa la construcción de submarinos nucleares para un país de la OCDE. Sabe mucho de riesgos y planificación de escenarios. Me preguntó qué iba a decir a este grupo de inversores. Le conté lo esencial y le enseñé algunos mapas Probable Futures en mi teléfono. Se quedó impresionado, me dio las gracias a mí y a mis colaboradores, y luego esbozó una sonrisa irónica, ladeó la cabeza hacia el público y dijo: "¿De verdad crees que esta gente va a escuchar? Lo único que le importa a este grupo es sacar el máximo partido de todo". Le contesté que estaba completamente seguro de que merecía la pena intentarlo. Y que su decisión de invitarnos a los dos era quizá una señal de que los optimistas estaban recapacitando.
Adelante,
Spencer