You Lost All My Money

By David Mandl, 10 April 2001
Image: William Holman Hunt, The Scapegoat, painted in 1845-5

As the gamblers’ rules that make stock markets bullish in the first place start producing waves of losers, David Mandl wonders what the bear market’s scapegoating frenzy is all about and advises the dot com cry-baby losers to read the manual

In a wonderfully cynical essay by David Mamet, the playwright and former poker hustler applied the lessons learned from a shelf-full of gambling books to the no-win business dealings that people have to engage in every day. Attempting to distil that knowledge down to a single pithy statement, he settled on this gem, from George Bernard Shaw: “All professions are a conspiracy against the laity.” Even when going up against unavoidable landlords, bosses, and phone companies, it’s well to keep those words in mind. If, however, you choose to be dealt in on a fixed game, or take on business men armed with thousand-page rulebooks you’ve never even read, you’ve got no one to blame but yourself. For the unfortunate acquaintance of mine who invested his life savings in a taxi partnership without reading the fine print, or the steady stream of naifs who drop $20 bills in rigged three-card monte scams on the streets of Manhattan, the message is the same: “Our game, our rules.” Caveat gambler.

Nevertheless, people can get pretty upset about losing 80% of their money in a scheme touted as a sure thing by everyone from the secretary of the Treasury to Jesse Jackson. And really, who can blame them? So, the search for the person or persons ‘responsible’ for the stock market crash of 2001 – with trillions of dollars of wealth already destroyed – has begun. We’re already painfully familiar with the list of names it has produced: the celebrity research analysts who shamelessly touted worthless stocks to drum up business for their investment-bank employers; the net entrepreneurs who used Monopoly-money options to dupe their employees into working seventeen-hour days for sub-minimum wages; and the media pundits who reeled in hordes of slavering viewers with better-than-sex bull-market yarns. But was anyone’s arm twisted? Weren’t these cry-baby investors motivated by unbridled greed in the first place? And why didn’t they complain when the NASDAQ was going up?

Just as in the tired debates about responsibility under a ‘free market’ (do teenage girls have to emulate anorexic supermodels? Is anyone forcing billions of people to eat at McDonalds?) things aren’t quite so simple. Whose fault is it if people are ridiculed for having their money in a 2.5%-per-annum checking account? Or that otherwise sensible couples approaching retirement age can be persuaded that they’ll be living in the street in a few years if they don’t move everything they’ve got into the stock of some stupid ‘internet incubator’? Or that hastily trained ‘financial advisors’ cut corners when disclosing risks to their unsophisticated customers? There have even been tacit admissions of guilt here and there, as in the new Regulation FD (Fair Disclosure) requiring companies to release their financial data to everyone at once rather than to a select group of industry insiders (as previous practice had it).

Still, anyone born before last week should have known better. The bait-and-fleece cycle that we’ve just witnessed – complete with junk IPOs, ‘new economy’ gurus, talk of a 20,000% increase in the Dow, and proletarians picking stocks based on their zodiac signs and winning – was practically a cliché, a pantomime that’s been played out over and over again and well documented even by insiders (like Benjamin Graham, author of the 1949 value-investing bible The Intelligent Investor). Say what you like about the ‘science’ of economics, but there are certain rules that aren’t going to be broken even in this millennium: anyone who sincerely believes that everyone can be a stock-market multimillionaire simply hasn’t been let in on the joke. Or as the old saying goes: “If you’re in a poker game and you don’t know who the patsy is – it’s you.”

David Mandl <dmandl AT>