Memo to seniors

Employment in the financial sector, viewed by your recent predecessors as a sure thing — or at the very least a perfectly palatable panacea — has now become viewed as a pact with the Devil.

This state of affairs is certainly a far cry from yesteryear. Moses Taylor Pyne 1877 (head of the First National Bank of New York), Harold H. Helm ’20 (president of the Chemical Bank), R. Manning Brown, Jr. ’36 (CEO of New York Life), Donald C. Platten ’40 (also CEO of Chemical Bank), Jack Bogle ’51 (who turned Vanguard into a mutual fund colossus), John McGillicuddy ’52 (CEO of Manufacturers Hanover Trust and, after merging with Chemical Bank, the combined entity), Dick Fisher ’57 (president and then chairman of Morgan Stanley) and his classmate Bill Hambrecht (founder of famed venture capital and investment banking firm Hambrecht and Quist) all served Princeton as trustees alongside compiling extraordinary success in the financial world.

These were and are all men of unquestioned integrity with strong and deep involvements in civic affairs and adherents to the highest levels of personal conduct. In essence, they have embodied the Platonic virtues of wisdom, courage, moderation and justice. They are models worthy of emulation.

But just as Machiavelli turned virtue into virtu and bought into the notion that the end justifies the means, modern finance has apparently bought into the notion that almost anything goes as long as it leads to handsome returns. No longer do relationships matter. In a 2-and-20 percentage management fee world, transactions are all that count — and if the customer gets screwed in the process, well then the emptor had better be a little more caveat.

It’s hard to escape the realities that our “post-industrial” economy (thanks, Daniel Bell) is increasingly appearing to be “post-employment.” And the service sector simply requires less capital investment than industry, so a Wall Street that had evolved to meet the capital needs of major industry had two choices over the past several years: fold its tent up and go away quietly (highly unlikely) or find/invent something that looks like capital raising and generates fees like capital raising even if it wasn’t capital raising. Courtesy of our friends in financial engineering, Wall Street went the latter way — on steroids. Not content to simply peddle the toxicity, large investment banks then also saw fit to set up trading desks to play in the game. This is akin to going to a casino only to find the pit boss sitting next to you at the poker table while his employee dealer shows him the cards before the deal.

If those who are appalled at this turn and walk away, then — by definition — the system will be populated only by those who believe that everything’s OK. In that case, things only get better by regulation, which tends to be reactive and heavy-handed; it also reinforces the notion of a game mentality, so the remaining players merely get more inventive in their efforts to circumvent the new rules — further reducing the appeal to those who found it appalling in the first place.

Investment is an act of faith. The demeaning of our financial system is a forfeiture of the future. So if men and women who see finance as the cardiovascular system of a free-market economy rise to the challenge of overcoming the sclerosis that has set in, then there’s hope. A legion of new financiers — investment bankers, analysts, commercial bankers — who see the role as central to restoring a sustainable economy and, in turn, bolstering a sustainable society, can turn this thing around. It can’t happen overnight, but without this sort of shift in the mindset of young people entering the field, it will never happen.

This task won’t be easy. In some ways, it’s likely to be the Omaha Beach of your generation: assault on an entrenched force that enjoys the advantages of a well-fortified position. But don’t give up. Don’t become a barista — become a teller. Before you know it, you’ll be a platform officer dealing with real people with real financial problems. Switch into commercial lending and help small business owners grapple with the challenges in growing their headcount. End up as the president of a local bank — key to the community, instrumental in a network of relationships that serves as the sinews of local and regional life. And if the only thing that has to get bailed out is the cockpit of your boat at your lake cottage before you can take your kids out on the water, that’s not too shabby.

We’re at a tipping point: Either we reestablish an economy that is based on real products and services providing real value to citizens, or we slide further into the theater of economic activity. The era of physics majors crafting opaque weapons of mass financial destruction has to come to an end. It’s going to take a new generation of Don Plattens and Dick Fishers, taking the knowledge from their majors in philosophy and history and applying it in their real work, to create a new and better real world. That observation, like solid financial practices, should be readily transparent, not opaque. If you think that you could contribute to that sort of a restoration, please don’t let anyone scare you out of it. We really need you.

Tad LaFountain III ’72 has worked as an analyst, portfolio manager and director of research on Wall Street. He can be reached at aal3@alumni.princeton.edu.