A Good Economist Is Really Hard to Find Now

December 13, 2023 21:59 EDT
Dear FO Reader

Alexander Gloy is our trusted finance and economics author. He helps us understand the financial issues of the day, like the US debt ceiling or the role of oil in the modern economy. Alex also writes explainers on basic financial concepts such as money creation and passive investing.

Our trusted author grew up in Hamburg, Germany, a thriving port city near the North Sea. It’s the most beautiful city in the world, he says, when the sun shines. Never mind that it rarely does. If you ever come to see the city, Alex advises, bring an umbrella.

Hamburg is also a financial hub. Although Frankfurt is the home of Germany’s stock exchange, Börse Frankfurt, Hamburg too is filled with financial institutions and banks.

Alex got his start in financial writing early. He started an amateur investment fund while he was in high school. Regardless of his young age, Alex took the job seriously. He wrote a monthly report for the fund that quickly got out of hand — it grew to 50 pages. Alex had to sneak into his dad’s office at night to copy it. He distributed the paper by hand from his car. But despite all of Alex’s dedication, eventually, his friends confessed that they could hardly understand it.

Alex started his formal career with a traineeship at one of the major German banks. It seemed an inefficient operation. Customer transactions had to be typed in by hand using long codes that the clerks had to memorize. And Alex was soon disappointed to learn the business was all about savings accounts, certificates of deposits, and home mortgages, a far cry from the exciting world of stock trading.

In 1989, Alex got his first taste of the trading game. A colleague needed to step out for lunch, and he asked Alex to step in and help customers make options trades. He was hooked. So, Alex decided to make trading his career, and enrolled in a university to study economics.

In many overcrowded German universities, you’re just a number. Professors address huge lecture halls and will hardly notice if you show up or not. So, Alex chose to do his undergraduate in Fribourg, a small, historic, bilingual city on the cusp between French-speaking and German-speaking Switzerland. There, he found a cozy environment with smaller class groups, personable professors and old-fashioned blackboards.

Fribourg University also had a mock investing contest where the first prize was an internship at Credit Suisse. In his third year, Alex won with a risky, aggressive strategy that turned 100,000 Swiss francs into 600,000. Then, he turned his internship into a job, and the rest is history.

This, at last, was the exciting, fast-paced environment Alex had been looking for. People shouted and shuffled across the offices and the phones rang off the hook. Alex became first an analyst for German stocks, then a market strategist. Finally, he became head of European equities for Private Banking in Zürich.

In 1997, Alex’s wife, who worked for UBS, was transferred to New York. So, the couple moved across the Atlantic. That is how Alex ended up in the home of the largest stock exchange in the world. (Or at least the symbolic home — the real trading is now done by a big computer system in Mahwah, New Jersey.)

Soon after, the 1998 Russian financial crisis hit. Work was hard to find for a moment, but Alex managed to find employment with a German private bank. Now, he does private research and advises investors to improve their absolute return.

It can be a lonely life working the European markets from New York. When the markets open in Germany, it is 2:00 AM in Eastern Standard Time. Alex doesn’t begin quite that early, but he is up and out the door before most of his neighbors are awake. With these hours, you don’t even meet the people in the apartments next to yours. Not to mention that Manhattanites — who prefer to spend their nights inside in front of the television and their days in steel towers — are hard people to meet in any circumstances. This was doubly true during the COVID-19 pandemic.

Ever since the pandemic restrictions eased, Alex has looked forward to meeting other people in get-togethers. His favorite is the FO° Meetup, Fair Observer’s monthly meetup, in New York. It’s a wonderful opportunity to talk to people who are completely “out of your bubble,” people who talk about things you perhaps didn’t know existed. No one is trying to network or fish for a job. There is no pressure to produce anything, and the conversation flows freely. Usually, the good times keep going right until Starbucks in the Empire State Building has to close up shop! Then, some of the guests roll on to another venue, usually in nearby Koreatown.

It’s not that easy to start a meetup out of thin air. In Munich, Alex tried to start an investment meetup, but attendance was spotty and the group had trouble getting off the ground. Fair Observer has the advantage of a dedicated nucleus of interesting people. You can always count on someone interesting there to talk to. This attracts others, so there’s a lively group of regulars and newcomers each time.

How to write about finance and still be honest

Just as the FO° Meetup attracts a unique set of people interested in learning instead of immediate personal advantage, so does Fair Observer. The readers who come to the website are not looking for stock tips or trading strategies. This gives Alex the freedom to approach finance in the same way as others approach culture or geopolitics.

In some ways, the challenge of finance is that it is so abstract. Money itself is an abstraction of an abstraction. Paper notes stand in for what used to be gold notes. Gold notes could be exchanged for gold. And even gold was exchanged for goods and services. Gold was used to buy things for centuries before paper came around. It takes art to talk about a great system made of abstractions and keep all the workings visible.

What economists really work with are theories. You make your models and hope that they match reality. You can’t see or touch the economy. Yet you have to interpret it in all sorts of figures and numbers. Theories are fundamentally abstractions of reality as some would say is religion. Still, economists sometimes hold on to their theories with religious fanaticism. Instead, if you approach the subject with the humility of a scientist and the honesty of an author, you are better off in making sense of the world.

Given the difficulty and ambiguity of the market, it is possible to publish nonsense and get away with it. Alex found plenty of this type of “journalism” on Twitter and LinkedIn. However, these platforms gave him an audience that was a lot more like-minded than the readership of his childhood market report. But it also gave an audience to clickbait. Alex learned, to his disappointment, that an article would get the most clicks if its headline had the most doom and gloom. The bland, the technical and the informative almost invariably got ignored. In fact, Alex had hit upon a worrying phenomenon of our times: Serious finance journalism gets blown off as “not a story.”

Roberta Campani met Alex on LinkedIn and invited him to write for Fair Observer. It is a platform that will publish a story because it is enlightening, even if it is not exciting or sensational. It’s a publication that values nuance. And when it comes to the economy, we need nuance.

The most simple questions never have a simple answer. We asked Alex, “Does the free market exist?” He responded with an anecdote. Take a certain medicine that costs $800 a month, every month. If you were uninsured, it could bankrupt you. If you had insurance, it would cost you a fraction of that. And if you had the time and the luxury to search for coupons and call around and complain, you could get agents to bend over backward for you and give you a rebate. So, it’s capitalism for the poor and socialism for the privileged. But it’s not just that. It’s an unspeakably complicated mix of rules and procedures that create a patchwork of capitalisms and socialisms all knit together. So, the American market defies comprehension.

In the US, public schools get funding from local property taxes. So, if you live in an area with high property values, you can expect to get a good education. Unfortunately, if you live in a less wealthy district, you may not be so lucky.

Even during the subprime mortgage crisis, Merryl Lynch paid billions of dollars in bonuses despite needing a bail-out. There would have been nationwide outcry if something like that happened in Germany. In the US, we had Occupy Wall Street, but not a movement on a national scale that was capable of demanding any real reforms. The country didn’t punish New York for leading it into disaster. If people from Hamburg had created a crisis, you can bet that a few cars with a Hamburg license plate would have gotten their tires slashed.

But perhaps this kind of disconnection between the elite and the people is coming to Europe too. Sometimes, whistleblowers have their careers ruined. In one case that Alex mentioned to us, a whistleblower was thrown into a mental institution. All for questioning the orthodoxy and calling out the powerful.

One can see the problems, but it’s hard to see the solution. Everyone knows that something about the modern economy isn’t working. Unfortunately, instead of mature criticism, too many dissidents espouse solutions that are just as rigid as the orthodoxy. The heresy of Bitcoin is just as fanatical as the papacy of the World Bank. Meanwhile, thoughtful, principled opposition, opposition that doesn’t require one closing oneself off in an ideological corner, goes unheard.

Fair Observer is trying to break this deadlock by publishing thoughtful, original perspectives. In finance, just like politics, we believe that hard conversations and real engagement with the arguments are the only way forward.

Yours truly,

Roberta Campani and Anton Schauble
Communications & Outreach and Assistant Editor
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