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The Ethics of the Wolf of Wall Street


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What was the $1.8 billion irony they deliberately didn’t tell you about in the movie, The Wolf of Wall Street?

Spoiler alert: This piece contains spoilers, both for the film, and for people aiming to make a quick buck.

Mark Hanna: “The name of the game, moving the money from the client’s pocket to your pocket”
Jordan Belfort: “But if you can make your clients money at the same time it’s advantageous to everyone, right?”
Mark Hanna: “No”

That’s one of the first insider lessons shared in the recent Martin Scorsese film, Wolf of Wall Street. The subsequent ‘lessons’ sink the characters further and further into a greed and lust driven moral cesspit.

We all know the well-worn path journey most finance films follow – a classic rags-to-riches story about a kid from the suburbs done good; the fast accumulation of wealth and trappings of success; temptation into ethical lapses; the inevitable fall; self-discovery; restitution followed by eventual redemption and forgiveness.

This film differs in that it doesn’t offer us a glimpse of a single redeeming feature in any of the characters. There is not a scene in the movie that depicts a single victim of the industrial scale theft. Perhaps victims would distract viewers from the voyeuristic pleasures of the self-proclaimed Wolf of Wall Street’s hedonistic lifestyle.

The ethics of the Wolf of Wall Street? None that I can perceive.

Journey of self-discovery? Didn’t happen.

Restitution? His victims are still fighting for it.

However, there are certainly lessons investors should take from this movie.

Markets are not precise calculators

On the trading floor in the movie, anything goes. That’s not my experience.
I’ve worked on large raucous male dominated trading floors in London. Boisterous joking behaviour, especially late on Friday afternoons, was certainly a feature. Working on the floor of the New York Stock Exchange sometimes felt more akin to a Turkish bazaar than an orderly office. Despite this, there was a clear and driving purpose and professionalism.

Investors seek rationale reasons for why markets fluctuate wildly in the short term. Sometimes the truth is more opaque – markets aren’t always rationale in the short term and market participants can influence that. According to Ben Graham, Warren Buffet’s great mentor – “In the short term, the stock market behaves like a voting machine, but in the long term it acts like a weighing machine” (i.e. true value reveals itself in the longer term).

Crime doesn’t pay

There is one great irony relating to the scam that enabled the FBI to catch the Wolf of Wall Street. One of his colleagues went to school with a shoe designer and used his personal connection to bring the new fashion company to market. They held onto 85% of the shares in the float and then sold them at inflated prices to their own clients, netting themselves $23m. It’s called a pump and dump scheme and it’s illegal.

The irony lies in events movie viewers don’t see. The fashion firm was Steve Madden, an incredibly successful designer shoe company. If the Wolf had acted honestly and simply held on to those shares, today that 85% share would be worth in excess of $1.8 billion, riches beyond his wildest dreams. Instead he fleeced his clients and went to jail.

The one thing about the Wolf of Wall Street they didn’t tell you was that he wasn’t even very good at basic finance.

Scammers play the same con

“My club is so exclusive – you want to be a member”. The Wolf of Wall Street didn’t say that to his potential investors/victims but he could well have. Instead, they are the words of another New Yorker, Bernie Madoff. These scammers only offer their services to a ‘select group’. Their insider secrets will supposedly make you money quickly and safely and if you ask any questions, you’re out.

You want to know the real investing secrets? Huddle round and pull it in close, I’ll share them with you. Bring it in closer & keep your voice down.

THERE ARE NO INVESTING SECRETS! There are NO safe ways to quickly get rich. The number of times I hear similar spruikers (albeit on a smaller scale) pitch their snake oil simply infuriates me.

I am passionate about finance and believe ethics should be embedded into how we serve our clients on a daily basis. This movie is no reflection on that and the fact that the self-proclaimed Wolf of Wall Street is regarded by some still today as a person somehow worthy of respect leaves a bitter taste in my mouth.

 

Tim Mackay CFP®

Quantum Financial Services

 

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