(And as context and to emphasize that first point, I think that a huge portion of the financial industry serves only as a giant parasite on the productive economy, and that the financial industry bailout has been/continues to be an economic and moral catastrophe).[/quote]
I agree with this but I’m going to provide a (partial) defense for it nonetheless.
My basic argument is that: A lot of people love the Parasite. They may not realize it, but they do. Allow me to explain with an anecdote.
Arguably, active asset management is one clear example of the parasitical nature of the financial industry. Very few managers outperform on a risk-adjusted basis after fees. So, there’s this huge stream of fees that goes into the financial industry’s hands that’s not productive. But do a lot of folks actually get something of value out of it? I’d argue they do. What, you may ask. In a word: Hope. Most people think they can find that one or handful of managers that will outperform. And the hope that they will find or have found such a manager gives them warm feelings about the future not unlike those experienced by someone walking up to a black jack table. And when they go to sleep, they dream of how well their manager is going to do relative to the rest. And it makes them smile. And they go to sleep, wake up, rinse and repeat. In other words, while much of the financial industry doesn’t provide real tangible benefits to folks, it provides a lot of “psychic benefits” via hopes and dreams. How do you place a value on such psychic benefits? Well, you can’t. And that’s the beauty of it.
So, on the one hand, I agree that there’s a shitpile of “waste” in the financial industry. On the other hand, people still clamor to participate because, well, they always think it’s the other (stupid) people who are actually paying for most of it, because “their” managers/advisors are the “good ones.” And this gives them hope and makes them feel superior. And who can put a value on that?
