Sensational! Against the tide of shallow value (Part 1)

What does the world weigh? Its scales are crooked. It weighs life and labor in the balance against silver and gold. That will never balance, it spills a lot of life that way.

Walter M. Miller Jnr “A Canticle for Liebowitz”

We need to campaign for real value

Real value refers to those things which have meaning in sustaining and supporting life, whether human or otherwise.

Shallow value refers to value priced beyond its worth; where value is the product of hype, glitter and market hysteria rather than of human and ecological need or meaning.

It is time to value what is precious to us all. The water, food and air that give us life, the shelter and warmth that allow comfort, the security of place, equitable income, education and communication that allow us to plan for our and our children’s future and the ability to develop, share, discuss and distribute ideas about the world and our existence.

Swamped by shallow value

Shallow value dominates our media, our discourse and our markets.

Shallow value is the triumph of sensation over meaning, surface over depth and gratification over satisfaction. It is by no means restricted to the obvious and literal elevation of image over substance in the media but has increasingly pervaded the everyday, becoming the base currency of capitalism itself and influencing the very core of how we understand and value what is worthwhile.

Capitalism has come to depend upon sensation to sell its products; brand has become the medium for translating a set of corporate behaviours, undertaken to maximise private profit, into a set of implied emotions and sensations. Buying a product or wearing a brand, capitalism implies, will help us to be who we want to be, to be happier, more beautiful, better and more fulfilled people.

Of course this is nothing new, sensational bubbles have been a feature of markets for many hundreds of years. More explicitly, the foundations of modern advertising consciously used and adapted the then emergent science of psychology for the purposes of linking products to a buyer’s sense of self and self-worth.

Alastair McIntosh, the scholar and activist, has written extensively on the issue, related to tobacco marketing and the pornography of consumerism. In his logical and emotional tour de force “Hell and High Water” (2008) McIntosh summarises consumerism’s deliberate “hacking” of psychological circuitry as follows “Could this be the core dynamic by which consumerism sustains itself? Addictions are powerful precisely because they taunt us with our heart’s longing. But they fake it. They short-circuit and actually block off the real thing – the focus of our ultimate concern.”

Building upon McIntosh’s thesis, I would argue that this sensationalist agenda has gone far further than merely representing the (now) unspoken design principles of advertising and marketing, it has also become unconsciously embedded within the very DNA of every facet of economic and financial activity, warping our conceptions of what is valuable, mistaking shallow economic price for real value.

The fetishisation of financial markets

One of the main reasons financial markets struggle with real value is due to the problem of economic externalities. These are the environmental, social and economic costs and benefits which either take place “outside” institutional accounts or occur across the balance sheets of multiple actors, stakeholders or proxies. The reconciliation and adequate pricing of economic externalities has become a major source of activity for environmentalists and economists seeking to address systemic and unpriced risks and market failures.

The problem of externalities becomes much, much more problematic when we consider the active disinterest of modern financial markets in their original, fundamental purpose. Financial markets first grew as a way of providing financial resources to agricultural and mercantile enterprise, allowing endeavours to be undertaken in expectation of future reward. For instance, to allow a farmer to buy next year’s seed on the promise of this years’ crop or a merchant to invest in stock for the next sea voyage in the expectation that the current one would land and its cargo be sold.

Financiers supporting such endeavours would of course need to make an assessment as to whether the investee in question was likely to be able to make good on the debt – and the way that they organised and conducted their business was therefore a key area of judgement for investors.

Today’s markets in listed companies are theoretically no different – representing a set of companies seeking investment and requiring a judgement on behalf of investors as to whether those companies have the strategy, risk management and staff capabilities to execute that strategy and deliver a return on investment.

It may therefore be presumed that an interest in, and analysis of, the fundamental viability, utility and longevity of those companies would be an essential area of interest for investors. While this is certainly the case for a wide range of individual investors, it is not necessarily true for the market as a whole. Market movement and the behaviours and inferred intentions of other market actors have become more important than the analysis of company fundamentals.

Market movement has become king, coupled with the rise of automatic, sub-second trading technologies, investors have become more interested in making sure they are not left stranded by market hysteria than acting as financiers and stewards of companies.

The UK economist John Kay entertainingly explores this fetishised market in his Parable of the Ox, which describes the perverse development of a market focussed solely upon market actors (experts in the art of Ox weighing) rather than upon its original purpose (weighing an actual Ox).

I would additionally argue that beyond the pornography of marketing and advertising, beyond the mistaken belief that price equals value, beyond a focus upon the market rather than the investee, there is one further perversion of real value that we have allowed to take place, the belief that just because a thing can be traded, that it should be.

Part 2 of this post explores the sensationalism of price and describes a market capable of defining and trading the real value which sustains us all.

This article was originally published (with the odd minor difference) by Green Conduct  on 25/1/2013.