The original premise for my blog was to put in words and pictures what I believe to be factual and relevant in regards to real estate and our economy. Becoming disillusioned with what I had been seeing in our financial sectors, our legislators and national government, I sought explanation of how a situation could go down so fast.
I sat down months ago to discuss the then current financial climate with Robert Radoccia of The Capital Group, and investment advisory firm in Cranston. Robert’s father in law is a client of mine and thought Robert would best answer my questions. What began as a discourse on real estate, investing and economic challenges soon turned to the education I didn’t know I was looking for. Robert echoed Warren Buffett’s sentiments on greed and fear and their prominence in our society in relation to financial matters. I then realized how greed and fear affect nearly every aspect of our lives. In fact, the more I thought about it, the clearer the picture became. Everything in our society falls under the umbrella of Greed and Fear.
Don’t misunderstand me; I am not saying Greed and Fear are right or wrong. I’m just emphasizing their prominence in our DNA. To me, Greed is the desire to profit or own. And I mean that in a good way. We work hard; we should strive to mark our successes in any way we desire so long as we adhere to the laws of ethics. Fear is as unavoidable as our imaginations. Just ask any buyer who was in a multiple offer in 2004. How much OVER asking price were you willing to go to not lose the house to the five other offers?
Fear of loss is the greatest motivator, period. I sell houses. A buyer will offer a specific dollar amount on a property based on the relative desire to own it and the fear of not losing it to another bidder. The delicate balance of greed (the desire to own) versus fear (losing out on something one covets) will determine the level of motivation and thus the offer, counter offer etc.
For a seller the greed (desire / need to sell) is weighed against fear (don’t want to lose a qualified buyer) and is directly determined by whether the market is busy or not.
Make no mistake; I would not trade our society for any other. As a third generation salesman, I appreciate the opportunities provided by free market capitalism as much as anyone can. However, it is the abuse of these innate pressure points which angers me and questions my understanding of human nature.
When lending institutions created loan products backed by investor dollars that should never have been sold to many consumers that was an abuse of Greed and Fear. Was the risk really worth the reward to lull unqualified buyers into adjustable rate mortgages that have now decimated our landscape in the form of foreclosures? Buyers had equal culpability, however. The desire to own (Greed) often outweighed their own common sense (Fear) in these purchasing decisions. Did predatory lenders take advantage of some buyers who didn’t know any better? Yes. See Greed.
When the pillars of Wall Street denied insolvency and continued to urge their clients to continue investing in these funds that was the pivotal example of abuse of Greed. Everyone is entitled to a fair profit. I believe if one takes the risk, one deserves the reward. This country was built on small business and chance. But the outright larceny of investor and consumer dollars was nothing short of repulsive. Insert every Bernie Madoff story here as well.
And now, we have the outright scourge of society rearing their heads in the forms of “Loan Modifiers” and “Debt Restructurers”. Just fancy words for blood-sucking, opportunistic, leeches.
Elections are fought, won and lost based on applying just the right amount of fear into the voters. Fear of the same, fear of change, it doesn’t matter. It’s the same formula for both parties.
What has evolved from all of the above is a global sense of mistrust. Consumers don’t trust that their banks will be there on Monday. Banks don’t trust other banks to borrow their money. Foreign economies don’t trust the United States as a sound investment. Did you ever think you’d see that day?
Greed and Fear are part of us as human beings. Understanding its role in our society is fundamental. Taking this knowledge and using it responsibly is crucial for us to move forward from the state of affairs we are in.
