Teaching Alternative Global Financial Games

I began reading Robert Rubin’s In an Uncertain World last night. I’ve been meaning to read it for two years. It has me thinking about global financial games and how they are taught.

Rubin devotes the first chapter to the Mexican financial crisis of 94-95 when he first became Secretary of the Treasury. Those familiar with the crisis won’t learn much new in the way of details about what happened. I pressed on into the second chapter.

In the second chapter, Rubin explains what he did when he first joined the Goldman Sachs arbitrage department when he was 28 years old. He played the mergers and acquisitions arbitrage game. He does a reasonably good job of explaining arbitrage in general and M&A arbitrage in particular.

I taught myself how to play the M&A arbitrage game back in the Nineties. I was involved in several acquisitions at the company where I worked during the Eighties and Nineties. My curiosity was aroused by how acquisitions were chosen and how the deals got done. But most of all, I wanted to know how one makes money off of the business deals. By the way, I never did any insider trading. That’s illegal and you can go to jail for a long time unless you can afford very expensive legal counsel.

I’ve played the M&A arbitrage game for my own account for the past seven years. I have reasonably sophisticated models that help me decide whether to bet or stay on the sidelines. The models are plugged into the latest financial data of companies around the world. I lose money most of the time, yet when I win, I make pretty good money for a guy goofing around on his computer.

I haven’t bet on anything for almost a year. Maybe, I have become risk averse in my old age.

The global capital game seems to tap into some sort of primal gambling instinct in many of us. As has been said many times before, it is not the money but the desire to win—the desire to beat one’s opponents and the system—that drives a player to the game.

Schools teach the global financial game at an early age. Students participate in fantasy stock market leagues where the players get play money and compete to see who can accumulate the most money over a given period of time. Schools have used this method to teach the elements of the stock market to students since I was a schoolboy. Thus are certain values subtly taught us in our youth.

One can imagine another kind of global financial game used for teaching purposes. The students would be the leaders of a rich country. The object of the game would be to see how much they, as a rich country, could improve the living standards of a destitute country. The team that helps the destitute country the most wins the game.

It would seem the alternative game could teach a different and important set of values.