Monday, January 29, 2018

Risks and reward

(originally published in The Outreach Connection in April 1997)

(A crummy early article featuring a wildly overextended metaphor and an absurd dismissal of Lost Highway, but presented here for posterity)

A riddle: when is the stock market like the movies? Well, pretty much all the time actually…

Things will probably have moved on by the time this article appears in print, but as I type these words on March 28, 1997, it appears that Bre-X Minerals – the company that had perhaps created more fast millionaires than any other in history – was far less special than it appeared to be. Due to astonishing and widespread error, fraud or a combination of both, the results of the company’s exploratory drilling seem to have been wildly misrepresented; when it all blew up, the stock price fell from around $15 (which was already way below it all-time high, and that’s taking into account a 10-for-1 stock split) to $2.50 or so. Those who took the money at those higher price may feel a sympathetic flutter of anxiety but otherwise will remain unscathed. Those who still own the stock may – if they’re lucky – have the resources to shake their heads and move on to the next thing; others who’d loaned money against it may have been ruined.

Bre-X was worthless when it started out in the not so distant past, and may end its life worthless again, in the not so distant future, which would make it a grimly interesting microcosm of the market: a case where, in the absence of any new wealth being created, the profits made by some people must be more or less exactly matched by the losses incurred by others (after taking into account the commission skimmed off at every stage). We might hope that the redistribution of wealth will have had some beneficial aspects to it, but more likely the map of winners and losers will be utterly chaotic – which was really inherent in the situation from the start.

There are many things that might earn you rewards of various magnitudes: working an honest day’s work, using a unique talent, contributing something wonderful to the world – but the really big rewards are nearly always a payoff for having been prepared to take a risk. And although everyone claims to understand that, it always seems to create shock waves when fate provides a handy reminder of how the principle works.

You recall that when the Lloyds insurance market collapsed, investors who’d been raking in lucrative returns for years got all uppity, and in some cases had the audacity to demand that the government (i.e. the normal people) bail them out. Where did they think those cheques had been coming from, given that they hadn’t been doing anything tangible to earn them? More generally, the economy only grows at 2 or 3% a  year, if that, so for how long can you expect your mutual funds to grow at 12 or 15% a year (better understanding of which, in the foreseeable future, might be forced upon our own crazed mutual fund environment).

You could likely find a metaphor there for the success or failures of emotional relationships, for job satisfaction and for much more besides, but I’m not that ambitious. So, to the movies. Pictures that try to innovate, which take big risks, lose big as often as they win big, but when they pay off, you can live off them – spiritual sustenance-wise - for a year. The safest, most calculated pictures provide a sliver of entertainment but seldom pay huge dividends. As always, a sample of films presently on release provides a comprehensive overview of the principle in action. There’s not a current example of a film that reaps big rewards from taking big risks, but then you’d expect that to be the rarest combination. The other permutations are well covered though.

In Lost Highway, David Lynch certainly takes a chance by creating a narrative that is deliberately and inherently incoherent. Given that even the most fervent of movie buffs still find the cinematic pill easier to swallow if it’s got a rattling good yarn wrapped around it, this is quite brave in its own way.

Result? Well, let’s say the return underperforms the market. Lynch’s wacky sleaziness keeps things rolling along, but the fact that it all makes no sense turns out to be a constant annoyance that sabotages the movie’s minor virtues, and a sign that Lynch is in a real creative crisis.

Donnie Brasco, to my mind, takes no real chances. Some critics have praised it for giving a daringly downbeat view of the mob, but this is basically just a modest spin on familiar movie territory. Casting Al Pacino as a gangster isn’t exactly going out on a limb, either. But then, Pacino is the greatest actor of his age, and the movie is made by real professionals, so the result is like buying blue chip stocks – you don’t expect to hit the jackpot, but you know you won’t lose your shirt either. A highly satisfactory addition to your viewing portfolio (someone stop me before I overload this metaphor).

Finally, I don’t know what the book was like, but Billie August’s Smilla’s Sense of Snow looks to me like a movie that tries to hedge all its bets by throwing in something for everyone. The early scenes have a moderately idiosyncratic frostiness about them, but the movie soon starts devoting itself to the kind of action set-pieces we’ve seen a thousand times before. It’s true that such movies still succeed, but nowadays usually only when they’re really expensive (which is taking a risk of another kind). I don’t know about Billie August’s sense of snow, but if he thinks he can strike gold with this kind of stuff…well, there’s a little site in Indonesia he might want to buy into.

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