Wealth in The Bank of Aristotle
Ron Duska
Legislation such as the Dodd/Frank bill has provoked much recent discussion of the fiduciary
duty of financial advisors. Most readings of the duty insist an advisor should look out for the interest, or
even the “best” interest of the client. While I have my difficulties with the notion of a “best” interest
(since it is difficult to ascertain what a “best” interest would be and one cannot have a duty to do the
impossible) at a minimum the advisor has a duty to put the client’s interests before their own interest.
or at least, like the golden rule, “Do unto others as you would have them do unto you”.
But, we should address an important issue rarely gets examined: “What constitutes the interest
of the client?” Usually it is simply assumed that financial advising and estate planning is concerned with
preserving or increasing or wisely distributing the wealth of the client. Hence the notion of “wealth
management”.
However, a moment’s reflection makes it clear that the concepts of “Interest” and “wealth” are
not unambiguous. For example, I might be “interested” in having a piece of cheese cake, but since I am
in need of losing some weight, having that cheese cake is not in my “interest”. I may be” interested” in
having a sleek new car like a Lamborghini, but buying one may not be in my “interest” because I cannot
afford it. Living in an era which promotes immediate gratification, we often forget that what we want
(what interests us) is not always what we need (in our interest). In like manner John Stuart Mill
distinguishes between what is desired from what is desirable.
I want to suggest that the notion of “Wealth” has a somewhat parallel double meaning. Most
likely our first referent of the concept of wealth is the amount of money or financial assets one owns.
Wealth management, from that perspective, becomes the development of financial plans aimed at
acquiring and keeping as much of one’s financial assets as possible. However, “wealth” can have a
broader meaning than that.
The ancient Greek philosopher, Aristotle, in his book The Politics developed a notion of what he
called “real” wealth. This real wealth is to be found in achieving “eudaimonia”, the Greek word for
happiness, which is best translated as living the fulfilled life. For Aristotle, life is fulfilled when one
strives for and possibly reaches one’s ultimate goals which are the final end or purpose for human
beings. All other goals are instrumental in achieving that goal.
Aristotle begins his analysis by portraying a character with a character deficiency, whom he calls
“the accumulator”. Accumulators as those who “… turn every quality or art into a means of getting
wealth. This they conceive to be the end, and to the promotion of the end they think all things must
contribute.” i This is clearly a picture of someone we would call greedy, and contrary to Gordon Gecco’s
claim in the movie Wall Street, greed is not good. As a matter of fact there is a long tradition which
views greed as one of the “deadly sins”.
In concert with that tradition, Aristotle points out that such an unrelenting search for wealth
cannot be a search for “real” wealth, because to pursue wealth simply for its own sake is inordinate and
unfulfilling. It is inordinate because monetary wealth is only an instrument not a goal in itself. Aristotle
asks:
“How can that be “real” wealth of which a man may have a great abundance and yet
perish with hunger, like Midas in the fable, whose insatiable prayer turned everything
that was set before him into gold…
Midas is the paradigmatic “accumulator”. He loved gold and wanted the power to turn
everything into gold. He was given that power, but when his touch turned all into gold, he
realized he had missed out on the really important things in life. We learn much from fables.
The Midas fable shows that monetary wealth, or its token, gold, is not enough. Monetary
wealth is certainly useful, an instrumental good, but only for something else, not for itself.
Midas was mistaken and confused about what would be fulfilling.
Why that mistake? As Aristotle says:
“The source of the confusion is the near connection between the two kinds of wealthgetting; in both the instrument is the same, although the use is different …
accumulation is the end in the one case, but there is a further end in the other, the
object of household management.”ii
So some, confusedly see the pursuit of money or wealth for its own sake as a viable goal. I have
often been bemused by those students, who, when asked about their goals, say they want to
be a multi-millionaire by age twenty five. It is disturbing when professors at the most
prestigious business schools in the world promote the idea that the purpose of markets
financial and otherwise is simply to allow people to make as much money as possible. The
characters in the book Liar’s Poker working for Solomon Brothers simply wanted to make as
much money as possible. The main goal of the financial gurus at ENRON was to make as much
money as possible for themselves and the company, in any way possible. These are paradigms
of people whom Aristotle describes as having a “disposition” such that “they are intent upon
living only, and not upon living well; and, as their desires are unlimited, they also desire that
the means of gratifying them; should be without limit.”
I have argued elsewhere that corruption occurs precisely when one is striving for a goal
which is unworthy of human beings. Accumulation of wealth for its own sake is unworthy of
human beings.
The point of the Midas fable is to show that monetary wealth, or its token,
gold, is not enough. Monetary wealth is useful, but only for something else, not for itself.
Certainly monetary wealth is a desirable thing, but as Aristotle says, it is an instrument for
other goals, and should not be sought merely for itself. For him, “real” wealth is that wealth
which can be used to attain further goals. Real wealth is wealth used in pursuit of the ultimate
goal, “living well”.
Thus we see that not all monetary wealth accumulation is corrupting. As a matter of fact, a
certain amount of wealth is necessary to living well. A recent study reported by Robert Frank, echoing
Aristotle, shows that to accumulate wealth in order to live better is fine. But notice that living better is
the goal, for which the accumulation is a mere means.
Aristotle makes an important and often overlooked point about wealth accumulation. What is
especially debilitating about accumulating wealth for its own sake is that you lose all sense of limits. If
gaining financial assets is your only goal, you can never be satisfied, since there is always more to obtain.
Further, if simply accumulating wealth for its own sake is final goal, there are no ethical checks on the
means used to accumulate the wealth. Whatever gets you to that goal is acceptable, since that goal
governs your activity. Ordinarily we guide and check our behavior by asking what goals we are trying to
achieve. What’s the point of what we’re doing? With accumulation for its own sake there is no point
except accumulation. Thus, whatever is necessary for the accumulation of wealth becomes acceptable.
This leaves us with two questions, the answers to which we can only sketch: What counts as a
fulfilled life, and what does all this have to do with financial and estate planning?
To the first question. “What would count as a fulfilled life?” there are various answers.
Recently, two authors, Charles Murray and Arthur C. Brooks, talked about determinants which
empirical studies show are necessary for such a fulfilled life. They identify four determinants, claiming
that a person to be fulfilled must be engaged in at least one of them: family; community; meaningful
work; and/or religioniii. One need not have all four, but having none would result in a miserable
unfulfilled life. This seems to be correct common sense and one can easily argue that having them is
much more important than having wealth. Aristotle certainly would agree with all of the above and
insist that a certain amount of financial wealth (sufficient to provide one’s needs) along with health and
friendship are usually necessary conditions for a fulfilled life, but such fiscal wealth cannot be the
governing goal of life.
In addition, Aristotle is echoed by Cicero, the profound Roman Stoic, who argues along similar
lines.
“Now, can anything be more foolish than that men who have all the opportunities
which prosperity, wealth, and great means can bestow, should secure all else which
monev can buy-horses, servants, splendid upholstering, and costly plate-but do not
secure friends, who are, if I may use the expression, the most valuable and beautiful
furniture of life? And yet, when they acquire the former, they know not who will enjoy
them, nor for whom they may be taking all this trouble; for they will one and all
eventually belong to the strongest: while each man has a stable and inalienable
ownership in his friendships. And even if those possessions, which are, in a manner, the
gifts of fortune, do prove permanent, life can never be anything but joyless which is
without the consolations and companionship of friends.” Cicero De Amicitia, section 15.
So mere monetary wealth cannot equate with the fulfilled life. There is though a question that
arises from that conclusion. If the above is true, what obligations does the advisor have to point out this
notion of “real wealth” to the advisee? I have known any number of advisors who worry about whether
and when they are obliged to warn their clients about not spending too much, or are acting in their true
interest. In discussing these situations with those advisors, I found they are quite concerned about
whether they have any ethical responsibilities in such situations, and if so, what they are. On what
grounds? Do we overreach when we claim that if it is an advisor’s responsibility to look out for the
client’s interest, it behooves that advisor to take note of the differences between fiscal and real wealth,
and develop ways to get the client to recognize those differences when they are relevant? Does looking
out for the interest of a client require the advisor to help the client examine the different notions of
wealth to see if being aware of those differences might help a client achieve a more well thought out
financial plan. Is it possible to make the case that the advisor has at least a minimal ethical
responsibility to make the advisee aware of the fact that there may be a difference between monetary
wealth and the “real” wealth of a fulfilled life?
Consider what you would do if you had Midas for a client? I would maintain that an advisor has
three obligations. Not to harm, to do good and finally to prevent harm where possible. If an advisor has
the capability of seeing that his advisee is on the wrong path, isn’t there a responsibility to at least warn
the client? I would think so, and the more dedicated advisors I have encountered in my work would
agree. Further, I would think that if there is an obligation to advise a client in accord with his or her
interests, those interests beyond simple wealth accumulation ought to at least be mentioned and
considered. What we need to do is ask seriously to what extent the financial advisor of the future has
the responsibility to get the client to consider whether and to what extent philanthropy, love of
others, is a necessary ingredient of the fulfilled life and how much that love engenders a requirement to
be met with some of the clients monetary wealth.
i
Aristotle, Politics, Bk. 1, Ch. 9.1258a13-14
For Aristotle, “household management” is economics. His notion of economics is always that of a management
of resources for the sake of something else, either the family, community or polis. The detachment of economics
from the common good is parallel to the detachment of business from everything except the pursuit of profit.
iii
I understand religion in this case as being bound or tied to something other than self. The etymology of the word
religion is that it derives from the Latin legatus, which means “tied”.
ii