On trust and respect

One of the wise students of Confucius, known as the philosopher Yu had this to say on trust and respect:

‘If trust (xin) is based on what is right or just (yi), speech becomes less complex.

If respect (gong) is given according to ceremony or customs (li), it distances shame and humiliation.

Then there is no loss to both kin and ancestors.’

[Analects 1 .13] [AL]

(James Legge and Hinton gave diverse interpretations on the passage; therefore I decided to look it up and wrote out a simple translation.)

Amid the current crises, students and investors may find wisdoms in the above passage worth remembering.

If we place our trust on someone or something that is not based on what is right (yi), there could be a loss not only to ourselves but also to our family, relatives, and to our ancestors. When you are affected they could be too. Think of the great wealth destruction of tens of trillion dollars in the US and in the world.

Investors in failing companies can also expect the CEOs to issue either nonsensical or complicated statements or blatant lies to gloss over the companies’ failures and insolvency. (Students or scholars may discourse over wrong points or hold on to incorrect practices because of mistranslations and misinformation.)

How many more times do investors need to hear that the titans - banks, auto companies, and insurers - are solvent and would be profitable going forward, before they realize they have been had?

If students and investors choose to rely on misinformation or on the unreliable - be they Gurus, CEOs, Masters of the Universe, Treasurers, or Central Bankers - there could be more pain, shame and humiliation at the end of the day.

Have we just as quickly forgotten their famous rhetoric of the day in 2008 –

‘Give me a bazooka, I will not use it’; ‘The ball park losses of US banks would be in the region of USD 100 Billion’; ‘We are solvent’; 'Our banks are solvent';‘The market has reached the bottom’?

All these before the huge bailouts now called rescues really started in earnest. Yes, many investors and those who were there to provide checks and balances were taken in by these confidences building rhetoric.

Ah, if only they had the foresight. Then they do not need to give long speeches to cover up based on hindsight.

And some of the Masters of the Universe still demand respect (and their bonuses)! Well, perhaps that was the customary practices of the US and Europe in the recent past.

But no more, I am certain, since the American and the European people are much wiser and inwardly raging. And so are people from all over the world. These masters of the universe had also forgotten that respect is given and not demanded. No matter how rich or poor they are.

And they bear no shame, since it was never their fault. It was the fault of the brokers, the rating agencies, the borrowers, China, the short sellers, the accountants, the guys who devised the various derivatives of mass destruction, and now the Government. Gambling addicts, drug addicts, and prodigal sons speak almost the same lingo as these bankers, don’t they? They will eventually blame their parents who had bailed them out from time to time until they go broke.

Luckily for these master villains, the US is no longer the Wild West; otherwise there could be thousands of lynching parties (including millions of foreigners) out looking for them! Now that was the customs (li)!

Talking about moral hazard, the US government may need to keep an eye on Harvard too. The esteemed university from where most of these ‘Masters’ graduated including a recent past president may be in need of a helping hand. It had also caught the gambling bug.

It was the fault of its students who taught the institution how to gamble! (There, given the ultimate excuse for a venerable institution, if it needs a huge bailout, oops, grant.)

How times change, but human nature and truths remain the same.