I know a lot of you would really like to understand how the economic meltdown happened. Well, OK some of you, as we’re not all econogeeks like yours truly. It’s kind of hard to wrap your mind around everything that happened.
May I then recommend The Flaw which is available at Netflix? Weirdly it’s tag “what happens when the rich get richer” doesn’t really sum up the film’s scope, but I suppose it sells well.
It’s an interview-based documentary on the economic meltdown of 2008, told via interviewing people in the middle of it, analyzing it, and involved in it. Stringing together these interviews it creates a smart narrative – and does so without a lot of doomsaying and drama. It’s an oddly human take on a horrible occurrence, which is one of its strengths.
The human take really helps you understand what went on during the run-up to econocatacylsm. You can see different perspectives and takes that both make clear what went on, but oddly, also understand why people didn’t listen to those ringing the warning bells. It’s kind of hard to get listened to when people have fragmented perspectives, ideological biases, or are just plain greedy.
This take makes it easier to understand what’s going on and what happened – and how supposedly very smart people like Alan Greenspan helped lead us into disaster.
However, one of the most outstanding things about this very human documentary is it explains, without fanfare, how investment goes terribly wrong. It’s worth focusing on both as a lesson and to illuminate the value of this film to us pro geeks.
It’s about investment.
In theory, in our ideals, investment usually means putting money into something like a business or an opportunity. If the business or opportunity yields something of value that makes a profit, we make a profit. It could be a dividend, getting paid back with interest, profit sharing, etc. You invest with both risk and reward, and in theory your money they produces benefits.
I think that’s how we often view investments. It’s also not how a lot of actual investment goes, a lot of it is about buying assets.
When you buy an asset, like gold, and hope to profit from it, the goal is to purchase something that you see going up in value, then sell it. Asset-based investment is basically not about creating value, but that perceived value will increase or value will go up by other means. The asset does not change, people’s desire for it does, and you buy low and sell high.
Which sounds great, unless you’re one of the people who doesn’t get out of the market in time when people stop valuing said asset. This gets pretty bad when a lot of people bought an asset that “couldn’t go down in price” and got hosed.
You know, like houses. Remember when housing prices always went up? Yes, I do as well, and I laugh bitterly. I still recall people telling me to buy a house a decade ago and I told them it wasn’t going to be worth it.
So when you look at the housing part of the economic meltdown in America, you can see how it’s fairly obvious it was going to collapse at some point. Values of assets can easily get inflated by buying them and by perception, and collapse just as easy. When a notable chunk of the economy depends on this, then you have a problem.
You’ll notice we had a problem.
“The Flaw” explains this beautifully and simply. I actually felt myself suddenly gripped while watching this, realizing “wait, now I can explain it simply.” Which kind of led to this review.
So, sit down and watch “The Flaw.” It’ll help you understand the mess we’re in, and may make it easier to explain it to other people.
By the way, if the irrational pricing of housing reminds you of trading of stocks based on perceived value not actual value, rushes on things like Bitcoin, or internet stock frenzies, then you aren’t alone . . . what looks like investment may just be assets . . .
Steven Savage is a Geek 2.0 writer, speaker, blogger, and job coach. He blogs on careers at http://www.fantopro.com/, nerd and geek culture at http://www.nerdcaliber.com/, and does a site of creative tools at http://www.seventhsanctum.com/. He can be reached at https://www.stevensavage.com/.