Hacking Financial Markets For the Common Good…?

Being involved with FairCoop has piqued my interest in the direct use of finance for activist means, and reading Brett Scott’s excellent “The Heretic’s Guide to Global Finance: Hacking the Future of Money”I have become aware of various attempts to do just that. Whereas FairCoop (and the related cryptocurrency Faircoin) seek to establish a parallel financial ecosystem based around social justice and fair trade, there are other projects attempting to ‘hack’ the mainstream financial system in order to use it as a means to increase equality in the world rather than, as generally seems to be the case on looking around me, to substantially decrease it.

I recently had a sort of vision of what could be possible when I recalled seeing a timelapse video of Dubai growing out of the desert nothingness into a large city within just over a decade. This is evidently due to two things: oil and capital investment and speculation in oil. Whatever one thinks of Dubai, when looked at on the macro level this kind of growth has a miraculous quality to it, showing that there is nothing humanity cannot accomplish when we really put our minds (and our money) to it. Imagine the same kind of breakneck growth being applied to putting solar panels on roofs, switching cars to renewable energy, converting the armies of the world to disaster relief outfits, building solar desalination plants and hydroponic vertical farms, regenerating cities like Detroit which have been abandoned by traditional capitalism… yes all of this at present is ‘pie in the sky’ idealism, yet all of this is becoming more and more of a necessity.

Can it be that the power to really transform our planet lies right in the ‘belly of the beast’, in the financial system? For too long activists have turned away and self-righteously chosen to demonise this power. Any Jungian knows that when one turns away from a great dark power, it has the distinct tendency to devour one – and this is of course what is happening. We need to shine a light on the system, and as Brett Scott suggests, infiltrate it – here’s an excerpt from his book:

DAS KAPITAL LLP: GOING LONG THE REVOLUTION WITH MARX’S HEDGE FUND

In 2011 the Guardian blogger Joris Luyendijk quoted me as saying ‘Karl Marx would have made a fantastic hedge fund manager.’ It predictably caused howls of outrage in the comments section, but I never meant it in a literal sense. I was suggesting that the best hedge fund managers are characterised by a certain disruptive tendency, an ability to cut through herds of conventional investors. This is not to romanticise hedge funds, but deploying money into a situation is similar to making a statement of belief- if your money goes against the herd, it’s a bit like saying ‘up yours’ to them. There are even hedge funds that set themselves up as ‘corporate raiders’ or ‘activist funds’ that deliberately challenge company management.
[…]

Activating the Financial Drag Queens

[…]Why isn’t there an Amnesty International LLP, gradually buying up stakes in companies with poor human rights records, demanding accountability while using the dividends to fund the dissent? For many NGOs, part of the answer is lack of funds, and the rest is ideological opposition to the idea. The financial system though, like the internet, is a networked technology of power which can be used in unusual ways. If you feel authorities and large corporates are dominating the internet with patents, firewalls and intellectual property lawsuits, you don’t turn off the wireless, you get creative. Who’s to say that we can’t wear the garb of a notorious financial institution in a heretical fashion.

A friend of mine who worked for 12 years in an investment bank had an idea of starting a hedge fund that would attempt to extract money from the oil sector and redirect it to the renewable energy sector. It’s interesting in principle, but incredibly hard to execute in reality. It’s important to take these ideas with a pinch of salt. Perhaps the point of an activist hedge fund is not actually to work in a conventional sense, but rather to create publicity, to learn, and to act as a subversive ‘drag queen’ joker bending the rules. On the other hand, so few people have experimented with the idea of creating subversive hedge funds that it’s hard to know what the potential might be. The only way of finding out if the dynamics of trading can be harnessed in a positive way is to experiment boldly. There is nothing to lose … except money.

He gives some examples of existing hedge funds which go against the grain:

Well-known examples include:

  • The Children’s Investment Fund: A fund started by Chris Hohn. In 2012 it launched a campaign against Coal India’s directors, suing them for breaching fiduciary duty (aka ignoring shareholders). They have an attached charity which receives a portion of the firm’s profits.
  • Greenlight Capital: A fund run by a poker-playing manager called David Einhorn which publicly bets against firms, much to their annoyance.
  • Carl Icahn: A corporate raider famed for terrorising corporate management teams. He views himself as a predator on a mission to destroy complacent CEOs: On his website,icahnreport.com, he quotes himself as saying ‘A lot of people die fighting tyranny. The least I can do is vote against it.’
  • Dan Loeb: A hedge fund manager infamous for buying stakes in companies and then writing incendiary letters of withering scorn to the company management teams.
  • Others, such as Pirate Capital, have been less successful, but are based on similar principles. Could it be that the mindset of a hedge fund manager can be strikingly similar to that of a campaigner? Certainly, the belief systems of hedge fund managers are expressed in financial direct action, albeit mostly for their own gain. Could campaigners battle it out in this realm too, by setting up truly activist hedge funds?

Looking into these funds gives a sense of what might be possible, although as Scott notes, the main raison d’etre of most of them does seem to be to enrich themselves, albeit by going about it in an unconventional way. However it does show that the financial world is not necessarily the ‘black box’ or ‘old boys’ club’ that many activists seem to believe it to be (of course many parts of it do indeed answer to those descriptions).

The Robin Hood Minor Asset Fund has already been featured on this blog and it might be this fund which is the pioneer for a new way of interacting with financial markets for social justice. The fund is set up as a cooperative which anyone, for the modest layout of €30 to become a member plus €30 for their first share in the coop, can join. All members have voting rights and can choose to share with commons-oriented projects any dividend they receive from the activities of the cooperative on the stock markets. This is a way of directly using the power of financial markets to empower the commons.

Other more overtly activist groups have been developing interactions with the financial world, such as Platform London and their Take The Money And Run event, designed to showcase how big fossil fuel and financial corporations attempt to ‘artwash’ themselves by sponsoring galleries and other artistic events.

Can we imagine a ‘Stock Market of the Commons’ in a decade’s time? Free trade hedge funds? Scores of activist shareholders insisting that companies do the right thing by the planet and ALL its people, not just privileged elites?

“The possible has been tried, we need to try the impossible”, as the great Sun Ra used to say…