Creating Wealth in an Ironic Financial Environment

Graphic of money emerging from cartoon head
Is wealth creation possible amidst irony? We certainly hope so, because the financial world seems intent on placing itself in ironic situations. The business phrase that “you don’t know if you have a great company until it has gone through a near-death experience” is attributed to Jack Welch a former CEO of General Electric Company (GE). The financial crisis of 2008 put GE, which by then had moved from being an industrial company to being a financial company, into a near-death experience. The irony is that the experience is dismantling GE, not strengthening it. The financial arm left long ago. The health care arm left recently. The power sector arm will leave soon, and GE will become its aviation arm.

Less comic and more serious is the US Federal Reserve’s position. It is trying to use the tools at its disposal to contain an economy intent on expanding from a Covid-era malaise. It probably should have jawboned earlier to the US administration that monetary tools would not be sufficient to counteract a fiscal policy that was throwing cheap money at a strongly recovering economy. It is not a question of whether the Fed is “serious” about its intent; it is about its ability to hold back the tide.

And if it is somehow successful, the end result is throwing Americans out of work. Perhaps a few different quotes from notables in various fields could show us the way to wealth creation amidst the irony. “You can’t really invent something from nothing. For me, innovation comes from negotiating … improvise … (to find) that unexpected reality.”.[1]  Perhaps the takeaway is use what you have? Another idea: “My greatest mentor told me that the most important ingredient in Italian cooking is the one you leave out.”[2]  Perhaps the idea is don’t be too smart by half?

“I’m always analyzing situations with my colleagues – what went wrong, how to develop—not because I want to criticize them, it’s simply because that was the only way to improve my next game.”[3] Perhaps the takeaway here is to  recognize the power of combining the positive and negative aspects of collaboration?

We believe in the power of collaboration. Our, and your, managers have completed a second very successful year. The investment returns of our Global Investment Performance Standards (GIPS) growth composite covering almost 90% of assets under management at Woodstock are, in a word, spectacular, over a very long period. We are trying creatively to use what we have. Our Woodstock “one pager” (view here) describes the combination of services offered, the structure at Woodstock, and the skills we’ve accumulated here as unique and very beneficial to our investment clients; we believe this to be true.

The English phrase “too smart by half” is wonderful. Part of our job is to say “no” to bad ideas which may be currently in vogue in financial circles. Our predecessors have done that for 70 years before us and we think we’ve been doing a good job of that for the last 20. Twenty years ago was our own “near-death experience” (in the form of a significant management change). We think, perhaps, we’re weathering well.

— William H. Darling, Chairman & CEO

1 Christina Quarles, “Imagination,” WSJ Magazine, Nov. 2022, p. 52
2 Missy Robbins, “Imagination,” WSJ Magazine, Nov. 2022, p. 52
3 Judit Polgar, “Power,” WSJ Magazine, Sept.r 2022, p. 60