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Twenty five years ago, nearly to the day, I awoke to participate in PaineWebber’s first major conference on the financial services industry as part of the firm’s equity research team, which hosted the one-day session. This was to become the single most siginificant event of my early career. Nearly 600 people attended and the guest speakers included Don Regan, former CEO of Merrill Lynch and, at the time of the conference, Treasury Secretary under then President Ronald Reagan, and other industry notables.

(Fret not, I will eventually make this piece relevant to the blog’s subject!)

It was a heady time. The sharp decline in interest rates had begun to usher a very long period of prosperity and disinflation; our conference was to mark this exciting beginning of the “financial services revolution”. Companies new and old floated onto the market (like Morgan Stanley, Shearson Lehman, Countrywide Credit and others), a host of innovative financial products (like mortgage backed securities) blasted into the mainstream and an assortment of gigantic industry mergers were consummated; hopeful participants seizing onto the opportunity of becoming a “financial services supermarket” and engaging in Allfinanz (if you were German) or Bancassurance (if you were French). In any language, it signalled the start of an unprecendented boom.

This boom has ended in a bust and an exciting epoch has come to an end. Commentators will for decades speculate on what caused the crash–I will not list all the suspects here. In my view the greatest contributor was excess–things simply went too fast, too far–outstripping the abilities of managers to control risks, Governments to conduct proper and effective oversight and market participants to fully understand what they were doing. The price of this excess is and will continue to be enormous–a nd ultimately will far exceed the already shocking figures which have been disclosed. Excess has been very much the zeitgeist, in my view, and it will be many years before the final financial impact has washed through the system. The political and social ramifications, in my view, will be even more long-lasting.

Excess in evironmental exlpoitation is a contemporaneous and strongly related development. Many future generations will bear the price of our gluttony with respect to the consumption of natural resources–a nd its negative effects will take longer to reverse than the credit crunch–if indeed we can. One could list other similarly inspired examples of excess in modern society and the adverse impacts. However, one feature born of this excess–perhaps even in direct opposition to it–is the irreversible trend towards increasingly ethically oriented consumption, and the injection of social or environmental imperatives into the way businesses operate–this is the over-riding theme of this Social Business Blog.

I have no doubt that this new phenomenon, like all other important social movements, will one day come to lose force. Perhaps it will collapse as a result of its own excesses, or perhaps it will simply be absorbed into the way in which we all behave? Regardless, this is the exciting early stage and ought simply to be savoured–enabling those perennial optimists among us (like me) to imagine we have uncovered a method which will “right all wrongs”. Surely there will be disappointment ahead, but for that there is plenty of time. For now, as someone who had the good fortune to be sitting in a front-row seat for the start of the last epoch–join me at the start of a new one. This is to be the era of Social Business and Investment.

Rodney Schwartz

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