Category Archives: Money & Finance

Risk and Stewardship

Risk (n.): exposure to the chance of injury or loss; a hazard or dangerous chance

This dictionary definition of risk scares a lot of people. Who would want this “exposure?” Wouldn’t life be so much easier if we never had to take any risks? Maybe.

In many settings, there exists a concept of “no risk, no reward.” Some examples:

  1. You’re at a casino playing roulette. Taking a small risk of choosing one color means that if you win, you double up your money. However, if you choose a single number (a very risky move since you have a low chance of winning), and actually win, you multiply your money by a factor of 36.
  2. You’ve been given some money to invest. Putting it in risky stocks will yield higher returns if the stocks do well, but investing in a safe government bond will not yield nearly as much return (but will also not lose, disregarding inflation).
  3. Your doctor recently told you that you need to stay away from gluten in foods, but your favorite food has a little bit of gluten in it. If you take the risk of eating it and it doesn’t affect you, you reap the rewards of its deliciousness.
  4. You’re buying shoes online and notice that they’re cheaper than the ones in stores, probably because you can’t try them on. If you take the risk of buying them online and they actually do fit, you’ve saved yourself money.
  5. You’re currently in New York at a stable job that you find unfulfilling. A job offer comes your way that’s higher paying and would be in an industry that you’ve always wanted to work in, but it’s in Chicago. If you take the job, you run the risk of losing touch with your close friends in New York but if you’re able to move on and find a new community in Chicago, then the positive career move is a great reward.

An interesting thing that all five of these risks have in common is that the “safe” option is not necessarily riskless. Here’s why:

  1. If you put the money on a color instead of on a number in roulette, you are risking the potential of winning 36 times your bet.
  2. If you put all of your money in government bonds, you are risking the potential of higher returns in stocks.
  3. If you don’t choose to eat your favorite food, you are risking the potential of harmless deliciousness if the food would actually do nothing bad to you.
  4. If you choose to buy shoes in store instead, you are risking the potential dollars saved by shopping online for shoes that could also fit just as well.
  5. If I had chosen to stay in New York, I would have been risking the potential of a more fulfilling job and a new community.

Many people will react to this by saying, “Well, no. Risking something certain for something uncertain is foolish. A bird in hand is worth two in the bush.” Don’t get me wrong, there’s definitely wisdom to this, but on the other hand, what is certain? (Ecclesiastes 8:7)

Therefore one way to view our life is that it’s full of risk because we have no idea what plans God has for us, other than that they are good for us (Jeremiah 29:11). This may seem daunting, but instead of calling it a “risk-filled” life, we can also generalize this idea to the more familiar idea of Biblical decision-making. In every decision we make in our lives, big or small, we are both uncertain of God’s will in the matter as well as the outcome of each choice. I still remember the valuable lesson I learned about this during Spring Retreat of my freshman year. The speaker told us that sometimes, we just need to have faith that God will redeem our choices and just make a decision (Romans 8:28). For me, that says that sometimes I just need to take that risk instead of being paralyzed by indecision (which is also a decision in itself, but is one that is often driven by doubt). But is it really that big of a risk when we have a God who has already won the battle and promised us an inheritance through His son?

———

That’s about as much wisdom as I can offer on decision-making/risk-taking in a Biblical context. But I also wanted to touch upon financial risk and stewardship in Christianity because I’ve been asked more than once how one “invests” as a Christian. First, the dictionary definition of invest:

Invest (v.): expend money with the expectation of achieving a profit or material result by putting it into financial schemes, shares, or property, or by using it to develop a commercial venture

Just to clarify this definition, investing is not only buying stocks, property, etc. but is also putting money in a savings account (it’s a “financial scheme”). Investing is not putting your money in a checking account or putting cash under your bed.

What does the Bible say about this?

Go to the ant, you sluggard; consider its ways and be wise! It has no commander, no overseer or ruler, yet it stores its provisions in summer and gathers its food at harvest. (Proverbs 6:6-8)

God wants us to be wise with our finances and resources. We are definitely called to be wise and save our provisions when they are abundant so we can access them when we need them later. But how should we save? What is allowed?

Ship your grain across the sea; after many days you may receive a return. Invest in seven ventures, yes, in eight; you do not know what disaster may come upon the land. If clouds are full of water, they pour rain on the earth. Whether a tree falls to the south or to the north, in the place where it falls, there it will lie. Whoever watches the wind will not plant; whoever looks at the clouds will not reap. As you do not know the path of the wind, or how the body is formed in a mother’s womb, so you cannot understand the work of God, the Maker of all things.
Sow your seed in the morning, and at evening let your hands not be idle, for you do not know which will succeed, whether this or that, or whether both will do equally well. (Ecclesiastes 11:1-6)

I must admit, I pretty was surprised to find this verse in the Bible. Solomon essentially describes here in Ecclesiastes the financial concepts of hedging and diversification of risk. Because we don’t know what God has planned, we are to diversify our investments (and not just financial, since “sow your seed” can be applied to other things/actions as well) because we “do not know which will succeed.” Finally, the Parable of the Talents speaks more to this:

“Then the man who had received one bag of gold came. ‘Master,’ he said, ‘I knew that you are a hard man, harvesting where you have not sown and gathering where you have not scattered seed. So I was afraid and went out and hid your gold in the ground. See, here is what belongs to you.’ “His master replied, ‘You wicked, lazy servant! So you knew that I harvest where I have not sown and gather where I have not scattered seed? Well then, you should have put my money on deposit with the bankers, so that when I returned I would have received it back with interest.” (Matthew 25:24-27)

Therefore, whether it’s our spiritual gifts or our material gifts, God has given both to us. We are called to invest in and develop these gifts rather than be lazy and let them sit stagnant in the ground.

Even though the Bible has given us general guidelines on investing, what is allowed and not allowed eventually comes down to intent. Some types of investing are similar to gambling in that the returns are primarily determined by luck, and these should probably be avoided. Another heart check (that I will admit that I sometimes fail) is to ask yourself “Why am I investing in this/doing this? Is it to ‘make a quick buck’ or is it with the intent of growing God’s gifts?” The answer to this, as well as one’s risk appetite, can differ among people and determine whether investment decisions are wise or not.

I’ll leave you guys with a link to a secular explanation of why risk isn’t always bad because of the potential lost by not choosing to take a risk. I also know that many people are more risk averse than I am so I would love to hear your opinions on this!

“Risky? yes, there is so much risk if I don’t do it.”

Advertisements

Concerning Camels and Needles

“Again I tell you, it is easier for a camel to go through the eye of a needle than for someone who is rich to enter the kingdom of God.”

– Matthew 19:24 (NIV)

In this familiar quote by Jesus in the gospels of Matthew and Mark, a rich man approached Jesus and asked the Son of Man what he should do to inherit eternal life. Jesus replied that he should keep the commandments, and the man stated that he had kept them all. To which Jesus responded, “If you want to be perfect, go, sell your possessions and give to the poor, and you will have treasure in heaven. Then come, follow me.” The young man was sad because he was unwilling to do this, prompting Jesus to speak the above verse to His disciples.

In the last couple of years, this verse has always been one that elicited both guilt and concern in my heart whenever I read it. Here I was, working in an industry known for its high compensation, and here Jesus was, telling us how hard it is for people with great wealth to enter His kingdom.  Fortunately, God set my heart at ease last month when through UChicago’s InterVarsity Fellowship, I attended a Bible study that spent some time digging into this passage.

Note: I’ll go ahead and state the obvious. Clearly I am more likely to interpret this passage in certain ways since I want to enter the kingdom of God (who wouldn’t?). Because of this unavoidable bias, please take my thoughts with all the salt required to melt the snow in Chicago this winter.

Idols

First, the perhaps easier way out for someone like me. One way to interpret what Jesus said is to broaden the scope of the passage to that of idols in general, instead of focusing on the particular idol of money. The rich man was someone who claimed to follow the law and hoped to earn his way into heaven. However, Jesus knew that for this particular man (and for everyone else in this world), there was some “idol” that he would not give up for God, so He asked him to give up his riches. If this man idolized something other than money, Jesus would probably have asked him to give that up to follow Him.

Even though there are other idols that can keep us from God, Jesus did specifically mention worldly riches here  and we can’t ignore that. While I can’t claim to know His complete reasoning,  these are two possible points that Jesus may have been trying to address here. First, we turn to the historical context. In Jesus’ time, the disciples expected the great/rich men of the world to glorify the Messiah with their wealth and power (from John Gill’s Exposition); therefore, like many of Jesus’ teachings, this was a counter-cultural statement that demonstrated how radical Christianity was in that society. It is no surprise that the disciples responded in the following verse with “Who then can be saved?”

Second, there is something about worldly riches that makes it easier to corrupt into sin than just about anything else in this world. God is sovereign, but money can give us a false sense of power. God’s will is final and already done, but money can make us feel in control. God calls us to live humbly, but money can breed arrogance and condescension. While having money is not naturally sinful, it’s all too easy for broken human beings to corrupt it into an idol. It’s one of the most dangerous gifts that God can give us that is not inherently broken.

Grace

Another interesting question that came up in our study was what it meant to give up our idols for God. In this case, if we idolized our riches, do we really have to sell everything and follow God empty-handed? Isn’t that a little harsh? I think the answer is…maybe. On one hand, God blesses His people with talents, whether it’s spiritual gifts or resources, so that they may glorify Him in this world. On the other hand, “The Lord gave and the Lord has taken away.” (Job 1:21, NIV) If God asks us to give up something for Him, we should be willing to do just that. In my opinion, this latter point is important. It’s not necessarily about taking the gifts that God has blessed you with and getting rid of it all to follow God, it’s about the willingness to give it up without a moment’s notice if that’s what He calls us to do. Now am I saying that I am willing to part with my worldly riches instantly if God told me to do so? Well….

In verse 26, Jesus says, “With man this is impossible, but with God all things are possible.” We have a God who is willing to help us turn away from whatever our idols may be and toward His salvation. God can move mountains for us, He can make camels go through the eye of a needle, and He can love His people even though they have fallen into sin. There is nothing I am more thankful of, because otherwise, I’ll have to start looking for a very large needle.

Jack Gang is currently working as an algorithmic trader at a proprietary trading firm in Chicago, IL.

I Guess It’s Chocolate

I originally wrote this post for Fare Forward, which is a sweet Christian publication written by and for young adults. You can read and comment on the original article at Patheos.

One of the misconceptions that recent literature on religion tries to take down is the idea that there is such a thing as “neutral” culture. Consider, for instance, the attention that Calvin College philosopher James K.A. Smith gives to the concept of “secular liturgies” in his book Desiring the Kingdom. There, Smith makes the audacious claim that seemingly innocent practices such as shopping at a mall actually shape us into certain types of people – people who think, feel, and move as if a better life was only a couple of purchases away. Participation in the liturgies of consumer capitalism – whether we intentionally want it to or not – condition us to become consumers, individuals who invest personal meaning and significance into the things which we own and buy. Our clothes, our car, our furniture all express who we are, personas attainable with but a swipe of the credit card. “I consume, therefore I am” is the mantra which unconsciously screams out from every television, poster, or billboard in our advertisement-saturated society.

In his book, Smith focuses his attention on places and events of particular identity-forming importance such as shopping malls, sports stadiums, movie theaters, and universities. These are “sacred spaces” of sorts, with their own rituals and communities of belonging that, in a way, compete with Christian liturgies of Eucharistic communion. Whether one is convinced or not, Smith’s analysis ought at least to give us pause about the habits embedded into our ordinary lives that might have larger behavior-shaping consequences than we would think.

Consider, for instance, the idea of having a favorite kind of ice cream. It’s a question we’re conditioned to answer from our very youth, from elementary school questionnaires to small group icebreakers, from college applications to password recovery security questions. Along with a favorite food and a favorite color, a favorite kind of ice cream is one of the necessary preferences to ensure that you’re not the awkward one in the circle whom everyone thinks had the deprived childhood. Though most start off with plain old chocolate and vanilla (with the occasional Neapolitan), youth quickly learn to diversify into the mint chocolate chips and Jamoca Almond Fudges. If you’re really sophisticated, it’ll be the Signature CreationTM at the local Cold Stone’s with a name like Cookie Doughn’t You Want SomeTM?

At the core, the question depends upon the seemingly innocent assumption that our preferences give some genuine insight into our identities. For most of us, this is so taken-for-granted that we have never really considered how odd it is to think that. Consider: it is not a story from our personal history that defines us, but an encounter – necessarily repeatable – with a particular commodity that merits the attention of those around us and, supposedly, breaks the ice. We have thus been ushered into a community of ice-cream-consumers which can now move on to tackle other issues in solidarity.

To be honest, part of the reason I’m writing about this now is that I’ve always struggled with coming up with a list of “favorites”. As far as I was concerned, most of the things we’re asked to have preferences on have little significance on what I actually cared about in life. Reading Smith’s book, however, made me wonder how much of our lives are structured by little encounters and rituals which try to get us to say something about ourselves in terms of, say, what we like (Facebook, anyone?), as if liking something is a primary determinant of who you are. The dynamics of consumer capitalism favor people who have strong preferences and who identify with them, but not everyone fits that kind of mold. When I go out to eat with my friends, for instance, a huge problem is often that no one actually has extremely strong preferences and we end up spending half an hour half-heartedly debating our options because most of us are more excited about eating with one another as opposed to eating something we “like”. That’s the way it always happened in my family. We ate whatever was put in front of us because it was what Mom made. There’s a kind of comfort in that sort of given-ness when things are outside our control. We still have preferences, but they are not the final determinants of our consumption. In this sense, family meals serve as a kind of counter-liturgy to the rhythms of the market. And in a world increasingly saturated by voices that want to give us the illusion that we can be in control – so long as we pay – it’s making more and more sense to me why Paul of Tarsus would insist so much that Jews and Gentiles can sit together at the same table. Before feast and eucharist were really separated, they played a similar role, telling us something important about our food choices: we eat because we’re family. So what if it’s pork?

The Lamb of Wall Street

“What are the odds that people will make smart decisions about money if they don’t need to make smart decisions–if they can get rich making dumb decisions? The incentives on Wall Street were all wrong; they’re still all wrong.”

– Michael Lewis, Liar’s Poker

To some of you, this quote may come across as unsurprising, given all that’s been said and done since the financial crisis over five years ago. You’re likely no stranger to how traders purposely sell complex and risky products to unsuspecting investors so they can get a higher bonus. You might know about the grueling hours investment bankers are forced to put in so they can rise up the corporate ladder, only to do the same to the new wave of incoming analysts. You’ve probably heard about the countless insider trading scandals by secretive hedge funds who control billions of dollars of this country’s wealth.

Or maybe you had no idea about all of this and you just knew that finance was a “prestigious” career where one could make a lot of money. This was me for most of my life.

Call me naïve, but having grown up in China, the Midwest, and Appalachia, I really wasn’t aware of any of this until a semester into my first year at Princeton University in 2008, when people jokingly (or not so jokingly) criticized my decision to study Operations Research and Financial Engineering by saying I had “sold my soul” to finance. My initial reaction was defensive: “There’s no way these people can do all these unethical things to make money off other people and actually get away with it. We don’t live in a world that broken. I’m sure they’re financially successful because of their talent and hard work.”

A few years later, I entered the world of sales and trading at an investment bank in New York and soon found out that the world was indeed that broken. During that summer internship, I often wondered if someone who claimed to follow Christ and live a life with the intent of glorifying Him could do so in such an environment. How could I glorify God when I worked in an industry where ethics and morals were often put aside in favor of a fatter paycheck? Fortunately, while switching jobs, moving halfway across the country, and dealing with the various life and work challenges throughout all of this, God has slowly but surely revealed to me how to have a gospel worldview within the finance industry.

How then will they call on him in whom they have not believed? And how are they to believe in him of whom they have never heard? And how are they to hear without someone preaching? And how are they to preach unless they are sent? As it is written, “How beautiful are the feet of those who preach the good news!”

– Romans 10:14-15 (ESV)

The first way is probably the most obvious: money. A Christian in finance is often (but not always) called to be a “sender” in the church both because he is financially blessed and also because his work-life balance usually makes it difficult to be a “goer.” The important fact to remember here is that this is not an inferior or superior position to be in. We are all given unique talents by God and in order for the body of Christ to function, every part must play its role (Matthew 25, 1 Corinthians 12).

At this point, cynical readers (I would usually be a part of this group, but I’m of course biased the other way in this case) may think: “Well, that’s easy for you to say. It must be nice to work in finance as a Christian. You get to give more to the church and live a wealthy lifestyle.” I believe that no Christian calling is easy if you put your whole heart into it, and I will talk more about that below. But with respect to money, I remember one of my college mentors challenging me before I graduated. He told me to “tithe until it hurts,” and that it would probably require me to give more than the 10% mentioned in the Old Testament. I was further convicted when I heard a sermon by Tim Keller in New York stating the same. It’s much easier for someone with $100,000 to give $10,000 than someone with only $100 to give $10.

However, it doesn’t stop here. I’ve met many Christians in the industry who think that financial giving is their sole calling from God. Except it goes much farther than just that.

“In a world where success is the measure and justification of all things, the figure of Him who was sentenced and crucified remains a stranger.”

– Dietrich Bonhoeffer, Ethics

When success of any kind is the ultimate goal, Jesus is pushed to the side and ethical/moral standards can quickly spiral down. In finance, where success is defined by profits, there is not only a gray area between what is permissible and not, but also one between what is permissible and what is right.  To help us discern where the lines are, Jesus told us that every law can be summed up in the Golden Rule: do to others what you would have them do to you. Would you want your client to hide those accounting records from you? That complex derivative that you’re selling to your counterparty, how would you feel if someone you respected/trusted made you the same false promises to cost you millions of dollars? How much commission would you want a bank to charge you for this transaction? I could go on.

However, holding strong to a set of Christian ethics can be very challenging in many circumstances. When performance is evaluated based on how much profit one generates, one may risk pay or even job stability in order to be ethical. In addition, there are many “prisoner’s dilemma” situations in parts of the finance industry. If even one person chooses to be unethical (charge an unnecessarily high premium, sell a risky product, etc.), others must often do the same or be at a severe disadvantage. How do we deal with these difficult situations and what can we do to make them easier?

(For more thoughts, some comments by others in the industry, and an example in trading, I wrote briefly about this topic here. Note: Some comments on WSO are not for the faint of heart.)

“So when we say that Christians work from a gospel worldview, it does not mean that they are constantly speaking about Christian teaching in their work…. It is a mistake to think that the Christian worldview is operating only when we are doing such overtly Christian activities. Instead, think of the gospel as a set of glasses through which you ‘look’ at everything else in the world.”

– Tim Keller, Every Good Endeavor

Giving money is not enough. Following a set of ethical rules is also not enough. In the end, the most important part of working for God is that we must live a Christian life in our work, regardless of what industry we are in. For business and finance in particular, Tim Keller tells us that this means seeing profit as only one of many bottom lines, which are all encompassed by a passion to work toward serving the common good. Some practical examples include: increasing the efficiency of financial markets, overhauling a company’s financial structure so it can be more productive, managing and reducing risk for clients’ portfolios, investing capital in companies that have world-changing ideas, providing financial advisory to clients, etc.

Aside from the tangible contributions by their workplaces, Christians in finance (and any other industry) can individually impact the workplace just with attitudes that are inspired by our beliefs. In Colossians 3, we are told “whatever you do, work heartily, as for the Lord and not for men.” In Matthew 6, Jesus says that we should “lay up for yourselves treasures in heaven.” These two verses remind of us of God’s righteous providence in all we do as well as His grace in sending Jesus to the cross to seal our inheritance in heaven.

While we will never stop learning what it means to live with this kind of heart, striving toward it can contribute much more to God’s kingdom than money or a set of ethical laws ever could. And it is only by His grace that we can live in this way.