Portfolio Society by Ivan Ascher

Rating: ★★★

Portfolio Society was, surprisingly, a decent introduction to both finance and Marx. It’s quite readable, and it’s endearingly goofy - there’s a half page in the endnotes that imagines characters in The Lion King worrying about saving for their child’s college education.

Here are some things I liked and some I didn't:

Reflexivity in borrowing

"[T]o the extent that an individual's risk profile comes to determine the terms on which they are allowed to borrow, the more 'objectively' risk is measured, the more 'objective' it becomes - that is, the more it comes to govern social life reflexively, most amplifying what social patterns already exist - but doing so under cover of scientific neutrality"

This is an interesting idea that I'm going to try to make concrete. An example is a borrower who is perceived to have a higher likelihood of default and so has a lower credit score. When the borrow, they do so with a higher interest rate and harsher terms. This makes the more likely to fall behind on payments or eventually default, so they prophecy that the borrower was higher risk was partially self-fulfilled.

Portfolio Society is a good companion to The Time of Money

It was interesting to read Portfolio Society after The Time of Money by Lisa Adkins. The two books cover some of the same ground – they both talk about speculation, risk, and financialization in daily life. There's more assumed knowledge in Adkins's book, so it was nice to fill in some of the gaps by reading Portfolio Society.

An example: in The Time of Money, Adkins talks about lending that is made on the basis of payment instead of repayment – the idea that some loans are made without any expectation that the principal will be paid off. This is an interesting idea, but Adkins didn't include examples of this principle in practice. In Portfolio Society, Ascher gives an explicit example: "revolvers," borrowers who can only pay a bit of interest each month but who don't default.

Some funny lines

  • "What would it mean, then (with apologies to Marx and Thomas Piketty) to write Capital in the twenty-first century?"
  • "This chapter may be especially trying for French readers who – according to Marx – are notoriously impatient"
  • "I wonder, though, whether it might be the racetrack, rather than the casino, that provides the better metaphor - or better yet, the bettor metaphor"

A miss on "absurdity" in finance

Here's Ascher: "Today, if I were to claim that the likelihood of a Greek government default stands in a relation - any relation - to the likelihood of a hurricane flooding the city of Orlando, the absurdity of the claim would also be manifest. Yet as our own analysis suggests, the categories of contemporary financial economics consist of precisely such absurdities."

Sure, when you write it out like this, it seems aesthetically silly. But the unrelatedness ("absurdity") of these events to one another is what makes them useful together. If you want a portfolio that won't get knocked out by a single type of risk, you have to choose assets that aren't correlated.

There are a few other passages like this where I'm pretty certain the Ascher knows better but goes for it anyways because it sounds fun.