Where I Stand — Brian Greenspun: Investor trust is lost

Tuesday, July 16, 2002 | 8:53 a.m.

MY MOTHER is the smartest woman I know. She always has been.

This is not a new revelation. Rather, it is a confirmation of what I and others have known for a long time. Whether in matters of family, or social or business concerns, her innate sense of right and wrong, coupled with a healthy dose of common sense, has never been found wanting.

Well, maybe on a family matter here and there, but when it comes to people and, especially, people in business, there is no one whose counsel I would rather seek.

Sometimes we take our parents, our mentors and our teachers for granted as we make our way in the world and achieve a modicum of success. We all suffer now and then from the same malady -- we think we know what we are doing. This was brought home Monday while speaking on the telephone to a friend of mine, Marc Sherman, in New York.

Mark runs money. By that, I mean Marc is like hundreds and thousands of really smart people in this country -- many of whom live and work in the Big Apple because that's where the money is, or I should say, was -- who invest other people's money in the various markets of the world and in a number of business opportunities that are awash on the Street in New York.

Years ago, when my family made a little score, I set about to meet as many of these smart people as I could, to learn which of them could and would invest our little windfall better than I could ever hope to do. As it has turned out, practically anyone on the Island of Manhattan could fill that particular bill.

I remember coming back home and reporting to my mother all that I had learned and what I had done with that knowledge to protect the family nest egg. I showed her charts and graphs, brochures aplenty and write-ups in Forbes, Fortune and The Wall Street Journal, all extolling the acumen, virtues and uncanny ability of those I had chosen to grow small fortunes into larger ones. I, for one, was impressed with my work. Mother was not.

The difference, of course, is that Barbara had been around the block once or twice and yours truly was just starting to figure out the difference between the minor leagues, where we had toiled for so very long, and the majors where the big boys played. After listening to what was then rational exuberance, looking at the computer printouts that filled my briefcase and supposedly kept track of every penny we had turned over to the experts for safekeeping, and hearing about how everything was coming up roses, she asked just one question:

"How do you know?"

"How do I know what," was my reply. My mother explained that all I had was a piece of paper telling me we had so much money here and so much money there. How, she wanted to know, did I know that was true and that the money was where the computer printouts said it was. Once I understood the question, the answer came quickly. Too quickly. "Because, the computer printout says it's so. They wouldn't lie."

Weeks later, Marc Sherman came to Las Vegas and met my mother. I am certain he impressed her with his knowledge and experience as he did me. That's when she asked him the same question, "How do you know?"

He turned to me and said, "That's the smartest question anyone has ever asked me." He gave her an answer similar to my computer printout one and we moved to other subjects. Barbara turned an eyebrow upward which is her sign that she still wasn't satisfied with the answer.

Fast forward a few years to Monday. The conversation between Marc and myself is all about the lack of confidence on Main Street and Wall Street that the numbers the big boys are giving us are, in fact, real. It is about the fact that President George W. Bush and Vice President Dick Cheney may be the two worst people to restore that confidence because of their own alleged skirting of propriety and their refusal to come clean so that the people can get past the distraction. And it is about the fact that people all over the country who have lost $2 trillion in recent months are postponing long-awaited retirements and starting over to rebuild once healthy savings accounts. The mood, we concluded, was not good for anyone in positions of authority because the people were looking for someone to blame for allowing these bad guys to get rich at the public's expense .

That's when Marc harkened back to my mother's question some eight years earlier. "How do you know?"

For the first time in his lengthy career, one that has seen good times and bad, Marc Sherman told me that Barbara's question was not only the smartest one he had ever been asked but, based on what we now know, it was the most prescient. That's because Marc's business and the business of capitalism rests on a foundation of honesty, and what we have been witnessing recently is a shakiness in that foundation that may cause the entire house to collapse.

Some people, we now know and, frankly, always have known, are dishonest. What they tell us is not true. They lie to us to advance their own interests at our expense and make sure that they get theirs long before we get ours. That's not everybody or even a majority of everybody, but it is enough people to make us wonder just how deep into the system the dishonesty goes. That results in the lack of confidence by almost everybody that is driving the markets down to depths they have not seen in many years.

For my friend Marc, his lament was that it was difficult to know just who to trust anymore. His instincts are that there will be great opportunities because of so many people's economic misery but even he, an expert, could not be certain who was telling the truth and who wasn't.

And that is the problem with which we are all faced. Wars and terrorists notwithstanding, ordinary people are having their lives and their life savings turned upside down to the point that they are living in the midst of an unsettling insecurity. As they look to our elected leadership to solve the problem, they get little solace because, true or not, the allegations continue that the foxes are guarding the henhouse.

I don't know how this whole thing is going to end other than the certainty that it will. And when it does, I know one thing for sure. When my mother asks me, "How do you know," I am going to have a better answer than the one I gave her years before.

That one relied on the honesty of others. The next one will have to rely on something else.