Samuel S. Weber, born in 1987, studied Business and Economics at the University of Basel. In 2020, his master’s degree in “Strategy and International Management” (SIM-HSG) at the University of St. Gallen was ranked first – for the tenth time in a row – in the global Master in Management ranking of the international business newspaper “Financial Times”. In addition, Samuel S. Weber deepened his study experience with practical internships, among them in investment banking and consulting.
Samuel S. Weber already took a personal interest in value investing during his bachelor’s studies and was introduced to this topic with the book “The Intelligent Investor” by Benjamin Graham. He found out that there are not many “real” value investors and, immediately after graduating, became self-employed as an independent wealth manager with an exclusive focus on this investment style. He was fortunate to receive active support from private individuals early on in his career. This group of clients has developed over time and now includes foundations and corporations. In 2018, Samuel S. Weber founded the SW Kapitalpartner GmbH, which manages its clients’ wealth and makes entrepreneurial investments.
In an interview with Xecutives.net, the financial specialist and business economist Samuel S. Weber deals with questions about money, investing, gold and the drifting apart of the financial and real economy.
Xecutives.net: Mr. Weber, you are a business economist, studied in Basel and St. Gallen and deal intensively with economic processes. You also help people and companies invest their money. Before we get into the details of investing, let me ask you how this has gone in the past. Let us go back 100 years. What did people back then who had money do with their money? Was the investment of assets an issue even then and how did one go about it?
Samuel S. Weber: Modern financial concepts, such as saving and investing, are quite young. For example, concepts such as pension assets, index funds, hedge funds and consumer debt (i.e. mortgages and credit card debt) are not even two generations old and only appeared after the second world war.
However, the concept of money is very old. The world‘s first currency is thought to have existed in Lydia – what today is Turkey – around 600 BC. Almost exactly 100 years ago (1919) John Maynard Keynes wrote the book “War and Peace”, in which he examined the economic consequences of the Treaty of Versailles and warned against burdening Germany with excessive reparation payments – a prophetic warning as it turned out in retrospect. From 1920 to 1937 he taught at Cambridge University and wrote his “General Theory of Employment, Interest and Money”, which continues to influence the thinking of many of the world’s best macroeconomists to this day. As you can see, 100 years ago money was already a topic that moved people’s hearts.
Xecutives.net: What exactly is money?
Samuel S. Weber: Money is a purely monetary unit that you can neither eat nor drink. It only has value if it can be exchanged for something valuable. And here, a lot has happened in the last two centuries. Since the beginning of the industrial revolution in 1820, real gross world product has increased a hundredfold, and since the beginning of the Enlightenment in the 18th century, even two hundredfold. Very importantly, per capita real gross world product has also grown massively during that time, even though – due to very high population growth – not quite as much as the overall real gross world product. Before the 18th century, both measures of wealth have stagnated for many millennia.
Actually, these impressive numbers massively underestimate the increase in prosperity. Indeed, income is measured in monetary units; The quality and diversity of the goods and services on offer are ignored. In 1776 Adam Smith wrote the „Wealth of Nations“ and identified specialization, division of labor and barter as key drivers for wealth creation. Networks of people continuously develop better and new products and services through knowledge and cooperation; with the result that the quality and variety of goods and services available today have increased massively in the last hundreds of years. 100 years ago, no amount of money in the world could have bought the wealth that we take for granted today – often without even realizing it.
With this background knowledge, I can easily answer your earlier question: 100 years ago, people had money, but by far not enough. They mostly – out of necessity – spent all their income, mainly because the economic development process was not yet so advanced. Even back then, there were very rich people. Despite their high nominal wealth, however, they could not even come close to affording today’s standard of living. Due to the economic boom, there were also many investment opportunities (mainly in transport and industry) that were funded by bankers such as James Pierpont Morgan and their wealthy clientele.
Xecutives.net: We are talking about a time when big entrepreneurs were also active in Switzerland, above all industrialists in St. Gallen, Basel, and Winterthur. They have contributed a lot to our current prosperity in Switzerland. They all had one thing in common: they created great added value. Many entrepreneurs today complain that a lot of money is not used to create value. You trade stocks or use financial vehicles to secure a financial advantage, whereby value creation hardly plays a role. What do you think of this drifting apart of the financial markets and the real economy? Where do you see dangers here, and possibly also opportunities?
Samuel S. Weber: You make an important observation, but first I must contradict the premise of your question. Value creation also plays a major role on financial markets, such as the stock market, at least over a period of several years. Think of it this way: Shareholders always sell their shares to other shareholders. In their entirety, however, they cannot sell their shares. If one ignores transactions between different shareholders, it becomes clear that their fate depends on the operational performances of the companies that they own. Numerous empirical and theoretical studies confirm that the stock market reflects rational company values very well over time, even if there can exist temporary and blatant differences between company values and stock prices. Value investors have specialized in exploiting such misprizing to their advantage.
Nevertheless, the drifting apart of the financial markets and the real economy that you mentioned is a very real problem. A good example of this is currency trading, which is the world’s largest industry in terms of volumes traded. A small portion of this kind of trading can be attributed to real added value, namely to companies and/or people who want to hedge the currency risk in their business. This is a value-adding activity – believe me, as a Swiss, I know what I am talking about.
Most currency transactions, however, have nothing to do with a company’s or a person’s value creation. They are a pure speculation on future currency developments that nobody can predict. Such speculations cost money without generating added value. They skim off value that should better go elsewhere. It is a major misallocation of scarce resources – a very painful phenomenon for me as an economist. In that regard, I feel like a doctor who must watch a patient chain smoke.
Unfortunately, I do not see any positives here. Value destroying activities siphon off value even if their proceeds are used for valuable things. A speculator can e.g. raise children who will achieve great things in the future. Or he can add value outside of his day to day job. Nevertheless, it would be better if his income also came from a value-adding activity.
Xecutives.net: I would like to take a closer look at money. Money is such a thing, for many people like sex, an intimate affair. You do not like to talk about it. Many parents do not want to openly talk to their children about money and their possessions. In Switzerland, people do not talk about their wages, in other countries this is less of a problem. How do you see money yourself and what do you personally associate with it?
Samuel S. Weber: For me personally, money equals independence. And because my job is to invest money productively, I cannot have too much of it as long as I find productive uses for it (I am talking about my psychological well-being and not about macroeconomic distribution issues). Theoretically, there is a limit to the amount of money that I can productively invest. However, this limit is very high and so far, I had no problem finding good investment opportunities. If I had another job, I guess there would exist some sort of optimum for how much money I can possess without damaging my psychological well-being. Too little money means being exposed to economic constraints, which is very uncomfortable.
Fortunately, the poverty in Switzerland is not comparable with that in the poorest countries of the world.“ But even in this progressive country, poor people must grapple with many problems – much like people who suffer from a non-fatal but very annoying disease.
Too much money can also be a problem. If you don’t deal with this topic rationally, you soon have to deal with problems that you would never have had without a lot of money, e.g. unnecessary material dependencies, wrong friendships and relationships, lack of drive, envy of other people and fear of loss.
This, in my opinion, also explains the intimacy of money that you mentioned. In and of itself, money should not be intimate. But we look after many of our interests with money, even very intimate ones. And considering that the world is full of conflicts of interest, it is not surprising that money quickly becomes a very tense and emotionally charged – indeed intimate – matter. In this regard, I am looking forward to reading Morgan Housel’s recent book “The Psychology of Money”.
Xecutives.net: In many conversations with investors, entrepreneurs, and wealthy private individuals, I keep hearing that money is not that important. In Basel, for example, there are extremely wealthy people who you would never see on the street that they have a lot of money, probably a Protestant echo of Zwingli. There are many funny episodes circulating about it. A well-known person, for example, told me that a wealthy Basel citizen had told him on his deathbed that he should have bought that beautiful Jaguar. Apparently, those were his last words and he died. That may sound strange to people who do not have a lot of money themselves, even to people who like to brag about a lot of money. What do these people, who all live in the best of circumstances, mean when they say that money is not so important to them?
Samuel S. Weber: Unfortunately, I am not a psychologist, but I do believe that I can observe a certain paradox: If you have too little money, you can hardly think of anything else. The lack of money dominates life. The more money you have based on this level, the less you think about it; you can afford what you need. Until you have too much of it, then you can hardly think of anything else again, because you must somehow deal with all this money.
This is a very static way of looking at this topic, however. The mentioned optimum can only be maintained by putting a high amount of energy into dealing with money. Financial planning becomes necessary as soon as people want to acquire or finance some of the more expensive items of life (such as a house, car or study fees), not to mention the need to save money (and therefore invest it) to prepare for a very long retirement and for the many nasty financial surprises that can – and indeed do – happen to most people.
And the observed paradox does not apply to people who have learned to handle money rationally. They only have too much money if they cannot find productive investments for it, in which case they should probably think about donating it for something meaningful. For a further discussion of this topic, see the philosophy of effective altruism.
Xecutives.net: Questions of the environment and human rights play a bigger role than they did in the past when it comes to investing. Increasingly, people want to know about the effects that their investments have on the environment. They do not want to finance companies that have a negative impact on the world, whatever that means. What do you think of this current sustainable investment boom? Where will this lead?
Samuel S. Weber: Sustainability is an important topic. However, many sustainability-related discussions deal with the distribution of wealth and it is easy to forget that wealth must be created before it can be distributed. Progress works in a way that solves problems; and these solutions then create other, new problems which in turn must be solved. Just because a solution to a problem is not without problems does not mean that there is no room for it. Sustainability does not mean that you have no problems and that everything that causes problems is bad.
In the current discussions about sustainability, I often observe a lack of awareness for the process that I have just described. Demonizing issues in the name of sustainability, such as fossil fuels or genetically modified food, makes it is easy to forget that these things are solutions to real problems. Since the beginning of the industrial revolution, the demand for fossil fuels has increased massively to this day. Our current standard of living would not be possible without them. And that cannot change overnight. For example, around 4.5 billion tons – that is 4,500,000,000,000 kg – of oil were produced worldwide last year. Despite the high investments in solar and wind energy, the share of fossil fuels in total energy consumption is still significantly higher than 80%, around the same level as 30 years ago, and the share of oil is significantly higher than 30%. It is worth mentioning here that the share of oil in total energy consumption was almost 50% in 1970 and has since declined continuously – independently of climate change.
If the oil producers were to stop investing in its extraction today, the supply of oil would fall by around 7% per year due to the depletion of resources, leading to sharp price increases despite the decline in demand (due to the corona pandemic and the increasing popularity of electric vehicles, among other things). Such a development would have the potential to drastically reduce global prosperity, because we depend on these fuels for the foreseeable future and would have to pay these high prices. This would reduce our incomes and jeopardize the investments that we urgently need for the development of modern technologies – i.e. to prepare for climate change. And without genetically modified seeds it will be difficult to feed a future population of 10 billion people with a changing climate.
We must work continuously to solve current problems and cannot rest on what we have achieved so far. Many of the technologies we use today have serious side effects. To a large extent, life consists of counteracting entropy through knowledge and cooperation. However, this requires rational, scientific approaches that carefully weigh all advantages and disadvantages. And many of the solutions to today’s problems will come with their own set of problems.
What we do not need – and what I unfortunately see too often today – are ideological debates with a lot of focus on personal preferences and little awareness of the problems that need to be solved. I am thinking of much discussed problems such as climate change, low productivity, environmental pollution (including from plastic), unsustainably financed pension systems, high debts, high economic inequality, poor quality of public infrastructure and lack of international cooperation (especially between China and the USA); as well as of less often discussed problems such as the decline in industry in developed countries, huge unmet need for age-related services, low public acceptance of economic inequality that is unavoidable in a capitalist system, factory farming, the security structure of the internet and the lack of public support for nuclear energy as well as a lack of equal opportunities and the risk of a nuclear war. The latter concerns me a lot, also because I hardly read about it anywhere. The internet was designed for a much smaller scale than it is used today and far too little – almost no – attention has been paid to security. This fundamental weakness of the internet will lead to many „surprises“ in the future.
What I worry little about, unlike many other people, is the emergence of a super-intelligence that will one day dominate us. Conversely, I do not see information technology as the solution to all problems, unlike many other people. But I see the risk that we rely too much on artificial intelligence, that we trust it too much and that we take too little account of the limits of its competencies.
Xecutives.net: I would like to take up this last point. The technical development around IT has brought about a lot of change. I am talking about electronic currencies like bitcoin. We already have the first hype behind us, but the whole matter is also preoccupying banks today, who must try not to lose touch with new technologies. What do you see today when it comes to such currencies worldwide? Where will this lead?
Samuel S. Weber: I cannot answer this question because I do not know the future. Blockchain technology is certainly a promising technology. For example, it enables trust building without a central authority – with a correspondingly wide range of possible applications.
I doubt, however, that governments will give up their currency monopoly and accept other currencies. The privilege of printing one’s own currency is too tempting and valuable – even though it leads to inflationary tendencies with the result that many paper currencies lose their value over time and usually even have to be replaced by new currencies.
Many technology forecasters only see what is technologically possible and forget that technologies must first be accepted by the population (including the state apparatus) before they can develop their potential. The emergence of the Internet is a prime example of this.
Of course, the world is inherently unpredictable, and I do not want to rule out the possibility that one day we will see one or more widely accepted blockchain currencies.
Xecutives.net: We cannot avoid addressing gold in this context. Gold has been on everyone’s lips again in recent years. What are the advantages of investing in gold and what will gold mean in the future?
Samuel S. Weber: There are two schools of thought in this regard. The famous US investor Warren Buffett thinks little of gold because it is lying around unproductively. The other school of thought says that gold is extremely valuable because it has been accepted worldwide for thousands of years and cannot be artificially printed, i.e. it should be of stable value, especially in times like today when practically all central banks print huge amounts of money and governments make huge amounts of debt. As John Pierpont Morgan said: “Gold is a currency, everything else is debt.”
Personally, I stay away from gold because I can invest the money more productively elsewhere. But I must make sure that I earn enough despite the devaluation. So, I must be compensated for the currency and inflation risk in my investments with correspondingly higher return expectations.
Xecutives.net: You yourself have your own ideas on how money can be invested. You regularly write about economic events on the Internet (LinkedIn and www.samuelsweber.com) or comment on the state of companies and industries around the world. How would you describe your attitude towards investing and when do you develop an interest in investments yourself?
Samuel S. Weber: My attitude towards investing can be described relatively simply as follows: invest the money where it creates the most value and make sure that the probability of permanent capital loss is negligible.
Xecutives.net: Mr. Weber, I thank you for the time you took for this interview and I wish you continued success, both privately and professionally!
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