Measuring progress, defining success

What if the way we are measuring economic progress is leading us down the wrong road? Today I’m going to highlight a recent piece by investor Anthony Deden, The Illusion of Progress.

It’s far too easy to fixate on the numbers on a screen, or on a graph that points up and to the right, and to interpret that as “success.” When working with clients, and in particular younger next generation family members, we often have to emphasize that when we talk about successful people, what we really mean is that they are financially successful. Because we can never know their inner life, and you can have a lot of financial wealth and still be a miserable asshole.

Deden is writing from the perspective of the economist, lamenting the modern disconnect between money and value, and examining what it means for society. He writes:

The real advances of mankind—from cultivation to industry—were not the gifts of invention alone but of moral order: the discovery that property, family, and saving could bind effort to consequence and turn scarcity into sufficiency. Progress was an achievement of character before it was a measure of output. It was the steady improvement of life through virtues that bound action to consequence: thrift, property, responsibility, and the protection of what one built.

I love the line “progress was an achievement of character before it was a measure of output.” Because today, one’s character seems to have become an afterthought.

For various reasons, I believe that the core of the changes Deden writes about came as a result of the abandonment of gold-backed currencies. This opened the door to politicians spending money that nobody had actually done work to earn. Perpetual government deficits, driven by the primary selfish goal of winning re-election, and paid for by future generations (theoretically). When money is “free,” by definition, it ceases to have value. And when the dollars we work so hard to earn cease to have value, why are we surprised when someone who puts in an honest day’s work can no longer earn enough to live a comfortable and secure life?

The goal, then, isn’t to be productive, or to add value. The goal has become to hoard financial wealth in any way necessary.

The old sequence—save, invest, produce, profit—was inverted. What had once been a measure of achievement became the object of it. The world entered an era in which the acquisition of money, detached from material purpose, was mistaken for progress itself.

So progress, now, means only that the chart goes up, and to the right. In that sense, the prime objective of those is power is only to ensure that the line keeps going up.

In this new order, even money lost its solidity. It became not the record of past effort but the anticipation of future policy. Credit creation, once a bridge between savings and investment, turned into a self-replicating process: new debt to sustain old, new liquidity to sustain valuations.

Perhaps what best epitomizes the emptiness of growth for the sake of growth is the use of Gross Domestic Product as a measure of progress.

Conceived in the 1930s to estimate wartime output and industrial capacity, GDP was never meant to represent human welfare or civilizational advancement. It counted production for the sake of mobilization, not prosperity. Yet over time, this emergency metric came to define progress itself.

To the politician who wants to boast about GDP growth under their watch, the path is clear. A dollar of wasteful government spending is worth as much as a dollar of true value created by innovation. Repairing existing infrastructure (that wasn’t built to last in the first place) is the same as investing in new productive infrastructure. And sadly, bombs are just as useful a purchase as school textbooks, or MRI machines. War, as they say, is good for business.

What does this mean about how markets work? And how do today’s markets reflect these values back to us? Look no further than the world of private equity.

Private equity is the purest expression of this new creed. Its tools—leverage, optimization, and exit—belong to a world where time has been conquered and consequence deferred. Businesses once built to last are now built to sell. The craftsman’s slow accumulation of goodwill is replaced by the manager’s quick extraction of yield.

And finally, Deden returns to the discussion of purpose. I’ve written about it here, and in the pages of Low Risk Rules. The idea of simplifying your investment portfolio is to make room for the things that matter, in the context of a world where those who own assets are at a significant financial advantage to those who don’t.

Here lies the moral inversion of our age. Money, which was once the servant of purpose, has become its measure. The larger yacht, the faster airplane, the greater “net worth”—these are not symbols of abundance but of dislocation. They mark the distance between possession and peace. The pursuit of more has displaced the question of what it is for. And when a civilization forgets to ask that question, it continues to advance in technique while it declines in wisdom.

Money is a tool, not the end goal. If you’re lucky enough to be one of the ones who has more than you need, the question of “what is it for?” is one that you should be asking.