Short essay on how money, meant to be a signal of trust and value creation, is corrupted when fortunes come from fees, rents, and opacity instead of real work. Uses the example of a Parisian wealth manager to argue for radical transparency, fair flat fees, and simple, low‑cost investing.
In 2023, a Parisian wealth manager retired with €47 million in personal wealth. For thirty years, this person advised a wealthy clientele, charging on average 2% of assets under management. Their clients systematically underperformed a simple global equity ETF portfolio by around 1.2% per year on average. And yet, at retirement, the market – that is, all of us collectively – signaled that this person was trustworthy to the tune of 47 million monetary units.
This case is not an exception. It is the norm. And it reveals something fundamental about the nature of the money we use every day.
Money is not what you think it is
We tend to think of money as a simple tool of exchange, a convenient intermediary between barter and the modern economy. This view, popularized by Adam Smith in The Wealth of Nations, is historically false.
Anthropologist David Graeber showed convincingly in Debt: The First 5000 Years that money did not emerge from barter. The first monetary systems, in Mesopotamia around 3500 BC, were not coins used to make it easier to trade sheep for grain. They were accounting ledgers, systems of community credit. They were account books noting who owed what to whom.
In other words: money was born as a distributed trust system.
Every monetary transaction is, at its core, a transfer of social credit. When I give you €100, I am not just handing over a piece of paper. I am telling the rest of my community – everyone who recognizes the value of that euro – that you have proven trustworthy to the extent of those 100 units. I am transferring to you a claim on society.
That is why the word “credit” comes from the Latin credere: to believe, to trust. Money is a mechanism for collective coordination based on trust. Every banknote, every wire transfer, every payment is a signal sent to the rest of the world: this person deserves to be trusted.
Wealth as a corrupted signal
If money functions as a signal of trust, then accumulated wealth should, in theory, indicate the degree of an individual’s trustworthiness. The more wealth someone has, the more they should have demonstrated their ability to create value for others and to be trustworthy in their dealings.
This logic holds… as long as wealth is accumulated by creating value.
But what happens when wealth is accumulated through rent extraction, information asymmetry, and regulatory capture? What happens when someone becomes rich not by creating value, but by capturing it without giving anything equivalent in return?
The signal becomes false. Wealth starts to lie.
Let us return to our Parisian wealth manager. This individual did not create €47 million of value. They captured €47 million in fees on assets they managed. The difference is fundamental. An entrepreneur who creates an innovative business, solves a real problem, and improves market efficiency is creating value. Their wealth is a relatively (though not perfectly) reliable signal of their contribution.
But the wealth manager? This person surfed on information asymmetry, on the perceived complexity of finance, and on misleading signals (luxury offices, three‑piece suits, technical language) to extract a rent without creating corresponding value. Worse, they likely destroyed value by misdirecting their clients’ savings.
And yet their wealth signals to the world that they have been exceptionally trustworthy. The monetary system has issued them a 47‑million‑unit certificate of trustworthiness. It is a forged certificate.
The economics of signals and their breakdown
Michael Spence received the Nobel Prize in Economics in 2001 for his work on signaling theory. His core insight: in a market with information asymmetry, economic agents use signals to communicate private information. But for a signal to be credible, it must be costly to fake.
The classic example is the university diploma. It signals intelligence and work capacity to the labor market. It functions as a signal because it is costly to obtain (years of study, tuition fees, intellectual effort). Someone who is not very intelligent or not very hardworking will struggle to fake it.
The problem with modern financial wealth is that it has become too easy to fake.
More precisely, it has become too easy to accumulate wealth without creating corresponding value. The mechanisms include:
- Information asymmetry: The client cannot distinguish the good manager from the bad one. They rely on proxies (institutional reputation, degrees, rhetorical fluency) that are decoupled from actual long‑term performance.
- Switching frictions: Changing financial advisor is emotionally and administratively painful. Once captured, the client tends to stay, even if performance is mediocre.
- Regulatory capture: Barriers to entry protect incumbents. Certifications and licenses create de facto monopolies without guaranteeing quality.
- Cantillon effect: The first beneficiaries of monetary creation (banks, financial institutions) capture value before inflation dilutes the signal. They grow rich by position, not by merit.
- Artificial complexity: The financial sector has an interest in maintaining a high perception of complexity to justify its fees. Simplicity – buying diversified ETFs and waiting – does not generate commissions.
Result: wealth accumulated in the financial sector is largely decoupled from value creation. The signal is corrupted.
The principal–agent problem at a systemic scale
In finance, the principal–agent problem is well known: when an agent (the manager) acts on behalf of a principal (the investor), their interests are misaligned. The manager wants to maximize fees; the investor wants to maximize net returns after fees. This is Economics 101.
What is less appreciated is that when this misalignment becomes systemic, it does more than distort individual transactions. It corrupts the monetary signal itself.
Think about it: if a significant share of the wealth in an economy is accumulated through rent extraction rather than value creation, then aggregate wealth ceases to be a reliable indicator of social contribution. The rich are no longer necessarily those who have created the most value. They may simply be those who best exploited information asymmetries, positional rents, and regulatory failures.
This has deep consequences:
- Misallocation of capital: If the market can no longer distinguish genuine value creators from rent extractors using the wealth signal, capital will be badly allocated. Real innovators struggle to raise funds, while well‑dressed charlatans get them easily.
- Erosion of social trust: When people realize that wealth no longer signals merit, trust in the system collapses. This is one of the deeper roots of contemporary populism.
- Crowding out of talent: Rational, talented individuals choose careers in rent‑heavy sectors (finance, consulting, corporate law) rather than in value‑creating sectors (industry, research, education). The result is less real innovation.
Measuring value: a fundamental challenge
One might object: “It is all very well to talk about value creation versus rent extraction, but how do we measure value creation?”
That is the question. And it is extremely difficult.
Value is subjective. A Picasso painting is worth $100 million because a collector is willing to pay that price. Did Picasso create $100 million of value? For that collector, yes. For someone who does not care about modern art, no. Who is right?
Similarly, a heart surgeon who saves a life creates immeasurable value for the patient and their family. Yet this surgeon earns less than a trader who moves money around secondary markets. The market says the trader creates more value. But is that true?
The socialist calculation problem (Mises, Hayek) showed that a central planner cannot compute value efficiently. Only a decentralized price system can aggregate the information dispersed throughout society.
But – and this is crucial – this system only works if prices truly reflect preferences and information, not unpriced externalities and rents.
When prices are distorted by monopolies, information asymmetries, and unpriced externalities, the price mechanism stops functioning properly. The market no longer discovers true value. It ratifies distortions.
This is exactly what is happening in finance. The “market” says that a wealth manager is worth 2% of AUM. But this price does not reflect value creation. It reflects information asymmetry, regulatory capture, switching costs, and artificial complexity.
Distinguishing types of wealth: creation, extraction, luck
Not all fortunes are equal. We need to distinguish:
- Wealth from value creation
Jeff Bezos created Amazon, which revolutionized commerce and improved the efficiency of distribution. Does his €150‑billion‑plus fortune signal his contribution? Partly, yes. Amazon has created enormous value for consumers (convenience, prices, choice).
But did he create exactly 150 billion of value? Probably not. Part of his wealth comes from network effects and economies of scale that create quasi‑monopolies. Another part comes from warehouse labor exploitation, aggressive tax optimization, and the destruction of local stores.
The signal is therefore imperfect, but it does contain real information about economic contribution.
- Wealth from rent extraction
Our wealth manager, lobbyists who capture regulation to create barriers to entry, monopolies that abuse their dominant position, financiers who benefit from the Cantillon effect.
This form of wealth is a purely fake signal. It does not reflect value creation. It reflects a capacity to extract value without giving anything equivalent in return.
- Wealth from inheritance or luck
Heirs of large fortunes, lottery winners, people who bought Bitcoin in 2011 out of curiosity. This wealth says nothing about the current person. It is pure noise in the signal.
The problem is that society no longer distinguishes clearly between these categories. A rich heir, a brilliant innovator, and a rent‑seeking financier all end up with the same “trust signal” in the eyes of the market. They frequent the same places, have access to the same opportunities, and are listened to with the same deference.
This lack of distinction is toxic. It rewards extraction as much as creation. It demotivates genuine value creators. It perpetuates unproductive dynasties.
The specific case of asset management
The asset‑management industry is a textbook case of monetary‑signal corruption. Consider the numbers:
- 90% of active funds underperform their benchmark over 15 years (Morningstar, 2023)
- Average total fees of a private manager: 1.5–2.5% of AUM plus performance fees
- Fees on a global equity ETF: 0.07–0.20%
- Average performance differential: about –1.2% per year
Let us run the numbers on a €1‑million portfolio over 30 years:
Scenario A: Private wealth manager
- Gross performance: 8% (the market)
- Fees: 2%
- Net performance: 6%
- Final wealth: €5.74 million
- Cumulative fees paid: around €1.2 million
Scenario B: Global ETF
- Gross performance: 8% (the market)
- Fees: 0.15%
- Net performance: 7.85%
- Final wealth: €10.06 million
- Cumulative fees paid: around €95,000
Difference: €4.32 million.
The manager has captured €1.2 million in fees. What value did they create in return? None. On the contrary, this person destroyed €4.32 million of potential wealth for the client.
And yet, over a career, such a manager will often accumulate tens of millions in wealth. Their trust signal will be dazzling. Private banks will court them, business schools will invite them as a prestigious guest speaker, and they will fund cultural foundations that bear their name.
All of this is built on net value destruction.
It is Kafkaesque. And it is systemic.
The mechanisms of perpetuation
How can such an obviously dysfunctional system persist?
Several reinforcing mechanisms are at work:
- The illusion of complexity
The financial sector cultivates the illusion that investing is infinitely complex and requires rare expertise. This is false. Academic research (Fama, French, Sharpe, Bogle) has shown that a diversified passive strategy beats 90% of active strategies.
But this simplicity does not generate high fees. So it is hidden, minimized, and buried under layers of technical jargon.
- Misleading signals
Managers use proxies to signal competence: offices in wealthy districts, impeccable suits, framed diplomas, technical language, 50‑page “macro‑economic trend” reports.
These signals have no reliable correlation with long‑term performance. But they impress clients, who lack the tools to evaluate true competence.
- Regulatory capture
Certifications and licenses create barriers to entry that protect established players. They do not guarantee quality – our €47‑million manager was almost certainly fully licensed.
Worse still, these regulations make it illegal to give financial advice without certification, even when doing so for free and being more competent than 90% of certified professionals. This is pure capture.
- Network effects of trust
Once a manager has an established clientele and a reputation, they benefit from network effects: “If the Duponts trust this person, I can trust them too.” Reputation becomes self‑reinforcing and decoupled from real performance.
- Lack of accountability
A manager who underperforms does not refund fees. They do not lose their license. They rarely go out of business. At worst, a few clients leave, but new ones arrive. There is no effective selection mechanism.
Compare this with a restaurant owner: if they serve bad food, they go bankrupt. The market selects them out. In finance, one can destroy value for 30 years and still retire comfortably rich.
Beyond wealth: invisible value creators
The corruption of the monetary signal has another perverse consequence: it renders genuine value creators invisible.
A nurse caring for terminally ill patients creates immeasurable value. This person brings comfort, dignity, and care to human beings at their most vulnerable. Yet a nurse may earn €30,000 a year.
A basic‑science researcher who spends 20 years understanding an obscure cellular mechanism may lay the foundation for a treatment that saves millions of lives in 30 years. They earn €50,000 a year.
A passionate teacher who inspires a generation of students, some of whom go on to become major innovators, creates multiplied value. They earn €35,000 a year.
Meanwhile, a hedge‑fund trader who exploits temporary market inefficiencies to move capital around without creating real value earns €2 million a year.
What does this say about our collective system for signaling value?
It says it is profoundly broken.
One might argue: “But the market decides! If people value trading more than nursing, that is their choice.”
That is partially true. But remember: the market only functions well if prices reflect real information and preferences, not rents and asymmetries. When a client pays 2% of AUM to a value‑destroying manager, it is not because they prefer this allocation. It is because they do not know any better.
If we had full transparency – if every client could instantly see their manager’s net‑of‑fees performance compared with a global ETF, if switching costs were zero, if complexity were demystified – the current industry would collapse almost overnight.
The fact that the industry spends billions on marketing, lobbying, and the maintenance of artificial complexity proves that it knows its survival depends on preserving opacity.
Toward radical transparency
What is the solution? How can we restore the reliability of the monetary signal?
The classic liberal answer is: more transparency, fewer frictions, more competition. In theory, this is correct. In practice, it is not enough.
Because information asymmetries in finance are structural. The average client does not have the time, skills, or tools to properly evaluate a manager. Even with perfect transparency, this person remains vulnerable.
So we need to go further. We need to:
- Make track records mandatory and standardized
Every manager should be required to publish net‑of‑fees performance compared with a relevant passive benchmark over all periods (1, 3, 5, 10 years, and since inception). The format should be standardized, audited, and impossible to manipulate.
Today it is voluntary. Guess who does not publish full performance? The underperformers. It is pure adverse selection.
- Ban percentage‑of‑AUM fees for passive or quasi‑passive strategies
If you are simply replicating an index or doing basic asset allocation, you should not be allowed to charge a percentage of AUM. Only fixed fees or hourly billing should be allowed.
Why? Because charging 2% on €10 million (i.e., €200,000 per year) for a strategy that consists of buying five ETFs and rebalancing once a year is an obvious scam.
- Tax rents, not work
This is the Georgist and Piketty‑inspired intuition: we should tax capital income more heavily (especially non‑productive income from rents, inheritances, speculative capital gains) and labor income less.
Why? Because this realigns incentives. If rent extraction is penalized and value creation through work is rewarded, people will direct their energy toward creation.
- Make financial education universal
The best defense against exploitation is knowledge. If everyone understood the basics of passive investing, fee compounding, and the difference between alpha and beta, the predatory part of the industry would collapse.
But financial education is almost entirely absent from school curricula. Why? Because many of those who sit on education committees have a strong interest in maintaining the status quo.
- Use technology for automation and disintermediation
Technology can destroy rents by removing intermediaries. Transparent algorithms can manage portfolios better than 90% of human managers, at a fraction of the cost.
Does this create new problems (platform power concentration, bugs, systemic risks)? Yes. But it does solve the problem of financial rents.
The challenge is to create systems where:
- Fees are flat (e.g., €10 per month) instead of a percentage of AUM
- Strategies are transparent and auditable
- Performance is measurable and publicly available
- Switching is instant and costless
In such a system, bad actors are quickly eliminated. The monetary signal becomes trustworthy again.
The paradox of monetary creation
There remains a deeper problem we have only touched on: monetary creation itself.
In a fiat‑money system, central banks create money ex nihilo. This creation is not neutral. It benefits the first recipients of new money (Cantillon effect): commercial banks, financial institutions, well‑connected borrowers.
These actors can borrow at low rates, invest before inflation spreads, and capture real value using newly created money. This is a pure form of extraction: they dilute the value of existing savings in order to enrich themselves.
As a result, a significant share of modern wealth stems simply from one’s position in the monetary‑distribution chain, not from value creation.
How can we solve this problem? The debate goes beyond the scope of this article, but possible avenues include:
- A return to some form of standard (gold, a commodity basket) – with all its own issues
- Decentralized currencies (crypto) – with volatility and scalability challenges
- Reforming money‑distribution rules (for example, direct “helicopter money” to citizens instead of banks)
What is certain is this: as long as monetary creation primarily benefits financial insiders, the wealth signal will remain partly corrupted.
Conclusion: a collective responsibility
Let us return to where we started: money is a system of collective trust. Every transaction is a vote. Every euro we spend is a signal to the rest of society about what deserves to be rewarded.
The problem is that this voting system is rigged. People “vote” for well‑dressed fraudsters because they do not know that these actors are fraudsters. They reward value destruction because it is hidden behind misleading signals.
But this is not inevitable. We can collectively demand:
- Radical transparency on real performance
- Business models that are aligned with clients (flat fees, no % of AUM)
- Regulation that protects clients, not entrenched rents
- Education that demystifies artificial complexity
- Technologies that disintermediate and automate
Whenever we pay someone, we should ask ourselves: “What value does this person create for me? For society?”
If the answer is vague, obscured by jargon, or masked by superficial signals, there is a high chance we are rewarding extraction rather than creation.
And by repeatedly rewarding extraction, we build a parasite economy.
The monetary signal – this magnificent human invention that allows billions of people to coordinate around value creation – becomes a signal of corruption.
We can do better. We must do better.
Because, at the end of the day, the money we spend is not just money. It is our collective voice on what we value as a society. On whom we want to reward. On what kind of world we want to build.
Let us choose to build a world where the signal tells the truth.
