Musings on Monaco

Posted by Brad McMillan, CFA, CAIA, MAI

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This entry was posted on May 17, 2019, 2:23:20 PM

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I just returned from spending the past week in Monaco on a Commonwealth conference trip. It was a stellar experience, per usual—our conference planners are the best of the best. Also per usual, getting out of my comfortable home environment has prompted a new level of reflection in me. In this case, I’ve been musing over affluence, income distribution, and what it means to be wealthy.

You see, at the moment, I feel extremely poor. I’m not—I’ve been blessed with a successful career and my family is quite comfortable—but when in Monaco, even people who make a good living are bound to feel out of their league. The other day, my wife and I spent an afternoon walking past hundred-million-dollar yachts. The cars driving past me on the road every few minutes cost more than my house. Looking at the properties advertised in the windows of local real estate offices, the cheapest I saw was just under 3 million euros—for 750 square feet. The surrounding areas are also affluent, although perhaps not quite as much as Monaco itself. Local residents, on at least a part-time basis, include Bono, Elton John, and Mark Zuckerberg.

Toto, we’re not in Boston anymore

In many respects, however, Monaco is not that different in terms of wealth and real estate from places closer to home: parts of Manhattan, for example, or San Francisco. Unlike Manhattan or San Francisco, however, there do not seem to be as many—or, really, any—underprivileged people. That’s a big difference.

Tellingly, for the first time in my memory, we did not hold a giving-back event at this conference. Normally, Commonwealth staff and advisors volunteer to help clean and refurbish a homeless shelter or boys and girls club, work with Habitat for Humanity to build a new home, or make meals for the hungry (Commonwealth also makes a substantial financial donation), so we can leave our destination just a bit better than we found it. In fact, that is always the first activity to fill up. Here in Monaco, though, despite our efforts, we were not able to identify a suitable project for conference attendees. I missed it.

I’m not sure what to think about all of this. I was glad to visit, and I had a wonderful time, but I’ve never really been to a place like this, where mere affluence fades to something resembling poverty, and poverty seems to have disappeared in the face of extreme wealth. I certainly don’t think I could live here, for more than just financial reasons. There is nothing wrong with wealth, but the normalization of extreme wealth in Monaco is something that could distort how I see the world—and even more, how my son grows up to see the world.

Reductio ad absurdum

One way to understand something is to take it to extremes and see what happens. In some sense, Monaco is just that with respect to wealth levels. A term for this from the logic field is reductio ad absurdum, where you take an argument to a logical extreme to demonstrate it is ridiculous and so disprove it. We certainly do not have that here, as Monaco is a beautiful and functioning society and has been for centuries.

I do wonder, however, how much the sustainability of this society depends on the availability of cheaper housing and labor in the nearby countries of France and Italy. I also wonder how much it depends on the political stability of those countries—and how at risk it could be if that stability fades. In other words, to what degree is Monaco a hothouse flower?

Considering the discussions about inequality blooming around the world, including in the U.S., my visit to Monaco was an eye-opening experience that has changed my perspective somewhat already. Now I need to spend some more time learning about the principality and thinking about what it might mean for us here at home.

Thanks to Commonwealth for another great trip—and to another great set of ideas to muse over.

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