Tags: heroes | villains | investors | martin shkreli

The Good and Bad of Heroes and Villains

The Good and Bad of Heroes and Villains
Alphaspirit | Dreamstime

By    |   Thursday, 10 August 2017 04:20 PM EDT

We need narratives. We build our lives around them. We want to see heroes rise and succeed—and we want to see villains meet their dastardly end.

This theme of good and evil plays out everywhere. Books, movies, video games, you name it. It creates a conflict that can be resolved in a satisfactory way.

We try to bring it to real life too. But the real world is a lot messier than it is on a page or the silver screen.

Consider Martin Shkreli. Last week, the hedge fund manager’s trial ended. He was found guilty on three of the eight counts, and now faces sentencing. There’s something downright Shakespearean about the whole thing.

You’ve probably heard the name. That’s because Shkreli rose to infamy for buying up a drug off-patent, then increasing the price 5,000 percent. It was easy to portray the jump in price of a life-saving drug as the closest thing to a real-world Bond villain we’re likely to get.

Beyond that, Shkreli has the kind of take-no-prisoners attitude that makes President Trump look like a seasoned and deferential diplomat. His attitude during his initial hearing last summer was to get it over with so he could go play the video game Pokémon Go.

But raising the price of a drug isn’t why Shkreli was on trial. He was accused of securities frauds at one of his former hedge funds. The fact that he was found not guilty on more than half the counts raises dubious questions.

We live in a litigious society, and going to trial is expensive. Prosecutors have learned over the years to over-charge the accused. The intent is to get them to agree to a plea deal, which saves the expenses of a trial for both sides. But the end result is that people will plea to something they didn’t do, rather than risk the possibility of a worse sentence.

It’s a rotten system, and a miscarriage of justice for a system that’s supposed to give everyone the right to a fair and meaningful trial. Being overcharged simply shows the fact that someone as despised as Shkreli can be overcharged too. It’s hard to make frivolous charges stick as long as jurors are honest about the facts and evidence presented—even against a real-world villain.

While it’s clear from last week’s ruling that Shkreli did wrong during his time at a hedge fund, the waters get murkier as we look past that to his role in raising drug prices.

Can I call Shkreli a villain? Of course. But the best villains have a sense of humanity in them that really makes their actions tragic. I can also recognize that he has a tremendous analytical skill. And that, if he had been mentored in a way that instilled a sense of ethics, he’d be out there managing a successful pharmaceutical company right now, rather than winning the “most hated man in America” award.

Think about it this way: Shkreli found an off-patent drug with no competitors that he could acquire cheaply, and then turn around and raise the price. If he had taken a different tack of gradually raising the price over time, he wouldn’t have gotten all the negative press and publicity. And by raising the price 5,000 percent overnight, he sent a signal to others in the pharma industry that they should be making generic versions of the drug too.

Capitalism entails competition. Competition keeps players honest. But the drug industry has patents—and for a good reason. It can take years for a drug to pass muster, up to and including FDA approval. In some cases, it can even take up to a decade. These drugs cost millions of dollars to develop before the first batch is ready for consumption. Entrepreneurs should get some kind of compensation for taking the risk. After all, for every successful drug out there, there are plenty that didn’t make the cut. Those cost millions to develop too.

That’s clearly something Shkreli understood. He just went about it the wrong way. And now society is worse off—whether from higher drug prices for those who need it, or from those who could benefit from Shkreli’s skills and knowledge. That’s why Shkreli is more hated than Bernie Madoff—Madoff mostly ripped off the rich with his Ponzi Scheme. Madoff did more damage in dollar terms, but Shkreli jacked up prices on something that people needed to live.

But hey, we got our villain, right? That’s a happy ending, isn’t it?

Maybe not.

There’s a German word that’s come to mind as I’ve read through all the hot takes on Shkreli. It’s called schadenfreude.

It’s a compound of the words “harm” and “joy.” Essentially, it means “happiness at the misfortune of others.”

There’s a lot of that going around too. It apparently isn’t enough that we got the bad guy. Now we can revel in the fact that he’s had his day in the court, and ultimately lost. There’s a lot of schadenfreude at play when it comes to business. We can be gleeful when a bank we had trouble with as a customer falls on hard times. Or when someone who has been making your work life miserable gets the layoff axe.

But what does that say about us? Maybe that deep down, we have the same flaws as the people we think of as villains. And while we may be the hero to our own story, we might be a villain in someone else’s—and don’t even know it.

As humans, we crave a good narrative. But the world is much more complex than that. We can be grateful that justice has been done against Martin Shkreli and his behavior. But it’s not worth reveling over. If he can reform himself and improve his behavior, he can yet provide tremendous value to society in the years ahead.

And that’s the greatest narrative of all: the villain, overcoming their evil nature through great effort, rising to become a hero. That’s the ending I want to see with Shkreli. It’ll take years and prison time to see if it plays out. Here’s hoping. It’s better than schadenfreude.

But at the end of the day, what we really know from this whole ordeal as investors is to stay away from flashy management—when they go down, they damage their shareholders as well,

Andrew Packer is a Senior Financial Editor with Newsmax Media. He currently writes the Insider Hotline investment advisory, serves as investment director for the Financial Braintrust, and writes the monthly newsletter Crisis Point Investor.

© 2024 Newsmax Finance. All rights reserved.

Maybe deep down, we have the same flaws as the people we think of as villains. And while we may be the hero to our own story, we might be a villain in someone else’s—and don’t even know it.
heroes, villains, investors, martin shkreli
Thursday, 10 August 2017 04:20 PM
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