The biggest knock against Sen. Barack Obama’s candidacy is that he doesn’t have enough experience to be president. Whether or not this is true, every first-term president is an Oval Office rookie, so the most important attributes for success are arguably 1) good judgment and 2) the ability to learn on the job.
Does Obama have these qualities? Armies of political experts are ransacking his professional experience to find out. In the meantime, we can seek answers in another realm: personal finance. What do Obama’s financial choices say about his rationality, competence, and ability to make decisions in an arena in which he doesn’t have a lot of experience? And what does Obama’s psycho-financial profile suggest about his potential to be a great president? (This is the latest in a series of psycho-financial profiles of American leaders: Check out our analyses of Chief Justice John Roberts, Fed Chairman Ben Bernanke, and others.)
Let’s start with the big picture: net worth. According to Obama’s most recent public financial statements, he and his wife, Michelle, were worth between $500,000 and $2 million at the end of 2005 (excluding whatever equity they have in their $1.65 million Chicago house). The bulk of this wealth came from $1.2 million in royalties Obama received that year for The Audacity of Hope and a previously published book (part of a $1.9 million, three-book deal). The $1.2 million figure is presumably pretax, which means that, after paying the IRS, Obama probably kept about $600,000.
This modest (for a senator) net worth suggests that Obama is in a good position to appreciate the situation of many Americans. He has worked hard enough and saved enough to have a healthy nest egg, but unlike, say, fellow Democratic candidate John Edwards, he doesn’t have enough to retire on. Because Obama earned his money himself, moreover—and recently—he can no doubt relate to both ends of the economic spectrum. Put differently, Obama’s not some silver-spoon fat cat who has lost touch with regular working stiffs, and he’s also not likely an angry populist obsessed with “the people versus the powerful.”
Now let’s consider some of his financial decision-making. First, there are those parking tickets. When Obama was attending Harvard Law School, he apparently racked up 19 parking tickets in Somerville and Cambridge, Mass.—and paid only two of them (both late). Then, 15 years later, two weeks before he announced his candidacy and just as the Boston Globe began sniffing around, Obama suddenly paid the remaining $375 in fines.
What can we glean from this psycho-financial nugget? First, like many people, Obama apparently parks his car wherever he pleases, finds parking tickets trivial and annoying, and knows uncollectable debts when he sees them. Supporters will cite this as further proof that Obama is just a regular guy. Detractors will say that Obama is an arrogant scofflaw who stole $375 from the people of Massachusetts, hid for 15 years as a fugitive in Illinois, and then came clean only when he realized that he was about to be brought to justice. A financial analyst, meanwhile, might conclude that Obama was merely employing a tactic familiar to anyone who has ever run an undercapitalized business: stretching out his payables. If the United States ever gets into a financial bind, President Obama would presumably be able to figure out which creditors we have to pay and which we can stiff.
Obama’s brief experience as a house buyer and stock-market speculator is the most revealing aspect of his financial biography. According to Slate’s John Dickerson and the New York Times, when Obama hit the book-advance jackpot, he decided to do two things: 1) buy a house and 2) seek some investment advice. The first impulse led to an eyebrow-raising real-estate deal that revealed a naive obliviousness to the appearance of impropriety (Dickerson discusses it in detail here). The second led to similar embarrassment—and modest financial losses.
On the investment side, Obama considered consulting his friend Warren Buffett—which would have been a good decision—but decided to ask a wealthy contributor, George Haywood, for advice instead. This was a bad decision. Haywood recommended that Obama talk to an unnamed broker at UBS (bad advice), who immediately plunked some of Obama’s money into two speculative stocks (terrible advice). One of the stocks was AVI BioPharma, which was seeking to develop a new flu-related drug around the same time that Obama was pushing for more federal money to fight avian flu. The combination of the lousy investment advice and the perceived conflict of interest cost Obama not only money but credibility.
So, Obama is perfectly capable of making crappy decisions (trust a stockbroker; underestimate the media’s eagerness to see conflicts in everything). He is also, however, capable of learning from his mistakes.
After the stock-picking fiasco, for example, Obama appears to have wised up. At the end of 2005, he had gone back to investing in diversified stock, bond, and money-market funds, including several offered by the low-cost firm Vanguard. Obama says that he ditched stock-picking to avoid the appearance of conflicts (smart), but in doing so, he is also pursuing a smarter, far more diversified investment strategy. He still appeared to be paying too much for commodity financial products: He has money at JP Morgan, UBS, and Northern Trust, full-service firms whose high fees will erode returns—but this a mistake made by many inexperienced investors, even intelligent ones (and for some, the trade-off is worth it). Overall, Obama seems to have overcome his inexperience and learned some valuable lessons—both of which would be attractive attributes in a president.