Tuesday, October 14, 2008

'Can this market be saved?' Part 3.

Getting back to Wall Street, the economy, and where it all got away from us....

I'm sure I'll take some hits here for being too broad and/or for inferring linkages where they don't exist, but I blame SHAMland for a lot of what has gone wrong on Wall Street, the boardrooms of corporate America, and hence, Main Street. In particular, I blame SHAM for reinforcing the least noble tendencies in people, and for taking the sting out of selfishness and lack of charity. Indeed, much of self-help, particularly in recent years, has framed selfishness as a virtue!

Let's back up a bit. It's clear to me from the phrasing in some of the comments in this series, as well as communication I've had with a few of you off-blog, that Part 2 in particular struck many readers as a naive rendering of the nation's free-market past. I concede that it was oversimplified;
I even stipulated to the point. I realize that witnesses to turn-of-the-(20th)-Century America might not have recognized the philanthropic model of entrepreneurship I described, either. There were many companies that wantonly profiteered on the backs of labor, and hired goons to bust (in the literal sense) fledgling unions. There were also sweatshops that took advantage of women and children. But as I see it, this was less a sign of any specific weaknesses in the free market than of a general lack of sophistication and civility, if you will, that marked American society as a whole.

Do you ever think about what a remarkably young nation the U.S. remains, in global terms? It has been barely 100 years since America kicked off the corporate free-market society we see today. When Henry Ford revolutionized manufacturing, the national economy was still agriculture-based; we were just feeling our way through the growing pains of industrialization and corporatization. I'm going to make a dangerous analogy here, but it's like slavery: Yes, of course, in some corner of their brains, even slave-owners must have questioned whether slavery was technically "wrong." But the point was moot; slavery was just the way things were, the way "life worked." As they saw things, whites had dominion over the Negroes of the Field in the same way that whites had dominion over the Beasts of the Fields and Forests. Then we learned better. (Although some of us are still learning.)

In the same way, over time
I'm skipping a fair chunk of history herewe developed a sense of corporate responsibility. We might not always have done the right thing, but at least we knew what the right thing was. We also knew when we were doing the wrong thing, and if nothing else, we were squeamish about it. We no longer had dinner parties where we boasted about the number of shirts some 8-year-old could knit in 12 hours of uninterrupted labor. If we were going to treat our employees like slaves, at least we tried to hush it up. (Progress is rooted in that growing sense of squeamishness and conscience, in the fact that one day, you just can't operate like that anymore.) By this point in timelet's say, the post-World War II eramany leaders of business and industry were respected, almost lionized for their overall contributions to society: first men like (Andrew) Carnegie, then IBM's Watson, then Chrysler's Iacocca, then GE's Jack Welch. Course-work in business ethics proliferated across the academic landscape. The phrase "corporate citizen" came into widespread usageand increasingly, when people used it, it wasn't just lip service.

But by the 1990s we suddenly began to slide backwards. An acquaintance and sometimes-source of mine who teaches at the famed Wharton School tells me that today, classes in business ethics are some of the least popular; students dismiss them as "drudgery," denounce them as "airy" and "impractical," take them just to get the requirement out of the way. The perception is that ethics isn't what business is really about
no more than an MBA is about "learning to help a business run as smoothly as possible" (or corporate law is about "ensuring that executives do the right thing." Lately it's been more about finding the loopholes that allow them to go on doing the wrong thing). Students today pursue MBAs because an MBA is a golden ticket to a six-figure income right out of the chute.

There are many reasons why this transformation has occurred, and I don't mean to imply that corporate scruples have gone to hell solely because of Dr. Phil, John Gray or Oprah. But I will say this: With SHAM's penetration of American society, the selflessness-based paradigm that drove the so-called "Greatest Generation"* began to fade away in earnest. It now became permissible to put yourself first in every regard: your happiness, your needs, your dreams. SHAM destigmatized selfishness. "Looking out for No. 1" became the mantra of the Baby Boom, fueled by the two-headed monster of Victimization (blame all of your failures on others!) and Empowerment (don't let anyone take away your dreams!). Watching Gordon Gecko tell us in Wall Street that "Greed is good!", many of us probably thought it was caricature, a portrait of what happens at the lunatic fringe
when in fact the only thing separating Gecko from tens of thousands of financial types (and other executives) is that he got his comeuppance from Charlie Sheen in the final act.

But the biggest irony of all is this: Even though we shake our heads at Gordon Gecko, we're not all that different from him. The only thing separating him from us, in too many cases, is that he dealt in very large, very profitable sins, while our lives revolve around a multitude of much smaller
but equally venalsins. And we think that's OK. We're entitled.

The other night on CNBC I heard an analyst explaining how greed "is going to help get us out of this mess" by motivating people to look for ways to profit off the nation's financial malaise; this motivation, he said, creates "opportunity" for savvy entrepreneurs and speculators.
I thought immediately of all those books and seminars that teach you how to get rich in foreclosures, sheriff's sales and the like. I blame those books and seminars for selling a "wealth-building" message that has no shame or sense of social responsibility. I blame the multilevel marketing schemes, too, that were direct derivatives of ideas developed and nurtured in the world of self-help; MLM taught us that the only important thing was to get in while the getting's good, make your killing on the backs of the people you bring in...then the hell with those who bring up the rear. They're not your problem. Your money's in the bank. When I lived in San Diego during the late 1980s and early '90s, I can't even tell you how many times I was approached to be a part of what amounted to Ponzi/pyramid schemes. They came up everywhere: at dinner parties, along the fences of Little League ballfields...everywhere. And the only thing that mattered to anyone was that you have to get in early. It was understood that the people who got in late were gonna get screwed. No one cared. Caveat emptor.

There is a difference between the traits that made this nation great
ambition, vision, passion, rugged individualismand the likes of greed, cunning, self-love, lack of conscience. To too large a degree, the fundamental commitment to goodness, to the whole of an enterprise (i.e. rather than its mere ability to generate revenue), has been lost. And without that goodness and that sense of philanthropywithout the notion that "we're all in this together"we are no longer a nation, but merely a place where 300 million individuals happen to live. The SHAMsphere continues to feed that sense of estrangement from our fellow man or woman.

Remember in the end: There's a reason why it's called self-help.

* No, I am not implying that every member of the WWII generation was some kind of saint. But I don't think there's any question that many of them put their own needs second or third behind the needs of family and country.


Cosmic Connie said...

"Remember in the end: There's a reason why it's called self-help."

That's precisely the reason I call it "selfish-help."

The other side of the story is the growing trend towards what I call "conspicuous altruism," which I know I've snarked about here (and on my own blog) before. More and more of the selfish-help gurus are now promoting programs that purport to "make a difference" (end poverty, end homelessness, end hunger, or whatever). On the surface these efforts seem noble, but the main purpose seems to be to showcase the guru's ego and provide yet another cash cow for the guru and a few cronies.

Anyway, congratulations on another excellent post. I know I haven't contributed much lately, but I've been reading and following the discussions with interest.

Steve Salerno said...

Connie, anytime you show up it's a plus, no matter how seldom or often.

Is "conspicuous altruism" anything like "compassionate conservative"? Whatever the case, I am equally skeptical about the motives of those who push it; our friend Mark Victor Hansen, for example, makes a big show of the (supposed) philanthropic pursuits of those who belong to his Millionaire's Club or Mega-Inner Circle or whatever he's calling it these days, but I still think most of it is for show--a way for people who are ordinarily motivated almost entirely by self-interest to make themselves feel like heroes. This is the same basic gripe I have against rock stars who hold all those benefit concerts to "end poverty"...instead of just reaching into their own pockets and ending poverty.

Cosmic Connie said...

And then of course there's "Mr. Fire's" famous plan to end homelessness, Operation Y.E.S. (Your Economic Salvation).


In the video he says that if you go to the Operation Y.E.S. web site you can download a wealth of information products to help you with your own financial challenges, in return for donating "whatever you want -- $100.00 or more." (That last part sort of cancels out the "whatever you want" bit.) He says the money doesn't go to him or to any of the other folks who are in on the program with him; every penny goes to "the National Coalition for Homelessness." In fact there is no organization with that exact name but there are a couple with similar names. So he either misspoke or was just making that part up.

In any case, you can't download or donate via the Operation Y.E.S. site. It's been up on the web for over six months now but all you can do is sign up to receive information once the program is launched. Yet Joe has been going around bragging about his program to end homelessness.

I think Tony Robbins is into some "philanthropic" programs too, come to think of it. Like you, I think all of their motives are suspect, to say the least.

RevRon's Rants said...

"the... gripe I have against rock stars who hold all those benefit concerts to "end poverty"...instead of just reaching into their own pockets and ending poverty."

Allow me to point out one glaring exception to that, Steve: Willie Nelson. People know all about his Farm Aid concerts. What most don't know is that he personally paid the delinquent taxes & mortgage payments for a lot of Hill Country farmers who would have otherwise lost their farms. By the same token, when the IRS confiscated all his property to settle a tax debt, it was the farmers who attended the auctions and bought the things that meant a lot to Willie - then gave the items to him. In Willie's case, the "conspicuous altruism" was just the tip of the iceberg... unlike some other stars and folks who keep telling us that they're stars.

Being from Texas, I just needed to keep the record straight and not lump St. Willie in with the poseurs & hustledorks. :-)

Anonymous said...

'many leaders of business and industry were respected, almost lionized for their overall contributions to society: first men like (Andrew) Carnegie, then IBM's Watson, then Chrysler's Iacocca, then GE's Jack Welch.'

The same charge of 'conspicuous altruism' can be levelled at all the great Victorian philanthropists.
Carnegie, Rockerfeller et al all made their considerable piles exploiting the labour of the workers and the natural resources of the land before suddenly finding their consciences when death loomed on the horizon and speediliy shelling out to propitiate whatever god might be watching.
Same argument could be made for Bill Gates or Warren Buffet.

I'm not too bothered by all that, I'm just grateful, when I sit in a Carnegie-endowed library, that the old robber baron got a bit scared about his mortality, like the rest of us, and finally put his hand in his pocket.

RevRon's Rants said...

So Bill & Warren are knockin' on heaven's door already, eh? I missed the announcements, I guess.

My take on Gates is that he's pragmatic enough to realize he could never spend the money he's made, and figures to do some good with it, while he's still sufficiently in control of his faculties to direct the process. And he can hardly be described as an exploiter of his employees, since he has made so many of them millionaires, not in response to their demands, but of his own volition. One of them is a good friend & client of ours.

I'm not so familiar with Warren, so I won't be so presumptuous as to ascribe motives to him.

roger o'keefe said...

Much as I almost hate to say it Steve, this is a pretty insightful analysis, albeit, an oversimplified one. Which you admit yourself.

I don't know if self-help is as responsible for all this as you claim. I do know that something made the past few generations, Boomers in particular, a lot more into themselves and their own interests than their parents. And I say that as a Boomer, myself. The results are all around us, plain to see.

Cal said...

Isn't this the inevitable result of human emotion, i.e., fear and greed? Didn't the same thing happen in the 1920's with the orgy of buying autos, homes and radios? Was the self-help movement as big an influence during that era?

And also this particular speculative period seems to be worldwide. House and commerical property prices boomed in Europe also, along with their own versions of toxic loans. I just can't believe that this happened NOT even one decade since the tech stock mania. But it seems everyone got out of Nasdaq and into real estate.

I do believe a lot of this is our responsibility, despite the extreme laissez-faire policies of recent memory. Wasn't this President urging the auto companies to stimulate sales after 9/11? What did come up with --0% financing, as well as 6- and 7- year loans on a depreciating asset? Are you kidding me?

And no one was asked to sacrifice after the war in Iraq started, like what was done in WWII. How could we have promoted fuel-inefficient vehicles when we have to get much of our oil from an area of the world that hates our policies? Especially when the developing countries, such as China, are trying to get a lot of their populations into the middle class and therefore putting pressure on demand?

My complaints are bi-partisan. There were programs championed by Democrats that were stretched beyond their original intent in order to get people into purchasing homes.

But my basic point is that despite all we know about history and human emotion, we will always fear and greed. If we get through this (and we are a terrorist attack away from real economic catastrophe at this particular time), I don't think will happen again for several generations. But after we are all long gone, there will be another version of this. Our future generations who are unborn will say "it can't happen again". And it always does.

This is a capitalist country, and capitalism is the one thing that most people are never taught about in our youth. There is such a concept as the economic cycle.

Anonymous said...

Happy Birthday Nietzsche!

Who had an interesting take on the questions you propose in your article:

"To speak of just or unjust in itself is quite senseless; in itself, of course, no injury, assault, exploitation, destruction can be 'unjust,' since life operates essentially, that is in its basic functions, through injury, assault, exploitation, destruction and simply cannot be thought of at all without this character. One must indeed grant something even more unpalatable: that, from the highest biological standpoint, legal conditions can never be other than exceptional conditions, since they constitute a partial restriction of the will of life, which is bent upon power, and are subordinate to its total goal as a single means: namely, as a means of creating greater units of power. A legal order thought of as sovereign and universal, not as a means in the struggle between power complexes but as a means of preventing all struggle in general perhaps after the communistic cliché of Duhring, that every will must consider every other will its equal—would be a principle hostile to life, an agent of the dissolution and destruction of man, an attempt to assassinate the future of man, a sign of weariness, a secret path to nothingness"

Rest in Peace, Friedrich.

RevRon's Rants said...

"that every will must consider every other will its equal—would be a principle hostile to life,..."

Where Nietzsche goes astray is in his insistence upon a purely organic, unfettered following of "natural" processes, while ignoring the necessity of civil discourse in society. Where humans live in isolation from all other humans, such an organic approach would be understandable, yet even the isolated human must ultimately consider his impact upon his environs, and modify his behavior to suit.

Even a starving Robinson Crusoe - denied the comfort of a Friday - would refrain from killing more than he needed to survive, his actions tempered by the knowledge that a living beast would provide sustenance in the future, where an uneaten carcass would not.

It is upon such rudimentary survival necessities that governance is founded. While the required behaviors deviate from Nietzsche's demand for a purely "natural" approach, they do offer the best prospects for survival, of the individual and most especially of the society at large. Not to consider every other will as "equal," but to consider them nonetheless.

Steve Salerno said...

Where I might differ with you, Rev, is in your distinction between "organic" and "civil discourse." Some of us believe that the latter is still governed by the former. After all, why can't conversation (and the thoughts that precede it) be a purely electromechanical function, just like digestion, cell growth, etc?

RevRon's Rants said...

There you go, getting all deterministic on us again! :-)

I still hold to the belief that we *choose* the manner in which we integrate and communicate with our surroundings. The "organic" response I describe is one borne of narcissism, while the "civil discourse" is borne of the need for socialization (and no, I don't mean the implementation of socialism, for those who might want to jump!).

Ultimately, the choice to engage in civil behavior is more in keeping with the organic world, as it more fully serves to perpetuate not only the species, but the entire ecosystem in which the species lives.

Elizabeth said...

and no, I don't mean the implementation of socialism, for those who might want to jump!

LOL, Rev! With this strong disclaimer, you make it sound like a bad thing.