Tuesday, May 8, 2012

Occupy Galt’s Gulch

Empty shirt
“Each of us in this room has warmed ourself at fires we did not build, and each of us has drunk from wells we did not dig.”

Mark Shields, as heard, October 1997

I am not ashamed to confide, O Dearest and Most Equable of All Readers, that I have had a version of this particular post marinating in my brain for more than five years, from almost the first time I began laying finger to keyboard at this modest opinion emporium. Lord knows I have had numerous opportunities to release it over the intervening period, what with, in sequence, 20-something investment bankers, 30-something hedge fund traders, and 50-something private equity mavens each trumpeting to the stars the overweening brilliance and talent of their professional accomplishments to any and all who would listen, and to many who would not. For those among you who have noticed, the exposure and ridicule of hubris among the Great and Good, the not-so-great and not-so-good, and the patently pathetic yet surprisingly lucky has been an overarching concern and even gleeful entertainment in these pages. It is somewhat of a hobby of mine, undertaken and cultivated, if for no other reason, than to remind Your Humble Servant that he should indeed try strenuously to remain as humble as he can. Because he sure as shit isn’t anywhere near as clever or accomplished as he would like to pretend to be.

To date, what has typically stayed my hand is an acknowledgement that any efforts to puncture the iron-clad self regard of the self-appointed financial elite would be doubly futile. First, because they would blink stupidly at me (metaphorically) for completely missing the point of their unquestionable magnificence, and second, because it has always seemed to me that the only people impressed by these individuals’ autofellation have been themselves. In other words, my targets have historically been both too impervious and too self-evidently ridiculous to bother.

What has tipped my hand at last has been the appearance, at Megan McArdle’s blog site, of a really excellent guest post by entrepreneur and investor Jim Manzi. Mr. Manzi’s capitalist credentials are indisputable, so I was both impressed and heartened to read the words he excerpted there from his newly published book:

Many entrepreneurs hold the opinion that “I did it all on my own,” which may be well adapted to leadership success in certain situations, but it is objectively myopic. The entrepreneur relies on an ecosystem of venture capitalists, risk-taking purchasers, and so on. This ecosystem itself rests on a deeper foundation of collective, government-led enterprise. The delivery of our software, for example, depended on the existence of the Internet, which is the product of a series of government-sponsored R&D efforts, in combination with subsequent massive private commercial development. Government funding has been essential to much of the university science that entrepreneurs have exploited. Honest courts and police are required for functioning capital markets and protection of assets; physical infrastructure is required for the roads and running water without which we would not spend much time thinking about artificial intelligence software. At the absolute foundation, national armed forces protect the whole system against external aggression. All of our exciting technical and economic innovations ultimately require men to stand watch all night looking through Starlight scopes mounted on assault rifles—and die if necessary—to protect our commercial, law-bound society. Would you do this to protect a billionaire hedge-fund manager who sees his country as nothing more than lines on a map?

Add to this, in my world, the foundational infrastructure of global financial institutions and markets, the extraordinarily complex socioeconomic web of laws, regulations, and conventions which protect, foster, and enable investment and speculation, and the enormously capable and complex bureaucratic platforms from which most traders, investment bankers, and investors operate, and you begin to appreciate that these self-proclaimed supermen resemble Prometheus wresting fire from Mount Olympus for the benefit of mankind far less than spoiled rich kids born on third base who grow up convinced they hit a triple. (Not to mention that most of these clowns got rich on a flying trapeze constructed over a free safety net composed of the taxes, retirement savings, and future debt repayment powers of tens of millions of their otherwise completely uncompensated and unrewarded fellow citizens.)

So let me just say that I remain completely unpersuaded that traders, bankers, and private equity investors who have made fortunes over the last ten years deserve to be unconstrained, unregulated, and untaxed because they did it all themselves. Bull—if I may be so bold—fucking-shit. Go pull the other one, sweetheart. I’ve worked in finance for more than two decades. You can’t fool me.1

* * *

Now don’t get me wrong, children. I think America, for all its various and distressing faults, is a remarkable country. In most countries in most ages of the world, the rich made their money the old-fashioned way: they stole it or they inherited it. For the last 200 years or so, we have run an experiment here and in a few countries abroad where capitalists have been allowed to create vast wealth for themselves and others based on sheer effort, talent, and—undeniably—loads of good luck. This is a remarkably heartening history. It is the unyielding bedrock for the Rawlsian contract which we all seem to enter into at birth, a contract which states that we will not unnecessarily constrain or prevent the great accumulation of wealth in our fellow citizens, as long as we have, ab initio, some non-trivial reason to believe we ourselves could be such a winner.

Jim Manzi puts it well (emphasis mine):

the fundamental tension of democratic capitalism [is that] winners... require shared resources produced by the losers. That is, the market economy requires broad social consent. Why should those who lose out in market competition give it?

Why indeed? Because they hope and expect that they, too, have some chance to be winners. If society evolves in such a way that winning becomes hereditary, or winners can rig the game in their favor, or losers have no chance to become winners because the gap is too wide, watch out. Social contracts are only worth the paper they are written on. And paper can be torn up.

The Mark Shields quote featured above remains graven on my brain, more than 15 years after I first heard it at an otherwise forgettable conference. It is true on its face, to anyone who will admit it. The rich and the successful in any society enjoy their spoils and their comforts at the sufferance of those whose lives, sweat, and blood have helped them earn it. This is what makes the Randian fantasy of capitalist übermenschen living self-sufficient lives in a remote canyon in Colorado—or, for the less self-reliant, modern titan, a condominium on Lake Geneva—so ridiculous. Most of the fat, pampered hedge fund managers and private equity moguls I know couldn’t survive a week without access to Whole Foods’ prosciutto bar, much less potable water, heat, and edible foodstuffs.

The complex, modern, secure, comfortable, and predictable society which we all enjoy at this time in history comes at a cost. It is expensive. And yet that cost, at least in this country, is subsidized for the rich by millions of fellow citizens who charge them less than market rates solely in the hope that they, too, might win the lottery of hard work and success.2 It would behoove you sundry Masters of the Universe—tech entrepreneur, corporate executive, and financial titan alike—to remember this fact. Because the rest of us have not forgotten it.

And we vote.

1 And don’t try to pull the “self-made man” shit on me, either, bubeleh. I’m one, too. It’s not any kind of excuse.
2 Would you deny this? How else do you explain that the aggregate tax burden in this country is so low compared to other advanced Western economies with comparable or superior standards of living? Please.

© 2011 The Epicurean Dealmaker. All rights reserved.