Homo Economicus [3]: Capitalism For Capitalists

homo economicus

Homo Economicus is alive and well where capitalism and capitalists are prospering  most:  in the USA. We know that because U.S. GDP is going up, and has been since the 2007-2008 financial crash, That’s the perspective of this Bloomberg piece:  Capitalism Is Working in the U.S.: From Warren Buffett to Jeff Bezos, today’s American capitalists are proving Adam Smith’s claim that free markets produce investment and growth (Nov., 2018)

“So where is capitalism succeeding in a world roiled by kleptocrats, simmering trade wars, and the xenophobia that inspired Brexit? That would be the U.S.

“American free enterprise is achieving the greatest growth in the developed world, posting annual gross domestic product gains since 2009. Within just eight years of the global financial crisis, the U.S. was the only non-emerging-market economy with record GDP. The nation’s growth has exceeded the Group of Eight leading industrial countries’ average every year since 2012, a trend that economists surveyed by Bloomberg forecast to continue through 2020.”

Bloomberg is bullish on American capitalism, but the Nobel prizewinning economist who created the concept of GDP had his reservations about its proper use:

“GDP’s inventor Simon Kuznets was adamant that his measure had nothing to do with wellbeing. But too often we confuse the two… If something has to be sacrificed to get GDP growth moving, whether it be clean air, public services, or equality of opportunity, then so be it.”

“GDP is how we rank countries and judge their performance. It is the denominator of choice. It determines how much a country can borrow and at what rate. But GDP is well past its sell-by date, as people are starting to realise. However brilliant the concept, a measure that was invented in the manufacturing age as a means of fighting the Depression is becoming less and less capable of imparting sensible signals about complex modern economies.

5 Ways GDP Gets It Totally Wrong As A Measure Of Our Success, World Economic Forum (Jan. 17, 2018)

The ideological clash between the two articles cited above couldn’t be more striking.

The Bloomberg’s article extols capitalism as a “moral force” to match the American Revolution:

“The founder of modern capitalism, Adam Smith, published The Wealth of Nations in 1776, the same year 13 colonies declared their independence from Great Britain. It remains the most referenced guide to prosperity because of its moral force: Smith said the freest markets are led by an invisible hand benefiting everyone, not just the individuals and companies motivated by their own profit.”

The article then lauds the big capitalist growth winners — Jeff Bezos, Elon Musk, Warren Buffet, Facebook, Amazon, Paypal, Apple, etc. — singling out Musk for special praise, saying “[Adam] Smith would relish the example of Musk,” who “might be the archetype of Smith’s capitalist,” despite his having to “give up his position as Tesla chairman and pay a $20 million fine to settle fraud charges.”

Finally, after a few paragraphs acknowledging there’s still work to be done, the article soars to a grand finale that quotes Abe Lincoln on upward mobility:

“Quoting Lincoln in her summer 2010 Marquette Law Review essay, Heather Cox Richardson wrote: “A healthy American society worked so that ‘[t]he prudent, penniless beginner in the world, labors for wages awhile, saves a surplus with which to buy tools or land, for himself; then labors on his own account another while, and at length hires another new beginner to help him.’ This was the idea behind free labor, ‘the just and generous, and prosperous system, which opens the way for all—gives hope to all, and energy, and progress, and improvement of condition to all.’ ”

By contrast, the World Economic Forum article is having none of Bloomberg’s enthusiasm:

“GDP is a gross number. It is the sum total of everything we produce over a given period. It includes cars built, Beethoven symphonies played and broadband connections made. But it also counts plastic waste bobbing in the ocean, burglar alarms and petrol consumed while stuck in traffic.

“Kuznets was uneasy about a measure that treated all production equally. He wanted to subtract, rather than add, things he considered detrimental to human wellbeing, such as arms, financial speculation and advertising. You may disagree with his priorities. The point is that GDP makes no distinction. From the perspective of global GDP, Kim Jong-un’s nuclear warheads do just as well as hospital beds or apple pie.

“Pointing out the defects of GDP and even tentatively suggesting alternatives is no longer controversial. Former French President Nicolas Sarkozy commissioned a panel led by Joseph Stiglitz, a Nobel economist, to examine the issue. It was creating a dangerous ‘gulf of incomprehension,’ Sarkozy said, between experts sure of their knowledge and citizens ‘whose experience of life is completely out of sync with the story told by the data.’”

The two articles are talking past each other, which allows both to be correct:  (a) capitalism is in fact good for capitalists, and (b) obsessing over GDP ignores general societal wellbeing. Squeezed between the two is the philanthrocapitalist vision of better world. We looked at that previously; we’ll look again next time.

Ambition: Promised Land or Wasteland?

A heap of broken images, where the sun beats,
And the dead tree gives no shelter, the cricket no relief,
And the dry stone no sound of water. Only
There is shadow under this red rock,
(Come in under the shadow of this red rock),
And I will show you something different from either
Your shadow at morning striding behind you
Or your shadow at evening rising to meet you;
I will show you fear in a handful of dust.”

T.S. Eliot, The Wasteland

We’re exploring how inspiration, motivation, and ambition can help create meaningful work. We found that inspiration is essential, but has a dark side that includes mania and delusional risk taking, and that motivation is a ManagementSpeak relic and a brain stressor.  As for ambition, much current commentary focuses on my kids’ generation, but there’s plenty here for the rest of us if we view it in the larger economic context.

Here’s a quick summary:  Our parents came of age in the glory years of The Job and a Fair Income for the Middle Class. We Baby Boomers were born into that economic model, customized with our own iconoclastic and utopian social visions. The model weakened in the 70’s and 80’s, but we were too busy with kids and careers to notice. The Gen Xers got in early enough to ride the upward mobility escalator, but now that the Millennials are  young adults the model is bankrupt, leaving them to face a whole new gig — as in “gig economy.”

All that happened while most of us didn’t know it. Along with our policymakers, we were and still are stuck in the cognitive and cultural bias of the jobs heyday. Back in the day, we showered the Millennials with self-esteem-building, be-all-you-can-be positive thinking, and told them to follow their dreams. But when they came of age the economy wasn’t set up to support them. Maybe that’s why some parents habitually hedged their advice, urging the kids to have a Plan B and for crying out loud quit with all the cold filtering and get a real job.

(For a remarkable look at the current state of economic opportunity, see “I’m a Millionaire Who Creates Zero Jobs. Why Do I Pay Less Tax Than You?” by Morris Pearl, a career Wall Street One Percenter who is now chairman of the Patriotic Millionaires.)

No wonder people write books like Generation Me: Why Today’s Young Americans Are More Confident, Assertive, Entitled–and More Miserable Than Ever Before , by psychology professor Jean M. Twenge. This is from the flyleaf:

Generation Me“In this provocative and newly revised book, headline-making psychologist Dr. Jean Twenge explores why the young people she calls “Generation Me” are tolerant, confident, open-minded, and ambitious but also disengaged, narcissistic, distrustful, and anxious.

“Born in the ’80s, and ’90s… the children of the Baby Boomers are … feeling the effects of the recession and the changing job market.

“Her often humorous, eyebrow-raising stories about real people vividly bring to life the hopes, disappointments, and challenges of Generation Me.  Engaging, controversial, prescriptive, and funny, Generation Me gives Boomers and GenX’ers new and fascinating insights into their offspring, and helps those in their teens, twenties, and thirties find their road to happiness.”

I was okay with the blurb until it got to “happiness.” I’m more in tune with the article we looked at last time — You Can Do It, Baby! Our Culture Is Rich With Esteem-Boosting Platitudes For Young Dreamers, But The Assurances Are Dishonest And Dangerous,” Aeon Magazine (July 17, 2015):

“Roman Krznaric, founding faculty member of The School of Life in London, says that .. we’ve seen ‘rising expectations among everybody for work that’s more than just a salary… You see this among people who are highly educated… and that helps explain why job dissatisfaction tends to rise over the past couple of decades, because people are asking … to use their talents or passions in their work.’

“The shift in expectation has resulted in tremendous anxiety over achieving these goals and, paradoxically, sheer delusion. Point out to parents or teens just how difficult it can be to achieve such a high-level career and you’ll likely be treated to a catalogue of all the people who bucked the odds. Not just the Oprahs or the Steve Jobses who achieved super-status but the friend of a friend who just bought a modern all-glass home overlooking San Francisco Bay with his signing bonus, or the daughter of a work colleague who was cast in a new TV show, or the neighbour’s son who got a scholarship to Harvard.

“If it’s possible for them, we want to believe that it’s possible for our children too. Besides, who wants to be the killjoy who has to remind the struggling math student that medicine likely isn’t an option? … Besides, technically it is possible. At what point do we abandon possible for probable, and encourage our children to do the same?

“‘This links to the cult of positive thinking,’ says Krznaric, ‘where we’re always wanting to feel up and good and send positive messages… and so we feel that we should only be sending good messages and positive messages to our children and to young people. That it’s somehow wrong or bad or inappropriate to tell them: actually, it isn’t possible.’”

Ambition says it’s possible. Current economics says it’s not. Now what? Back for more next week.

Monopoly: The Ultimate in Upward Mobility

monopoly

The Horatio Alger rags-to-riches ideal was born in the Gilded Age of the Robber Barons. A century and a half later, it remains an enduring icon of the American Dream and still makes for inspiring stump speeches.

If only it were true.

Truth is, something more powerful than pluck fueled the Robber Barons, and continues to fuel today’s Meristocrats and Robber Nerds. Yes, things like ingenuity, vision, determination, and hard work have had a lot to do with it, both historically and currently, but the essential element for creating mega-companies (sometimes whole new industries) and staggering personal wealth has been none other than government policy, which by definition favors selected economic activities over others.

A trio of distinguished economics and political science professors[1] provide one of the more provocative summaries of this economic reality in their book Violence and Social Orders: A Conceptual Framework for Interpreting Recorded Human History (2009). Harvard sociologist Steven Pinker described it this way: [2]

“The economists Douglass North, John Wallis, and Barry Weingast argue that the most natural way for states to function, both in history and in many parts of the world today, is for elites to agree not to plunder and kill each other, in exchange for which they are awarded a fief, franchise, charter, monopoly, turf, or patronage network that allows them to control some sector of the economy and live off the rents (in the economist’s sense of income extracted from exclusive access to a resource).”

Medici

This practice is sometimes called the “Medici Cycle,” after the famous Florentines:

“In Towards a Political Theory of the Firm, [ Luigi Zingales of the University of Chicago Booth School of Business] theorizes that firms use their economic power to acquire political power. They then apply that political power to achieve greater economic gains, which in turn helps them acquire ever more political power. It’s a cycle Zingales likens to the Medici dynasty of 15th-century Florence, Italy. The Medicis leveraged their lending relationships with the Roman Catholic Church into considerable political influence in Renaissance Europe.”[3]

As an example, consider how Andrew Carnegie made his money:

“The competitive strategy of the steelmakers in 1875 was simple:  Collude and fix prices…. Carnegie was invited to join the newly formed Bessemer Steel Association. The association was a cartel, and in the days before antitrust laws, completely legal. Rather than compete tooth and nail for every bit of railroad business, it made far more sense for the steelmakers to establish quotas to limit the total supply in the market. By agreement, each firm was to produce its quota and sell into the market at agreed-upon prices.” [4]

The upside is that Medici Cycle government policies have supported all kinds of timely innovation and inventions, social and cultural trends, and quality of life improvements. The downside is what happens when monopolistic are allowed to go unchecked for too long. Researching this article, I came across several recent expressions of concern that this is happening on many levels in the current U.S. economy:

1)         In their book  The Captured Economy:  How the Powerful Enrich Themselves, Slow Down Growth, and Increase Inequality (2017), Brink Lindsey and Steven M. Teles[5] describe their concern with  “regressive regulation” — monopoly-perpetuating policies — especially these four types:

  • “subsidies for financial institutions that lead to too much risk-taking in both borrowing and lending;
  • excessive monopoly privileges granted under copyright and patent law;
  • the protection of incumbent service providers under occupational licensing; and
  • artificial housing scarcity created by land-use regulations.”

2)         Nobel Laureate Joseph Stiglitz and the Roosevelt Institute issued a 2015 report that lists numerous government policies that support or deter monopoly. You can download the full report here or read a Business Insider article published earlier this month that serves as a sort of executive summary of the report, and also brought it up to date:  Nobel Prize-Winning Economist Joseph Stiglitz Says The US Has A Major Monopoly Problem.

3)         This recent article from The Institute For New Economic Thinking describes the derivative problem of “monopsony”:

“Center stage in the meeting of the Federal Research Bank of Kansas City’s annual symposium in Jackson, Wyoming this August was a discussion of the repercussions of having a small number of companies dominating the labor markets where they hire workers–what economists call ‘monopsony.’”

In a nutshell, the problem with monopsony is that, “When a small group of companies can dominate a labor market, wages—and workers—suffer.”

4)         Finally, state-supported monopoly is also evident in the current “rentier economy,” which, as the Steven Pinker quote above indicates, is the result of government policy that grants “exclusive access to a resource.” This is another instance of “regressive regulation.”

We’ll be looking more at the rentier economy in the weeks to come. But first, next week we’ll find out about a surprising twist in the original version of the Monopoly board game. In the meantime, you might enjoy my latest LinkedIn Pulse article The Fame Monster: Rockstars And Rockstar Entrepreneurs.

[1] Douglass C. North is co-recipient of the 1993 Nobel Memorial Prize in Economic Science. He is Spencer T. Olin Professor in Arts and Sciences at Washington University, St Louis and Bartlett Burnap Senior Fellow at the Hoover Institution at Stanford University. Barry R. Weingast is Ward C. Krebs Family Professor in the Department of Political Science and a Senior Fellow at the Hoover Institution at Stanford University. John Joseph Wallis is Professor of Economics at the University of Maryland and a research associate at the National Bureau of Economic Research.

[2] As described in Enlightenment Now:  The Case For Reason, Science, Humanism, and Progress, Steven Pinker (2018).

[3] From this post on the CFA Institute’s Enterprising Investor blog.

[4] From Americana: A 400-Year History of American Capitalism, Bhu Srinivasan (2017). I’m not the only one who didn’t learn about this in my American history class. See this interview with the author of Lies My Teacher Told Me: Everything Your American History Textbook Got Wrong.

[5] The authors combine for one of the more unique economic collaborations I’ve come across in my research They’re a pair of political science professors at Johns Hopkins University who are also associated with the Niskanen Center, a libertarian think tank. Brink Lindsey is a libertarian, so no surprise there, but Steven M. Teles is a liberal, and together they offer an mix of perspectives that provides heartening evidence that not everyone of conflicting persuasions is so entirely polarized that they can’t tlk to each other or agree about anything.

The Great Gatsby Lawyer

How okay are we, really, with the right of everyone (a) to make as much money as they want, and (b) to spend it any way they like? If we would limit (a) or (b) or both, then how and why?

Consider for a moment what your (a) and (b) responses have been to the upward mobility stories we’ve looked at so far:  Richard Reeves, Matthew Stewart, Steven Brill. Travie McCoy. David Boies, Eric and I. Now consider this story from an article in Above the Law:

“[P]ersonal injury attorney Thomas J. Henry threw a lavish bash to celebrate his son, Thomas Henry Jr.’s, 18th birthday. And the price tag for the Gatsby-mixed-with-burlesque-themed fête? A cool $4 million.

“To rack up such a hefty bill, the event had lots of performers which included showgirls, aerial performers, art installations, and contortionists (oh my!). Plus, there were musical performances and celebrity guests.

“And don’t think the over-the-top party was the only gift the birthday boy received:

“The star of the party, who sat on a throne-like chair when he wasn’t dancing, was given a fully loaded blue Ferrari, an IWC Portugieser Tourbillion watch and a custom-made painting from Alec Monopoly.

“Henry’s work as a trial attorney is obviously pretty lucrative. The big payouts he’s been able to secure for his clients have made him a member of the Multi-Million Dollar Advocates Forum.[1]

“Henry is known for throwing giant parties. Just last year, he spent $6 million for his daughter’s quinceañera. I guess we know which one is really daddy’s favorite.”

The writer telegraphs her attitude about the story with the article’s tone and with the understated lead line, “this seems extreme.” Apparently she would cast a vote for limitations on (b). When I’ve shared the story with friends, the response is usually stronger than “this seems extreme.”

I wonder why. Maybe it’s because this looks like a case of conspicuous consumption, which never goes down well. Economist/ sociologist Thorstein Veblen coined the term in his 1889 book, The Theory of the Leisure Class, to describe how the newly prosperous middle class were buying things to communicate their move up the social ladder. The neighbors were rarely impressed — that is, until they made their own purchases, and then the game turned into keeping up with Joneses.

The conspicuous consumption shoe might fit here:  Mr. Henry’s website tells a bit of his upward mobility story — German immigrant, raised on a farm in Kansas, etc. Or maybe there’s something going on here that transcends his personal story. In that regard, the term “affluenza” comes to mind.

“The term “affluenza” was popularized in the late 1990s by Jessie O’Neill, the granddaughter of a past president of General Motors, when she wrote the book “The Golden Ghetto: The Psychology of Affluence.” It’s since been used to describe a condition in which children — generally from richer families — have a sense of entitlement, are irresponsible, make excuses for poor behavior, and sometimes dabble in drugs and alcohol.”

From an article by Fox News. See also these descriptions from CNN and New York Magazine.

Definitions of the term come loaded with their own biases, judgments, and assumptions. This is from Merriam-Webster:

Affluenza: the unhealthy and unwelcome psychological and social effects of affluence regarded especially as a widespread societal problem: such as

feelings of guilt, lack of motivation, and social isolation experienced by wealthy people

extreme materialism and consumerism associated with the pursuit of wealth and success and resulting in a life of chronic dissatisfaction, debt, overwork, stress, and impaired relationships

And this is from the popular PBS series that came out shortly after The Golden Ghetto:

Af-flu-en-za n. 1. The bloated, sluggish and unfulfilled feeling that results from efforts to keep up with the Joneses. 2. An epidemic of stress, overwork, waste and indebtedness caused by dogged pursuit of the American Dream. 3. An unsustainable addiction to economic growth.

Affluenza teenAffluenza made quite a splash in the estate planning world where I practiced, spawning a slew of books, CLE presentations, and new approaches to legal counseling and document design. Affluenza went mainstream in 2014 with the highly-publicized trial of Ethan Couch, the “Affluenza Teen,” when a judge reduced his sentence on four counts of intoxicated manslaughter and two counts of intoxicated assault after an expert witness testified that his wealthy upbringing had left him so psychologically impaired that he didn’t know right from wrong.

For a great number of my clients, that their kids might catch affluenza was their worst nightmare.[2] Their fear suggests this consensus to Thomas Henry’s partying habits:

(a) it’s okay to make all the money you want,

(b) but it’s not okay if you use your money to make your kids a danger to themselves and to others.

I wonder — would it temper our rush to categorize and judge Mr. Henry if we knew his philanthropic history and philosophy? This is from his website:

“Mr. Henry’s overall philosophy is that helping others when you have the good fortune of being successful is not an elective decision but a mandatory decision. People who achieve success have a duty to help others.”

That statement closely mirrors the beliefs of Robber Baron Andrew Carnegie. We’ll look at that next time, along with the perceptions of other 0.01 percenters about the social responsibilities of wealth.

[1] The Forum’s website says that “fewer than 1% of U.S. lawyers are members,” which appropriately signals Thomas Henry’s position in the economic strata.

[2] I used to tell my clients that if I had a dime for every time a client said, “I don’t want my money to ruin my kids,” I would have been a rich man. That was hyperbole, of course:  a dime each time wouldn’t have made me rich. On the other hand, a million dollars each time might have made me a billionaire. A billion is a BIG number.

The Matthew Effect

“For to everyone who has will more be given, and he will have abundance;
but from him who has not, even what he has will be taken away.”

The Gospel of Matthew 25:29, Revised Standard Version

Economists call it the Matthew Effect or the Matthew Principle. Columbia sociologist Robert K. Merton used the former when he coined the term[1] by reference to its Biblical origins.[2] The more pedestrian version asserts that the rich get richer while the poor get poorer.

According to the Matthew Effect, social capital is better caught than taught, better inherited than achieved. That notion is borne out by current economic and demographic data[3] showing that the only children with a statistically relevant shot at experiencing a better standard of living than their parents are the ones born with a silver spoon in their mouths — or, as David Graeber says in Bullshit Jobs, the ones “from professional backgrounds,” where they are taught essential social capital mindsets and skills “from an early age.”[4]

Statistics are susceptible to ideological manipulation, but bell curves conceptualize trends into observable laws of societal thermodynamics. The Matthew Effect bell curve says it’s harder to get to the top by following the Horatio Alger path:  you’re starting too many standard deviations out; your odds are too low. On the other hand, if you start in the center (you’re born into the top), odds are you’ll stay there.

That might depend, however, on how long your forebears have been members of the club. Globetrotting wealth guru Jay Hughes has spoken and written widely of the concept of “shirt sleeves to shirt sleeves in three generations.” According to the aphorism, if the first generation of a family follows the Horatio Alger path to wealth, there’s a 70% chance the money will be gone by the end of the third generation, which means the social capital will be gone as well. That first generation might defy the odds through hard work and luck, but odds are they won’t create an enduring legacy for their heirs.

guy in a suit driving a tractor

My own law career was an exercise in another folk expression of the Matthew Effect:  “you can take the boy out of the country but you can’t take the country out of the boy.” (No, that’s not me in the photo — I just thought it made the point nicely.) My career finally hit its stride when I created a small firm serving “millionaire next door” clients — farmers, ranchers, and Main Street America business owners who became financially successful while remaining in the social milieu where they (and I) began. Nearly all of those families created their wealth during the post-WWII neoliberal economic surge, and are now entering the third generation. I wonder how many are experiencing the shirt sleeves aphorism.

Curiously, my transition out of law practice was also dominated by social capital considerations — in particular, a social capital misfiring. I had a big idea and some relevant skills (i.e., some relevant human capital — at least other people thought so), but lacked the social capital and failed to make the personal transformation essential to my new creative business venture.[5]

rocky field

In fact, it seems the Matthew Effect might be a larger theme in my life, not just my legal career. In that regard, I was surprised to find yet another one of my job stories in Bullshit Jobs. This one was about a townie who took a job as a farm laborer. His job included “picking rocks,” which involves tackling a rocky field with a heavy pry bar, sledge hammer, pick axe, spade, and brute strength, in an effort to remove the large rocks and make it tillable. I’d had that job, too. I was a teenager at the time, and it never occurred to me that it might be “completely pointless, unnecessary, or pernicious” (Graeber’s definition), which is how the guy in the book felt about it. In fact, when I told my parents about my first day of picking rocks over dinner, my dad was obviously so proud I thought he was going to run out and grill me a steak. Obviously I’d made some kind of rite of passage.

Picking rocks is just part of what you do if you work the land, and there’s nothing meaningless about it. I enjoyed it, actually — it was great training for the upcoming football season. I can scarcely imagine what my law career and life might have been like if I’d felt the same way about my first years of legal work as I did about picking rocks.

The Matthew Effect has far-reaching social, economic, legal, and ethical implications for the legal profession, where social capital is an important client- and career-development asset. Next time we’ll look at another lawyer who, like David Boies, rose from humble origins to superstar status, and whose story brings a whole new set of upward mobility issues to the table.

 

[1] Merton was originally trying to describe how it is that more well-known people get credit for things their subordinates do — for example, professors taking credit for the work of their research assistants — the professors enriching their credentials at the expense of their minions’ hard and anonymous work. Merton might just as well have been talking about law partners taking credit for the work of paralegals, law clerks. and associates.

[2] As for why “Matthew” when the other Synoptic Gospels (Mark and Luke) have the same verse, I suspect that’s in part because Matthew is the first book in the New Testament canon, but it may also substantiate a derivative application of Merton’s law made by U of Chicago super-statistician Stephen Stigler, known as the Law of Eponymy, which holds that “No scientific discovery is named after its original discoverer.” I.e., later arrivals collect the accolades the” original discoverer” never did. In that regard, Mark’s gospel is believed to have been written first, with Matthew and Luke’s coming later and deriving from it. That would make Mark the true original discoverer. That this economic phenomenon is not called the “Mark Effect” is therefore another example of Stigler’s law.

[3] See, e.g., the “Fading American Dream” graph and the “Geography of Upward Mobility in America” map in this NPR article.

[4] The phenomenon has been widely reported. See this study from Stanford and our trio to new Meristocrats from a few weeks back:  Richard V. Reeves and his book Dream Hoarders and his Brookings Institute monograph Saving Horatio Alger (we looked at those last time). The second was philosopher Matthew Stewart, author of numerous books and a recent article for The Atlantic called The 9.9 Percent is the New American Meritocracy. The third was Steven Brill, founder of The American Lawyer and Court TV, author of the book Tailspin: The People and Forces Behind America’s Fifty-Year Fall–and Those Fighting to Reverse It and also the writer of a Time Magazine feature called How Baby Boomers Broke America.

[5]  I’ve told that story elsewhere, and won’t repeat it here, but if you’re interested in more on this issue, a look at that particular social capital disaster might be illustrative. See my book Life Beyond Reason:  A Memoir of Mania.

Rebel Without A Cause

Continuing with David Graeber’s analysis of Eric’s job experience from last time:

“What drove Eric crazy was the fact that there was simply no way he could construe his job as serving any sort of purpose.

“To get a sense of what was really happening here, let us imagine a second history major–we can refer to him as anti-Eric — a young man of a professional background but placed in exactly the same situation. How might anti-Eric have behaved differently?

“Well, likely as not, he would have played along with the charade. Instead of using phony business trips to practice forms of self-annihilation, anti-Eric would have used them to accumulate social capital, connections that would eventually allow him to move on to better things. He would have treated the job as a stepping-stone, and this very project of professional advancement would have given him a sense of purpose.

“But such attitudes and dispositions don’t come naturally. Children from professional backgrounds are taught to think like that from an early age. Eric, who had not been trained to act and think this way, couldn’t bring himself to do it.”

James-Dean-Rebel-Without-A-Cause-Movie-PosterLike Eric, I couldn’t bring myself to do it either — although it was not so much that I couldn’t, it was more a case of not knowing how. I was bright enough, had a knack for the all-important “likeability factor” with clients and colleagues, and worked with lots of clients and other professionals who were members of the Red Velvet Rope Club. But like Eric, I remained on the outside looking in, and I spent a lot of time feeling envious of others who fit in so easily. Those dynamics dogged the early years of my law career. In time, a general sense of inadequacy became depression, which I compensated for by nursing a rebel-without-a-cause attitude.

My experience didn’t have to be that way. Consider, for example, the story of super-lawyer David Boies. Like Eric and me, Boies was also born to working class parents and grew up in a farming community, but that’s where the resemblance ends. Chrystia Freeland introduces him this way in her book Plutocrats: The Rise of the New Global Super-Rich and the Fall of Everyone Else (2012):

“As the world economy grows, and as the super-elite, in particular, get richer, the superstars who work for the super-rich can charge super fees.

“Consider the 2009 legal showdown between Hank Greenberg and AIG, the insurance giant he had built. It was a high-stakes battle, as AIG accused Greenberg, through his privately-held company, Starr International, of misappropriating $4.3 billion worth of assets. For his defense, Greenberg hired David Boies. With his trademark slightly ratty Lands’ End suits (ordered a dozen at a time by his office online), his Midwestern background, his proud affection for Middle American pastimes like craps, and his severe dyslexia (he didn’t learn how to read until he was in the third grade), Boies comes across as neither a superstar or a member of the super-elite. He is both.

“Boies and his eponymous firm earned a reputed $100 million for the nine-month job of defending Greenberg. That was one of the richest fees earned in a single litigation. Yet, for Greenberg, it was a terrific deal. When you have $4.3 billion at risk, $100 million — only 2.3 percent of the total — just isn’t that much money. Further sweetening the transaction was the judge’s eventual ruling that AIG, then nearly 80 percent owned by the U.S. government, was liable for up to $150 million of Greenberg’s legal fees, but he didn’t know that when he retained Boies.”

What did Boies have that Eric and I didn’t?

Well, um, would you like the short list or the long?

Boies is no doubt one of those exceptionally gifted and ambitious people who works hard enough to get lucky. I suspect his plutocrat switch was first activated when his family moved to California while he was in high school, and from there was exponentially supercharged by a series of textbook upwardly mobile experiences:  a liberal arts education at Northwestern, a law degree from Yale, an LLM from NYU, joining the Cravath firm and eventually becoming a partner before leaving to found his own firm.

That’s impressive enough, but there’s more to his story:  somehow along the way he was transformed into the kind of person who belongs — in his case, not just to the 9.9% club, but to the 0.1 %. Yes, his human capital was substantial, but it was his personal transformation that enabled him to capitalize (I use that term advisedly) on the opportunities granted only by social capital.

And now, if the 9.9 percenters we heard from a couple weeks back are correct, the pathway he followed is even more statistically rare (if that’s even possible) than when he travelled it — in part because of an economic principle that’s at least as old as the Bible.

We’ll talk about that next time.

Eric and Kevin’s Most Excellent Career Adventures

thermos

 

lunch bucket

 

David Graeber’s book Bullshit Jobs is loaded with real-life job stories that meet his definition of “a form of employment that is so completely pointless, unnecessary, or pernicious that even the employee cannot justify its existence even though the employee feels obliged to pretend that this is not the case.” One of those stories rang a bell:  turns out that “Eric” and I had the same job. The details are different, but our experiences involved the same issues of social capital and upward mobility.

Eric grew up in a working class neighborhood, left to attend a major British university, graduated with a history major, landed in a Big 4 accounting firm training program, and took a corporate position that looked like an express elevator to the executive suite. But then the job turned out to be… well, nothing. No one would tell him what to do. He showed up day after day in his new business clothes and tried to look busy while trying in vain to solve the mystery of why he had nothing to do. He tried to quit a couple times, only to be rewarded with raises, and the money was hard to pass up. Frustration gave way to boredom, boredom to depression, and depression to deception. Soon he and his mates at the pub back home hatched a plan to use his generous expense account to travel. gamble, and drink.

In time, Eric learned that his position was the result of a political standoff:  one of the higher-ups had the clout to fund a pet project that the responsible mid-level managers disagreed with, so they colluded to make sure it would never happen. Since Eric had been hired to coordinate internal communication on the project, keeping him in the dark was essential. Eventually he managed to quit, kick his gambling and drinking habits, and take a shot at the artistic career he had envisioned in college.

My story isn’t quite so… um, colorful… but the themes are similar. I also came from a strong “work with your hands” ethic and was in the first generation of my family to go to college, where I joined the children of lawyers, neurosurgeons, professors, diplomats, and other upper echelon white collar professionals from all 50 states and several foreign countries, At the first meeting of my freshmen advisory group, my new classmates talked about books, authors, and academic disciplines I’d never heard of. When I tackled my first class assignment, I had to look up 15 words in the first two pages. And on it went. Altogether, my college career was mostly an exercise in cluelessness. But I was smart and ambitious, and did better than I deserved.

Fast forward nine years, and that’s me again, this time signing on with a boutique corporate law firm as a newly minted MBA/JD. I got there by building a lot of personal human capital, but my steel thermos and metal lunch bucket upbringing was still so ingrained that a few weeks after getting hired I asked a senior associate why nobody ever took morning and afternoon coffee breaks. He looked puzzled, and finally said, “Well… we don’t really take breaks.” Or vacations, evenings, weekends, or holidays, as it turned out.

A couple years later I hired on with a Big 4 accounting firm as a corporate finance consultant. My first assignment was my Eric-equivalent job:  I was assigned to a team of accountants tasked with creating a new chart of accounts for a multinational corporation and its subsidiaries. Never mind that the job had nothing to do with corporate finance…. Plus there were two other little problems:  I didn’t know what a chart of accounts was, and at our first client meeting a key corporate manager announced that he thought the project was ridiculous and intended to oppose it. Undaunted, the other members of the consulting team got to work. Everybody seemed to know what to do, but nobody would tell me, and in the meantime our opponent in management gained a following.

As a result, I spent months away from home every week, trying to look busy. I piled up the frequent flyer miles and enjoyed the 5-star accommodations and meals, but fell into a deep depression .When I told the managing partner about it, he observed that, “Maybe this job isn’t a good fit for you.” He suggested I leave in two months, which happened to be when our consulting contract was due for a renewal. Looking back, I suspect my actual role on the team was “warm body.”

Graeber says that, at first blush, Eric’s story sounds like yet one more bright, idealistic liberal arts grad getting a real-world comeuppance:

“Eric was a young man form a working-class background.. fresh out of college and full of expectations, suddenly confronted with a jolting introduction to the “real world.”

“One could perhaps conclude that Eric’s problem was not just that he hadn’t been sufficiently prepared for the pointlessness of the modern workplace. He had passed through the old educational system … This led to false expectations and an initial shock of disillusionment that he could not overcome.”

Sounds like my story, too, but then Graeber takes his analysis in a different direction:  “To a large degree,” he say, “this is really a story about social class.” Which brings us back to the issues of upward mobility and social capital we’ve been looking. We’ll talk more about those next time.

In the meantime, I can’t resist a Dogbert episode:

Dilbert