Wednesday, January 7, 2009

Capitalism RIP…

"The point is, ladies and gentleman, that greed -- for lack of a better word -- is good. Greed is right. Greed works. Greed clarifies, cuts through, and captures the essence of the evolutionary spirit."
Gordon Gekko

Don’t get me wrong, I am as much of a jingoistic money grubbing capitalist pig as the best of them, and believe me when I say that I don’t intend on ‘sharing my wealth’ anytime soon (well, what little is left of it, anyway!); but I am saying that American Capitalism, the ideology that has been the essence and core of the global capitalist engine, is dead. The one that has for the last thirty or so years been filling up on spurious petrol to keep it revving; and much like Detroit, it is too late for an overhaul or an oil change to keep this baby purring – it will need to be replaced with a new and more generationally friendly one.

My conclusion is based on a simple premise. It is not one steeped in financial foresight or wizardry or even based on an innate understanding of derivatives, credit default swaps or the global financial systems’ intricacies or lack of regulatory structure. To my simple and poorly read financial mind there were (and remain) a couple of warning signs that our system of Capitalism was on a path to failure. And I want to clarify that it is not the fundamentals of Capitalist theory, but the people applying them, that have failed; the end result, however, remains the same.

The first warning was a growing lack of accountability coupled with a management culture where captains of industry were no longer being chastised, but routinely rewarded, for failure. And we, society, were saying it was fine that these men take no responsibility for their actions as long as they did not screw us personally. Of course, it also seemed like looking the other way had become easy because we were all in some way feeling a part of the greater wealth creation, by pushing our credit limits beyond our means and deluding ourselves into believing that our first million was probably also just around the next corner. It seemed that as long as these CEO’s had not broken any laws, all their sins were permissible and they could move to their next big job with a slap on the wrist and a golden parachute, instead of into management oblivion as should have been the case each time and with no exception. Add to this the small matter of Wall Street financial corporations, banks and hedge funds, creating generational wealth in a year and yet none of them were creating products or innovating, financial or otherwise (last time I checked CDO’s were not products). They were purely generating huge profits on a quarterly basis, which as it turns out were false, grossly overstated or simply hiding even bigger losses. These men were not only building the most dangerous and flimsy house of cards in the history of the world, but gambling recklessly and profiting from it and here’s the kicker – they were using your retirement money and mine to do it.

The second sign was one that was brewing in the world of academia. Colleges, whose critical role is to broaden minds beyond traditional spheres of influence and thinking, and to encourage future generations to discover and pursue dreams they never knew they had, were busy peddling sophisticated and fail proof financial models that would help companies evaluate ‘risk.’ You suddenly had professors everywhere becoming advisers to large corporations, showing up on company boards, and espousing ‘financial and economic’ expertise via regular columns in newspapers or appearances on television and basking under the bright lights of six and seven figure celebrity. Something is astray in academia when the line between classroom and boardroom starts to disappear in such a relaxed and yet alarming way. There were numerous reports of how talk of becoming a doctor, public servant or teacher had long disappeared from the modern day dorm room. It was now all about how one could make his first million dollars before turning thirty. Dreams consisted of amassing Astor or Rockefeller-like wealth not over a few generations, but through a few bonuses.

The third is what I deem the deterioration in the moral fiber of society; big words, I know, but simple when thought about in the context of the lack of meaningful action in the world of business and life, today. It is as if the fundamental human values and principles (not written laws or government regulation) that used to govern our inner consciences were being washed away in a tsunami of wealth creation. It felt like people only cared about creating personal wealth and were no longer willing to give back in real and consequential ways, in terms of donating their time and energy to bettering future generations. As long as everyone was making money, everyone seemed happy. Average people were buying their dream homes, and even less average ones were managing to buy second and third homes, politicians were filling their campaign coffers to the point where some actually stopped accepting any more contributions and we were filling our shopping carts with the latest flat screen televisions and Blue Ray players with money we did not have, and of course India and China were growing at 10% a year; nobody bothered about serious accountability and most of us did not stop and think about personal responsibility. We were happy to keep looking the other way as long as we and our own felt better off from one year to the next. And it is not altruism that I speak off. My mother always said it was easy to open your cheque book to appease your conscience, but it’s much harder to give up your Saturday to mentor new company recruits or give up the tee time to take your children to an all day camp - the issue that I believe lies at the heart of our problems and the failure of Capitalism. We were looking out for ourselves (in much, much larger numbers than in generations before us) and worried less and less about improving the future of our employees, companies, communities and our world.

So we can simply blame the Bernie Madoff’s, the Dick S. Fuld’s, the Barney Frank’s and the Republicans for all our woes and push for stricter laws, more stringent financial regulation and more transparent regulators, but I don’t believe this will solve the deeper underlying problem for the far future. I am all for bringing to book the leaders who misled companies, abused public office, refused to accept responsibility and engaged in criminal wrongdoing (and even have their bonuses and campaign contributions revoked) but I also believe that there is one more thing that we should all think about: ensuring that we set the example and bring up better people, in the generations that follow.

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