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Showing posts with label wealth. Show all posts
Showing posts with label wealth. Show all posts

Thursday, June 30, 2016

The Vicious Cycle of Stupid Capitalism



“To live fully, we must learn to use things and love people, and not love things and use people.” 
John Powell 

Work. Earn. Buy. Work harder. Earn more. Buy more. Want more. Work even harder. Wages stagnate. Prices go up. Use credit. Want more. Use more credit. Buy even more. Prices rise. Wages stay stagnant. Start giving up essentials; use more credit to buy more stuff. Get deeper and deeper in debt. Repeat.

Therein lies the vicious cycle of the stupid, wasteful, excessive consumptive capitalism that we have become trapped in. One in which companies are driven purely by profiteering based on selling us more stuff; no longer innovating or solving real problems but simply updating existing products with more memory, larger screen sizes or higher definition. We in turn want to keep up with the Joneses and even though there is absolutely no reason to discard your iPhone 5, ROKU 1 or 2009 model 40” LG flat screen TV, we want the newest gadgets and products because everyone else has them.

Even if you try to resist the urge to constantly consume (like our family does), companies have started to ensure that we have no choice. Many now make products with shorter lifespans, that fall apart in a less than a couple of years. I still remember when all white goods and even clothes and furniture from my parents’ generation lasted for decades. My father’s shoes and shirts lasted him more than twenty years; mine last less than two. My mother’s fridge stayed with us for more than a decade; our last one broke in one year. My last laptop died two years after I bought it. I had to buy a new one after Lenovo told me that the cost of replacing the broken part would be more than I paid for the laptop. In fact, it has gotten so out of hand that leading up to the financial crisis people were buying and selling homes as regularly as people upgrade iPhones.

Today, it is as if companies exist purely for profit at all costs. Consumption and consumerism has reached a fever pitch and are now bordering on insanity. Amazon just introduced a DASH button that allows you to re-order household products the moment you start to run low (Source: TechCrunch article). God forbid we ever run out of paper towels or washing detergent, the world might end; toilet paper is another matter entirely.

Perhaps, it started with Wall Street’s introduction of quarterly earnings results which were presumably designed to gauge the health of public companies and create greater transparency. Somewhere along the way it became a measure of profits, with growth expected every quarter. Shareholders started to expect their piece of this pie via an always rising share price and dividends every quarter. 

The problem with this model is that companies realistically cannot grow at such a frenetic pace. Such rapid rate of growth is neither realistic nor feasible and leads to putting the kinds of pressure on management that always lead to ill-conceived and myopic decisions at best and totally dishonest, illegal and fraudulent ones at worst. Essentially, we have created a system where we reward short-term success, at any cost, and penalize long-term or strategic thinking, the type that leads to real and sustainable growth.

This is not a viable model of capitalism and more importantly it is based largely on false premises and unrealistic expectations. It is not the fundamentals of capitalist theory that are in question but the people applying them who seem to have become increasingly devoid of ethics, morals, principles and personal responsibility. We have created a system where winner takes all, at the expense of everyone else. If we continue down this path we are putting the wonderful system of capitalism on a path to failure and also creating conditions for major social unrest across the world.

It seems that all sins are permissible as long as companies continue to produce profits. And when senior leadership fails, they simply move on to the next job with a golden parachute, instead of into management oblivion or jail where they really belong. After Enron, every senior executive learned to never leave an email or paper trail; when topics broached sensitive territory in e-mails, they would often write ‘LDL’—let’s discuss live.” (Source: New Yorker). It used to take generations to amass substantial wealth. Today, between Wall Street hedge funds and Silicon Valley startups Rockefeller and Vanderbilt-like wealth is being created in a matter of years, and is often based on valuations pulled out of blue sky or based on misleading small investors.

Even the world of academia has succumbed to this growing greed and worship of money. Colleges, whose critical role was to broaden minds beyond traditional spheres of influence and thinking and to encourage generations to discover, are busy peddling sophisticated financial models that help companies evaluate ‘risk.’ Professors have become 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. 

There are numerous reports of how talk of becoming a doctor, public servant, poet or teacher has long disappeared from the modern day dorm rooms. Today, it is all about how kids can make their first million dollars before starting their sophomore year in college. 

We have moved away from the notion of steady, honest hard work as the key recipes for success to a model that supports fast, easy, reality-TV-type do-nothing success. Everything is about an exit and not about building companies that span generations. Bluster wins the day while substance, it seems, is considered old-fashioned and outdated.

With this approach to success we have washed away the fundamental human values and principles that used to govern our inner consciences. We are looking out for ourselves (in much larger numbers than generations before us) and worried less about improving the lives of our employees, communities and children.

So we can blame our politicians, the business elites, media and everyone else for our woes and push for stricter laws and more stringent regulation, but I don’t believe this will solve the deeper underlying problem we are facing; we have made money our new God. It is this greed that we need to tackle; one that forgoes ethics, principles and decency in a bid to get ahead. 

Until we remember that each of us has a greater responsibility to society and to the generations that follow, we will remain plagued by this imbalance in our lives and in our little global village.

Wednesday, January 7, 2009

Capitalism RIP…

(Image: Henley Design Studio via Unsplash)
 

"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 Wall Street financial firms, hedge funds and Silicon Valley unicorns, creating generational wealth in a year and yet few were creating products or innovating, financial or otherwise (last time I checked CDO’s were not products). They were generating huge profits on a quarterly basis, which often turns out were based on false premises, grossly overstated sales figures or simply hiding big losses. These people 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 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 Madoffs, the Dick S. Fulds, the
Mark Zuckerbergs 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.