From Deadly Sin to Virtue

Ma'at

I had more responses to last week’s blog posting, Greed is Still Good, than any since I skewered Reverend Jones last September (Is That What Jesus Would Do? Really? ). I was pleased that the responses were thoughtful and articulate. While the core of my argument was about the economic theory known as the Law of Creative Destruction, most of the responses were a reaction to the headline. Apparently mentioning one of the seven deadly sins is a great way to get a response.

Of all the responses, most interesting to me was a comment from the Mensa group on Linked In by Richard Irwin. Here it is:

“There is no point in having wealth and power if it is just to serve our own ego. Wealth should be spent so others benefit from it, not hoarded, for that is miserly. Power should be used to serve others, not ourselves, as true happiness is not achieved through the domination of others. Equally, poverty is of no benefit to the individual or the society they find themselves in.

“We now need to look at sustainability and balance and learn to rebuild the diversity of the world we inhabit. The ancient Egyptians had a concept they called Ma’at which was the presence of truth, order, balance and justice in the world. I believe that after a century or more of world conflicts and unrestricted exploitation, that the concept of bringing Ma’at back into the world through the deeds we undertake in our lives is a valuable one.”

I must confess that I had never heard of Ma’at who, as it turns out, was an ancient Egyptian goddess representing the concept that Mr. Irwin describes.

In reading about Ma’at, I found myself thinking of Practical Wisdom, the principle defined by Aristotle. The result of the application of Practical Wisdom is a virtuous society. Two great books, published in the last year, examine Aristotle’s thinking in the context of modern society. The first is "Justice: What's the Right Thing to Do?" by Harvard professor, Michael J. Mandel and the other is "Practical Wisdom: The Right Way to Do the Right Thing" by Swarthmore professors, Barry Schwartz and Ken Sharpe. Schwartz gave a great lecture on the topic last November which can be found on TED.com by clicking HERE.

The critical element of Practical Wisdom in its application to how our society works is the flexibility to bend the rules -- to use judgment to structure the best outcome for society and its inhabitants. Schwartz compares it to Jazz improvisation. The notes are on the page but the musicians play a variation that results in beautiful music. My interpretation is that he is talking about the difference between rules and principles (a construct first pointed out to me by a colleague).

Aristotle

In American society, our response to people and institutions that are unprincipled is to create rules to govern their behavior. But Schwartz points out that doesn’t work. Hence we have laws like No Child Left Behind that leaves children behind and Dodd-Frank Financial Reform that doesn’t reform the financial system.

On the topic of bankers – that target of the OWS crowd – Schwartz points out the bankers are smart people and “like water, they will find the cracks in any set of rules”. What we need, posits Schwartz, is the moral will to do the right thing and the skill to figure out what that is. In other words, we need principles.

He further points out that rules (or regulations in government parlance) “create people who only respond to incentives”. If you reward teachers for their students achieving higher test scores, that’s all they will teach. If you reward doctors for doing too many medical procedures, they will perform too many medical procedures.

Great thinkers like the college professors who have written on this topic make a material contribution to our society by creating a construct for our institutional leaders – commercial, religious or government -- to absorb and adapt to a practical application. But for most of us there is a simpler way to look at it.

It’s not what you do but how you do it. There is nothing inherently wrong with being a lawyer; however, lawyers who put their own interest ahead of their clients are unethical. There is nothing wrong with being a doctor; however, prescribing too many procedures so you can make your next boat payment is unethical.

Examples abound… Journalists who bend the truth to create a headline that will please their editor… legislators who are guided by special interests that make donations to their campaigns… Auto mechanics that convince you to make repairs you don’t need. And so on.

During the years before the financial crisis, Goldman Sachs sold Collateralized Debt Obligations (CDOs) to their customers while their proprietary trading desk was “shorting” those same securities through the purchase of Credit Default Swaps (CDS’s). They made money while their customers lost a bundle. Unethical? Definitely. This is a simple principle anyone can grasp.

Illegal? Maybe. We’re still sorting that out. Legal is about the rules while ethics is about principle.

Is investment banking in and of itself unethical? In practice, investment bankers arrange for capital financing to enable entrepreneurs and corporations to invest in business growth spurring demand for goods and services and creating jobs. Is that unethical? I think not.

Wall Street – the financial services industry – provides a valuable service that enables the prosperity of American society. That investment bankers can make millions while doing so is neither illegal nor unethical. The OWS crowd may take issue with that. Despite the lack of a coherent platform, one clear message from these protests is that our system lacks social justice.

Perhaps we can find some guidance in Ma’at. Consider this from the Tour Egypt website:

“Ethics" is an issue of human will and human permission. It is a function of the human world of duality. What is "ethical" for one group is sin for another. But Ma'at, the reality that made all groups what they are is transcendent of ethics, just as a rock or a flower is amoral, a-ethical, without "truth or falsehood." How can a flower be "false" or "ethical?" It just is. How can the universe be "ethical or moral, right or wrong"? It simply is. That is Ma'at.”

Greed Is Still Good

True confession: I used to work at Goldman Sachs. Yup, the evil empire, the scourge of the Occupy Wall Street (OWS) protesters. So, I have a bias.


So many pundits, editorials and reporters have made the obvious observations about this now national (or maybe global) movement that I find it difficult to add any new thoughts. They are righteous… they are wrongheaded… they should be marching on Washington…. Maybe they just want jobs… Or, maybe they just want to get laid. (Well, this last observation is mine. But then I am old enough to remember the anti-war demonstrations of the 60s.)

I’m in the camp that thinks they should be marching on Washington. But where specifically? The White House? The Capitol? The Fed? The Department of Treasury? Too complicated. Let’s just occupy Wall Street.

Another obvious observation: they have worked hard and played by the rules and feel screwed by the system. They need jobs.

But, here’s the problem. The jobs aren’t coming back and it has nothing to do with Wall Street. It has to do with technology and the Internet in particular.

Have you been to an airport lately? If you have, you probably checked in to your flight at a kiosk which spit out a boarding pass and directed you to your gate. Remember how many people it used to take to check you in? Do you think those people are getting their jobs back?

This is just one of the examples of “The Second Economy” identified by the McKinsey Quarterly (you can get a free copy by clicking HERE and creating a login). The Internet has disrupted a lot of old methods of doing business. Thousands, if not millions, of jobs have vanished by way of the use of RFID technology, websites that have replaced travel agents, retail stores, schools and data centers. Yes, even Info Tech professionals have been affected. Our data is moving to “the Cloud”. We don’t know where it is and, apparently, we don’t care.

What server holds your Facebook page and all your photos? Don’t know? Neither do I.

Speaking of Jobs, lots of comment about the adoration among the OWS of the recently departed billionaire, Steve Jobs. It’s easy to focus on the contradiction. After all, Apple wouldn’t exist if it weren’t for junk bonds, hedge funds, IPOs, secondary offerings, derivatives and the like.

I find it more interesting to look at Apple as a microcosm of the global economy. Think of it this way. Apple creates the product – the design, the engineering, the operating system, etc. The products, the iPod, iPhone or iPad, are manufactured primarily by Foxconn in China. In the industrial economy that started to vanish from these shores about 20 years ago, the manufacturer would be a very valuable company in stock market terms. Yet, Apple is the most valuable (or second most valuable behind Exxon Mobil) company in the world. Not Hon Hai, parent company of Foxconn, which has over 400,000 employees worldwide.

I don’t think the OWS protesters are focused on Steve Jobs the billionaire or on Apple, the company. They are just turned on – like the rest of us – by all the power that the iPhone places in the palm or our hands.

Michael Douglas as Gordon Gekko

Which brings me to Gordon Gekko and the “Greed is Good” speech from the movie Wall Street. In context, the famous Gekko speech was an interpretation of Schumpeter’s Law of Creative Destruction. Here is what Gekko said, in part:

“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. Greed, in all of its forms; greed for life, for money, for love, knowledge has marked the upward surge of mankind.”

Here’s a quick overview of Schumpeter’s law cribbed from Wikipedia: “In Schumpeter's vision of capitalism, innovative entry by entrepreneurs was the force that sustained long-term economic growth, even as it destroyed the value of established companies and laborers that enjoyed some degree of monopoly power derived from previous technological, organizational, regulatory, and economic paradigms. Schumpeter also elaborated the concept, making it central to his economic theory.”

It wouldn’t make a very good movie script, would it?

But, whether you prefer Gekko’s version of it or Schumpeter’s, the fact is that email destroyed the Post Office, Netflix destroyed Blockbuster and the guys who invented that airport kiosk destroyed all those airport jobs. And, all of us are willing participants.

Oh, and by the way, if you have an iPhone, you can even skip the airport kiosk. How’s that for power in the palm of your hands?

So, here’s the real problem. To replicate the success of Apple Computer and Steve Jobs, we need to train more engineers and designers. And, we aren’t? According to a Kaufman Foundation study, more than half the students in technical masters programs are foreign. And, now they don’t have to stay here to find jobs in their field. They can go back to China, India, Korea or South Africa to find meaningful work.

So, maybe the protesters should be marching on the Department of Education.

What do you think?

All My Children... And a Few More

Joe and his cousin Anna

I just returned from NY where we celebrated my brother-in-law Joe’s 80th birthday (yes, he’s much older than we are). What a great party! My wife’s family is full of energy and the party drew distant relatives from far and wide. Rhode Island, Toronto and, of course, Florida. There was no music or dancing at this party. The music could not have been heard over all the laughter.


Like any Italian family, the more of us you get in a room the more you hear great stories. I have heard them all 100’s of times before. But, they get better every time.

The planning for our trip was juxtaposed with the end of an era. All My Children, a long running daytime soap opera, was airing its last episode on network TV. What’s a soap opera lover to do now that Susan Lucci – perhaps daytime TV’s most well-known star – has faded to black along with the entire Pine Valley community?

Susan Lucci as Erica Cain

One of my favorite stories is about my late father-in-law, Dominick, who lived to the age of 95. He was as tough as any Italian born in the old country but he could also charm the skin off a rattlesnake. I loved him dearly and we still miss him 20+ years after his death.

In their later years, Dominick and his sister Catherine would sit together watching afternoon soaps. This was not idle time. They were truly engaged in the process. You might have thought these soap opera characters were their neighbors or, perhaps, distant relatives. They would swear and curse at the immorality on display. How would they react to Susan Lucci’s character, Erica Cain? They would be spitting mad.

“Che puttana!” (What a whore!)

Note: it is far funnier to hear this story told by my sister-in-law than it is to read it.

Were they alive today, Dominick and Catherine would be crestfallen to hear of the end of All My Children. Where could they get their melodrama fix?

Well, fear not! We have the Republican candidate debates. Well, we call them debates; but, are they really? For the most part, they are sound bite contests. No need to watch. Just wait for the four minute summary on the morning news. They will dutifully show you the “highlights” which focus on barbs and retorts NOT on substance.

But, that’s not the real melodrama. The daily reports of who’s in and who’s out are the real action. Will it be the fat guy from New Jersey? How about the hot chick from Alaska?

This is more fun than wondering if Erica Cain’s daughter is really a lesbian. Is Mitt Romney really a conservative? Moreover, which Republican will the voters kill off before the primaries? We have already seen the rise and fall of both Michelle Bachmann and Rick Perry. However, Perry seems like he could come back and cause problems for the main characters. Sort of like when Erica Cain’s thought-to-have-been aborted son, Josh Madden, returned to the show.

The other melodrama? The competition to be the most influential state in the primary season has moved big state Florida to schedule its primary in late January. So, New Hampshire and Iowa will likely hold their main events shortly after New Year’s Day. Too bad. It’s clear that anyone who hasn’t declared is unlikely to jump in now. Fat guy says no. Hot chick says no. They’re spoiling the fun, aren’t they?

Pop star, Rihanna, made several guest appearances on our favorite soap opera back in 06. Couldn’t we have at least one more brief guest appearance? How about South Carolina Representative Joe Wilson who famously yelled, “You lie”, at President Obama during the 2009 State of the Union address? Wouldn’t that drive everyone crazy? Wouldn’t Bill Maher have a ball with that?

Amidst all this madness comes the Wall Street Journal editorial (October 5) which almost, but not quite, names Romney as the best of the lot. They refer to him as a “technocrat” (whatever that means) whose candidacy would give Republicans the best chance of reclaiming the White House – maybe.

Speaking of juxtaposition. The demise of Erica Cain is nearly simultaneous with the rise of upstart, Herman Cain (no relation). The Journal describes him as the “most intriguing” candidate. They were careful not to endorse anyone.

Cain’s 9-9-9 proposal has gotten everyone’s attention. Personally, I love it. It would reduce the government’s misallocation of capital, increase economic growth and employment; more fairly tax the public, attract Foreign Direct Investment and favor exports over imports. And, it has the added advantage of being easily understood by the average Joe.

But if Cain ever made it to the White House, the real soap opera would begin. I am not a lawyer but I think I could translate Cain’s 9-9-9 program into a Congressional bill in two or three pages. What would Congress do to 9-9-9? How many pages would the legislation be after the lobbyists got hold of it?

I am tempted to utter some Italian epithet. But, instead I will simply ask:

CHI PRON GUIDO? (WHO WILL LEAD?)