The movie “Wall Street” came out in 1987 when I was 25 working as a junior investment banker, and it immediately became the iconic symbol for the brash Wall Street culture that emerged in the 1980s.
I am often struck by the simplest form greed takes; profit is never enough. It must be greater. In that realm, earning a return of 8% is not enough. If we earned 8% last year, we should earn 9% this year. Of course, 8% was enough for everyone to enjoy the profit and 8% of this year's increases sales would mean an increase, but 8% would be seen as flat and we can't have that. Oh, let's also be clear that 7% would be a loss, which mathematically it is not, because all that matters is year-to-year comparisons.
I wish some company would say, even once, that last year we earned 8% and we all lived comfortably so this year, since we earned 9%, we are giving the full additional 1% to our lowest level employees, those who actually make the product or deliver the service that earns our profit. Alternatively, we will lower prices to target 8% again for next year, that being adequate for us.
"Enough is enough!" is only uttered by frustrated parents. It is never said in boardrooms.
I love this piece. I too played the game early in my career. In ‘87 I was 6 years into a relatively successful career with Drexel Burnham when the SEC in all their prescient wisdom shut our doors and threw our savant Michael Milken in jail. I left the biz and never went back. Where would be today without “junk” corporate debt? Certainly the PE boys would be scrambling a little more to fund their self-serving adventures.
David [with respect], your post raises some very good questions. But we have to be careful. Most roads correcting for "class inequality" lead to dangerous places. The world is littered with examples of such correction. One of the truly admirable things about much of American wealth creation, and also what is uniquely American, is a result of the kind of economic mobility that does not exist anywhere else in the world e.g., "Mega billionaires have become American celebrities, just like movie and sports stars. People like Buffet, Gates, Bezos, Zuckerberg, Musk." You say this with derision (I think) but ALL these men are largely self-made (compare them to the top 1% elsewhere in the world). The main reason people from the rest of the world are still dying (often literally) to come to America is largely because of this. Socialist, (still) feudalistic-minded, class obsessed cultures even in Western Europe are much worse. I grew up in socialist (not even communist) India and I know what that was like. Lack of economic opportunity is a curse much bigger than just "not having nice things". Separate topic for another day...
But I agree with you as well.
Something is broken when our economic mobility leaves behind vast communities hollowed out by the same factors that create gargantuan wealth. It asks for a complicated balance. I don't believe in single cause attribution but one of the reasons our blue collar communities feel jipped is because our other institutions, especially education + healthcare, have utterly failed them. And now insulting the injured, the "elite" guard their wealth while laughing at those left behind (blue collar, "fly over" country) in our snotty culture wars.
The other failure has been poor oversight of/by government agencies (esp the 3 letter, thoroughly unelected ones, SEC, FTC, DEA, FDA...to name a few) which has resulted in an unholy nexus between politicians and those with the greatest economic power (industry / gov revolving doors, lobbying for fav regs, etc etc). The challenge is breaking this nexus without giving more power to politicians and bureaucrats because they're all for sale. We should note all these agencies were created from the same logic.
Finally I'll just say, encouraging a culture to be less greedy/ materially obsessed will not come from government fiat, which brings terrible unintended consequences. The search for meaning can't be imposed, it has to be sought. Not offering simple solutions here but I do know which "solutions" will be worse. Kinda' like democracy... Thanks for your post.
Thanks for taking the time to write a very thoughtful response.
I admire all the mega-billionaires I mentioned as entrepreneurs who have created vast companies. That said, it is a symptom of how we live now that they are celebrities as opposed to just famous businessmen.
I don't want to see a change from capitalism; it's by far the most efficient system to provide both opportunity and increases in standards of living. But it seems increasingly clear to me that American capitalism today has gone too far in rent-seeking and corruption. As well, I believe we have a subpar safety net that should be far more robust and paid for by a more progressive tax system. At some point enough people will get frustrated enough that the system breaks. I think we 're getting too close for comfort to that.
I really appreciate what you have to say in pointing out the complexities. I’m especially concerned when it comes to politicians who are able to become exceedingly wealthy because of insider knowledge. There’s something very corrupting about that.
1) I believe economic inequality is bad and getting worse. Like many people, I have a sense that the wheels are about to come off and that ugly things are imminent.
2) Most remediative proposals seem to come from the direction of seizing state power and forcing economic redistribution. If there’s anything I think is worse than economic inequality, it’s consolidated state power run amok. It’s the proverbial rock and hard place.
I don’t have the answers, only an unpleasant sense that I am watching a disaster unfold in slow motion.
You and @reenakapoor raise indeed the hard question of what could be done.
As an example, I wrote the post below about the 2021 Expanded Child Tax Credit, which was redistributive, but was simple and did not involve the creation of a significant bureaucracy. Had it been paired with any one of many reforms to make the tax code more progressive, it could have been budget neutral and a great start.
I would agree with those who say that the presence of billionaires itself reflects the systemic problem, regardless of how they accumulate their wealth and what they do with it.
I agree that American philanthropy is necessary because we do not have the robust safety net we could afford. That lack is unjust.
Thanks for sending your sermon. I would not go as far as the people you quote and I don't see the best system as one that would somehow prevent the creation of billionaires. That said, there's much that could be changed.
As an example, I wrote the post below about the 2021 Expanded Child Tax Credit, which was redistributive, but was simple and did not involve the creation of a significant bureaucracy. Had it been paired with any one of many reforms to make the tax code more progressive, it could have been budget neutral and a great start.
Glad I came across this, and I very much agree about how much investment strategies and misguided faith in the stock market have taken over business talk/ideas - in the recent Republican debate, no one questioned the premise that the Dept of Education should get the axe in favor of giving that money to “the people” to invest - or that a mythic 87,000 new IRS agents should be chopped to put that money into the hands...etc. Ramaswamy basically IS Gordon Gekko.
It's great to hear your thoughts on this movie as a financier. I've never watched it, but I now realise that it probably had a huge cultural impact when it was released. I'm especially hooked by this idea of Bud grappling between his two "Fathers" - it's a very archetypal motif which everyone struggles with to an extent. And I agree with your conclusion that on a societal level, Gordon Gekko is somewhat winning right now. Thanks for writing this David!
There's another movie called Boiler Room (highly recommend) about a penny stock operation that was essentially a way to steal from investors. In one scene the characters are watching Wall Street and quoting along word for word with Gordon Gekko.
Thanks very much.
I am often struck by the simplest form greed takes; profit is never enough. It must be greater. In that realm, earning a return of 8% is not enough. If we earned 8% last year, we should earn 9% this year. Of course, 8% was enough for everyone to enjoy the profit and 8% of this year's increases sales would mean an increase, but 8% would be seen as flat and we can't have that. Oh, let's also be clear that 7% would be a loss, which mathematically it is not, because all that matters is year-to-year comparisons.
I wish some company would say, even once, that last year we earned 8% and we all lived comfortably so this year, since we earned 9%, we are giving the full additional 1% to our lowest level employees, those who actually make the product or deliver the service that earns our profit. Alternatively, we will lower prices to target 8% again for next year, that being adequate for us.
"Enough is enough!" is only uttered by frustrated parents. It is never said in boardrooms.
Love the idea that "Enough is enough" is exclusive to frustrated parents!
I love this piece. I too played the game early in my career. In ‘87 I was 6 years into a relatively successful career with Drexel Burnham when the SEC in all their prescient wisdom shut our doors and threw our savant Michael Milken in jail. I left the biz and never went back. Where would be today without “junk” corporate debt? Certainly the PE boys would be scrambling a little more to fund their self-serving adventures.
Thanks Dee. Hard to believe that there used to be a financial world without non-investment grade debt!
Truth
So wonderfully spot on! Thanks David
David [with respect], your post raises some very good questions. But we have to be careful. Most roads correcting for "class inequality" lead to dangerous places. The world is littered with examples of such correction. One of the truly admirable things about much of American wealth creation, and also what is uniquely American, is a result of the kind of economic mobility that does not exist anywhere else in the world e.g., "Mega billionaires have become American celebrities, just like movie and sports stars. People like Buffet, Gates, Bezos, Zuckerberg, Musk." You say this with derision (I think) but ALL these men are largely self-made (compare them to the top 1% elsewhere in the world). The main reason people from the rest of the world are still dying (often literally) to come to America is largely because of this. Socialist, (still) feudalistic-minded, class obsessed cultures even in Western Europe are much worse. I grew up in socialist (not even communist) India and I know what that was like. Lack of economic opportunity is a curse much bigger than just "not having nice things". Separate topic for another day...
But I agree with you as well.
Something is broken when our economic mobility leaves behind vast communities hollowed out by the same factors that create gargantuan wealth. It asks for a complicated balance. I don't believe in single cause attribution but one of the reasons our blue collar communities feel jipped is because our other institutions, especially education + healthcare, have utterly failed them. And now insulting the injured, the "elite" guard their wealth while laughing at those left behind (blue collar, "fly over" country) in our snotty culture wars.
The other failure has been poor oversight of/by government agencies (esp the 3 letter, thoroughly unelected ones, SEC, FTC, DEA, FDA...to name a few) which has resulted in an unholy nexus between politicians and those with the greatest economic power (industry / gov revolving doors, lobbying for fav regs, etc etc). The challenge is breaking this nexus without giving more power to politicians and bureaucrats because they're all for sale. We should note all these agencies were created from the same logic.
Finally I'll just say, encouraging a culture to be less greedy/ materially obsessed will not come from government fiat, which brings terrible unintended consequences. The search for meaning can't be imposed, it has to be sought. Not offering simple solutions here but I do know which "solutions" will be worse. Kinda' like democracy... Thanks for your post.
Thanks for taking the time to write a very thoughtful response.
I admire all the mega-billionaires I mentioned as entrepreneurs who have created vast companies. That said, it is a symptom of how we live now that they are celebrities as opposed to just famous businessmen.
I don't want to see a change from capitalism; it's by far the most efficient system to provide both opportunity and increases in standards of living. But it seems increasingly clear to me that American capitalism today has gone too far in rent-seeking and corruption. As well, I believe we have a subpar safety net that should be far more robust and paid for by a more progressive tax system. At some point enough people will get frustrated enough that the system breaks. I think we 're getting too close for comfort to that.
We agree on the problems. Just the solutions are not as obvious or simple to me. Thanks for your response.
I really appreciate what you have to say in pointing out the complexities. I’m especially concerned when it comes to politicians who are able to become exceedingly wealthy because of insider knowledge. There’s something very corrupting about that.
Thanks Anne! So true.
Reena asks the hard questions.
Some personal premises:
1) I believe economic inequality is bad and getting worse. Like many people, I have a sense that the wheels are about to come off and that ugly things are imminent.
2) Most remediative proposals seem to come from the direction of seizing state power and forcing economic redistribution. If there’s anything I think is worse than economic inequality, it’s consolidated state power run amok. It’s the proverbial rock and hard place.
I don’t have the answers, only an unpleasant sense that I am watching a disaster unfold in slow motion.
You and @reenakapoor raise indeed the hard question of what could be done.
As an example, I wrote the post below about the 2021 Expanded Child Tax Credit, which was redistributive, but was simple and did not involve the creation of a significant bureaucracy. Had it been paired with any one of many reforms to make the tax code more progressive, it could have been budget neutral and a great start.
https://robertsdavidn.substack.com/p/the-cruel-untimely-and-much-too-quiet-ad5
I would agree with those who say that the presence of billionaires itself reflects the systemic problem, regardless of how they accumulate their wealth and what they do with it.
In sermon form: https://avbronstein.substack.com/p/behind-every-great-fortune
I agree that American philanthropy is necessary because we do not have the robust safety net we could afford. That lack is unjust.
Thanks for sending your sermon. I would not go as far as the people you quote and I don't see the best system as one that would somehow prevent the creation of billionaires. That said, there's much that could be changed.
As an example, I wrote the post below about the 2021 Expanded Child Tax Credit, which was redistributive, but was simple and did not involve the creation of a significant bureaucracy. Had it been paired with any one of many reforms to make the tax code more progressive, it could have been budget neutral and a great start.
https://robertsdavidn.substack.com/p/the-cruel-untimely-and-much-too-quiet-ad5
Glad I came across this, and I very much agree about how much investment strategies and misguided faith in the stock market have taken over business talk/ideas - in the recent Republican debate, no one questioned the premise that the Dept of Education should get the axe in favor of giving that money to “the people” to invest - or that a mythic 87,000 new IRS agents should be chopped to put that money into the hands...etc. Ramaswamy basically IS Gordon Gekko.
And I'm glad your comment above led me to read your lovely re-post about you and your son on vacation.
Great cliche: about being a parent: the days are long , but the years are short.
And I'm borrowing your son's opening pun!
“Mom, why do bees have sticky hair?”
Silence.
“Because they use honey combs!”
Aw, thanks, David - that re-post was a kind of heart flash for me
It's great to hear your thoughts on this movie as a financier. I've never watched it, but I now realise that it probably had a huge cultural impact when it was released. I'm especially hooked by this idea of Bud grappling between his two "Fathers" - it's a very archetypal motif which everyone struggles with to an extent. And I agree with your conclusion that on a societal level, Gordon Gekko is somewhat winning right now. Thanks for writing this David!
There's another movie called Boiler Room (highly recommend) about a penny stock operation that was essentially a way to steal from investors. In one scene the characters are watching Wall Street and quoting along word for word with Gordon Gekko.
Thanks for the comment, Zan.
Sounds great! I'll add it to my list of movies to watch