When JD made an admirably-footnoted reference to "El Borak's Pirates" tonight, I realized I have never really explained what I meant by that.
Despite what I said below, empire-builders constitute a unique skill set, and perhaps a necessary skill set, in capitalism. These are the guys who build companies, starting with an idea for whatever product, and bring it to the public, being rewarded by that same public with profits from the voluntary purchases of those who find the idea worth paying for.
As an example, I once worked for a now-bankrupt company called House of Lloyd. Headquartered in Grandview, Missouri, it was the personal empire of a man named Harry Lloyd who began in the 1950s with a fireworks stand and eventually built it into one of the 3 or 4 largest home-party companies in the world. Harry sold imported Chinese trinkets via a network of hardworking housewives, making millions. He died in the mid '90s, just a handful of years before I came on to fix their Y2K code.
So long as Harry ran the show, HoL's profits accrued to the owners - it was capitalism at its Darwinian best. But as soon as he died, its profits began to accrue into the hands of those who were not owners, but employee managers. They were not capitalists - they did not own the company - but pirates, people who benefited from the company paying wages and providing benefits they themselves set by virtue of their power in the organization. Primarily because they had a different skill set from Harry*, HoL went bankrupt in 2001, leaving nothing behind but an empty warehouse. All its assets had been looted by pirates.
One can see this same dynamic - though perhaps not so quickly tragically - in other companies that survive their founders. Ford and General Motors might be good examples, but just about any "old" company will suffice. When the original founder dies, the company is taken over not by people who own the company but by managers who run the company on behalf of the new legal owners, but in their own interest.
It is doubtless difficult to run a company on behalf of anonymous** owners, especially when the owners are "represented" by a board whose members are themselves selected by the same management they oversee. This incestuous relationship rewards a different skill set and one shared with politicians: the ability to manage the politics of the business rather than the business itself, to move up the organization rather than to direct it. Because the managers no longer answer to the owners, politics and then piracy - the wholesale looting of the company's accrued value - quickly becomes the norm.
One probably needs no better example than John Thain's $1.2 million office redecoration when he headed Merrill Lynch. It is hard to believe that he would have spent $4000 of his own money on a trash bin, but because it was not his money but represented his power in an organization, he had no problem looting the shareholders without regard to company performance. And the true owners had no way of knowing the day-to-day operations of the business, being separated from the working of their company by mutual fund managers and a board, and each shareholder owned only a tiny percentage of the company anyway.
While I would be the last person to call for legal limits on such piracy - it is a shareholder problem, not a government one - there can be no doubt that late-stage capitalism, managed as it is by pirates, their captive boards, and their golf buddies who vote the shares through the mutual funds they manage, represent perhaps the final, senile stage of capitalism***. I have very little confidence they can fix what is wrong with Wall Street, because they are in many cases themselves what is most wrong with it.
Their skill set, like that of most politicians, is geared towards enjoying wealth created by the empire-builders, the capitalists, whom they had the good fortune to be born after.
* Make no mistake, it was Harry's fault. He liked to make decisions and was good at it, so he surrounded himself with people who were good at implementing decisions. when he died, there was no one left who could make a decision. It was not simple incompetence that doomed HoL, it just made that doom nearly immediate.
** Not in the sense that they are not legally known, but in the sense that they are simply a list of names on a ledger held somewhere on "the Street."
*** this is not to say that there are not still capitalists. Say what you like about Bill Gates or Meg Whitman or even Vince Offer at Shamwow, they represent the ability to create value rather than to consume it.
The 2013 White Privilage Conference
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