The first post, "Why the culture of the financial sector has to change", drew a comparison between doctors and bankers (it helps to know that this comes from a Brit, the difference is more clear-cut over there):
Doctors, for the most part, care very deeply about the social impact of their work. Their ethos is one of wanting to do a good job for its own sake. Some make a lot of money, others do well but are not super-rich (this is the typical case in Europe), but from day one at medical school, the ethos is pretty evident. In contrast, bankers tend not to care - or sometimes even think about - the social impact of their work. It is very clearly a fundamentally different ethos. I do not want to idealize doctors - there are clearly some real exceptions - but only to put bankers alongside them to bring out some of the differences in culture.
This is, in fact, an encapsulation and intensification of a wider cultural divide, going back for centuries, if not millennia: that between business and the professions. While there are certainly many exceptions, many businessmen who feel a sense of calling to a particular business for a particular reason, the overarching logic of the business worlds is against this, and in favor of simply making money. Having a sense of mission may be extremely helpful in doing that, and there are all sorts of books and seminars about the importance of it. But you don't see a lot of doctors buying such books and going to those seminars. They don't have to learn about the importance of having a mission. Most of them can't really imagine life without one.
The post continues:
You can see this difference in culture play out on the supply side of the labour market. Doctors are usually smart, hard-working people who could do well in other areas, but in most countries they have to go through a very long and genuinely tough training phase before they earn really good money (and in many countries the money isn't even that great). Yet this doesn't seem to deter applicants: medical schools can almost everywhere afford to be highly selective. This is because medical school applicants are, for the most part, people who actually want to make ill people better: that is, they have a sense of mission. In some sense, the "delayed gratification" acts as a filter: if you don't care about the mission, you'll find it hard to make it through to the latter, more lucrative stage of the medical career.
No amount of seminars are going to make your average businessperson into someone with the mindset of a doctor. It's just not going to happen.
The post goes on to note how the same sense of mission can be found in "engineers, teachers, technology innovators," saying:
People who start tech firms want to get rich, sure (who doesn't?) but a big part of their motivation is a desire to develop products that are widely used and make things better for people. (In open source you have the extreme case of people - often highly skilled - who care mostly about impact, not earnings.) Analogous to the delayed gratification in medicine is the high risk and opportunity cost of getting involved in a start up. If you're finishing CS grad school, and have a bright idea, at that point in time it's by no means clear that pursuing it will make you a millionaire. Yet to chase the dream you may have to pass up on other opportunities (e.g. a steady job). It's a high risk, high reward choice. Note also that in technology (as in music or sports) a long-running passion for the job is almost a pre-requisite for doing well; in this sense the opportunity costs kick in as early as high school, or even primary school.
This is also known as intrinsic motivation. People do a particular kind of work because of the work itself, because it speaks to (or rather, from) who they are.
Finance could not be more different. It is the general business mentality on steroids:
In fact, if you look across the economy, it's hard to find another line of work that offers high rewards as quickly and with as little risk as finance. If delayed rewards in medicine and high risk in technology act as a filter, selecting the passionate over the merely greedy, the quick riches and relatively low risk of finance perhaps act in the opposite manner, selecting for people who simply want to become wealthy as quickly as possible.
What's more, grouping people together with others of like mind tends to intensify whatever their motivations may be:
We can extend this analysis in time and across people by looking at how norms evolve in groups. When groups of like-minded people get together, they tend to reinforce their initial views. So if you like science at high school, four years with like-minded peers at Caltech may take your passion to another level. This effect of reinforcement by clustering can work for good or evil: it helps us all to put wannabe tech innovators together in CS departments and places like Silicon Valley, because they spur each other on in mostly a good way. But it can work against us too: think of criminal gangs, or extremist political groups.
So, here's a thought. Above I suggested (by way of implicit contrast) that businessmen (and those in finance, in particular) lacked the sort of intrinsic motivation that drives professionals. But what if that's not really the case? What if it only looks that way? What if they just have a different kind of instrinsic motivation?
Switching back to the New York magazine article:
As CMOs became more complicated, my job was to make everything seem simple-to, in effect, mask the complexity that would've made the bonds difficult to trade. We invented a language for mortgage-backed bonds. I called it BondTalk. Lehman was a runner-up in CMO underwriting. I was told to rewrite the entire system. Make it all push-button. Flexible and faster. Traders told us what they wanted, and we wrote the software code to make it possible. We were on the cutting edge. When I finished that project, I approached my former boss to ask if I could move to the trading desk, to where the big money was.
"Mike," he told me when denying my request, "can you really look for people dumber than you and then take advantage of them? That's what trading is all about."
In short, it's about predation. And that's the intrinsic motivation. That's the "mission." Now, maybe not for everyone. Maybe not even for most. But for those who grasp the essence of what they are doing, and who truly love their work, that's what it's all about.
It certainly explains the whole predatory lending side of the equation, up to and including the marketing of mortgages that were never intended to be repaid. There was nothing unique about finance in this regard. It was the same at Enron":
This is Bob Badeer (a trader at Enron's West Power desk in Portland, CA, where all these tapes were recorded) and Kevin McGowan (in Enron's central office in Houston, TX, as he mentions in the transcript):
KEVIN: So,
BOB: (laughing)
KEVIN: So the rumor's true? They're fuckin' takin' all the money back from you guys? All those money you guys stole from those poor grandmothers in California?
BOB: Yeah, grandma Millie, man. But she's the one who couldn't figure out how to fuckin' vote on the butterfly ballot.
KEVIN: Yeah, now she wants her fuckin' money back for all the power you've charged right up - jammed right up her ass for fuckin' 250 dollars a megawatt hour.
BOB: You know - you know - you know, grandma Millie, she's the one that Al Gore's fightin' for, you know? You're not going to -
BOB: Grandma Millie -
This is pure predator/prey mentality. And it requires a pure us/them dichotomization, in which the logic of one is completely different than the logic of the other. This is why IOKIYAR. Of course lions eat lambs. But lambs eating lions? Now that's an abomination. Similarly, it doesn't matter what a Democrat does compared to what a Republican does.
This is hidden logic of the "tea-baggers" as well. Remember I cited Rachel Maddow yesterday , talking about them?
This is the message that's being sold most aggressively about what the great conservative tea-bagging protest of 2009. the idea is that they're against taxes, that's mostly what they're for. You can also buy lawn signs that say 'taxed enough already' Get it? T-E-A [sign onscreen] tea? There are t-shirts, bumper-stickers, 'Taxed enough aleady!' The outrage! 'Our taxes are outrageous. We will evoke the spirit of the American colonists who seceded, who seceded from the tyranical government that taxed them so unjustly! These Obama tax policies are just unconscionable.'
You know what Obama's done to taxes in the less than three months he's been in office? He's, he's, he has passed the biggest middle class tax cut in American history. Honestly, these protests are organized around the principle of taxed enough already, and they're protesting now? Right after taxes just got cut for everyone making less than a quarter million dollars a year?
It makes no sense logically from a perspective where X can stand for anything, and the same form of argument will always apply. But it makes perfect sense tribally, from a perspective where they can never do what we do, simply as a matter of definition.
Put simply, conservatism depends on polarization, because tribal us/them logic is at its very core. Liberalism, OTOH, depends on common logic, which is another reason why liberalism is inherently much more concerned with the middle class. It's not just that liberals care about those who are in the middle class. They want a country in which the logic of the middle class prevails--a logic in which what's good for one is good for all. A logic of lateral relations. This is why America's failure to deal with poverty-addressed in my diary "US Public Spending In Context--Part 2"--is so consequential. It's both a symptom and a cause of polarized, conservative, predator/prey thinking. It reflects a dog-eat-dog mentality that lies at the heart of conservatism.
And those are conservatism's real moral values.
The Compulsive Theorist followup post summarizes:
* Norms matter: strong regulation is no substitute for good norms, both because of enforcement costs and the likelihood of regulatory capture and gaming.
* I am not saying that all - or even most - employees in financial services have no interest in the social value of their work: my claim is only that there appears to be a critical mass with a more cynical viewpoint who have effectively set the cultural tone.
* The issue not really a lack of altruism, but something less lofty: caring about the work itself as opposed to earnings alone.
* Financial services have, of course, considerable social value and I do not doubt that many entrants into the sector are motivated in this way. But I think that such people quickly find themselves in a culture where their views are not much heeded. Consider the position of a (hypothetical) young recruit into AIG's Financial Products division who may have been concerned about what was going on.
* I used a contrast between bankers and doctors to bring out some differences in norms. This contrast is probably much more extreme in the UK than the US: doctors here earn far less than their counterparts in the US*. In the UK at least, it is pretty clear to me that doctors care far more about the social impact of their work than bankers. There are of course many exceptions to any such statement about averages.
This is actually rather mild, Clark Kentish sort of stuff. And it's balanced by the following:
Willem Buiter's latest blog post [at Financial Times] makes many of the same points, but perhaps less politely. Some excerpts (but the whole post is worth reading, even if you find yourself in disagreement with him):
"I am, however, as more detailed evidence accumulates about the genesis of the financial collapse, becoming more and more impressed with the importance of misfeasance and malfeasance - of negligent, unethical and outright criminal behaviour, ranging from high crimes to misdemeanours."
"...to enrich themselves by robbing their shareholders blind. ... Where are the class actions suits by disgruntled shareholders? Where are the board members in handcuffs?"
"What we have seen and continue to see in much of the border-crossing financial sector, however, is a rather more literal form of moral hazard: a lack of morals in some key participants in the financial system dance causing major hazards to the financial well-being of millions of powerless victims. Corrupted morality putting at risk genuine, wealth-creating financial intermediation, innovation and risk-taking."
Here's my own favorite passage from Buiter's post:
(1) UBS agrees to pay $780m (£548m) in fines and to turn over a yet-to-be-determined number of US customer names to the US government as part of a settlement in which the Swiss bank admitted it helped thousands of clients evade taxes. I don't understand why a bank that systematically and over many years promotes, aids and abets tax evasion, tax avoidance and tax fraud should be allowed to continue to exist. Why aren't all those involved stamping license plates? Surely, these are criminal as well as civil offences?
Why indeed? This is out-and-out criminal predatory behavior. And this is why the populist outcry against the AIG bonuses was so righteously justified, as Glenn Greenwald wrote a few weeks back in "The virtues of public anger and the need for more":
This anti-anger consensus among our political elites is exactly wrong. The public rage we're finally seeing is long, long overdue, and appears to be the only force with both the ability and will to impose meaningful checks on continued kleptocratic pillaging and deep-seated corruption in virtually every branch of our establishment institutions. The worst possible thing that could happen now is for this collective rage to subside and for the public to return to its long-standing state of blissful ignorance over what the establishment is actually doing.
It was only a generation ago that the sorts of CEO salaries we see today would have been unimaginable. And those CEOs presided over companies that employed vastly more Americans in secure middle-class jobs with pensions, health-care and broadly-shared prosperity. What's allowed CEO salaries to reach the Moon-regardless of performance, I might add-is precisely the shift in norms in the society as a whole. And it is the wrathful repudiation of this shift in norms that must be at the core of any genuine reform and reorientation.
This is not at bottom a financial crisis. It is a moral crisis. And it is time, after all these years and decades of deceit, for the real moral majority to stand up and be heard.
And not just be heard, but be heeded, as well. |
