Greed is not good
Roy C. Smith, a professor of finance at New York University's Stern School of Business, and a former partner of Goldman Sachs, makes an argument for greed, in the Wall Street Journal. But I find the argument is bullshit. Greed is not good. Greed is what got the US, and the rest of the world, into the present economic predicament. Holding financial soothsayers in high regard to the detriment of the actual engines of the economy is drove the irrational exuberance to the point where it all came crashing down.
The bonuses simply broke the public back. The risk of not paying out bonuses to the financial wizards of Wall Street, means what? That talent will leave? And go where? If talent is the worry, then talent will find new homes, and will help dig us out of the hole, regardless of where they find work. The bullshit that we're being sold is that the people working in the investment community will simply disappear if they are not bonused, and that's simply not true. They would contribute to the economy regardless of where they go -- and that would be a true test of their talents. And would it be such a bad idea if the one's who got us into this mess -- who fought regulators -- who invented new definitions for the word optimism -- would it be such a bad idea if they simply got lost?
I don't think so. It's not the investors that will get the world out of the hole it is in right now -- it's the actual people who are producing goods that will.
And of course, Milton Freidman -- who thinks there is no other way than greed. Notice that he will refrain from answering any of the questions in this clip -- but rather turn the question back to the audience. How would you respond to Freidman?
The market thrives on locating new opportunities, providing innovation and a willingness to take risks. It is also, regrettably, subject to what the economist John Maynard Keynes called "animal spirits," the psychological factors that make markets irrational when going up or down. For example, America has enjoyed a bonus it didn't deserve in its free-wheeling participation in the housing market, before it became a bubble. Despite great efforts by regulators to manage systemic risk, there have been market failures. The causes of the current market failure, which is the real object of the public anger, go well beyond the Wall Street compensation system -- but compensation has been one of them.
The bonuses simply broke the public back. The risk of not paying out bonuses to the financial wizards of Wall Street, means what? That talent will leave? And go where? If talent is the worry, then talent will find new homes, and will help dig us out of the hole, regardless of where they find work. The bullshit that we're being sold is that the people working in the investment community will simply disappear if they are not bonused, and that's simply not true. They would contribute to the economy regardless of where they go -- and that would be a true test of their talents. And would it be such a bad idea if the one's who got us into this mess -- who fought regulators -- who invented new definitions for the word optimism -- would it be such a bad idea if they simply got lost?
I don't think so. It's not the investors that will get the world out of the hole it is in right now -- it's the actual people who are producing goods that will.
And of course, Milton Freidman -- who thinks there is no other way than greed. Notice that he will refrain from answering any of the questions in this clip -- but rather turn the question back to the audience. How would you respond to Freidman?
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