Wall Street to Socialism: a generation’s progress

Conventional wisdom holds that a social democratic overthrow of corporate capitalism is unlikely to happen in the United States. People are too happy, complacent, and conservative, this “wisdom” holds, to do it. They are wrong, and I will establish this by pulling evidence from the most unlikely source: a generation and nation that, thirty years ago, fell in love with Wall Street and the corporate rich with sufficient energy to bring about massive cultural changes and, eventually, the nation’s own ruin. I choose the financial industry simply because it represents the ambitions (base as they may have been) of a generation’s most energetic individuals– at a time when the United States had a different economy and presented individuals with radically different options and incentives. From this analysis, I hope to establish that the next crop of young people will throw equal energy into a completely antipodal cause: the overthrow of the corporate menace.

The Wall Street mania of the past three decades was driven by the alluring but remote possibility, for the rising generation, of becoming a titan like Michael Milken, Carl Icahn, or the fictional Gordon Gekko. Even films like Wall Street and American Psycho, which portrayed the industry quite negatively from any mature perspective, inadvertently made the industry attractive to young people with empty, materialistic ambitions. What was Wall Street selling? What did it offer that inspired thirty years’ worth of bright college students to toil for 80, 100, and sometimes 120 hours per week on boring work in distressing, hierarchical environments? Money is the common explanation, but that’s far from the best answer. What it offered, or at least pretended to offer, was economic security– the option, within time, to own one’s life rather than rent it from a boss who might one day close down the factory, or ship one’s job overseas. The Bud Foxes were the first to realize that “middle class America” still relied on the ruling class for survival, and may not exist in a few decades– and history seems to be proving them right.

Only raving egotists want to be enormously rich, buying new Ferraris every week and owning $10-million apartments. But everyone wants freedom, and the collapse of the professions (which exist to allow a class of people, although not enormous wealth, the ability to reliably sell labor at a decent wage; a privilege that a frenetic economy such as the modern global one can afford nobody) in the United States made it evident that economic freedom was becoming a rare commodity. Wall Street offered a path to economic freedom: a person could get very rich in banking, retire at 40, and work no more. No illusions were ever given about the work being rewarding, socially beneficial, or even especially interesting. At the entry level, banking jobs always were, with neither apology nor attempts to conceal the fact, notoriously unpleasant. Even in the comparatively cushy “Bateman days” of the 1980s, when expectations of mid-level bankers were still soft and reminiscent of Mad Men‘s culture, entry-level bankers were expected to work 90-hour weeks. But the promise associated with an investment banking “analyst” stint was that it would open doors, for ambitious and smart young people from the middle class, into the well-paid corporate and financial sinecures previously only available to the upper class.

The upper classes did not want to open any doors, but in the case of banking, they had to do so. What had been a lazy and somewhat boring upper-class “safety career”, available mainly as a means by which ruined WASP aristocrats could replenish lost fortunes, changed abruptly with the escalating demands of clients, as well as innovations in derivative securities, which required a fair deal of mathematical knowledge to comprehend. Suddenly, banking needed better– smarter and harder working– people than it could find if it restricted entry to the upper class. The industry lost its genteel indolence and suddenly had to hire “mercenaries” from lower social classes: people who could work for extremely long hours, often exceeding 100 per week, on unpleasant work with no complaints; and, for different purposes, people with sufficient mathematical talent to actually understand the new derivative securities.

The combination of these two traits is extremely rare, and the few who have both mathematical talent and herculean endurance usually have better options than investment banking, so the banks had to recruit on two fronts. To hire mathematical talent, it developed quantitative analysis (“quant”) divisions to foster research and development. To get workhorses, capable of bearing punishing hours and low autonomy for months at a clip, it created analyst programs that were available, with no training, immediately out of college. Analysts don’t actually “analyze” anything, but they take on the worst of the grunt work, and the analyst program’s real purpose has always been to separate those who can remain functional (you don’t need to be smart or socially skilled to be an investment banker, but you must have the rare talent of being not-terrible in both measures after a double-all-nighter) under severe duress from the majority who cannot. (Half of an analyst class burns out in the first 12 months, and only about 1 analyst in 10 becomes an associate.)

Quants were happy with the opportunity to make middling six-figure salaries in applied research, being paid three to five times what was available to them in academia, as long as their autonomy remained high (by corporate standards) and their work was interesting. Since they were mostly dismissed academics with PhDs, they’d never intended to be rich and the face-value offer given to them was enough. On the other hand, analysts (who were paid, on an hourly basis, worse than retail managers; and arguably overpaid at that, since they were useless until “proven” via the analyst crucible) needed an additional incentive to endure their miserable, 90-hour-per-week jobs. Banks provided it: the (rarely delivered-upon) promise of future economic freedom, either in the potential for enormous compensation (for those who stayed in banking) or in the availability of corporate sinecures (“exit opportunities” for those who left). Most analysts never achieved either of these goals, instead quietly failing and retreating from view, but the lottery had enough winners to create a sense of promise, especially in a culture that made the successes highly visible but kept the failures hidden (mostly because they, much like failed academics, grew too self-loathing to speak up about their blasted careers).

Academia and large-firm law (“biglaw”) pulled the same tricks, realizing that people who had been used to winning– getting top grades, being admitted to top undergraduate and graduate schools, and getting selective entry-level jobs– for their entire lives were utterly terrible at estimating their odds of future success, due to the 20 years of “beginner’s luck” (note: beginner’s luck actually does exist, because those with poor initial luck in gambling don’t “begin”, they quit) they had experienced. Those who had always beaten the odds and bent the rules would fail to ascertain that the rules now applied to them, and would therefore misapprehend a 10% chance (of tenure, biglaw partnership, MD status in banking) as an certainty for them; after all, they’d survived so many 1-in-10 cuts in the past.

This gets to the heart of so many things, but one among them is executive overcompensation in corporate America. Most people attribute the absurd and obvious undeserved overpayment of corporate CEOs to back-scratching and simple greed, and that’s a major part of it, but it’s also a mechanism for printing money in the form of “dreambucks”. If young people overestimate their chances of ascending to the parasitic ranks– each believing they have a 1% chance of becoming a CEO instead of 0.005%, and a 25% chance of attaining a middling executive rank rather than 0.2%– then this is an arbitrage-like opportunity to delude them about their future income should they continue a certain career path. It’s a very effective mechanism of promising future wealth that won’t be delivered because it doesn’t exist, but that also can’t be legally demanded because it was never formally promised.

The overconfidence of youth made sense in the context of the 1980s, with its focus on individual prosperity and enormity, but one thing that’s clear in 2011 is that the easy, sure paths to economic freedom (which were never as easy or sure as their hopemongers wanted to let on, but were much easier and surer even 10 years ago than they are now) are, for the foreseeable future, gone for good. The world of 2011 is not some hopeless post-apocalyptic hellhole in which it is impossible to have success, but it is one lacking in “obvious” paths to excessive individual prosperity. A few, as in any generation, will become inordinately wealthy on Wall Street or through VC-funded technology startups, but most won’t, and the odds are good nowhere. The middle class is learning, on the whole, that entry into the ruling class, even for the 140-IQers once sought as quants and the 110-hour workhorses once hired as analysts, is so remote a possibility that it shouldn’t even be considered, and that reviving America’s middle class prosperity is their only hope.

The goal of the ambitious Wall Streeter was to reach a level of wealth at which he’d no longer need to work. But work is a fact of life, and the accumulation of enormous wealth is (for most) an extremely inefficient (to say nothing of its parasitism and high rate of failure) means of achieving a decent life. Why not, instead, improve work? People will always have to work, on account of psychological if not economic needs, but there’s no good reason for working to be the miserable endeavor that it is for most people.

Corporate capitalism makes work unpleasant, and it does so quite intentionally. The low autonomy, punishing sacrifices, insulting conditions, artificial scarcity, miserable compensation, and menial tasks that average workers face exist for a reason: work, for those not of rank, has to be painful, in order to make people fight to “move up”. The system manages to motivate people using excessive and often unrealistic promises: one who keeps working hard will be able to buy himself out of the “common curse” (of needing to work) entirely. Yet it’s obvious that, for the vast majority, the million-dollar salaries, corporate sinecures, and tenured professorships never come. Those who do escape the need to work often find themselves so bored and isolated by their supposedly “free” lives that, although they re-enter it on far better terms than are allowed for common people, they readily rejoin the working world. The psychological need to work (not necessarily the need to hold a paid job, but the desire to contribute in a meaningful way to society) is so deep-seated the the vast majority of people will work (I include unpaid stay-at-home parents as working people; there is no good reason not to include them) no matter what sort of society we need. All of this firmly establishes that it’s better for all of us to improve work for all rather than to devolve into vicious battles fought by social-climbing, ambitious individuals seeking to escape it.

A society that implements libertarian socialism will need energetic, enthusiastic workers, but it will be forced to use the positive incentives (this is why total equality of results, which is not even possible, is undesirable) rather than the negative ones that currently characterize economic life in the United States. In a world where a basic income, universal healthcare, and appropriate education are guaranteed, there will still be janitors– people will pay others to do the work– but they will be treated with far more respect than they are now. Rather than being spat upon, they will be honored for their sacrifice of their time. When libertarian socialism finally overthrows corporate capitalism, the world ushered in will be so superior in function, beauty, and social justice to the one we have now that people will wonder how we possibly allowed such an archaic, brutal system to exist for so long. Perhaps surprisingly, I can answer that.

The term “crab mentality” is used in the Philippines to describe poor communities that work to prevent their most talented individuals from escaping or succeeding. This refers to a proverb pertaining to captured crabs in a bucket: an individual could easily escape, but when they are in a group, the other crabs hold back any who might get out. (I have no idea if this is actually true of real crustaceans.) I might take this concept a little further and say that what’s described here is a pulling crab mentality: the ambitious person is held back by his impoverished and envious neighbors. In the United States conservative/individualist mindset, we see a pushing crab mentality instead: the escaping person is so desperate to get out of his milieu (more likely, in the U.S., to be middle-class mediocrity rather than true poverty) that he beats the others down in order to rise. This reckless and socially harmful individualism explains why upwardly-mobile Americans accepted, rather than destroying, corporate rule for as long as they did; they’d rather ascend to rank in an evil system, something an individual can occasionally accomplish without assistance, than tear it down, something that a single person cannot do in the absence of a like-minded and supportive movement, but that the group can do easily if it is not divided against itself (as the upper class prefers, hence their willingness to use racism and religious bigotry to polarize this nation). The good news is that between a systemic and long-term collapse of the old-style corporate system and an increasingly global consciousness, this “pushing crab mentality” is on its way out. Given time, it will fade.

Wall Street filled its ranks using a promise of individual prosperity and delivered on it about 10 percent of the time, if that often, and it got a lot of energetic, talented people while doing so. Contrary to the laments of some Ivy League professors, investment banking actually never drew “the best and the brightest”, but it drew a fair portion of the “rest of the brightest”, and that’s often what counts. History is driven more by cultural forces than eminent individuals, and the most important sector of humanity (as a mover of culture, history or society) from this perspective has never been the most brilliant 0.1%, nor the average-to-below 85%, but the 14.9% in between those sets (i.e. the people likely, during the past three decades, to be drawn to Wall Street). If you want to predict the future of a large group of people, focus neither on the idiosyncratic luminaries (who are the same freethinking, brilliant, and mostly ignored people whether in the U.S., China, Finland, or sub-Saharan Africa) nor on the average people, but on the bulk of smart-to-very-smart people between those two segments.

To assert that the people who, in one generation, suited up and learned how to proofread pitchbooks will, in another, become socialist luminaries is obviously absurd. Since time is passing, it’s not going to be the same people. What remains true is that people, speaking in aggregates, do not have specific leanings but rather respond to incentives and their environments. The “yuppie” movement occurred not because a generation was intrinsically uncultured and materialistic, but because certain opportunities (ascent, thanks to a corporate upper class in need of technical talent it did not have among its own, for ambitious middle-class people to rise very high) existed in the 1970s and ’80s that have since disappeared. If the rising generation had faced the incentives and options available to the “yuppies”, it would likely grow up to resemble them; but it does not. From this point, what does it take to create a generation of energetic, progressive, and altruistic socialist revolutionaries? First, the corporate system must be in such a state of decline and closure that an enormous number of people cannot get distracted by decent jobs and middle-class comfort. Note: the Petty Depression of 2007-2015(?) is having this exact effect. Second, it requires an intellectual environment in which information flows freely and the best ideas can win and percolate to the surface. Note: The Internet-borne’s Second Enlightenment of rational liberalism is evidence of this happening. Rational liberalism has taken such a strong hold in geek culture that conservatives decry it as a “hive mind” on websites such as Reddit. Third, it requires the sense that positive change can be accomplished, and that the process will be peaceful (or at least peaceful enough that the costs are outweighed enormously by the benefits). Note: Tunisia, Egypt, and one might even include Wisconsin, are all encouraging examples.

We have the “perfect storm” necessary to bring forth a socialist generation in the United States. Now, on this, consider the following. Almost all of the work done in the middle and higher echelons of corporate America was purchased using offers entailing small chances at individual prosperity: a 10 or 20 percent chance that hard work will eventually be rewarded. To purchase professional lottery tickets, a monstrous amount of effort was expended. Much of this work was toward negative ends (as seen in the financial crash of 2008) but the amount of energy expended was, nonetheless, incredible. If it were harnessed toward the downfall, instead of the support, of corporate capitalism, society’s enemies would fall from power within weeks.

It goes without saying that most rational people would rather improve the lives of everyone than improve only their own. There are some pathological individuals who value relative superiority over absolute well-being, those who would rather reign in hell than serve in heaven, but they’ve never been a majority. (They are, sadly, the majority of those holding power in a corporate system so favorable to narcissists and psychopaths as to have turned its upper ranks into nests of such people, but that matter opens another discussion.) Treating such perverted individuals as marginal (and they would actually be marginal, were it not for power’s twin tendencies to attract the corrupt and to further corrupt those who have it) one can make the following assertion. People would much rather have an 80 percent chance of a free and prosperous life for all than a 10 percent chance of a prosperous life for only themselves.

This, of course, is why I expect to see a great deal of energy, talent, and energy thrown into the effort to overthrow corporate capitalism in favor of rationalistic, libertarian socialism. If people will expend a great deal of energy and creativity in, for example, the creation of abstruse derivative securities in order to nab a 1-in-10 shot at a better life for themselves, just imagine what they’ll do for an 8-in-10 shot at a better life for everyone. Of course, the “80 percent” estimate is a number for which I have little firm basis– probabilities can only be stated for uncertainties of known structure, and this is one of unknown structure– but I don’t consider it far off base. Asymptotically, the probability of corporate capitalism’s eventual fall is near 100 percent. I consider the 80-percent estimate to be appropriate to its overthrow, and its subsequent replacement by a society that is better (likely, but not guaranteed, especially in the undesirable case wherein the revolution becomes violent) rather than worse, within the next 50 years. If it is achieved, the potential to solve otherwise intractable social problems (since most of the nation’s problems emerge, at root, from poverty and classism) becomes immense. When the U.S. disinherits its abusive, parasitic upper class (by removing the privileges associated with wealth as well as wealth’s self-perpetuating enormity) and eradicates poverty within a generation, the improvements it will confer upon the general well-being of all will be massive.

With all this in mind, the overthrow of corporate capitalism seems not unlikely or speculative, but inevitable. It may not happen as soon as one may hope, but as an eventual outcome, I consider it certain.

From http://sasamat.xen.prgmr.com/michaelochurch/wp/2011/02/21/wall-street-to-socialism-a-generations-progress/.

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