Don’t worry, this is neither a story about car insurance mascots nor tropical lizards. Rather, what got me started on this theme is Oliver Stone’s Wall Street (1987) character, Gordon Gekko, played by Michael Douglas (he won the Best Actor Oscar for it). Stone, whose father was a Wall Street stockbroker, built the character from several ’80s figures including Ivan Boesky (the biggest source). His 1986 Berkeley commencement line that greed is healthy became Gekko’s “greed is good” speech, and Boesky’s insider-trading downfall shaped the plot. Carl Icahn and Asher Edelman contributed the corporate-raider persona. Edelman reportedly consulted on the film. And even Michael Milken (very much in his heyday in ‘87) added some of the junk-bond-era swagger. The odd legacy is that many people went into finance because of Gekko, even though he was written as the villain. I’ve met many of them across the table in my securities career (including Milken and Icahn). But the Gordon Gekko quote that is on my mind this morning came out in a Paul Krugman piece where he attributes to him the line, “I create nothing, I own.” Gekko says it to Bud Fox (Charlie Sheen) in the scene where Bud realizes Gekko plans to break up Bluestar Airlines instead of rescuing it. He’s describing pure financial capitalism. Gekko doesn’t make products, employ engineers, or build anything. He makes money by controlling assets and moving them around: buying companies, stripping them, selling the pieces, and trading on information. In the same speech he calls it a zero-sum game, where money isn’t made or lost, only transferred from one holder to another. To him, wealth comes from ownership, not production. The line is intensely as a contrast to Bud’s father, Carl (Martin Sheen), a Bluestar machinist and union rep who stands for the “makers,” the workers whose labor actually builds value. Stone’s whole moral frame is the contrast between people who create value and people who extract it. That’s why the Bluestar plot matters: Gekko would liquidate a working airline and its pension fund because the parts are worth more than the whole. There’s a real debate underneath the caricature. Raiders of that era argued that they disciplined bloated, badly run companies and freed up trapped capital. Critics answered that they loaded firms with debt, gutted jobs, and captured value instead of creating it. Stone obviously took the second view, but the line still captures a real divide between owning capital and producing with it. As with ,most things, the truth tends to fall somewhere in the middle.
I have thought a lot about this issue over the years, specifically in the context of my own personal path. There is no surprise that a person like me, raised in a very liberal-minded household, has some internal debate about being a capitalist. My guiding light on the subject in my early days when I was in business school and then starting on Wall Street was my mother. She was just finishing her career with the UN and her 40 years of work in the development world. If anyone knew me and knew the conflict, it was her. She had grown up “farm-strong” and independent and had bootstrapped herself from the immigrant farm with the woodburning stove in the kitchen and gone to college on her own dime (with the help of a land grant university) during the Great Depression. Her life and career, besides raising three kids on her own, was all about helping those less fortunate in the world. She was not a capitalist, and yet she had a great deal of respect for capitalism as a system…when properly organized and regulated. I chose business school over graduate work in development economics. In all honesty, I did it for lifestyle reasons. I wanted to stay in the U.S. and not spend my youth in the developing world that I had lived in as a child. My mother was supportive and in no way warned me off of capitalism.
Over a forty-year career on Wall Street doing what could only be called capitalistic work, I found a passion that strangely enough did not focus on wealth accumulation. It focused on a combination of creativity, business building and professionalism. The industry suited me well because it was in a particularly innovative stage and I worked for a company that prized innovation. I was viewed as a creative thinker that preferred to do new ground-breaking transactions rather than execute repeated profitable transactions. I was viewed as a business builder who loved the challenge of creation rather than being the power broker who either was a deal junkie or accumulator of businesses. It was clear that the most aggressive people were usually one or both of the latter two. I was in a small group who liked developing new ideas and building businesses around them. Learning new things every day was what drove me and a sense of accomplishment put a profitable outcome on most of what I undertook. I was an optimist (creators need to be), but I was not a dreamer, but rather a person who simply drove forward to a finish line with high perseverance. And all of that was driven by a pride of professionalism, which also tended to incorporate a sense of obligation to a code of conduct that kept me on a narrow path that was easy to transgress if one wasn’t careful.
As a natural observer of human nature, I could see that I was different than many of my colleagues. I made career choices driven by a different set of desires and preferences than many of my peers. It’s not that I didn’t care about money, it was, after all, the demarkation system for value added and I cared a lot about that. But money was never the driving force in any of my choices. I always assumed that value added would get recognized and rewarded and for the most part I was not disappointed with the outcomes. Others made a habit of arguing for more money all the time. I was far more accepting of what I was given (not that my expectations weren’t significant in most years) and never considered a change for money. My mantra was always that the day we added as much as a fifth grade teacher was the day we could complain about our pay. I used that line with countless subordinates when they groused about their bonuses.
One of my assignments in the peak years of my career was running a global wealth management business. If I didn’t respect wealth accumulation before that, that experience did nothing to improve on that. People who accumulate wealth are quick to say that they did it through their own hard work. Some will say it was their shrewdness and toughness. Are will attribute it to luck. The reality is that the main factor behind soaring wealth concentration is almost surely government policy, specifically a drastic reduction in taxes on capital income, largely enacted by Republican presidents and congresses over the last forty years. This decrease in the progressivity of the federal tax code has supercharged the process by which wealth begets wealth. It’s become one of the main economic battlegrounds and the issue will go through continuous cycles over time.
The business world is divided into those who want to create and those who want to exploit the zero-sum game through ownership. Gordon Gekko was honest about his inclinations. The world is currently full of Gekkos or wannabe Gekkos (the Bud Foxs). I am a Carl. I want to be a maker, a builder, a worker. I am about earned income, not passive income. That makes me very different, but I think Mom would ultimately be proud.