By MitchellIn the interests of full disclosure, let me state at the outset that I consider myself a tried-and-true capitalist. If there's a better economic system functioning right now, I haven't met it.
Having said that, longtime readers of this site also know my healthy skepticism (read: contempt) for "Corporate America," which I consider more of a culture or a way of thinking than I do an economic entity. Suffice it to say that Corporate America, in my opinion, is its own worst enemy, and in many ways an enemy to all of us.
It was, therefore, with a great deal of interest that I read a piece by David Goldman (aka "Spengler") entitled "Mediocrity and Corruption in Corporate America." If there's anything in this piece I didn't agree with, I haven't been able to find it. A few choice bits:
Mediocrity breeds corruption. The business world is crawling with affable, industrious, intelligent people with nothing to distinguish them from ten thousand other affable, industrious and intelligent people, but who very much would like to be rich. . . These are the people most inclined to cheat, for they know that they have nothing unique to offer the world, and their ascent depends either on luck or unfair advantage. They cheat in every way possible, whenever they have a chance. One way they cheat is to steal from the stockholders by front-loading profits and back-loading risks. That is what destroyed the banking system. At the top of the market in 2006-2007 when risk compensation was stupidly low, bank managers made their return-on-equity numbers by adding leverage on top of leverage. Every one of them knew that it was a dumb and dishonest thing to do, but they all hoped that they would be promoted by the time the problem blew up in someone else's lap.
Dogged-as-does-it, steady-as-she-goes, unimaginative CEO's of the sort [David] Brooks' praises sat in front of spreadsheets, demanding that their subordinates make their numbers. Without keen insight, they simply piled on risk just as the portfolio hit the fan. The most imaginative, intelligent, and daring firm on Wall Street, namely Goldman Sachs, took out massive short positions against the subprime market. So did J.P. Morgan. Wonder why they are coming out on top? About those who came out on the bottom, a respectable silence is appropriate.
There is only one truly effective way to control corporate corruption, and that is through creative destruction. Let the wild men, the warped geniuses, the chip-on-the-shoulder mad entrepreneurs loose on the established corporate world. Let big corporations go bankrupt right and left. Drive out mediocrity with the scourge of innovation. Let new companies emerge, and then go bankrupt when something better comes along. Real genius, as Heinrich Heine once rhymed, pays cash at the bar. The oddball entrepreneurial types don't cheat. They see life as a game and want to play it by their own rules. They are out to prove that they are smarter than their peers, and to cheat would be to miss the point of the game.
And I'll add that this is by no means limited to what we think of as "Big Business." It can be found throughout the business landscape, from non-profits to small companies to - oh, say, automakers. Goldman is spot on in saying that mediocrity has to be driven out - there's far too much of it at every level of management for as far as the eye can see. As Pat Buchanan once famously said, Corporate America has to "workship at a higher altar than the bottom line." Mere competence would, at least, be a start.