Category Archives: First Cup of Coffee

First Cup of Coffee: Mitten’s Former Bain Partner Says Wealth Concentration at Top Ought to Be Twice as Extreme

ImageIn his new book (which I won’t link to here) 51-year-old .01%er Ed Conard, retired, makes a case for greater economic inequality.  Yeah — he wants the top 10% to control more than 2/3 of America’s net worth.  Conard argues increased wealth concentration at the top is necessary to drive nonproductive “art history majors” (a term he uses to describe lawyers and pretty much anyone he sees as adverse to competition and risk) from the sidelines. Ed hopes that, once we’ve got these wallflowers moving, they’ll get involved with socioeconomically productive endeavors, such as high-leverage (debt-laden) buyouts of companies followed by massive cost-cutting layoffs so that the businesses can be flipped like so many foreclosed properties.

“It’s not like the current payoff is motivating everybody to take risks,” he said. “We need twice as many people. When I look around, I see a world of unrealized opportunities for improvements, an abundance of talented people able to take the risks necessary to make improvements but a shortage of people and investors willing to take those risks. That doesn’t indicate to me that risk takers, as a whole, are overpaid. Quite the opposite.” The wealth concentrated at the top should be twice as large, he said. That way, the art-history majors would feel compelled to try to join them.  Adam Davidson — NY Times

Let’s be honest here — private equity firms get cash-rich institutions (e.g., teachers’ pension funds) and ultra-rich individuals to front the capital to purchase an underperforming venture.  This limited-partnership legal entity has investors essentially betting on the firm’s management strategy to produce a turnaround or notable growth.  The PE firm comes in and “cuts the fat” (often on the backs of the labor force), executing an extreme bottom-line-focused strategy, and each of its management decisions is informed by the desire to exit the investment.  The format is both exclusive — you’d typically need upwards of $1M to invest — and short-term focused.  There’s zero incentive to think of healthy long-term growth for the asset, as the only goal is to reach IPO or acquisition.

At its best, Conard’s thought grants us a fairly honest portrayal of the inner machinations of his former partner’s take on distributive justice.  It’s a scary sight.  The fact that this set of folks is so eager to advocate for greater risk just four years after risk nearly destroyed our economy — and after we’ve seen only mixed recovery — tells me that the risk-takers responsible for the economic crisis saw little downside (punishment) to their behavior.  Conard, Romney, and their ilk are the outcome of moral hazard.

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First Cup of Coffee: May Day (Bealtine)

 Busy this morning but I wanted to get this up … May Day is a big one, as far as I’m concerned.  As Occupy Chicago’s #M1GS* takes place in the Chicago Loop, today’s (very late) First Cup of Coffee is one part history and another part creepy.

In it’s pre-modern form, May Day finds its origins in the Druidic paleo-Irish Bealtine holy day.  On this solemn day – the Day of Baal’s Fire, as it was known – the anxieties of the shepherds ran high.  It was a supernatural date nestled within the superstitious pagan calendar – a day defined by witchcraft, harms befalling cattle and kin, and bad luck of all flavors.  After waking to the augural sound of a helicopter hovering over my Chicago apartment at 7AM, I’d guess the ominous feeling I have this morning is historically apt.  Anecdotally replace witches and hobgoblins with complex financial derivatives and Rahm’s armor-clad Chicago PD and let the somber Bealtine observations begin.

*I missed the event due to a job interview.

Surowiecki on Joblessness

Surowiecki says there’s no end in sight…

Comforting, in light of yesterday’s post on my vocational situation.  A good read, nonetheless.  I’m not sure I agree that America has yet to experience hysteresis.  It’s a scary thought.  It seems we’re about 25,000,000 jobs short of paying our tab.

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First Cup of Coffee: The Ought and the Is…

I’m unemployed right now (I’ve got a post upcoming re: what it means to be unemployed during the Great Recession Era) so, while my joblessness lasts, a few mornings each week I’ll try and write a quick response to something I’ve read over my “first cup of coffee”.

Modernity started from the dissatisfaction with the gulf between the is and the ought, the actual and the ideal; the solution suggested in the first wave was: to bring the ought to the is by lowering the ought, by conceiving of the ought as not making too high demands on men or as being in agreement with man’s most common and most powerful passion…

The quote above belongs to Leo Strauss and can be read, in full context, in his paper regarding the Decline of the West (The Three Waves of Modernity, 1959).  Strauss finds his answer to the problem of the gulf between ought and is in Rousseau’s notion of the General Will — a republicanism that requires that each man vet his own requirements of society by calling his will in to law.  The idea that only generalized wishes will result in law convinces Rousseau that the general, and not particular, is the just pursuit.  This whole exercise is the forebear to the Kantian notion of the categorical imperative which draws some powerful parallels to the Constitutional Law models that define the legal institutions in the United States.

So, getting to my point here, the quote prompted the following questions: 1) Does the “dissatisfaction with the gulf between the is and the ought” still exist today?  2) If so, has it ebbed in intensity or has it grown more apparent in our contemporary setting? 3) What does the situation on the ground have to do with Rousseau’s notion of the General Will.

1) I think this one is easy.  That dissatisfaction is certainly still present and it’s ubiquitous, too (answering question #2).  In fact, I’d argue that that phenomenon is a pre-cursor for the post-modern condition — the acquiescence to nihilism and the intentional obliviousness that’s followed.  Here’s where interesting little character-bits (e.g. the hipster-emphasis on cleverness over intelligence — you’re cool if you know lots about obscure bands but you’re a downer if you discuss pursuit of the good) emerge, I think.  And, regarding #3?  Rousseau’s General Will requires two human factors: reason and shame.  I’d venture a guess that, when faced with a century-long bout with the weight of nihilism, the erosion of faith, and a crisis of the good, the human store of both reason and shame have been depleted.  Rousseau’s General Will requires a sense of community that we no longer possess.  I’d be interested in thoughts…

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