No Easy Solutions

Ever since the financial crisis of 2008 broke out, bankers became the hated lot who (nearly) brought the system down with their greed. But even more than their greed, the point that gets most people riled up is the fact that they had no skin in the game. When things were doing well, they got their commissions and bonuses; but when things went horribly wrong, the losses went to the suckers who bought their products (And don’t even get people started on the bailouts that followed).

As Alan Shore said in Boston Legal, the common feeling is:

“If Shakespeare were alive today he might say, “First thing. Let’s kill all the bankers.”

The knee jerk reaction might be to go medieval with the rule book, a la Hammurabi’s Code:

“If a builder builds a house for a man and does not make its construction firm, and the house which he has built collapses and causes the death of the owner of the house, that builder shall be put to death.”

But that would be like turning the clock back a few centuries back, to a time before the concept of a limited liability company existed. This concept was created to protect investors: their liabilities were limited to the money they had used to buy a stake in the company. Imagine if we go all Biblical and vengeful instead. Would anyone want to invest in a company? No, because the risks would be too high. And that would be the end of almost all corporations overnight. In case you didn’t get it, that would also be the end of new ideas, end of many employment opportunities, and the end of most of technological progress.

It looks like most Westerners get that part. And so they don’t advocate killing the corporation. Instead they hate the richest of the rich, the so called 1%. Tom Perkins, one of the 1%, recently said that the demonization of the rich was going to a point where a Hitler analogy was not out of place. That, as expected, created a furor.

Scott Adams wrote a great blog saying why Perkins may not be completely wrong. First, he says, Perkins just mentions a growing trend. And trends is what Perkins is great at spotting:

“His firm invested in AOL, Amazon.com, Citrix, Compaq, Electronic Arts, Genentech, Geron, Google, Intuit, Netscape, Sun, Symantic and more.”

Second, he says “all analogies invite wrong interpretations”: Adams doesn’t think that Perkins used the Hitler analogy to say that the rich are similar to Jews in concentration camps. Rather, he was talking about the increasing hatred towards a group.

Next, Adams points out that:

“If a pundit of modest means had raised a warning that worsening attitudes about the rich might someday escalate to violence no one would raise an eyebrow.”

But let a rich guy say it with a Hitler analogy to boot and it’s all wrong! It’s not what is said, it’s who said it and how they said it that seems to matter more.

Adams also says something that I believe completely:

“Much of the public believes the economy is a zero-sum game and therefore the rich are stealing their money from the poor. That is economic illiteracy, not opinion.”

The people with the so called “solutions” are just going to make things worse. The economy and social inequalities are complicated problems; perhaps, with no easy solutions.