Ten days in Jamaica did wonders for the spirit. The weather was good; as always early in the year, hope sprang fresh and eternal from the golf bag; old friends came down to visit, and we tested and retested the best ingestible formula I know outside of Daily Candy’s B-complex for present happiness: “One of sour / Two of sweet / Skip the water / Four of neat” (the latter being Appleton Estate Jamaican Rum).
Read and reflect–that was the order of the day. I sat by the Caribbean, cooled by the trade winds out of the northeast, now and then lifting my gaze from my book to study the sea or to watch the blue heron that comes every day to wade in the shallows. I don’t know anything about the life expectancy of shore birds, but an ancestor of this one first visited our little reef 40 years ago, so this could be the fourth or fifth generation to make daily house calls–sufficient cause to ponder the long way of the world, its whys and wherefores, and try to figure out what to do next as the sand begins to run out. Youth does not have an exclusive on long, long thoughts.
For example, should I self-publish my own novel, Nobody’s Fault ? I think it’s “on point,” as we Law & Order addicts say. It’s about marriage and (no-fault) divorce, church and state, profit and principle–all subjects of some pertinence today, one would think–set in a moral landscape that one character calls “the slippery slope between the Ten Commandments and the Bill of Rights,” with a damn good Supreme Court angle, if I do say so myself. It’s been read by two groups of approximately a dozen readers each, one of which is really quite enthusiastic about it, the other not at all. The latter consists of people professionally employed by New York publishing houses; the former is made up of “amateurs,” people who actually buy, sell and read books, including the proprietor of one of Manhattan’s more prominent bookstores, who tells me he could sell 1,000 copies in his shop alone, which seems a reasonable start. In this difference of opinion may reside the reason why so many fiction blockbusters–John Grisham and Harry Potter being the most notable–have come as relative or complete surprises to their publishers.
Under such conditions, one blessed tropical day following another in an implacable, sun-bright cadence, one can take a long view of concerns outside oneself: for example, of the immutable laws to which Investor Capitalism is subject. One is a monetary variant on Parkinson’s Law that is worth keeping in mind: namely, that it is the natural tendency of liquidity to expand beyond the market’s capacity for its sensible employment. Each boom or bubble merely adds a zero or two to the value of the damage that terminated its cyclical predecessor. In other words, given half a chance and another Greenspan, the next millennium may see a trillion-dollar Enron.
Speaking of which, one might also ask whether Schumpeter’s theory of “creative destruction,” which the proponents of free-market theory are always going on about when they need to justify the speculative excesses that flesh is heir to, includes suicide. Is there–should there be–such a thing as “creative self -destruction?” Actually, if we want to see a classic Schumpeterian conundrum made flesh, we should turn our eyes away from the Enrons and Global Crossings (with respect to the latter, people who hand over billions to former close associates of Michael Milken deserve what they get) and look at what’s happened to the game of golf, which at the professional level seems to be committing self-murder before the very eyes of millions of viewers.
Here, technology–classical theory’s preferred engine of “creative destruction”–has changed the game, at least at the Tiger Woods level, for the worse: The pro game is killing itself. Professional golf is now so boring that it is virtually unwatchable. A year or so from now, I expect to see belly-reduction and George Foreman crockpot “infomercials” during the Masters as ratings start to drop and Travelers folds up its red umbrella and goes elsewhere. To paraphrase the P.G.A. commercial: These guys are bo-ring!
And yet … and yet ….
The news isn’t all bad. Yes, game-improvement technology now permits the merest journeyman touring pro to hit a 7-iron 180 yards, at a stroke (so to speak) negating the native genius of Tiger Woods and the native virtue of one great classic course after another, with every round lasting over five hours. The people in the game strictly for the money, like CBS–or the pompous suits (blazers, actually) who run the P.G.A. and USGA–know that something’s wrong, but don’t know how to fix it. (They might start by looking at Major League Baseball, with its crafty Luddite retention of the wooden bat). But the new golf tech has also brought undoubted incremental joy to millions of amateurs, yours truly included. As with shaped skis, the new metallurgy, physics and chemistry of golf equipment have restored a good deal of what the years have taken away, in terms of both fun and distance. People in the game mainly for the pleasure–whether in the paneled locker-room at Seminole or in the Dyker Beach parking lot–will vote for the new gear.
So whose ox is more worth the ultimate technological goring, we ask? I wonder what Schumpeter would say.
Elsewhere on the “creative destruction” front, analyses of Enron have become comparative, have begun to emphasize the big energy trader’s collapse as one more variation on a well-established theme dating back to Jay Gould. Equity Funding, the 1973 scandal uncovered by Ray Dirks, where the numbers were completely made up, is frequently cited as a parallel. Certainly aspects of Enron have been experienced before. When I got back to Brooklyn, I went to the most honored space in my business library, the 18 or so linear inches occupied by the works of the late John Brooks, who was for years The New Yorker ‘s Wall Street and business correspondent, and who set standards for this kind of work that have seldom been matched.
I started with “The Impacted Philosophers,” his account (reprinted in Business Adventures , 1969) of what people my age are likely to recall as the most shocking business malfeasance prior to Enron: the 1960 indictment and prosecution for price-fixing of a group of manufacturers (including G.E. and Westinghouse) of heavy electrical equipment. See if this rings a bell: “To top it all off, there was a prevalent suspicion of hypocrisy in high places … [the four top executives of G.E. and Westinghouse] let it be known that they had been entirely ignorant of what had been going on within their commands right up to the time the first testimony on the subject was given to the Justice Department.” In other words, an early version of what we might call “the Taubman-Skilling Alfred E. Newman Defense.”
Moving on, I found in Brooks’ 1972 The Go-Go Years , his exploration of the 1960’s on the Street, a passage that might have a certain resonance in the corridors at Arthur Andersen: “In the sixties … the crucial element in stock trading was the financial and accounting naïveté of the millions of new investors. Naïveté led to a search for simplicity, and simplicity … was found in focusing attention on the bottom line. And this simplified view of business performance soon led accountants, including some of the best, to descend almost unawares from their pedestals of disinterestedness and become at times the willing accomplices of ruthless corporate managements and essentially dishonest promoters.”
In other words, under the sun–whether in the tropics, on Wall Street or elsewhere–there is little if anything that’s new. Only context changes.
It is context that makes Enron different, that confers an unmistakable difference of moral tonality, of key, of dimension, that sets it apart from Insull or Krueger or Ponzi, or LTCM, or Equity Funding, or the S&L’s, or Penn Square-Continental Illinois, or Bre-X (remember that one?), or even Boesky, Milken et al.
To my mind, the key element in the context is Enron’s triangulation with the events of Sept. 11. Just as was the case with the electrical-equipment scam, Enron broke upon a nation that considered itself at war, a nation that felt itself under dire threat from without. Today, the International Terrorist Conspiracy is the foe; 40-odd years ago, it was the International Communist Conspiracy. The effect on the public’s nerve ends has been the same, producing the same reflex: A proud and grieving nation will not suffer swindlers or profiteers gladly in wartime. In the public mind, such people degrade the sacrifice of others; such behavior is akin to treason. Those who lost their jobs and savings at Enron are equated with the victims at the W.T.C. and their families: ordinary people, innocents shorn of blood and treasure–working stiffs and enlisted men, drawn mainly from what the British officer class calls “other ranks.”
Which leads me to adumbrate one more law of Investor Capitalism: The mechanics of a scandal, the sums involved, even the extent of corruption or ethical opacity that’s brought to light, are less important to its impact on public opinion than the mood of the public at the moment it is found out. As they say about so much else on the Street, timing is everything. Ken Lay’s couldn’t have been worse.
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