We had a fascinating and enlightening conversation recently with Sanjay Sanghoee about Wall Street, where he once worked for a major hedge fund. He's a novelist now (Merge, Killing Wall Street) and a fellow blogger here at The Huffington Post. We wanted to hear his thoughts on Good vs. Evil in the financial world and in the larger world of American business, and he was eager to speak his mind. He pointed out, as I did in The Constant Choice, that evil can be hard to discern in business. It doesn't look evil. It's largely invisible, in daily choices that stem from oneself first at the expense of others and thinking about short-term gratification and success while ignoring the consequences. In that regard, we've got an epidemic on our hands.
I've worked with hedge funds so I've seen this first hand. They don't take time investigating the industry they've invested in, so they pressure companies to do things that aren't in the companies' best long-term interest. CEO pay is out of whack. When times are good people want to get paid a lot of money and when times are bad, they want to wash their hands of the whole thing, and say we're not really responsible for this.
In other words, corporate America has built almost no accountability into its executive compensation system. Shareholder activists ought to be "holding senior management's feet to the fire," and reducing or withholding pay when bad decisions lead to declines in the company's market or profitability. More shareholder activities have motives like a corporate raider: They want to extract profit without any consideration for what effect the changes will have on stakeholders.
If you can make one more buck doing something, whatever that is, it's celebrated. You are considered a good capitalist. If you try to balance the interests of all stakeholders -- customers, employees, communities, the environment -- you aren't considered as good.
What was most interesting in Sanghoee's analysis of all this was his views on the role technology has played in eroding our old-school values. He believes that technology has inundated us with so much stimulus that our attention spans have been steadily shrinking for more than a decade. Our perspective has shrunk to take in only whatever is happening in the current hour or even simply the past five minutes. Since the rise of the Internet, and specifically the Web and social media, people crave shorter and shorter bursts of new information -- that ping of new email, new tweets, new comments on Facebook.
The Internet created a real sense of A.D.D. in our society. Too much information overload which came onto people all of a sudden. At first it was subliminal and then it all exploded. Nothing was satisfying anymore because there was so much more of it around the corner. People's attention span got shorter and shorter.
So we have a widespread loss of sustained and thoughtful attention to anything that requires more than a few minutes of study. Add to this the way in which computing power has transformed Wall Street with high-frequency trades, where transitory and relatively meaningless fluctuations in stock prices become the focus of buying and selling. Gone is a sober and studied consideration of all the factors that point to growth and strength.
Add into this toxic mix a third factor, the way in which executives at companies are hired and compensated. Their founders, or at least people who understood the industry or market from the inside, once ran companies. Yet it's commonplace now to bring in professional managers, who have little or no experience in a given industry. Load them with stock options that reward destructive practices for short-term profit and carry no penalties for failures. They stay for as long as it takes to extract the salary, stock and benefits they want and then move on to another position. They have little incentive to think of the company's future security and health. They focus on spiking the stock price now.
It arose in the mid-'90s. Until then, investment banking was a white shoe profession where there were a lot of long-standing relationships, which kept bankers honest in providing real value and services to their clients. It all changed because of the technology boom. The business model became transaction-oriented. All that mattered were the fees in the deal. Can I get my money right now?
In Sanghoee's view, whatever the cause for this widespread shift in our culture, it comes down to an ancient impulse celebrated buy Gordon Gecko in Oliver Stone's Wall Street: greed.
What's amazing to me though, is that such powerful players in this game don't recognize how all of this behavior is leading us toward social and/or economic collapse. The disparity between the tiny percentile of the super-rich and all the rest who are struggling is getting wider and wider. Yet no matter how greedy you are now, there's nowhere to hide your gains if the whole system implodes and the value of everything plummets, as it did in 1929. But again, our attention spans are focused on Miley Cyrus, not the precarious long-term health of, say, the bond market. If we don't wake up and change the way we run our companies and invest our capital, immediate gratifications are going to become a dim memory for all of us.
We worship greed. That's pretty much it. I'm coming to this conclusion reluctantly. I see it in my friends, in people I know and at large. We have become a culture of greed and short-term gratification. Everyone wants everything today. They want it now. They really are not looking long-term. It permeates to our leaders and the CEOs. They are thinking of their own welfare and own survival.