Months ago, I began to research Occupy Wall Street and with so many participants and sympathizers having different views and perspectives, it was incredibly difficult for me to make heads or tails out of the movement. However, the one common thread I did observe through my interviews and surveys is that there is a clear lack of education in the general public about our financial system and how it works, which in part is creating either frustration or delusion, or quite possibly both.
Several of the 'Occupy' movement sympathizers have told me that they believed that Wall Street is made up of individuals born with a silver spoon in their mouth. Well, my experience with Wall Street is a bit different. In fact, I occupied Wall Street more than 16 years ago -- by joining it.
I did not win the genetic lottery by any means. Neither of my parents graduated from college. My father was a union electrician for 40 years, laboring outside in below zero temperatures during the harsh Chicago winters on the construction of high rise buildings.
I made school my own priority and was accepted to the Wharton School of Business at the University of Pennsylvania. My parents couldn't afford the school (in fact, my father was laid-off when I was accepted), and so I paid for it through a combination of some financial aid from the school, me taking a job each semester, my father's small contribution and through student loans. When I graduated in 1995, I had a whopping $40,000 in debt from my schooling.
My father taught me that obligations were obligations, so I knew that I had to make paying off my loans a priority. In 1994 when I started looking for work prior to my 1995 graduation, the job market wasn't great, although I acknowledge that it was not as tough as it is now. I applied to hundreds of companies and went on more than 70 interviews before taking a job with investment banking firm Montgomery Securities (which was eventually merged into Bank of America). They were a "Wall Street" firm (although not technically located on Wall Street proper), engaging in raising capital, mergers and acquisitions, trading and similar activities.
The majority of my "Wall Street" time was spent on corporate finance activities, such as IPOs, private placements and follow-on offerings that helped businesses raise capital. I worked on transactions for companies like The Cheesecake Factory, Dave and Buster's and the largest franchisee of Papa John's Pizza to help them to raise money to continue to grow their businesses. This money helped them build new restaurants, hire more employees and grow the local and national economy. The investors that provided the money for this growth took a risk; if the company did well with their growth, the stock price increased and they made an investment profit. If not, they took a loss. This, in my eyes, is not corporate greed; it's capitalism. It's what grows the economy and creates new jobs. Moreover, it's what allowed me to pay down my own debt obligation and become a successful businesswoman.
I understand the frustration with our current situation in America. However, if the movement was going to target any street, I believe it would have been better served to be called Occupy 1600 Pennsylvania Avenue, as the government situation (from Congress up through the White House) is one that I personally think needs to be re-examined. That being said, not everyone has had the opportunity or perhaps taken the initiative to understand some key concepts that drive our capitalistic society. If any movement is going to be taken seriously or if our country is going to ever come together for a viable dialogue, it's critical to understand specifics instead of generalities.
While I don't currently work on Wall Street, I have gotten a solid Wall Street education. Here are a handful of the many concepts that we need to educate the American public about.
What's a corporation?: Corporate entities, especially large, publicly traded ones, seem to be perceived as evil robots. A corporation is made up of people. There are the people who work in the corporation, the people who manage the corporation, the people who own the corporation (which, as discussed below, are collections of individuals) and the directors who oversee the management on behalf of the owners. Corporations themselves can't do anything; only people can. Using phrases like "corporate greed" doesn't make a lot of sense. If there is a specific issue or issues to be addressed in the private sector, let's get specific about what they are.
Even corporate greed isn't definable. When I asked OWS sympathizers about specific companies from the Dow Jones Industrial Average being greedy, there was a wide differential between which were perceived as greedy and which weren't (except for the financial institutions, which seemed to be universally seen as greedy). Is Disney greedy? Kraft? The Home Depot? Caterpillar? Many felt these companies weren't greedy, so ostensibly, shareholders of these companies should be allowed to be rewarded for making investments, but those of financial services firms shouldn't? That is a notion based on uninformed emotion and perception.
The 99% own a significant percent of corporations: I asked OWS sympathizers questions ranging from who owns companies like Bank of America and JP Morgan Chase, to what percentage of companies are owned by insiders. Many said, "I have no idea", where other answers varied from "the management teams" to "China". Some thought that 90% of holdings on average were owned by insiders. A few respondents quoted the salaries of top executives (not the stock holdings, but the salaries) as a response. I don't point these answers out for ridicule, but rather to illustrate the desperate need for financial education of our people. We have to educate the public that every corporation is owned by its investors. For publicly traded corporations, those investors are heavily made up of pension funds and investments of ordinary people (i.e. your IRA or 401k plan).
Plus, according to data made available through Yahoo! Finance as of June 30, 2011, only four of the 30 companies that make up the Dow Jones Industrial Average had insiders and 5% holders own 1% or more of the shares. These were The Coca-Cola Company, The Walt Disney Company, Microsoft Corporation and Wal-Mart Stores, Inc. For the other 26 companies, not even 1% of their holdings were held by insiders; this includes every financial institution in the Dow Jones Industrial Average.
Investment money is risk capital (and has already been taxed): A common area of confusion is around people who make money off of investments. One respondent told me that "The super-rich do not work for a living. They live off their investments." What seems to be missed is that these investments are in the form of risk capital that individuals have earned- and paid taxes on -- before being invested into the corporations (or other investment vehicles). As I discussed above, in making those investments, each investor takes on risk. If the company isn't managed well, the investor risks losing some or all of their money. When the company is managed well, the investor makes a profit. There is real risk in this equation, which seems incongruous with greed. If there isn't a reward that makes sense given the risk, nobody would take the risk. If we didn't allow investors to benefit with rewards for taking on risk, it would mean that companies wouldn't have access to investment capital needed to grow. This is fundamental to the financial system and seems to be overlooked by those who deem corporations focusing on profits as "shady behavior".
Wall Street firms provide many functions: The mortgage crisis was completely stupid -- all around. Individuals were careless to take on loans that they truly couldn't afford and trading departments were reckless in creating securities around these bundled loans. This was totally boneheaded on all fronts. That being said, there is much more than that to the concept of our financial market and to most Wall Street firms. Wall Street creates access to capital and liquidity required for a financial system to thrive. Let's not cut off a nose to spite the face and let's share the responsibility on both sides here.
Who is the 1%?: Respondents agree that it's "the super wealthy", but not one Occupy sympathizer that I asked could define who was in the 1% (other than Warren Buffet). One respondent said the following -- a sentiment that was echoed by several respondents, "My dad is a physician. He's probably considered well-off, but he is not part of the super-rich. People who bring in $1-2 million a year are not part of the top 1%. They are merely rich." Well, according to the math, that's not true. If you make $380,000 a year, you are in the "1%" in America (and as The Motley Fool points out, if you make $34,000, you are in the top 1% worldwide). While the 99%/1% is catchy as a brand or slogan, again, if it's just generic jargon, it's difficult to understand the problem. And if you stick with the 1% analogy, then explain the cut off. Why is someone making $380,000 per year materially different than someone making $365,000 per year?
There's no such thing as free: You've heard that there's no such thing as a free lunch, right? Well, there isn't. In fact, one of the reasons that it's so important to encourage our capitalistic system is that there is no such thing as free, period. Education, healthcare and social programs all take money to run. They are either being run by the private sector or by the government. The choice is either to allow investors to take risks with appropriate rewards to pay for programs (because there needs to be a reward for someone to take a risk), or to hand over more of our earnings to government officials (many of whom have no private sector experience) to make those investments. I would surely rather have the money in the hands of the private sector. And if you are on the fence, just take a look at our deficit and the fact that for years, our government has consistently spent more than it makes (recently by a tune of over one trillion dollars per year). Would you trust your investment decisions to a friend who is bankrupt or heavily in debt? I hope not. That's what you are suggesting in any tax increases (whether from the 1% or not) as that money goes from the private sector to the government to allocate and invest (or I guess I should say spend).
I sympathize in part with the sentiment of Occupy protestors that a change needs to happen. However, I believe that the efforts are directed in the wrong place. Regardless, though, of any specific beliefs, no traction or progress is going to be made until the public is better educated about our financial system and how it works. We won't move forward until there is a better grip on the concepts of risks, rewards and personal responsibility. Who knows, perhaps instead of vilifying something that they don't understand, more people will occupy Wall Street the way I did by seeking to join its ranks.