Since we have defined corporations as persons, though they have none of the characteristics of what makes people human and often make human beings into greedhead zombies (oops -- have I tipped my hand already?), we need a new matrix for morality. I say morality rather than ethics, because it is a matter of small daily acts more than grand theories.
Nassim Taleb to the rescue. He has used his time, money, and fame to investigate the roots of our Western culture, looking for keys. They turn out to be more simple and more obvious than one might have thought, knowing “Greek” was involved, which has been hard to understand even for the Greeks. But we all lose our way with money now and then. (Some are beginning to question the usefulness of “money” as a marker of wealth.)
Once on an enviro listserv I got into an argument with someone (probably a young white academic male) about whether corporations were hopelessly evil. My position at the time was that since they are “owned” by share-holders, reform would be simple: enlighten the shareholders and they would take their votes and proxies to the annual meeting to demand that the business wake up to human suffering and global warming. (It worked on MacDonalds.) The arguer couldn’t explain why that wouldn’t work (he was a Marxist and went by theory), but Nassim can by using his little charts and his invented characters with their well-defined points of view.
He’s talking about the same sort of thing I talked about when I was discussing Native American artifacts: the gradient of value. (You can get rich if you find something that is of low value one place and high value the other place, and then carry it across to sell.) But this is in terms of money. Long ago, someone explained that lawyers get rich because they are the ones who pass the cookies. That is, when someone wants a cookie, they ask a lawyer, who passes them the plate and takes a cookie for his trouble. Then he returns the plate to the cookie maker, again taking a cookie. Every time the plate moves, the lawyer gets a cookie because he controls the plate.
It is not the “owners” of corporations who get rich, it is the CEO’s, the managers. They are passing the plate between owners and investors. And they carry it between rooms, never revealing to one group what the other group knows. They themselves are the only ones who really know what is going on and, Oz-like, they control that knowledge partly by pretending that it is beyond the understanding of mere mortals, quant-magic that only they can provide. No one else could pass cookies like they can, though they can’t bake and always hoard. In fact, they begin to pass bits of paper that say “cookie” instead of the food itself. No one knows where the cookies go or even whether they ever existed at all.
Nassim writes “in plain sight” online with readers giving him feedback and asking him questions while he develops the chapter. When he begins on one of his ideas, it’s a great big tangle with his typos and second-language locutions getting in the way. He doesn’t like dumbheads and tells them so. But then he finds a guiding phrase and it all comes into focus.
This time the phrase is “skin in the game.” The investors and the owners have skin in the game. The CEO does not. He’s a manager on salary which he manages to shove up high (ahem) and bolster with bonuses whether the company is doing well or not. He has NO skin in the game. In ancient times a bridge builder and his family were required to go live under the bridge for a time until it was evident that the bridge was solid. When there was a war, even so recently as Napoleon and George Washington, the leaders of the war were in the field on horseback, unarmored, risking their hides, not sitting at a polished table somewhere, glancing at their watch to make sure they aren’t late for cocktails. (cock-tails). Even society at large has “skin in the game,” so that tax-revenue bailouts are mandated, at immense cost to citizens.
If the CEO is fortunate in the circumstances of the corporation (which he may not control as much as timing and politics do), the money rolls in and no one questions strategy. If things go sour, the owners (whether shareholders or family founders) take the loss or society pays cents on the dollar. The CEO keeps the plate. Managers of mutual funds are also working on salary and not at risk if things go wrong. They do not lose their pensions and life savings.
So Nassim’s chart has three columns: one for those who have NO skin in the game, one for those who DO have skin in the game, and a surprise category: those who have SOUL in the game. That is, people who are willing to take a loss for the sake of others. (He’s been hanging around with idealists like Ralph Nader.)
By occupations, the first column (no skin in the game) includes bureaucrats, consultants, corporate executives (“with suit”), theoreticians, data miners, observational studies, centralized government, editors, journalists, politicians, bankers.
The second column (skin in the game) includes citizens, merchants, businessmen, artisans, entrepreneurs, lab and field experimenters, city-state government, writers, speculators, crusading journalists, activists, traders and his character “Fat Tony” who is always practical. He says, “Do not fly in a plane without the pilot aboard.” (Predator drones risk no lives -- just a lot of taxpayer money. Aside from the targets, of course.)
The third column (soul in the game) includes saints, knights, warriors, soldiers, prophets, artists, innovators, mavericks, municipal government (I’d argue.), great writers, rebels, dissidents, revolutionaries, taxpayers (involuntarily -- whether providing safety nets or needing them). This is where he assigns his character “Nero Tulip.” (Himself)
The next step is linking the fragility theory from the Black Swan idea. The more distance and lack of understanding between columns one and three, the more fragile the system is, the more unexpected the disaster because the farther from reality. The corollary is that modernity (technology, globalization) increases the difference between columns one and three, because it is education and wealth that takes people’s skins out of the game. (Until now, when education of the academic kind has proven much less effective. Wealth ALWAYS works.)
The middle class is in the middle column. The much discussed distance between the rich and the poor corresponds to columns one and three. Talk (Fat Tony says “tawk”) lives in column one, but direct experience is heaped up in columns two and three. The trouble is that column two can be persuaded by clever talk and they are over-impressed by the wealth and status of column one. They tend to be wary of column three.
The discussion goes on to name names. It will be in the next book but by then the lawyers will have things to say about it. It’s more fun now. And I think he’s right. Even helpful.
I must add to this post a grateful hat tip to Dave Lull, who keeps me in this particular Nassim Taleb loop.
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