To understand how President Obama views successful people, I think you have to go back and watch that 1983 Eddie Murphy/Dan Aykroyd movie, Trading Places, one of the first of a now endless series of switcheroo stories where two people exchange lives.
Aykroyd is a stolid commodities broker getting rich just by being white and going to work every day dressed in a suit. Murphy is a wily homeless beggar who possesses none of the advantages of the ruling class but has street smarts. A couple of eccentric Philadelphia millionaires see them bump into each other on the sidewalk and make a bet that if only a few things were different, each would end up in the other’s clothes. You can guess the rest.
The interesting thing is the way the movie ends. Murphy finally finds his place on the trading floor. He stands there taking bids and, presumably, making money hand over fist. Hey, this is easy! One bid here, another bid there. Wow, there’s nothing to this! He’s on his way to being rich, end of story. Of course the moral lesson is clear — only racial prejudice, discrimination, class divisions, and “the system” separate the rich from the poor. Just rearrange the furniture and the rich would be poor and the poor rich.
Let’s step back a moment. The role Aykroyd and Murphy play is a commodities floor broker, a job that required a lot of hand signals and a quick mind but has generally been eliminated by electronic trading. Nobody ever got very rich at it. Usually brokers were kids from the Bronx or Queens who went to work right after high school and worked their way up the ladder. Occasionally there’s a Richard Grasso or a Louis Ranieri who made it all the way to the top, but by then they had long moved over into commodities and bond trading.
A trader is an entirely different animal. You have to bet your own and other people’s money every minute. Anyone who thought they could master this in an afternoon would probably clean themselves and their company out in about the same amount of time. It happens often. There was a case last week of a 31-year-old UBS trader who went through $2 billion making unauthorized trades. When he was paraded in front of the cameras, he looked like a little high school kid who had just been caught playing hooky. A few years before that a European French trader at Société Générale went through $6 billion before being nabbed. Anyone who thinks trading is a sure-fire way of making money has never tried it.
Movies like Trading Places only reveal that, at the directorial and script-writing level at least, Hollywood knows absolutely nothing about the business world. It reminds me of Ludwig von Mises’ description of Lenin in the opening pages of Socialism. Von Mises points to a passage in Lenin’s writing where the great Revolutionary leader proclaims that all there is to running a business is tallying up the profits as they roll in. Anyone with a little math can do it. Therefore, in order to establish justice in the world, all that was necessary was for the Bolshevik vanguard to wrestle the means of production out of the hands of the capitalists and run them for the good of the people. Lenin had the “grocery boy’s view of business,” writes von Mises, and it is not surprising, based on this short passage alone, that every socialist and communist economy that ever existed has quickly sunk into squalor almost as soon as the new leadership took over.
Since Hollywood and the Democratic Party are often indistinguishable, we can see that these very same attitudes are behind the Obama Administration’s supreme confidence that it knows the destiny of the American economy. We are undergoing a “Green Revolution” and it is the business of the Presidency to steer the nation’s wealth and capital in that direction. Although President Obama does not realize it, his assumption of this role has put him in the position of a hedge fund manager. What he is doing is no different than what thousands and thousands of other individuals from Wall Street to Greenwich, Connecticut, to Sand Hill Road do every day — placing money at risk on the basis of where they believe the economy will be tomorrow and next year. There are only two outstanding features of this effort: 1) the President has absolutely no experience at the job, and 2) his hedge fund is the United States Treasury.
The Solyndra bankruptcy is now being played up as a “scandal” — even to the point of being given that dreaded suffix referring to an expensive apartment complex on the Potomac. I prefer to think of it as the Green Teapot Dome. That ancient scandal, which brought down the Harding Administration, also involved the concentration of large amounts of energy resources in government hands. The federal government had set up a Naval Oil Reserve to make sure the Navy always had enough fuel to power its ships. When it came time to granting drilling leases, Secretary of the Interior Albert Fall handed them out to a few associates in the oil industry who in turn awarded him what would today amount to $2 million. He was a little too obvious in flaunting his newfound wealth and ended up the first cabinet member in history to go to prison.
Being somewhat more benign and “green,” the Solyndra scandal probably won’t have such dire consequences for anyone in the Administration — although it may be too early to tell. What it does show is that the business of picking successful technologies is much more difficult than the average neophyte would imagine. For every win there’s a heck of a lot of losses. As Washington plays a greater and greater role in the economy, the risks of this amateurism grow greater. In 1922 it was a few tracts of land in Wyoming that were being doled out with a little favoritism. Today it’s vast, budget-busting “stimuli” that can be distributed in whatever manner the majority party decides.
What lies at the bottom of this is a vast misunderstanding of the business world — and a huge underestimation of how difficult it is to make money in the private sector. Seeing how things work in Washington, Democrats (who rarely have any private sector experience) casually assume that people succeed in the private economy through log-rolling and personal favoritism. They think people get rich on Wall Street just by showing up for work. What they fail to comprehend is that people succeed in the private sector only by doing things better than the next person — and much better than everyone else. If Obama only understood this, he might not be so eager to tax every rich person’s money away and use it to fund his own schemes.