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.
