Photo: Jay Yarow, Business Insider
Last week, DealBook hosted a fabulous conference where the heads of the most important investment banks in the world spoke, along with some big names in the tech and economics.
One thing that stood out was the way money was and was not discussed.
The CEOs of investment banks were pushed to talk about money, inequality, and compensation. The tech people weren’t asked about money at all.
During the first interview of the conference, Andrew Ross Sorkin asked Jamie Dimon, “How do you think about money?” Sorkin asked because there is still resentment in this country about inequality, and because there was a story that when Dimon was 9-years old he told his parents “I want to be rich” when I grow up.
There’s nothing wrong with wanting to be rich. It’s what every 9-year old wants. It’s what every 40-year old wants. We all would love to have money.
Anyway, Dimon said, “Money was never that important to me.” And then said, “I don’t like the fact that we have an increase in inequality in the United States. Now you better be very careful if you say were having that because I paid that person properly. All of you have the right to say, ‘I want to be paid what I’m worth in the market.'”
In other words, before you point a finger at JP Morgan for giving out big bonuses, keep in mind we are only paying people what they would get anywhere else in this industry.
He then ticked off ways to fix inequality: Progressive taxation, better education for people in inner-city schools. He ended by saying, “We want to lift people up so society is better off.”
The next interview Sorkin did was with Marc Andreessen, who is almost a billionaire thanks to his invention of the web browser. He has since invested in dozens of companies intent on disrupting the standard way of doing business, thus causing lots of people to lose their jobs. One of those companies is ours, Business Insider.
He spoke about how the government is terrible and it should never do anything. He talked about Microsoft, Apple, Google, HP, going to college, and a lot more. One thing he didn’t talk about was compensation. He wasn’t asked about his attitude towards money, despite the fact that he has probably accumulated more money than Dimon.
The next big interview was with Lloyd Blankfein, Goldman Sachs’ CEO. He too was asked about money. “When you think about the amount of money that’s in this business still, and the arguments around inequality, you think what?”
Blankfein said, “We have two responsibilities. We have a responsibility to enlarge the pie, and we have the responsibility to distribute it in a fair and sensible way, but that doesn’t mean equal way because you distribute it and redistribute it over and over again, you don’t have a system that will cause the pie to expand. So, it’s a balance between incentives and then having a stable political system which agrees the ways the spoils are redistributed in a fair way.”
He then said, I despise the fact that the disparity between the highest and lowest incomes is so great, but he doesn’t think the government should necessarily try to close that gap.
After Blankfein, Google chairman Eric Schmidt spoke. Schmidt is the 45th richest man in the U.S., with a net worth of $7.5 billion, according to Forbes. He made his billions running Google, a search engine that was invented by two other guys.
No one asked him about whether or not he wanted to be rich when was a little kid. No one asked him about the generous compensation at Google.
So, I asked. I asked Schmidt what he thinks of money. His answer, “I think ultimately, entrepreneurs create great wealth, and drive for change, but they also create great wealth for themselves and that’s celebrated in America. I’m very proud to be part of a system that does that. It’s when the money is taken off the top and it doesn’t really serve the community and it doesn’t really serve the businesses, that it’s a problem.”
It’s pretty obvious why tech executives aren’t pressed on inequality. They’re are hailed as visionaries making our world much better. The Wall Street guys are seen as greedy men who just rearrange money until there’s more money in their pockets.
Yet, the tech guys are arguably as guilty to contributing to inequality in this nation as anyone. And they’ve made considerably more money from the destruction of America’s retail and manufacturing sector than Wall Street.
Photo: Dealbook screengrab
It took Paul Krugman to frame the issue properly.At the end of DealBook’s conference, he said, “We tend to think of the tech guys as doing this wonderful thing for us, which to some extent they are, although often the executives aren’t necessarily the innovators. But, maybe we need to reconsider a little bit, are we so, totally happy with what technology is doing? I love watching concerts on my iPad, and all that, but there’s a pretty good case, that technology is ambivalent, in its effect on workers, or possibly even harmful right now. Which doesn’t to mean stop it, but we need to think more about how are we going to support a decent distribution of income. And it means also that maybe we can stop worshiping the tech executives. Respect them, fine, but this worshipful — it’s like when Steve Jobs died, what a great name, Steve Jobs, it turns out the number of jobs that Apple actually creates in America, especially in manufacturing is ludicrous. Which is not to say technology ain’t great, but it’s not a panacea for our economic problems.”
He then goes on to note that most of the value of technology comes from using it. From the 70’s to the 90’s America’s productivity was stagnant. It took off once corporations figure out how to use IT to make other stuff more productive.
What’s different now is that, “We’re using capital intensive stuff, you buy a bunch of servers and those servers replace thousands of people doing what was previously a skilled occupation which is simultaneously displacing a lot of jobs and it’s capital using, so since have limited amounts of capital, this is going to shift the distribution of income away from workers and that has happened rather stunningly fast since 2000. The distribution between capital and labour was more or less stable for 50 years. In the last dozen years or so, the labour share has plummeted. Technology is certainly one of the plausible stories there, and it’s not a good story.”
The bottom line is that Wall Street is villainized for making money and is blamed for the destruction of our economy. Meanwhile, tech companies have multi-million dollar compensation packages to retain talent, and contribute to the destruction of our economy. Or as they proudly call it, “disruption” of the economy.
The tech companies are celebrated and revered. And I get that. I love my iPhone. I love my iPad. I, like most people, don’t fully grasp what a collateralize debt obligation is.
So, Jamie Dimon appears to be some guy who makes funny comments while his company does obscure work shifting money around. Steve Jobs, on the other hand, is a god, because I can use the iPhone.
But, in focusing on the tangible, like an iPhone, we often miss the other side, and don’t ask tech executives about how they feel about the inequality they’ve created.
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