CO: I’m Cathy O’Neil, I’m a facilitator for the Alternative banking Working group from Occupy Wall Street.
OPR: So today we are doing Chapter 7, a bunch of old banker’s tales that we are gonna try to debunk. One thing that comes up in regular talk a lot is, well, the rich people, the 1 %, they earned their money so they get to keep it. What’s wrong with that?
CO: There’s lots of things that you need to unpack from that sentence and the first thing we want to talk about is ‘earning”. What does it mean to earn something? Usually when you talk about earning you these kind of like Superman examples, you have the Steve Jobs or like a sports player and the idea is that they gave people happiness in some sense and their net contribution to society as super positive therefore they’ve earned all their money. I think you can make that case sometimes for some people and so let’s start with those people that we know and love like Steve Jobs and then we’ll go onto other people who are rich because not everyone in life is Steve Jobs. But even starting with him, the first thing I want to say is that is all about context, Steve Jobs, born in a different century, born without a partner, Steve Wozniak, would have not done what he did. It was facilitated by his environment and by opportunities he was presented with and the fact that he was at the right place at the right time. He had a lot of luck going into it, which is to say that it’s not that he didn’t make something happen that was great, it’s just that it happened because of a whole myriad of things like China’s workers, the people he met the year he was born, the education he had. And so it’s not an individual effort. Even if you have individual great people like him, it’s always about a lot of things that worked.
OPR: In the chapter you talk about ‘social wealth’. Can you describe that?
CO: I’m not an economist myself, I’m more of a conversational scribe if you will for this chapter so I might get this wrong from a technical definition but the idea is basically happiness that you create or that is created. My argument is that no individual creates it by themselves, it’s a group effort at all times. But the idea is, it’s not necessarily happiness or goodness or utility measured by dollars and cents but it’s more of a generic concept that you can measure in various ways.
OPR: As a society, if companies don’t contribute to our well-being and to the society, why as a society would we want to keep them around?
CO: That’s a great question and one of the basic questions this chapter is trying to address is the idea of what you are being paid, is it what you are worth, is it what you’ve earned somehow, is it additional social wealth that you’ve added to society and to the world versus if you didn’t exist or is it what is somebody is willing to pay you to do it. I think, I would fall into that latter camp. So basically many things exist because they make money so that’s why they continue to exist. It’s not like we as a society said this is worth it, offer these resources. And so going back to the question of earning it, a lot of people got rich that were nothing like Steve Jobs and arguably did not help the world at all, in fact what they did was, they figured out how to create, if you are talking about finance, how to create exotic instruments that somehow obscured information or risk they were able to sell onto unsophisticated clients and make a lot of money off of them. That has nothing to do with adding value to the world, in fact it is the opposite but they did make money from it so you have to able to separate the two concepts of adding value, however you want to measure that, and making money. A lot of things exist because they make money so they continue to exist and they are not illegal sometimes.
OPR: Right, so maybe as a society we should have different standards.
CO: Well, as a society we do have different standards but the question is to what extent is our voice heard in debates about policy and so the reason we wrote this chapter essentially is because we want to insert the fact that Economic Miss are not the only valid voice in this discussion about how we spend money, why we spend money, how we choose to create our government and what our government does with the taxes that it takes and collects.
OPR: So your argument is that is society that creates their wealth but another myth is also that if you work hard you will be successful, the meritocracy argument. Is meritocracy a myth or a fact?
CO: I don’t think there is no basis in that. I think meritocracy is a very convenient thing to point to when you are successful in your life and you don’t want to feel like it was a group effort, you want to feel like it was an individual effort. It’s human nature to take for granted a lot of things that you have in your arsenal, like a Harvard education, or friendship, or support system and actions, …Meritocracy, from my perspective working at a hedgefund, which was sort of married to this concept of meritocracy, it’s usually a word people use when they’re trying not to acknowledge an inequitable system that hey are on the lucky side of.
OPR: And back to the “well they’ve earned their money so they get to keep it”, can we talk about the keeping-the-money part?
CO: So we’ll talk about taxes a little bit and we’ll talk about …before I go there though I want to talk a little bit about the market. There’s luck involved, even with Steve Jobs, but also with other people that made a lot of money, there’s luck…and then we’ll talk about what it means to have a fair market price…
OPR: Let’s talk about fair market value. People are not paid according to their social value but are defined on how much money they can make. How is that fair in the market?
CO: Actually it’s not particularly fair. So we’ve already excluded the possibility that value added, it’s more like, how much is someone willing to pay, how much money can you make on those weird, exotic derivatives you’ve just created but it doesn’t mean it’s fair either because the market..and there’s good things about free markets, which we don’t have by the way, we can touch on that later, it’s not free, but there’s quite a lot of good things about the market system, in particular the idea that what’s good for the whole might not actually be good for any given individual. You might have some really hard working bright person come up with a great idea for the market and it might be a great idea but that somebody else gets their cut five months before they do and it’s just they never make any money, in fact they go bankrupt. What’s fair about that? That’s not fair, that’s serendipitous, so it’s not true that fair market value for a given person necessarily pans out in the end, there’s a lot of noise. In fact the market is almost pure noise on the individual level and that’s an important feature of the market. On the other hand in general of course the market rewards people who are in the market and so when we think about, you know, recently we hear about the market going up and up and up but most people don’t care because most people don’t have a stake in that. So the market, which isn’t a fair market, because right now it’s being inflated by the Fed, the monetary quantitative easing program and stuff, it’s on one hand not very …but on the other hand, as a class, the class of people who invest in the market are of course benefitting. So when we talk about the tide that lifts all boats, it doesn’t lift every single boat exactly, in a fair sense but at all because it’s really more about monetary policy than smarts but in particular this tide is lifting those boats.
OPR: So what would be a fair system or how can we make this system more fair?
CO: That’s a great question. My personal feeling is that it’s a question of our values, our moral values and one of the biggest hardest questions is how you evaluate success and for whom and so one of the things we have to realize is that to the extent that we care about the median person or the most impoverished person, our current proxy of GDP is not doing its job, maybe it used to be a pretty good proxy for the well being of the median but it was unpaired or uncoupled with that quite a few years ago and hasn’t returned. So when we hear good growth numbers for our country, at the same time we hear incredible suffering for the lower classes so that’s a political struggle right there. People think of it as data and they think of data as objective but really what it is is a definition of what does success look like and that’s one of things that Occupy is coming to the table to discuss and demands to discuss.
OPR: Thank you.