Bain Capital Occupies Wall Street
Gordon Gekko: [at the Teldar Paper stockholder’s meeting] Well, I appreciate the opportunity you’re giving me Mr. Cromwell as the single largest shareholder in Teldar Paper, to speak. Well, ladies and gentlemen, we’re not here to indulge in fantasy but in political and economic reality. America, America has become a second-rate power. Its trade deficit and its fiscal deficit are at nightmare proportions. Now, in the days of the free market when our country was a top industrial power, there was accountability to the stockholder. The Carnegies, the Mellons, the men that built this great industrial empire, made sure of it because it was their money at stake. Today, management has no stake in the company! All together, these men sitting up here own less than three percent of the company. And where does Mr. Cromwell put his million-dollar salary? Not in Teldar stock; he owns less than one percent. You own the company. That’s right, you, the stockholder. And you are all being royally screwed over by these, these bureaucrats, with their luncheons, their hunting and fishing trips, their corporate jets and golden parachutes.
Cromwell: This is an outrage! You’re out of line Gekko!
Gordon Gekko: Teldar Paper, Mr. Cromwell, Teldar Paper has 33 different vice presidents each earning over 200 thousand dollars a year. Now, I have spent the last two months analyzing what all these guys do, and I still can’t figure it out. One thing I do know is that our paper company lost 110 million dollars last year, and I’ll bet that half of that was spent in all the paperwork going back and forth between all these vice presidents. The new law of evolution in corporate America seems to be survival of the unfittest. Well, in my book you either do it right or you get eliminated. In the last seven deals that I’ve been involved with, there were 2.5 million stockholders who have made a pretax profit of 12 billion dollars. Thank you. I am not a destroyer of companies. I am a liberator of them! The point is, ladies and gentleman, that greed, for lack of a better word, is good. Greed is right, greed works. Greed clarifies, cuts through, and captures the essence of the evolutionary spirit. Greed, in all of its forms; greed for life, for money, for love, knowledge has marked the upward surge of mankind. And greed, you mark my words, will not only save Teldar Paper, but that other malfunctioning corporation called the USA. Thank you very much.
Been a while since I saw the movie so I can’t recall how it ended-
Did Gordon Gekko and his greed save Teldar Paper, America and all its jobs?Report
Obviously not. I wouldn’t have held the “greed is good” (which is bullshrimp; greed does not = rational self-interest) thing remotely relevant to the point here; the part about the shareholders getting screwed over while the figureheads at the top bleed the company dry more accurately captures things. There is a systemic conflict of interests at heart here, one that still exists today: the separation of control from the rank-and-file who actually matter on balance. Though, I would include the workers in this as well as the shareholders.
At the same time though, this conflict applies also to the entity allegedly “regulating” big business: government. If we take as given the ludicrous concept drilled into our heads in government schools that we are all shareholders in America Inc., then can anyone say with a straight face that the interests of the shareholders are remotely being served?
Of course, I’d say the central truth is the merging of the two: big government and big business stroking each other to the promised land, while we lose what we went to the trouble of working for in the first place. Gordon Gekko’s failure was in not befriending someone in the SEC.Report
Blue Horseshoe loves Bain Capital.
The “Greed is good” line is the most important one here, though. It is the justification for entire reason for the speech because everyone knows what happens if the deal goes through. There is no more “Teldar Paper” if they take the offer. There is, right now, a certain candidate out there making the argument that this particular business experience is a virtue. This is separate from the argument of corporate/status quo business interests capturing regulatory agencies and whether that means corporations have too much power or government has too much power.
Creative destruction is necessary to a healthy market. Ossified, inefficient firms are out-competed by innovative, more efficient ones. Most people picture that happening in the form of a competitor growing smartly and taking over market share. The shrewd executive, let alone entrepreneur, with gumption and a better product is admired. Rightly so.
But competition isn’t what Gecko (or Bain) proposes, here. Also, note that this is speech to a shareholder meeting. It is definitely not a pension fund stakeholder meeting or an employee meeting. Gecko and Bain don’t make anything, or create a product. Their innovation is how to most profitably handle the destruction of a firm to the benefit of the shareholders. Some of the companies they buy live on and even thrive, but that isn’t really what they specialize in and it isn’t their real concern. Gecko makes that point elsewhere in the film if I remember correctly. They have to refrain from liquidating every company they buy just to prove that they might have good intentions when dealing with others. As long as management fees are generated and wobbly old firms are stripped down profitably, all is good. For the shareholders and for Gecko/Bain.
Gecko /Bain do a necessary function. Life is tough, suck it up and all that. But these guys are not Steve Jobs or Warren Buffet. They don’t “make” anything at all. Bain/Gecko are a function of competition but don’t actually compete in the same market as the firms they buy, and are really only “good” if, in fact, greed itself is good. This argument is tenable in the abstract and reasonable if you are a shareholder, of course. But most people in a market interact with a firm as an employee, though. Their “investment” is very different, built over a long time, and not so abstract or liquid. It’s a tough sell.
(Whether this is all a case of class ressentiment or the hyena asking for the lion’s share is a debate for another day.)
Report
Reason #27 for Why I No Longer Identify as a Libertarian: The tendency of those in the movement to use the phenomenon of regulatory capture as an open-and-shut case against nearly all regulation. Baby. Bathwater.
Reason #34: The movement is lousy with the sorts of people who think “government schools” is a clever pejorative.
Report
Please substitute “Libertarian” for Tea Party, as the tea party clearly is not in favor of smaller government. If the image does not show up, I am linking from here: http://roadburnt.wordpress.com/2012/01/11/ows-image-for-linking/Report
I don’t use government schools solely as a pejorative, I use it because it’s more accurate. They’re schools funded by taxes and operated by employees of local government, with increasing state (and these days federal) intervention. A “public school” would be one collectively held by the people of the area who use it and open to all minus the government middle. Public does not = government, otherwise the two would agree a lot more than they do in practice.
BTW: I personally include the very existence of corporate status as one of those regulations. The corporate form as we know it did not emerge from a spontaneous market order, it is a grant of privilege provided by the state. Any libertarian serious about calling out the problems with state intervention would be advised to at least consider the harm of that one, regardless how much the occupants of culturally conservative spheres they may associate with cringe at such a lefty thought.Report
Back in high school, I did a presentation on finance regulation (or something) for a Law class. We were given bonus marks for including multimedia, so I showed this scene to kick off my talk. I always knew Gekko was the villain (obviously), but I always wanted to root for him, nonetheless.Report
Let’s look at this from a tribal perspective, shall we?
Everyone agrees that corporate vice presidents are worthless loafers who get paid too much, even at $200,000 a year, which I doubt that any of them make anymore — it’s surely at least ten times that.
So I’m again’ em too. I’m for the little guy!
But that means I’m with Gordon Gekko. And he ends up a failure! And a Very Bad Person!
Report
For the record, I find the line of attack on Bain Capital more than a bit bizarre, especially coming from the Republican candidates. This is how things work in our system. When they don’t work this way, the situation is a lot worse (and likely more corrupt) than it would be otherwise. The system functions by separating the wheat from the chaff. Dead bodies attract vultures, but it’s better than leaving them to rot and spread disease. When Gingrich and other candidates attack Romney on these grounds, they sound like socialists. Luckily, we can rest assured that Gingrich means nothing he says.
As for this post, aside from the weirdness of the National Review coming around to the opinions of Occupy Wall Street, I have to ask: We all know that Gordon Gekko is a fictional character, right? In a movie directed by (I believe) an avowed communist. So, really, is it a fantastic petard to hoist these occupy people on that they agree with a speech given by a fictional character in a didactic movie made by a communist?
Report
When that character is purportedly a capitalist, yes.Report
I think a part of it is that there are so few conservative role models on television that they take what they can find. An intrepid villain is better than what they’re usually going to find (typically an oaffish villain).
It’s also a testament to the writing. It’s good when you can have your villains make cases that are compelling to the people that he is supposed to represent.Report
A communist? A real, honest-to-God communist?
Why, I would pass by the exhibit of the Loch Ness Monster, Elvis, Walt Disney On Ice and Bigfoot, just to catch a glimpse of such a creature!Report
If you went to college and didn’t meet any Communists there, I have to wonder where you went to college.
Are you an Aggie?!Report
Saw this in Forbes the other day, about how maximizing shareholder value is not a good idea (RTWT, it’s more nuanced than one might think)Report
Exc comments, all. I think I agree with everybody!
It is just a movie, and an Oliver Stone movie at that. I was struck by the content of this particular speech and its ability to open doors for conversation. That Gekko turns out to be a goniff seeking insider info later in the movie doesn’t bear on his T. Boone Pickens-style shareholder insurgency here, which I’ve always had a liking for.
[“Greed is good” can also be read as “enlightened self-interest is good”: we need not respond to the actual words here, just the concept.]
To Rufus, Gingrich’s attack on Bain and Romney has ended his candidacy and may return him to pariah status even within the GOP or Fox.
As for “shareholder value,” part of that value is liquidity, and meeting earnings expectations makes it easier to sell and get full value. Liquidity is the only benefit of high finance, and we pay a high vig for it. But the liquidity of capital is in the end democratic and egalitarian, because a stock doesn’t care who owns it, a business doesn’t care who invests in it.
Before capitalism, there was only real estate, largely kept out of the hands of the common folk by the landowner-elite class. It was the liberation of capital that made democracy and equality even nearly possible.
To return to “shareholder value” again, there are companies with a socially liberal agenda, that profits aren’t everything, and there are mutual funds that specialize in them. For all those favoring this view of business, they are free to put their money—capital, savings, employee pension plans, union pension plan holdings—where their mouths are.
http://reason.com/archives/2009/01/12/the-next-catastropheReport
What makes self interest “enllightened”?Report
Geez, Lib60, even the Wiki knows the answer to that one. RU yankin me?
“In contrast to enlightened self-interest is simple greed or the concept of “unenlightened self-interest,” in which it is argued that when most or all persons act according to their own myopic selfishness, that the group suffers loss as a result of conflict, decreased efficiency because of lack of cooperation, and the increased expense each individual pays for the protection of their own interests.”
BTW, this:
http://blog.mises.org/12675/voltaire-on-enlightened-self-interest/
I just discovered this gem in Voltaire’s Letters on England. Voltaire responds to Blaise Pascal’s pronouncement that,
with this rejoinder (emphasis added):
Report