Tag Archives: What Good Is Wall Street? Much of what investment bankers do is socially worthless

Ever More Traders, Seemingly Fewer Builders – Consensus is Growing

The consensus is growing.  The problem is truly coming into focus.  The solution seems to elude us all.

A while back, I wrote this blog post:  “Traders” vs. “Builders” – the “Fantasy Economy” vs. the “Real Economy.(It is the most read post on our blog in the last quarter).  It was prompted by my reading of the Richard Florida book, The Great Reset.  Though the entire book is worth reading, it is a small section that jumped out at me most strongly.  Here’s the key quote:

…builders need to take their preeminent position back from the traders for the economy of the future to flourish.

A long list of observers and authors are weighing in on this disconnect in our society.  Here’s a quote from Frank Rich, Still the Best Congress Money Can Buy, from this morning’s New York Times:

As John Cassidy underscored in a definitive article titled “Who Needs Wall Street?” in The New Yorker last week, the financial sector has paid little for bringing the world to near-collapse or for receiving the taxpayers’ bailout that was denied to most small-enough-to-fail Americans. The sector still rakes in more than a fourth of American business profits, up from a seventh 25 years ago. And what is its contribution to America in exchange for this quarter-century of ever-more over-the-top rewards? “During a period in which American companies have created iPhones, Home Depot and Lipitor,” Cassidy writes, the industry reaping the highest profits and compensation is one that “doesn’t design, build or sell a tangible thing.

The article Rich quoted is What Good Is Wall Street? Much of what investment bankers do is socially worthless by John Cassidy.  He puts it simply:

For years, the most profitable industry in America has been one that doesn’t design, build, or sell a single tangible thing.

And here are excerpts from The Power of Failure by William D. Cohan (William D. Cohan on Wall Street and Main Street):

Despite the very dire consequences of the latest financial crisis that Wall Street perpetrated on the world, America cannot seem to shake its infatuation with Wall Street bankers and traders.

We continue to shower them with riches, prestige and glory. We make movies about them. We write books about them. We seriously overpay and then envy them. This year alone, while millions of others suffer from the Great Recession, bankers and traders are expected to be paid — incredibly — another estimated $144 billion in compensation and benefits. Accordingly, Wall Street remains the No. 1 destination for our best and brightest.

There is enormous power in failure, especially when one learns from it. Wall Street has been making a lot of mistakes lately. But will it bother to ever learn from them? And will we have the courage to return Wall Street to a less exalted place? The answer to these questions will increasingly come to define what America is all about in the future.

So, Wall Street has taken us down some blind paths, and failed spectacularly.  Yet, Wall Street profits are up, and seems to already be back on top.  Our best and brightest would still rather work there than elsewhere.  And when they do, they build little or nothing – they master “trading,” not “building.”

We need our best and our brightest building an actual economy, not moving money around in a stagnant one.  But we seem to be powerless to bring about any needed change.

So, what shall we do in this fantasy economy era?