Payment Problems

One of my friends, Larry Samuel, recently released a book entitled Rich: The Rise and Fall of American Wealth Culture.  In the WSJ review of this book the reviewer states that, “The American rich have proved themselves to be too creative, too diverse and too adaptable to be vulnerable to the politics of class envy.”

It’s this statement which I find most interesting as I continue to think through the post Great Recession consumer and in this particular blog entry, the furor arising around Wall Street’s pay. Rather than attack this post from the angle that the we, the taxpayers, are taking the risk off of which a small sub-section of society benefit hugely, I’ll take it from the perspective of marketing and in particular the corrosive effects of class envy on America’s growth.

The problem in particular with the growth of Wall Street Wealth is that it is institutional and not individual. Individual wealth creation is a hallmark of American capitalism and as such doesn’t create envy as its achievement is that of an outlier not the mainstream. When massive wealth is generated institutionally, see Dick Fuld as paper billionaire, $GS paying 2007 era bonuses after near bankruptcy, or the latest Andrew Hall scandal, we have cognitive dissonance. That dissonance comes from comparing our own career path’s within institutions and realizing that these institutions do not pay anywhere near the amount paid to bankers. And more to the point, despite this high, “achievement based pay”, we’re bailing these folks out for their massive underperformance. 

The Wall Street brand was built in this latest incarnation on a merit based system that rewarded performance from the backrooms to the institutional top. indeed we see these stories of rags to riches in the current generation of CEOs, but this is the final generation as entire companies are now composed of individuals from 4 Ivy League schools and a few high prestige eastern liberal arts academies. That is not America and as a consequence America, via its politicians, is rejecting this mode of operation.

As a consequence it is incumbent that Wall Street address its marketing if it is to maintain some semblence of the business model that has been so successful. One way to think about managing this issue, while still maintaining profitability, is to position yourself as an entrepreneur. Illuminate the risks taken, think long term wealth as opposed to short term gain, tell the stories of the path to success and figure out how to broaden your work force and mightily increase philanthropy. We need Wall Street, what is not entirely clear is that we need Wall Street pay to manage this essential function. Unless Wall Street starts thinking like an entrepreneur you can be sure that this time it’s going to be tough to displace the public envy.

Tagged as: Andrew Hall, Business model, empathy, Financial crisis of 2007–2009, goldman, greed, Wall Street