Speaker 1: I'm Bethany McLean. This is making a killing in this show.
Speaker 1: I cut through the hype and handwringing to reframe the
Speaker 1: stories you thought you understood and uncover the ones you
Speaker 1: didn't know were important. I started work on Wall Street
Speaker 1: in nineteen ninety two, in the mergers and acquisitions department
Speaker 1: at Goldman Sex. In nineteen ninety five I went to
Speaker 1: Fortune Magazine. By this time we were firmly in the
Speaker 1: age of shareholder primacy, by which I mean the purpose
Speaker 1: of a company was to make money for shareholders. If
Speaker 1: they didn't make enough, it was a bad company. And
Speaker 1: then a god of finance aka biotfirm, a private equity firm,
Speaker 1: would come along and fix things. This was the natural
Speaker 1: order of things, or so it seemed my guest today.
Speaker 1: Long time journalist Nick Lehman describes this period of acceptance
Speaker 1: of the status quo and his brilliant new book Transaction Man,
Speaker 1: The Rise of the Deal in the Decline of the
Speaker 1: American Dream. He writes, there moments in history when everything
Speaker 1: seems calm, when there isn't some obvious bitter contention about
Speaker 1: big problems. That, of course, was the late nineteen nineties,
Speaker 1: even the subsequent dot com crash, and then, of course
Speaker 1: the implosion of Enron didn't seem to me at the
Speaker 1: time so much an example of a deep systemic problem
Speaker 1: as it was a story of good ideas taken to
Speaker 1: bad extremes at a market peak. The men, and they
Speaker 1: are mostly men, who order our economic world, must be
Speaker 1: right in their thinking, because well, because they order our
Speaker 1: economic world. It's a perfect example of the fallacy of
Speaker 1: the consequent high Aristotle. I think the financial crisis in
Speaker 1: two thousand and eight made us question all of that.
Speaker 1: What Nick does in his book is outline the beliefs
Speaker 1: that have shaped our economic world and show them not
Speaker 1: as inviolable truth, but as temporary and fairly fragile constructs.
Speaker 1: Here's one take the mid century idea that big corporations,
Speaker 1: their power kept in check by smart government regulation, would
Speaker 1: always dominate. It was the polar opposite of today's startup
Speaker 1: loving culture. As Nick writes, it's worth recalling how little
Speaker 1: the founding of new companies was part of the prevailing
Speaker 1: narrative of how business worked. How obviously wrong did that
Speaker 1: turn up to be. Then it became an article of
Speaker 1: faith from the eighties until oh about now that financiers,
Speaker 1: We're going to make companies stronger and more efficient, and
Speaker 1: somehow never mind exactly how that was going to work
Speaker 1: for the rest of us too. Now that idea is
Speaker 1: under fire as well. In late August, the Business Round Table,
Speaker 1: which as it sounds, essentially represents big business, said it
Speaker 1: it's changing its statement of the purpose of a corporation.
Speaker 1: No longer should decisions be based solely on the Milton
Speaker 1: friedmanesque view that the only purpose is to produce higher
Speaker 1: profits for shareholders. Rather, corporate leaders should take into account
Speaker 1: all stakeholders, that is, employees, customers, and society writ large.
Speaker 1: Today I get to discuss all of this and more
Speaker 1: with my friend Nick Lehman, who, in addition to his
Speaker 1: many other roles New Yorker writer din Emeritus of the
Speaker 1: Columbia Journalism School, is also the editor in chief of
Speaker 1: Columbia Global Reports, which published my last too mini books.
Speaker 1: So I'm thrilled that now I get to talk to
Speaker 1: Nick about his new book. So Nick, tell me what
Speaker 1: was the genesis of this book. First of all, you
Speaker 1: mentioned that I was dean of Columbia Journalism School, and
Speaker 1: in that role, fundraising was a big part of my life.
Speaker 1: So that was the first time I had encountered the
Speaker 1: current generation of very rich people, and I was fascinated
Speaker 1: to learn kind of how they thought, which was if
Speaker 1: I said, will you give money to Columbia Journalism School,
Speaker 1: they'd always say no. If I said, we're going to
Speaker 1: disrupt journalism and create an entirely new institution that will
Speaker 1: be very loosely related to the Journalism School, but it'll
Speaker 1: be sort of entrepreneurial and dismantling everything that existed before,
Speaker 1: they'd say, great, I love it. So there was this
Speaker 1: kind of prejudice that you'd encounter over and over again
Speaker 1: toward taking a part institutions that existed, even once I
Speaker 1: believed in, and then creating new ones that would supposedly
Speaker 1: be better, or just not having institutions. And there's also
Speaker 1: a part about journalism. And I won't name the person,
Speaker 1: but one of my fundraising meetings when I was dean
Speaker 1: was with a former journalist who had become very wealthy
Speaker 1: venture capital investor. So I thought, great, you know somebody
Speaker 1: who loves journalism. And I went to see him with
Speaker 1: my colleague who was the fundraiser, and he just I
Speaker 1: don't know why he took the meeting, but he spent
Speaker 1: an hour just giving us a big lecture on how
Speaker 1: everything in journalism was going down and he was proud
Speaker 1: to be part of that, and how he was going
Speaker 1: to fund all these startups that were going to replace
Speaker 1: all the familiar journalism institutions and do a better job.
Speaker 1: And my development officer and I went back to a
Speaker 1: hotel and met for breakfast. I said to him, did
Speaker 1: you look at all the sites he's funding? And he said, yeah,
Speaker 1: did you? I said, did you do you want to
Speaker 1: kill yourself? Or is it just me? Because they were
Speaker 1: just you know, pop culture basically, So it just it
Speaker 1: just was striking to me to encounter this mindset delivered
Speaker 1: with total sureness and a kind of religious fervor, and
Speaker 1: to try to sort of pinpoint and identify that as
Speaker 1: William White did many years ago in his great book
Speaker 1: The Organization Man, which was kind of about the opposite
Speaker 1: phenomenon back in the nineteen fifties. Right, So asking these questions,
Speaker 1: is it fair to say that by looking at an
Speaker 1: institution or a business that you knew well, mainly journalism,
Speaker 1: and thinking about how the mindsets regarding journalism were changing,
Speaker 1: made you start thinking about these larger mindsets that have
Speaker 1: ordered our economic world, and how they've changed over really
Speaker 1: the course of American history. Yeah, exactly, I was. I
Speaker 1: was using as nonfiction writers often do you know in
Speaker 1: fiction class which I've never taken, supposedly they tell you
Speaker 1: right about what you know and you know in nonfiction,
Speaker 1: I think what you do is, or at least for
Speaker 1: book writers, you take something that, probably for a personal reason,
Speaker 1: you're intensely interested in and curious about, but you don't know,
Speaker 1: and try to find out about it. So with all
Speaker 1: my books, there's been this dynamic of how did this happen?
Speaker 1: You know, something that I had experienced in a deep
Speaker 1: way but hadn't understood, And then I would go try
Speaker 1: to unravel the mystery. Now that the Business Roundtable has
Speaker 1: come out with a statement about corporations having a broader responsibility,
Speaker 1: do you think people recognize that this is, essentially, as
Speaker 1: you lay out in your book, a return to an
Speaker 1: old way of thinking rather than something that's completely fresh.
Speaker 1: I mean, it strikes us all as revolutionary now to
Speaker 1: say that the purpose of a company should be something
Speaker 1: other than generating shareholder value, and yet that's actually how
Speaker 1: most people thought about corporations up until oh, the nineteen
Speaker 1: eighties or so. Right, Yeah, But I mean before I
Speaker 1: get there, there's a tension between the financial world and
Speaker 1: the corporate world, and that's just built into the fabric
Speaker 1: of everything. I live on the fabled Upper West Side
Speaker 1: of New York, home of liberals. If I say that
Speaker 1: to people, the initial reaction is what huh, Because I
Speaker 1: think we think of them as the same thing. Business
Speaker 1: and finance are both part of the same big evil scheme.
Speaker 1: So it takes a little work to introduce the uninitiated
Speaker 1: to the fact that this tension exists. But once you
Speaker 1: get there, Yes, the story I tell in the book
Speaker 1: is one where when we start in the early twentieth century,
Speaker 1: there is no notion of corporate social responsibility, and then
Speaker 1: it's created with government playing a very large role in
Speaker 1: its creation. We can get more into the pause there
Speaker 1: and tell us about the character about Off Burley, who
Speaker 1: you tell this story through. Burley was a crucial advisor
Speaker 1: to Franklin Roosevelt in the early days of the New Deal.
Speaker 1: Burley and a co author wrote a book that was
Speaker 1: published in nineteen thirty two called The Modern Corporation and
Speaker 1: Private Property. In that book, They said Burley had a
Speaker 1: flair for the dramatic. For the first time in human history,
Speaker 1: ownership and control have been separated. Because the modern publicly
Speaker 1: held corporation, then quite a new institution that people found
Speaker 1: strange and unfamiliar, has shareholders who are so widely dispersed
Speaker 1: that they can't have any influence over the management of
Speaker 1: the company. So the management is completely unaccountable, and there
Speaker 1: needs to be some way to call them to account.
Speaker 1: Early in his career, Burley was read as an advocate
Speaker 1: of what we'd now call shareholder activism. In other words,
Speaker 1: he was noting this, and people thought he was noting
Speaker 1: it to say, well, let's put the shareholders in charge.
Speaker 1: That's not what he thought. What he thought was, let's
Speaker 1: bulk up government so it can be as powerful as
Speaker 1: the corporations, and there can be a sort of fair fight,
Speaker 1: like what I call in the book a clash of
Speaker 1: the titans between them, and only then, in his view,
Speaker 1: would you get the socially responsible corporation. Many years later,
Speaker 1: he was quite typical of sort of Eastern liberal establishment
Speaker 1: types in saying things like, we have these big industrial corporations,
Speaker 1: no one will ever be able to compete with them.
Speaker 1: They will last forever. They will only get bigger and
Speaker 1: bigger and more dominant. There are no entrepreneurs in America anymore.
Speaker 1: Only large corporations can innovate. Wall Street has become irrelevant
Speaker 1: in the American economy and will disappear eventually. Because he
Speaker 1: thought these corporations would be so rich they would just
Speaker 1: invent their own financial products to fund production and things
Speaker 1: like that. And you know, in a certain way, I
Speaker 1: hate to say he died just in time, because is
Speaker 1: this world that he went to his deathbed thinking was
Speaker 1: forever and many people like him did exploded not long after.
Speaker 1: The three things that really stood out to me that
Speaker 1: you noted about Burley were that you wrote he believed
Speaker 1: the corporation had become the conscience carrier of twentieth century
Speaker 1: American society. And that's a quote from him. Either way,
Speaker 1: that's not no, it's but it's fascinating because it shows
Speaker 1: how this idea was so ingrained for a while, that
Speaker 1: corporations had this larger responsibility. And then I also thought
Speaker 1: his idea that a near clash of the Titans analogy
Speaker 1: government was the one thing that could restrain big business.
Speaker 1: And then the way in which he believed, back to
Speaker 1: the point you were making about corporations and finance being
Speaker 1: two different things, the way he believed that capital had
Speaker 1: come out of capitalism, that this really was just about
Speaker 1: big corporations and Wall Street was quiescent. Really, yeah, he did,
Speaker 1: he said one of his He loved to make these
Speaker 1: dramatic pronouncements, and one of them was, we now have,
Speaker 1: for the first time in the world capitalism without capitalists.
Speaker 1: Was that right? A fantastic lyde tell us. Before we
Speaker 1: move on to how the world changed and how this
Speaker 1: world because construct Burley had created seemed to be wrong,
Speaker 1: because it's so relevant today, talk a little bit about
Speaker 1: the difference in views between Burley and Brandeis. Lewis Brandeis
Speaker 1: was Supreme Court justice and before that a crusading liberal lawyer.
Speaker 1: He was appointed to the Supreme Court by Woodrow Wilson,
Speaker 1: and he's kind of the father intellectually of aggressive anti trust.
Speaker 1: His favorite phrase was the curse of bigness, and he
Speaker 1: was a crucial advisor to Woodrow Wilson in his first
Speaker 1: successful presidential campaign in nineteen twelve. We now forget that.
Speaker 1: Number one. The big issue in that campaign was anti
Speaker 1: trust policy, believe it or not. And number two Theodore Roosevelt,
Speaker 1: one of the three candidates who's seen today as a trustbuster,
Speaker 1: was the anti anti trust candidate. Woodrow Wilson was the
Speaker 1: one for breaking up big companies, not Roosevelt, because Roosevelt
Speaker 1: had embraced Burley's view that big corporations could be restrained
Speaker 1: by Yeah, I have this idea in the book Clash
Speaker 1: of the Titans. Liberals who tend to be people from
Speaker 1: New York, and they believe, you know, supersize government, supersized business,
Speaker 1: and then you can have a kind of fair fight
Speaker 1: between them. Brandeis believed in dispersing power and not coincidentally,
Speaker 1: maybe came from the provinces Louisville, Kentucky. So really interesting relationship.
Speaker 1: Burley's very first job he was a lawyer after law school,
Speaker 1: was working for Brandeis and Brandeis's law firm and they
Speaker 1: had a long tortured relationship. Burley claimed that he kept
Speaker 1: a picture of Brandise on his office wall until his death,
Speaker 1: but he thought Brandeis was completely wrong on anti trus
Speaker 1: Burley was fiercely opposed to anti trust his whole life.
Speaker 1: Every time he got a chance to testify in Congress
Speaker 1: against breaking up a company. He would do it, and
Speaker 1: he just thought this was a kind of backward looking,
Speaker 1: nostalgic attempt to revive nineteenth century America. So he would
Speaker 1: one of the many things he'd be shocked by if
Speaker 1: he were alive today. What is the revival of anti
Speaker 1: trust that we're now seeing out on the campaign trail
Speaker 1: and in Europe the revival, right at least, the revival
Speaker 1: of the idea. I was thinking when you mentioned Brandeis
Speaker 1: and the curse of bigness, how much that resonates today,
Speaker 1: not only when you think about technology, but the big
Speaker 1: banks after the financial crisis. Right, Yeah, And as I said,
Speaker 1: Burley had a flair for the dramatic. One of his
Speaker 1: many dramatic pronouncements after World War Two, and after Brandeis
Speaker 1: was dead, he said, this is such a settled matter
Speaker 1: that these big corporations are a good idea for America,
Speaker 1: that I believe that justice Brandis, my friend, if he
Speaker 1: were alive, would have supported my view. So he sort
Speaker 1: of converted Brandis to his position post mortem. So before
Speaker 1: we get to how a settled matter became incredibly unsettled,
Speaker 1: I want to pause for a minute on Roosevelt, just
Speaker 1: because he also is an interesting character in light of
Speaker 1: what's happening today, and a complicated one. In other words,
Speaker 1: he strikes me as a bit Clintonian, perhaps in his
Speaker 1: embrace of multiple ideas that would seem to be in
Speaker 1: conflict with each other. Franklin Roosevelt is a fascinating character,
Speaker 1: and you know, very attractive in many ways, but he's
Speaker 1: beyond Clintonian in his sort of affable elusiveness. One advantage
Speaker 1: we have is in those days, everybody wrote everything down,
Speaker 1: so there's wonderful archives on all of the endless internal battles.
Speaker 1: Remember that FDR changed vice presidents three times, and he
Speaker 1: was just always moving and shifting his position instinctively. Well,
Speaker 1: or I would say he never really sat down and
Speaker 1: stated what his views were. In fact, what people often
Speaker 1: cite as the best statement of his views was written
Speaker 1: by Burley during the nineteen thirty two campaign. What was that.
Speaker 1: It was called the Commonwealth Club speech, and it's often
Speaker 1: taught in history classes and so on. And the timing
Speaker 1: of presidential campaigns was a lot more slow than it
Speaker 1: is now. So around August nineteen thirty two, Burley wrote
Speaker 1: Roosevelt a letter he was by then a key advisor,
Speaker 1: and he said, look, you know, you might win or
Speaker 1: you might lose the election. We don't know. But even
Speaker 1: if you lose, you don't want to be remembered as
Speaker 1: somebody who had no vision. And right now no one
Speaker 1: knows what you stand for, so you need to make
Speaker 1: a speech showing what your vision is. So Roosevelt wrote
Speaker 1: back and said, okay, write me a speech that contains
Speaker 1: my vision and I will deliver it. So Burley and
Speaker 1: his wife, who was an amazing and very accomplished medical
Speaker 1: doctor named Beatrice Burley, sat down in their kitchen table
Speaker 1: in the Berkshires and wrote this speech that they telegraphed
Speaker 1: to FDR who was riding on a train across the country.
Speaker 1: Supposedly he saw it only minutes before he delivered it,
Speaker 1: but he delivered it. And it was this grand, sweeping
Speaker 1: vision of very Burly esque, of how America was being
Speaker 1: strangled by these giant corporations and government had to push
Speaker 1: back against them. And it actually cited Burly's book. Of course,
Speaker 1: you can't write a speech without signing your own book. Ye.
Speaker 1: So anyway, everybody was always fighting in the Roosevelt administration,
Speaker 1: and no one could quite figure out where Roosevelt stood
Speaker 1: as he zigged and zag between various warring liberal camps.
Speaker 1: And one dimension of this was government regulation. And you
Speaker 1: know how much did he believe in markets or not?
Speaker 1: Was he trying to save the market or was he
Speaker 1: trying to get the United States onto another system? And
Speaker 1: then another was did he believe in Brandeis or did
Speaker 1: he believe in Burley? And he kind of believed in both, right, yeah,
Speaker 1: or no? One could tell that there's a fascinating moment
Speaker 1: where Brandeis. In those days, people in Washington, maybe like today,
Speaker 1: maybe even more so, didn't color inside the lines as
Speaker 1: they say. So Brandeis calls Burley and says, I don't
Speaker 1: like FDR's new economic policies and essentially implies if he
Speaker 1: doesn't change, I'm going to strike down one of his
Speaker 1: key new government agencies, the National Recovery Administration, which is
Speaker 1: being challenged in the Supreme Court. So Burley tells Roosevelt this,
Speaker 1: Roosevelt writes back in his usual sort of affable, mysterios
Speaker 1: way and says, I'll just have to call in the
Speaker 1: Justice and have a little talk with him. And whatever
Speaker 1: happened in the talk, the Supreme Court did strike down
Speaker 1: the National Industrial Recovery Act, with Brandis voting in a
Speaker 1: unanimous majority. Can you imagine today if it became public
Speaker 1: that a Supreme Court justice was effectively blackmailing the president
Speaker 1: at the United States. I mean, that's a pretty extraordinary story, right,
Speaker 1: And also it later emerged. I mean, I'm a big
Speaker 1: admirer of Brandis, I think he was a great man.
Speaker 1: But it later emerged, not from my work, but from
Speaker 1: another historian's work that Brandeis was paying a stipend to
Speaker 1: his later colleague on the Supreme Court, Felix Frankfurter, who
Speaker 1: was an arch enemy of Burley, to sort of promote
Speaker 1: ideas that were friendly to Brandis, but that Brandeis couldn't
Speaker 1: promote personally because he was a Supreme Court justice. So
Speaker 1: how did this world that appeared to be so settled
Speaker 1: began to unravel? And at the risk of asking to
Speaker 1: why didn't people see it at the time that what
Speaker 1: seemed to be so permanent was actually just a fragile,
Speaker 1: impermanent construct. You've got this great phrase in the book,
Speaker 1: masterless money, and yet that supposedly masterless money suddenly became
Speaker 1: a master, a master at the universe. As a matter
Speaker 1: of fact, masterless money, I think is another of Burley's
Speaker 1: great phrase it's not mine, but just to set the
Speaker 1: table for this, any time you were born into a
Speaker 1: social system and a group of arrangements, you always kind
Speaker 1: of automatically think, well, this is the way the world is,
Speaker 1: so this is the way the world will always be.
Speaker 1: So I would say what happened is number one, inflation,
Speaker 1: which had been quiescent for a number of years, really
Speaker 1: took off in the nineteen seventies, and that destabilized the
Speaker 1: system a lot, particularly because banks could no longer at
Speaker 1: act depositors because they didn't want to have their money
Speaker 1: lose its value while it was sitting in a bank
Speaker 1: at a regulated interest rate. So it led to all
Speaker 1: this listening of the rules at the behest of the
Speaker 1: banking line, right. So the banking industry, which had never
Speaker 1: really wanted to be regulated in the first place, started pushing, pushing,
Speaker 1: pushing to be able to invest more daringly, have fewer
Speaker 1: safety and soundness restrictions, etc. So that was That's totally
Speaker 1: fascinating and worth pausing on that point for a moment,
Speaker 1: because for all the discussion about what led to the
Speaker 1: collapse of Glassdagle. Obviously Roosevelt's law. I'd never thought of
Speaker 1: inflation as being as being a part of that story,
Speaker 1: but it is. Yeah. I think it is a really
Speaker 1: important the story. Another part of the story is just
Speaker 1: general mood of the times. When I was starting out
Speaker 1: in journalism, I was working in Washington in the mid
Speaker 1: to late nineteen seventies, and at that point you could
Speaker 1: actually see New Deal figures walking down the street elderly men,
Speaker 1: and it was just an article of faith with us.
Speaker 1: I mean, looking back, you think, well, you know, the
Speaker 1: New Deal economic regime, and the whole regime worked pretty
Speaker 1: damn well, getting us from a horrible financial crisis in
Speaker 1: the late twenties and early thirties to no real financial
Speaker 1: crisis for many years. But by we, I mean liberal
Speaker 1: journalist types believed that anything with New Deal attached to
Speaker 1: it was outmoded and didn't work anymore. So there was
Speaker 1: a kind of excitement not just on the right but
Speaker 1: also on the left about dismantling things and innovating and
Speaker 1: deregulating and starting over. That strikes me as really important.
Speaker 1: How people who you would have expected to push back
Speaker 1: against the dismantling of some of these systems instead became coopted.
Speaker 1: Perhaps that's not the right word, but how does that happen?
Speaker 1: I think a lot of how it happened is I mean,
Speaker 1: I hate to say, I'm going to say we we
Speaker 1: liberal elite types. We're in on the deal our kids,
Speaker 1: and we go to schools that are the sort of
Speaker 1: bastion of liberalism in America, but where most people, most parents,
Speaker 1: and most of the students are going to go into finance,
Speaker 1: and finance sort of pays for the whole thing, so
Speaker 1: we're sort of beneficiaries of it. Finance gives copiously to
Speaker 1: liberal politicians. Barack Obama got more money from Wall Street
Speaker 1: by far when he ran in two thousand and eight
Speaker 1: than John McCain did. So. In Roosevelt's day, business and
Speaker 1: finance were one Republican and now they're very split, and
Speaker 1: that means that that world is located part of both.
Speaker 1: So tell us about Michael Jensen, because he's this fascinating character,
Speaker 1: because he embodies this drive toward the idea that markets
Speaker 1: are the answer to everything, and I think a craving
Speaker 1: for a simplistic worldview that we all have in a somewhere,
Speaker 1: but then he becomes a skeptic of this idea he
Speaker 1: did so much to implement. Jensen came from a blue
Speaker 1: collar background, from several generations of printers and newspaper line
Speaker 1: of type operators in Minneapolis. He was the first person
Speaker 1: in his family to go to college, and he wound
Speaker 1: up through a few twists and turns in the famous
Speaker 1: University of Chicago economics department in the sixties, which is
Speaker 1: when Milton Friedman was kind of the guiding spirit there,
Speaker 1: and when all these financial techniques that underlie the derivatives
Speaker 1: markets were invented by economists, So he was part of
Speaker 1: that group that was kind of quantifying the financial performance
Speaker 1: of portfolios, and that was the first phase of his work.
Speaker 1: Then in the seventies, inspired in part by Freedman. In
Speaker 1: those days, as we were noting earlier, the reigning belief
Speaker 1: was a socially responsible corporation. So Milton Friedman began questioning
Speaker 1: that and saying the only purpose of a corporation should
Speaker 1: be to make money for its shareholders. And then Jensen
Speaker 1: really took hold of that idea and wrote a famous
Speaker 1: academic article, one of the most cited academic articles of
Speaker 1: all time, detailing with formulas and specific techniques how a
Speaker 1: corporation could reorient itself toward its shareholders. So he became
Speaker 1: kind of the intellectual godfather or patron saint of all
Speaker 1: those old corporate raiders of the early eighties like Boone
Speaker 1: Pickens and Ron Perlman and all those people, because what
Speaker 1: he wanted to do was create what he called a
Speaker 1: market for corporate control. That is, the control of the
Speaker 1: corporation would itself be up for grabs at all times,
Speaker 1: available to the person who could produce the best return
Speaker 1: for shareholders. So this was kind of the set of
Speaker 1: ideas around all the stuff that you were dealing with
Speaker 1: when you started at Goldman. Sachs. Oh, it's fascinating. As
Speaker 1: I read your book, I thought, here's the intellectual godfather
Speaker 1: of the construct of the world that I just took
Speaker 1: for granted. I thought that's the way the world was,
Speaker 1: you know, mergers and acquisitions and paying CEOs in stock
Speaker 1: options so that they would be personally enriched by the
Speaker 1: performance of the stock. But the core idea of it
Speaker 1: is there's one owner. There's not dispersed ownership. I mean,
Speaker 1: he was consciously saying, and he says briefly in that
Speaker 1: first article, I'm blowing up Adolf Burley's construct here, you know,
Speaker 1: So there's a sort of connection there. So what he
Speaker 1: loves about, or used to love about private equity was
Speaker 1: that you'd have one person like black Stone or KKR
Speaker 1: owning a company, so the shareholder in the management were indistinguishable,
Speaker 1: and so that you'd get rid of all these social
Speaker 1: arrangements that had been embedded into the corporation union contracts
Speaker 1: and fancy offices and all that, and then spin it
Speaker 1: off and release value. So all through the eighties into
Speaker 1: the nineties, Jensen was always sort of writing and testifying
Speaker 1: in Congress and so on in favor of this big
Speaker 1: revolution that was going on in the American corporation. Something
Speaker 1: like a third of the fortune five hundred disappeared in
Speaker 1: the nineteen eighties alone. So it was done by that
Speaker 1: nig big, big change, and unpopular with a lot of people,
Speaker 1: including a lot of politicians. But Jensen's view was that
Speaker 1: his techniques used by others, had saved the American economy
Speaker 1: from failure and created hundreds of billions of dollars of value.
Speaker 1: But yet he becomes a skeptic, threw he's a real genius,
Speaker 1: and he's sort of an ideologue, and like many ideologues,
Speaker 1: he tends to have one simple idea that solves everything,
Speaker 1: but it's capable of switching. So he's rejected the idea
Speaker 1: pretty much of shareholder primacy and instead gone to this
Speaker 1: idea that he calls integrity. You have to wonder what
Speaker 1: both Jensen and what Early would think of the current
Speaker 1: system where you have private equity firms taking over companies
Speaker 1: only to cut jobs and destroy pensions. And then supposedly
Speaker 1: the mechanism that enables the private equity firms to do
Speaker 1: this is indeed workers pensions, which are invested in private
Speaker 1: equity firms, as the only possible It's this, it's this odd,
Speaker 1: it's this odd, weird circle, right that proves I think,
Speaker 1: how corrupted this idea became. But before it we're done,
Speaker 1: I want to interestingly chart this move from organization man
Speaker 1: to transaction man, but then to network man, which is
Speaker 1: where we are now, back to how you began this
Speaker 1: story with the primacy of words like disruption and entrepreneurialism.
Speaker 1: And do you see this as we finally arrived at
Speaker 1: the right system by which to order our world? Or
Speaker 1: do you think we should all look at this this
Speaker 1: world too and say, wait, this is just another construct
Speaker 1: that may not last either or maybe shouldn't last. I'm
Speaker 1: picking option be there. It is clear to me that,
Speaker 1: especially after the financial crisis, but to somewhat before there,
Speaker 1: the idea of a business world that's run for shareholder
Speaker 1: value as not just as a market making principle, but
Speaker 1: as a society making principle was really losing altitude fast,
Speaker 1: you know. And you see that in this presidential campaign,
Speaker 1: where there's more talk about these basic economic arrangements than
Speaker 1: I can remember in my lifetime by candidates. You know,
Speaker 1: we're back to the early twentieth century days in that regard.
Speaker 1: For suddenly people care about this again, right, the way
Speaker 1: the world is ordered economically. If the book is a
Speaker 1: procession of these sort of big sweeping ideas that claim
Speaker 1: to be able to solve everything, I would say, if
Speaker 1: you were looking for one end of the twentieth century
Speaker 1: early twenty first, it would be this idea of a
Speaker 1: network based society and a network based economy. The bloom
Speaker 1: on that rose is already really off. Because when I
Speaker 1: started the book, no one in the press ever said
Speaker 1: an unkind word about Facebook ever and now and now
Speaker 1: every single day it's gone from white hat to black hat,
Speaker 1: and we're back to brandeis right and the course of bigness.
Speaker 1: Right before I let you go, I wanted to close
Speaker 1: on one last question. Why is it what is it
Speaker 1: about human nature that makes us long for these big, conceptual,
Speaker 1: simple ideas that seem to clarify everything and provide an
Speaker 1: easy worldview. Well, I'll have to tackle that one in
Speaker 1: my next book on human nature. But it's appealing, and
Speaker 1: it's especially appealing to sort of very smart elite types
Speaker 1: who live a fairly insulated life from the harsh realities
Speaker 1: of life, and the transaction man phenomenon that I write
Speaker 1: about removes you from seeing people who aren't like yourself
Speaker 1: because you're maybe not sitting all the time in these
Speaker 1: large institutions, so it seems to kind of make sense,
Speaker 1: and you're always being told how smart you are. But
Speaker 1: I would say what I'd like the book to do
Speaker 1: is reopen a conversation about power sharing, power limiting, not
Speaker 1: having big concentrations of money and power, and having a
Speaker 1: restored balance between politics and markets is a conversation we
Speaker 1: need to be had. Having a get yep, and paying
Speaker 1: attention to the way things are structured and seeing it
Speaker 1: not as inevitable but as the product of choices, and
Speaker 1: the product of choices that that may not last. Right.
Speaker 1: I thought that that's an incredibly valuable addition to the conversation,
Speaker 1: So thank you so much for joining me. It's really fun.
Speaker 1: The US economy hit a historic high in twenty eighteen,
Speaker 1: and today unemployment is at its lowest rate in five decades.
Speaker 1: Yet wage growth for the vast majority of Americans has stalled,
Speaker 1: and more people are struggling to afford housing, healthcare, education,
Speaker 1: and other basics. Clearly, the economic model that is in
Speaker 1: place now does not work for everyone, and so it
Speaker 1: is that that economic model is now a campaign issue.
Speaker 1: Big tech, which such a short time ago was so celebrated,
Speaker 1: is in the crosshairs. That's true of big finance. Also,
Speaker 1: gone are the days where we unquestioningly accepted the idea
Speaker 1: that the gods of Wall Street knew what they were doing.
Speaker 1: We are in uncertain times, and my main takeaway from
Speaker 1: next book is that maybe we should be in uncertain times.
Speaker 1: We should keep questioning economic models and trends and the
Speaker 1: economic constructs that rule our world. Because you'll never know
Speaker 1: when you'll realize all of a sudden that they're wrong,
Speaker 1: or when the world will change and you'll be forced
Speaker 1: to realize that they are wrong. Making a Killing is
Speaker 1: a co production of Pushkin Industries and Chalk and Blade.
Speaker 1: It's produced by Ruth Barnes and Rosie Stofford. My executive
Speaker 1: producers are Alison McClain no relation in Making Casey. The
Speaker 1: executive producer at Pushkin is Mia Loebell. Engineering by Jason
Speaker 1: Gambrel and Jason Rastkowski. Our music is by Jed Flood.
Speaker 1: Special thanks to Jacob Weisberg at Pushkin and everyone on
Speaker 1: the show. I'm Bethany McClain. Thank you so much for listening.
Speaker 1: You can find me on Twitter at Bethany mac twelve
Speaker 1: and let me know which episodes you've most enjoyed.