Rich people and their discontents Tom Smith

I found the brief piece by Tom Wolfe that Professor Rappaport links to belowboth highly amusing and quite thought provoking.  The remarkablebehavior, some of it bad, of the very rich is a favorite topic ofWolfe’s.  I’m tempted to adumbrate on Wolfe’s view of human vanity andthe question of what is a life well lived, but I should probably justrefer the reader to his novel A Man in Full, where Wolfe makes his most admirable character a stoic,in the classical sense, an ethical viewpoint I admire myself.  If youpressed Wolfe on what he really admired, instead of what he was happyto make fun of, I bet he would say he was some sort of stoic.

But Wolfe on the antics of hedge fund heroes made me ask, well, whatare we to make of all this utterly over-the-top, conspicuousconsumption?  The truth I keep coming back to, trite though it may be,is Adam Smith’s observation that from private vice can come publicvirtue.  I do think there is something wrong with a man who would spend$6000 on a pair of shoes.   (Probably with a woman too, but I don’tpretend to understand a woman and her shoes.)  Please note I am notsaying the state should prohibit people from making or buying $6000shoes.  I am just saying buying or wearing them reveals a flaw incharacter.  And quite the contrary, when some hedge fund hero does laydown six large for his odd looking shoes, he helps keep employed somehighly skilled craftsmen in London somewhere. 

More indirectly, even the grotesque consumption in Greenwich whichWolfe lampoons serves an important social purpose.  Hedge funds makemoney in several ways, but three prominent ones are by investing inunderperforming public companies and then forcing management to managebetter; by arbitraging among various securities that are incorrectlypriced; and by taking on risk other investors do not want to take on. So hedge funds promote more efficient management of companies, increasethe efficiency of capital markets, and make credit easier to get.  Youmay have read about the problems in international credit markets due toilliquidity of sub-prime mortgage assets — well, if hedge funds hadnot been willing to invest in sub-prime mortgages, a lot of people withpoor credit would not have been able to buy their own homes.  Some ofthem probably should not have bought their own homes, but others whowill make their payments now own their own homes instead of rentingbecause some jerk in Greenwich decided go long in the sub-primemortgage market. 

So there is a very concrete connection between the burning desire ofsome guy whom the girls despised in high school to have his own golfcourse, because Stevie has one, and the ability of two hard-workingpeople, say a teacher and mechanic, to buy their 1700 square footfixer-upper.  Are hedge fund heroes fueled by greed and a perversedesire to display their wealth and market chops?  Well, duh.  But theyare doing exactly what they should do.  Thank goodness there are peoplewho want to work 80 hours a week obsessing over market oddities inorder to accumulate wealth they lack the imagination to spend onsomething a bit more creative than golf and art they probably neitherlike nor understand.  They make our credit card rates lower and ourplywood cheaper. 

Tom Wolfe has his fictional Upper East Side lady with old money ask,”what is it that makes these [newly and extremely rich] people so angryand so nasty?”  But in truth, that is not our problem.  And in fact, atthe heights of any profession or occupation you will find people whoseprivate virtues are crowded out by other things they want to achieve. I bet many NFL linebackers are really not very nice.  I have it on goodauthority that the Navy SEALs contain a number of stone-cold killers,who when sitting in a swamp in the Philippines, waiting for a shot thatwill blow off some terrorist’s head, would think, there is nothing Iwould rather be doing, and I’m glad I have a job where I get to killpeople.  Many excellent surgeons have notoriously unpleasantpersonalities, perfectionism being a common vice.  You should not wantto be any of these people if happiness is your goal (maybe) or at leastnot moral goodness.   But their vices are our gains.

At the same time, I think Tom Wolfe does a public service making funof the gigantic egos to be found among the super-rich.  Of course, someof the criticism of the newly super-rich is just older and lesser moneytrying to erect barriers to entry into their exclusive world.  This ispartly the merest hypocrisy, pretending that some money is better thanother.  But it is not completely that.  It makes perfect sense thatrich people should want to form associations with other people who areboth rich and nice.  The rich part means that they can talk aboutcommon interests, such as where to find intelligent yet docile servantsor whatever, and the nice part means they will know better than toboast loudly about their new solid-gold pooper-scooper.  Social normsdon’t go away just because the group has a lot of money, thoughobviously some people seem to think this is the case, but then youwould expect no less of people who don’t know how to behave.  I foundit interesting that Wolfe claims that some exclusive buildings inManhattan are now excluding people who have too much money (andtoo much in this context must be a lot), using a net worth in perhapsthe high hundreds of millions or billions as a proxy for having thesort of personality you don’t want to be around.  But then, some of ushave probably been excluded from groups because we were too clean, hadtoo few tattoos, or spoke too grammatically. 

But Wolfe is more than just an enforcer of social norms among thevery rich, though he is partly that.  He is more morally serious inthat if you read more of his work, you can see what he really despisesare morally trivial people.  He works hard to undercut the bad examplethat such people set when they have a lot of money or celebrity. Obnoxious hedge fund heroes offset, though probably mostly locally, thepublic goods they produce by setting a bad moral example by beingselfish, greedy assholes (not to put too fine a point on it).  Bymaking fun of them, Wolfe advises us not to follow their moral example.