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Alan M. Webber

Alan M. Webber

Alan Webber, a founding editor of Fast Company magazine, is an award-winning editor, author, and columnist. His most recent book is Rules of Thumb: 52 Truths for Winning at Business Without Losing Yourself.

Is this the face of capitalism?

Q: Goldman Sachs promises to put customers' interests first. At the same time, Goldman was able to avoid serious financial trouble by hedging positions in ways that placed bets against clients. Do Goldman's leaders need a new business strategy, or do they need to just do a better job at explaining their business to regulators and the public?

Here's the way to think about Goldman Sachs.

Goldman Sachs is the smartest, toughest, most aggressive, most powerful player in the world. Period. They have the most powerful political connections. They get the smartest people to work for them. They have the most competitive culture. They make the most money. They win. Not all the time. But most of the time. They win more than they lose, and they win more than almost anybody else. The way they play the game makes them the biggest dog in the world.
In other words, you could think about Goldman Sachs the way most of the world thinks of the United States of America.

Not fair! The United States of America is the most generous nation in the world. We contribute to the rest of the world. We provide aid to needy nations. We not only are powerful, we are also . . . good. Which is what the defenders of Goldman Sachs say. Goldman uses its power and money for good. Yes, it rewards itself with fat bonuses. But there's also the generous side of Goldman. The philanthropic side of Goldman. The noblesse oblige side of Goldman.

The reaction to Goldman today in the press is one of the things that happens when Americans see too clearly their reflection in a mirror.

Are we really that aggressive? Do we really play the game with that degree of cut-throat, win-at-all-costs raw power? Is that really the face of capitalism?

The answer to those questions is to ask some more questions, to use this face-in-the-mirror moment to do some long-overdue soul searching.

If you owned stock in Goldman Sachs, would you sell it? Or buy more? Would you write an angry letter as a shareholder? Or secretly congratulate management for maximizing shareholder value--and hope the SEC case falls apart?

If your son or daughter were about to be awarded his or her MBA, and Goldman produced an offer letter, inviting him or her to join the firm, would you argue against taking the offer? Or offer your own congratulations on the invitation to join the inner circle of the world's financial elite?

Here's the question behind the question: What kind of capitalism do Americans really want?
Casino capitalism? Wild West capitalism? Winner-take-all capitalism? Or are we looking for something that moderates raw, unfettered, ruthless cowboy capitalism with values that include social equity, the public good, the common cause?

It's not simply a matter of more-or-less government regulation, although regulation is one tool for braking the otherwise foot-to-the-floor style of Goldman and others. It's a matter of national values, national purpose, and social philosophy.

Adam Smith wrote "The Theory of Moral Sentiments" to make the point that in matters of economics and social well-being we all have a responsibility to each other. He wrote "The Wealth of Nations" to describe the operations of the invisible hand to maximize the efficiency of economic transactions.

When we look in the mirror after the dust settles over financial regulation, which face of capitalism do we want to see? What do we want our champions of finance to represent?
Because what we are is what we get.

We are all Goldman Sachs.

By Alan M. Webber

 |  April 27, 2010; 6:17 AM ET
Category:  Economic crisis Save & Share:  Send E-mail   Facebook   Twitter   Digg   Yahoo Buzz   Del.icio.us   StumbleUpon   Technorati  
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Her face isn't that great, but in my business we leave all the pretty girls to the guys with no imaginations. The eye of the beholder doesn't change. Religion, knavery and change. Better days are ahead.

Posted by: tossnokia | May 2, 2010 9:43 AM
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"We" are not "all" anything. Unless you're a socialist.

I'm all for socialism. And communists. And liberals. And the left. When lacking anything above your brain stem, call someone a socialist.

Posted by: ssterno | April 27, 2010 4:48 PM
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Does the democracy serve at the will of the capitialists or is capitalism the chosen tool of democracy? America has at its heart a general liking of mankind. We always root for the underdog. We talk about rights and justice. We want to leave a place better than we found it. These are our values. We are not GS and the profit at all costs model is not America.

Posted by: bob29 | April 27, 2010 4:33 PM
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a fair society..the RAT RACE IS evil

Posted by: RAICH | April 27, 2010 2:59 PM
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If you could guarantee that wild bets affect only those who want to be involved in risky stocks, etc., then I'd say go for it. But my stocks are safe, slow, and meant to be there for me when I retire. Yet my retirement lost 50 percent; (I guess luckily) this week it's down 7 percent from 2008. If I'd had the money in a checking account I'd be richer. The only folks who made out are the Goldman Sachs types who saved their own rear ends rather than protect the customers who have made them ridiculously rich.

Posted by: HookedOnThePost | April 27, 2010 2:12 PM
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Yes, yes, yes. We are all Goldman Sachs. No one complained as housing prices increased (unless you didn't have one). We love our cheap gas, our cheap goods from China, and we let corporations rule the hen-house. We do this by how we vote, what we buy, where we go to work, what we let happen to the other guy. Every day. This is not the worst of the crisis. Most people in the world didn't have money to lose in this Recession. But we all lose as we rip apart the fabric of the natural environment. We are all part of this planet. Even capitalists.

Posted by: AlexThuronyi1 | April 27, 2010 2:08 PM
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You hit the nail on the head.

How many of us are adamant about being paid the highest salary we can get while refusing to pay for things not on a deep discount sale?

How many Americans are willing to pay more in taxes to actually build needed roads (vs. Texas toll road fire sales), hire enough food inspectors, or treat sick veterans (estimates say 12-20% of Iraqi veterans have PTSD, http://ncptsd.va.gov/ncmain/ncdocs/fact_shts/fs_how_common_is_ptsd.html), much less pay off the enormous debt that our grandchildren are facing? (Interest on the debt in 2008 cost our our government over $200 billion per page 100 of the 2009 IRS 1040 instruction manual.)

Sure, there will be "winners" and "losers" if the rules are changed (search Warren Buffett and derivatives), but I would like my 401K money to be useful to someone actually running a business instead of just being used by some financial whizzes gambling with it.

Posted by: johnsojl1975 | April 27, 2010 1:59 PM
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You had me until the last line ...

"We are all Goldman Sachs."

Obviously, we are not even all Adam Smith.

Evolution - Just a Theory ...
Moral Sentiments - Just a Theory ...

Capitalism needs the concept of Redemption like a basketball needs a FaceBook Page, and the concept of Mercy even less.

Posted by: gannon_dick | April 27, 2010 12:54 PM
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We have no control over Goldman Sachs. Even their shareholders must struggle to have a say. You cannot pin this on the voter who's competing against $gazillion lobbying from the financial industry.

However we do have the government we voted for: short-termist and childish. No touching our goodies. Please lower taxes. Mortgage interest deductions good, credit good, innovation (?) good, limits bad. Which made the bubble, and derivatives, and G-S profits, possible.

Posted by: Hunter | April 27, 2010 12:44 PM
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You are starting with a false premise: "They get the smartest people to work for them." Prove it. The clown behind the latest imbroglio is one "Fabrice Tourre", a 31-year-old bozoid from France and a posterboy for narcissism. He got a Masters from Stanford, but how he ended up at the structured products correlation trading desk is open to conjecture. He worked for another astonishingly oblivious thirty-something, Jonathon Egol, who distinguished himself by creating a product that allowed investors to bet against the mortgage-backed securities other people at the firm were selling AND peddling T-shirts proclaiming "I'm SHORT YOUR HOUSE." Smartest? Pfffff.

Posted by: Quatermass | April 27, 2010 12:39 PM
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"We" are not "all" anything. Unless you're a socialist.

Posted by: RandFan | April 27, 2010 12:33 PM
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