The Liberal Coach and the Conservative Athlete

            A good sports team elegantly combines the animating spirits of both the conservative and the liberal political paradigm.   A conservative believes two things:

            1)  That everyone has a responsibility to take care of himself and his own circle of interest, that society works best when everybody looks out for himself and his own, and

            2)  In the traditional values of hard work and fidelity to the codes of the community.

            Almost every successful athlete believes in these things to the core of his being, and manifests these beliefs in his daily routine. 

            A liberal believes:

            1)  That we must all care for one another, that we must all share in the responsibilities of the communities’ needs, and

            2)  That we must be forward-looking, innovative and inclusive, and that we must break through the barriers that have been placed upon us by the fictions and prejudices of the past.

            Almost every sports organization, on one level or another, is devoted to these principles.   Sports teams are and have always been the most open and inclusive organizations in society, because we care more about winning than we do about anything else, and we’re not going to let the prejudices of the community hold us back.   This is the message of Moneyball as much as it is the message of The Jackie Robinson Story.     

A successful sports team, then, merges the core tenets that divide society in the verbose and windy prairies of political dispute.   These core tenets may be seen as the four wheels of a vehicle, and then it may be seen that the power given to each tenet must be carefully kept in balance, one to another, or you will have a vehicle with a 38-inch tire on the right front and a 27-inch tire on the left rear, and very quickly you’re in the ditch. 

            Let us reflect now on the relative structures of three things:  Family, Team, Company.   Company or Business; both words have alternative meanings that are almost wholly irrelevant to the present discussion, but there is one definition of both terms that is nearly identical, and this is the meaning on which we are focused.

            As it is true that a successful team must merge the core beliefs that in another context are seen as divisive, so this is true as well of a Family, and of a Business.    In a family as well, everyone must carry their own weight, and yet everyone must care for one another, and in a successful business as well, everyone has to buy in to the values of the group.    There is this difference:   that in a family there is necessarily more of an emphasis on caring for one another, and in a business there is necessarily more of an emphasis on looking out for yourself, but these are mere differences in shading, like the difference between de-fense and defense.   A sports team, to succeed, must be a family during the season and a business in the off-season.  

            What happens to families over time, and to teams, and to businesses, is that the power alignments shift, and then the tires no longer balance, and the vehicle can no longer be kept on the road.   A newborn baby is happy being powerless, being cared for by parents who make all of the decisions and have all of the power.  An 18-year-old is not.   A six-year-old child happily accepts the traditional values that his parents want him to accept; a sixteen-year-old wants to look forward and choose the values that seem right to her.   When the power alignments shift the wheels are out of balance, and the family has reached the end of its run.  

            You will think in parts of this that I am writing about the Red Sox, but I am writing as much about the conservative father and the liberal mother, and I am writing as much about the conservative company president and the left-leaning factory worker.   There are a lot of things going on.   My oldest daughter was married two weeks ago; my youngest son is 18 years old and in his last year of high school.   My other son is between these two points, rather closer to the first.    We are still family, but we are not the family that we were a couple of years ago; we are becoming a different family now.   We have to start over and re-balance the wheels.

            When a sports team has been together for a number of years, it becomes inevitable that the power alignments on the team will change.    When a manager has been with a team for a number of years and has been highly successful, it is almost inevitable that he will become a power center in the organization.   When you have veteran players who have been with the team for years and years they become power centers; when you have a General Manager who has been in his position for the better part of a decade and has been successful his power grows relative to his co-workers.   This is not wrong, any more than it is wrong for a cooing baby to become a young adult, or wrong for her to pass through the role of a headstrong teenager along the way.   

            But when the power centers shift so substantially over a period of years, it is as if the four wheels of the vehicle were four different sizes, and it becomes impossible to keep the vehicle on the road.   You have a car wreck; in our case, a high-speed car wreck.   We have to start over and re-balance the wheels.

            We come, now, to the real subject of our piece, which is the chaos on Wall Street.   In a company as opposed to a team or a family there is more tolerance for selfishness and individual interests, and yet it is still true that the successful company must express and defend in its every action the interests of the group, rather than the interests of the individual.  There is no "I" in "Company", either; how come nobody ever mentions that?    

I have a good deal of sympathy for the Tea Partiers; I think they have valid points to make, and I support their efforts up to a point.   But I also have at least as much sympathy for the Wall Street protestors, and I am in sympathy with their goals to at least the same extent.   Their "goal" being what?

            To denounce greed. 

            A company can accommodate selfishness and greed on the part of its employees, up to a certain point.   Within the last generation we have entirely lost track of the second half of that concept, the "up to a certain point" part.   We have convinced ourselves that it is fine to pay top-level executives hundreds of times as much money as we pay the rank and file workers.   It is not fine; it is destructive.   It destroys companies, it damages the economy, and it damages society.  

            If you put a 62-inch tire on the passenger’s side rear wheel, what would happen to your Mazda?   Paying an executive a $20 million salary has the same effect on a company as putting a 62-inch tire on a passenger car.   From that point on, you’re never going to be able to drive the damn thing where you want it to go.

            So far I have been speaking in analogies, and probably I have reached the limit of the analogy.   Let’s talk specifics.   When the top executive is paid a very large salary, that immediately changes the culture of that organization.   From that point on, everyone in the organization is looking to get as much out of the company as he can.   It is virtually impossible to run a successful organization in which everyone is constantly trying to get as much from the company as he can.   The company, from that point on, is in a kind of slow-burning civil war.   

Every business that has chosen to pay its CEO a salary of tens of millions of dollars is on a course toward bankruptcy from that point forward. 

A company works only as long as those on all sides recognize their common interest in the success of the group.   If the worker in the factory. . .well, why should we assume that the worker is in the factory?   The worker may be in a factory, at a computer, in a sweatshop, on the asphalt or in the pit of a mine, or she could be in a thousand other places.   If the worker and the executive both realize that their paycheck is dependant on doing something that neither of them can do alone, the company is in good shape. 

            Recognizing, of course, the dangers of submitting a two-paragraph history of labor relations. . .

            In 19^th America, owners of companies routinely absorbed as profit a very large share of the income generated by the company as a whole.  This led to widespread hatred of the rich, which divided America into rich and poor to the extent that the real threat of revolution hovered over the nation.  Americans of the Teddy Roosevelt/Woodrow Wilson era recognized both the danger and the injustice of this.   Their response was to give legal power to the Unions such that the Unions could successfully fight for a larger share of the income of companies.  

            There followed a long period of the democratization of wealth.  Different people have different understandings of why this happened, but no one argues that it did not happen.   Comparing America in 1980 to America in 1910, there was much more of an even division of wealth at the end of that era than at the beginning.  It is the view of author that the democratization of wealth in the years 1910 to 1980 was substantially to the credit of the Unions.  

            What no one quite anticipated was that the democratization of wealth would lead to the democratization of ownership, and that the democratization of ownership would lead to the "ownership" of companies becoming essentially anonymous.   By 1980 millions of Americans were invested in the stock market directly or indirectly, and, as such, millions of Americans were the owners of most large businesses, through union and individual pension plans.   Who owns America’s oil companies?   You do.   It’s true—and that became the next problem.  We own the banks, we own the oil companies, we own the merchants.

            In 19^th century America, when large companies were owned by fantastically wealthy individuals, those individuals were often greedy and irresponsible until the end of their lives, when they gave all their money away and became beloved philanthropists, but this also put limits on executive compensation.  The Robber Barons weren’t going to pay outlandish executive compensation, because they didn’t have to and they wanted the money for themselves.   This kept the executives and the workers more or less on the same page:  they were all fighting with the owners.

            It has been observed by Malcolm Gladwell and others that as recently as 1980, the salaries of executives were generally on the same scale as the salaries of workers.   A company president earned more money than a factory worker, certainly, but more commonly three to five times as much, rather than three to five hundred times as much (or even, in some cases, three to five thousand.)   This is still true today in Japan and in many other countries, that executive compensation is on the same scale as worker’s compensation.    

            In America in the last generation, it has become the practice to compensate a small percentage of executives on an entirely different scale than workers, and even an entirely different scale than most executives.   Gladwell has pointed to the role that baseball played in creating this expectation.   In 1960 star baseball players were paid more than factory workers, but on a similar and overlapping scale.   When sports stars and movie stars came to be paid hundreds of times as much as ordinary workers, star executives saw this as a justification to push for higher salaries of their own.   Executive salaries began to rocket upward from that point.

            It is my view that Gladwell is correct on that issue.   But what I would point out as well is that, in the 19^th century corporate ownership model, executives who pushed for spectacular salaries would—with exceptions, of course—have been thrown off the boat and told to swim for shore.   By 1980, the democratization of wealth had created anonymous ownership structures.  The Boards of Directors, in theory, represented the pension plans and stock portfolios that owned the companies, but the fact was:   it wasn’t their money.   When the Star Executives began to push for star salaries, the Boards of Directors should have pushed back, but. . .it wasn’t their money.   It understates the problem to say that they had little incentive to reign in executive compensation.   The fact is that they had every incentive to feed the fire.   As executive compensation exploded, salaries of Boards of Directors exploded.  

            The theory was that the Board of Directors represented ownership.   The reality was that the Board of Directors became the highest rung of the executive ladder.  

            Among the things that America has done really, really well that makes us America is to institutionalize the concept of civilian control over the military.   One of the things that we have failed to do, that makes us a weaker country than we should be, is to fail to generalize this concept.   We don’t let Generals decide when to go to war, but we do let retired teachers sit on school boards, we let lawyers run the justice system, and we let executives graduate to the Board of Directors.    We would be better off if we would realize that, for the same reason that you don’t let Generals decide what is in the best interests of the army, you don’t let educators decide what is in the best interests of schools, you don’t let lawyers run the justice system, and you don’t let executives sit on the Board of Directors.

            And you don’t let athletes run baseball teams.  Interestingly enough, we do recognize this principle now, about baseball.    A generation ago, when I started writing about baseball, many General Managers or most General Managers were ex-players.    When the salaries exploded, the owners of teams realized pretty quickly that, while many ex-players are extremely intelligent people, the experience of being a player did not provide the athlete with the ideal perspective on the problems of a General Manager. This happened in part because sports have clung to a 19^th-century ownership model, in which the teams (except the Packers) are still owned by wealthy individuals, rather than by an anonymous collection of share-holders.  

            But getting back to the Wall Street banks and the other companies that are now run by thieves, pardon me, high-salaried executives.   The Boards of Directors were the firewall between Star Executives, who were asking for and receiving constantly escalating compensation, and owners, who (by 1980) were in many cases faceless groups of hundreds of thousands of stock-holders.    

            Ah, you will argue; but if an executive is worth $5 million to the company, why should he not be paid $5 million?   You may not argue this, but I watch Fox News.   I like Fox News; they do a great job of representing their point of view.   I only wish that someone would speak for the Left with the same clarity. 

            Please understand that when I say, ‘"you’ve got to be an idiot to believe," I don’t really mean that you have to be an idiot to believe something.   Very intelligent people believe all kinds of stupid stuff, because the world is simply so complicated that our ability to understand all the nuances of complex real-life problems is very limited.  

            Fox News would argue that if an executive is worth $5 million to his company, he should be paid $5 million.   You’ve got to be an idiot to believe that any of these executives is really worth $5 million a year.   These people don’t get paid millions of dollars a year because they actually earn millions of dollars a year for their companies; they get paid millions of dollars a year because they occupy a strong position in the political power struggles over the money generated by the company as a whole. 

            Look, here’s what I think happens; I don’t claim to be able to prove any of this.  Relate it to a baseball.  Suppose that the agent for a baseball player—Porky McBling of the Blue Knights--picked through his RBIs for the season and said, "Look here.   The game on July 6 was 4-3, the Knights team behind.   Porky hit a two-run double and they won that game.   Porky won that game for them.   Here’s another one; game was 4-2, Porky hit a three-run homer, the Blue Knights won, 5-4.   Porky won that game for them.  

            "Altogether, Porky drove in 76 runs for the Blue Knights, which led directly to 23 victories for them, or 28% of the team’s 82 victories.   The Blue Knights payroll was $106 million.   28% of that would be $30 million, but Porky isn’t asking to be paid $30 million.   Porky only wants $12 million.    This is a very fair salary given his contribution to the team."

            Because we have sophisticated tools to analyze baseball and are in the habit of using them, we are able to see through that argument very easily.   Porky was able to drive in two runs in the July 6 game only because two runners had reached base ahead of him, and these two runs won the game for the Blue Knights only because three runs had been scored earlier, and these five runs were enough only because of the performance of the pitchers and the fielders. 

            But businesses rarely or never have equally sophisticated tools to evaluate the contributions of each employee.   The executive says "I opened up the Chilean market for us by establishing contact for us with the Chilean WalMart.   Our sales in Chile last year were $213 million, leading to a profit of $41 million on our operations in Chile.   I deserve to be compensated for that.  $10 million is nothing compared to the contributions I have made to this company."   Yes, you opened up the Chilean market for us—but only because somebody else built the products that you convinced them to buy, and only because some engineer or inventor designed those products, and they sold $213 million, but only because somebody in the warehouse filled every order, and somebody put every widget in a box, and somebody else loaded that box on a truck, and somebody else drove that truck to the airport.    

            The explosion of executive salaries is really about the failure of ownership, about the weakness and exploitation of ownership by a coalition of those they employ to run their companies.   Returning to the four-tires analogy, modern ownership (in most areas, not in baseball) is a flat tire.  I am in danger here of using "Conservative" as a synonym for "selfishness", which is not my intention, for the Conservative believes not in selfishness or greed; rather, the Conservative believes that the selfishness and greed which are integral parts of human nature provide the coiled energy that drives society forward.   This is more realistic than believing that that energy can be replaced by altruism, which is not to speak ill, either, of altruism.  

            In any case, the Conservative advocates for respect for value, arguing that the lack of respect for value deprives society of its creative energy.  I have no problem with this argument.   My argument is that I simply do not believe that those bankers and executives who are paid multi-million dollar salaries have actually earned them.   I do not believe that this is their actual value.   I believe that they are paid salaries greatly exceeding their actual value because they have the political power within their companies to demand such salaries, and those who should resist paying them, on behalf of the owners, have no real incentive to do so.

            For that matter, I don’t believe that $20 million baseball players are worth $20 million, either, but that’s a different argument.  In any case, we have a situation in which some people are being paid very large salaries, while others are not doing well.   What do we do about it?

            Here we have a divide between the organized and the disorganized left.   Political commentators have made much of the political divide between the Country Club Republicans and the Tea Partiers—the organized right and the disorganized right—but the same divide exists on the left.   The organized left wants

            a)  To tax the millionaires and billionaires, and

            b)  To strengthen the Unions. 

            The disorganized left wants Wall Street to stop paying these ridiculous salaries.

            President Obama’s argument to tax the millionaires and billionaires is falling on deaf ears because it comes across as a denial that government is spending too much money.    The Tea Partiers argue—and I agree with them—that government is trying to do too many things, that government is trying to do things that it is incapable of doing well, and that because government is trying to do too many things and is trying to do things that it is incapable of doing well, it is just spending too much money.   When the President responds to that argument with "tax the millionaires and billionaires", it comes across as an attempt to deny that government is spending too much money.   "We’re not spending too much money," Obama seems to be saying.   "We just have to increase taxes on the millionaires and billionaires."    Until President Obama admits that government is too large and is spending too much money, his pleas for additional tax revenue are going nowhere.   Once he admits that government is way too large and is spending way too much money—not admits this once off-handedly, but acknowledges it as a fundamental truth, acknowledges it repeatedly and adopts some sort of program to address the problem—then I, for one, will be with him in saying, "Let’s increase taxes on the rich until we get the deficit under control."   Until he does that, I’m with the Tea Partiers. 

            If one wishes to see a more equitable distribution of wealth—which I do—taxing the rich is in any case a limited strategy because of the ability of the rich to evade taxable events.   Raising taxes on the rich funnels as much money to tax lawyers as it does to government.   There is an element of the Left that remains under the spell of a delusion that the Unions can still be what the Unions were a hundred years ago, that they can still play that very valuable role that Unions once played in getting a more equitable distribution of wealth.    It seems clear that they can’t, for two reasons.   First, the Unions were given, in the Teddy Roosevelt era, legal powers with which they could do battle with owners.    This is not fundamentally a battle between ownership and workers; it is fundamentally a battle between workers and executive stars.   Owners are as much a victim of executive greed as are workers.  The tools that the Unions were given are ill-equipped for the modern multi-national struggle, and they are ill-equipped for a battle in which they and the owners of companies should be on the same side.   Second, the American people no longer are with the Unions and no longer believe in Unions.   The Unions have forfeited the moral high ground by a century of greedy, unrealistic and selfish behavior which, while no worse than the behavior of owners or executives, causes them to be seen as no better.   

            The organized left, then, is unrealistic (the pro-Union crowd) and in denial about the nature of their problem (the tax-the-rich crowd.)   What are we left with?  

            We are left to condemn greed.   It is useful to condemn greed; it is appropriate to condemn greed, and it is, to an extent, satisfying to condemn greed.   The Wall Street protestors are condemning greed in a manner that is clumsy, inarticulate, ill-mannered, unfocused and misdirected.  They are not making an economic point or in any case not a cogent economic point; they are making a moral point:  Greed is destructive.   Greed is corrosive.   I don’t disagree.   Self-interest is the coiled spring that drives sports teams and great businesses, but greed destroys companies in the same way that selfishness destroys baseball teams and football teams and basketball leagues.   There is no easy way to recognize when self-interest passes into greed, but wherever that point was, that Stars of Wall Street rolled past it several years ago.