MF Global’s filing for bankruptcy has produced a wave of opprobrium for its CEO, Jon Corzine, formerly CEO of Goldman-Sachs and senator, then governor, of New Jersey. Henry Blodget, for example, characterizes his handling of MF Global, which invested heavily in Spanish, Italian, and Irish bonds, as incompetent, likening his chairmanship to flying the company “into a mountain”:
As we noted yesterday, Jon Corzine, the pilot who took over the MF Global plane and flew it into a mountain, contractually has the right to a $12 million golden parachute, which would presumably go a ways toward easing his regrets. We hope that, for decency’s sake, he waives it.
If he doesn’t waive it, he can get in a long line of creditors including CNBC, from which Corzine’s MF Global bought (and didn’t pay for) some $845,000 of advertising. And, hopefully, if there’s any justice in the world, Corzine will be at the end of that line.
Because he really shouldn’t get a cent.
What happened to MF Global on Corzine’s watch was not just incompetence. It was spectacular recklessness. It was the equivalent of aiming a 747 filled with people straight at the side of the mountain and hoping that, just before you smash into it, the prevailing winds will shift and enable you to pull up.
And it’s not as if Corzine didn’t know the mountain was there.
All of the Wall Street CEOs who bet their firms in the years leading up to the financial crisis–most of which were then saved at the 11th hour by the government–at least had the excuse that they had never seen markets crash like that.
Jon Corzine had seen markets crash like that.
In fact, he had just seen markets crash like that. Just three short years ago. Along with everyone else on the planet who was not in a coma during the financial crisis.
And yet the first thing pilot Jon Corzine did when he took over the controls of MF Global was aim it straight at the mountain!
Charles Gasparino, on the other hand, says he knew it all along:
Jon Corzine is many things: Erudite, down to earth, and well-meaning being chief among them, people who know him tell me. But is he a good businessman? Not even close, these same people openly admit.
In fact, based on his long years in the financial business, from CEO of Goldman Sachs to his current job as chief executive of the failing MF Global, Corzine is proof positive that on Wall Street you don’t have to be very good at your job to get paid a lot of money, which is why hatred of fat cats remains a bipartisan pastime—and will for the foreseeable future.
What I think is missing from all of the stone-casting is a recognition that Mr. Corzine made an enormous amount of money over a period of many years. Why? If he’s so incompetent why did he make so much money?
He’s held quite a number of positions of extraordinary responsibility, not just as CEOs of Goldman-Sachs and MF Global but as advisor to Preisdent Clinton, senator, and governor. The answer may be Tevya’s conclusion: if you’re rich they think you really know.
IMO there’s only one iron-clad conclusion you can draw from somebody’s making a lot of money: somebody, somewhere is willing to pay for the goods she produces or the services he provides. He or she may be the smartest guy in the room, the hardest-working, the best-looking, or maybe just the luckiest. Those factors don’t explain their wealth but willingness to pay does. There are guys who aren’t particularly smart who make a lot of money (some professional athletes, for example), people who aren’t hard-working who make a lot of money (Jamie Johnson, who may be able to lay claim to popularizing the phrase “the 1%”, for example), and peole who aren’t particularly good-looking who make a lot of money in a field notorious for very good-looking people (Seth Rogen).
What were people willing to pay Jon Corzine for? I don’t know him and haven’t followed his career. My offhand guess is that early in his career at least he was one heckuva salesman. That echoes my dad’s observation (adjusted for 2011 dollars) that anybody who earns more than $200,000 a year is a salesman.
I’ve written about social class here from time to time. Summarizing my view quickly I think that we do have social classes in the U. S. but the upper class is sufficiently small that it’s not particularly concerning. Here’s my favorite definition of being upper class: you’re upper class when no matter how badly you screw up you won’t be allowed to fail. By that standard the clearest example of somebody who’s a member of the upper class is George W. Bush.
Money isn’t synonymous with being a member of the upper class. Ask Bernie Madoff or Raj Rajaratnam. Despite their wealth they have been allowed to fail in dramatic and public ways. Warren Buffett may be the richest man in the world but he is decidedly not upper class and whether his children succeed or fail will depend more on what they learned at the dinner table and their own efforts than to social class. Money may be a ticket to the upper class (the Kennedys). My greatest concern about the concentration of wealth that’s occurred over the last couple of decades is that those who’ve found themselves the beneficiaries of that trend may try to parley that into a real class system.
I don’t know why Jon Corzine made so much money. I think it’s possible that he was just smart enough, just hard-working enough, just tall enough, just charming enough, and just the right age to ride a demographic wave that brought him and thousands of others enormous wealth. Now the tide is going out.
Update
Indeed, those looking for reckless behavior, massive risk taking, and willingness to bet the farm on marriage, in politics, and in life, Corzine represented rare “impossible to pass up” talent.
“I don’t know why Jon Corzine made so much money. I think it’s possible that he was just smart enough, just hard-working enough, just tall enough, just charming enough, and just the right age to ride a demographic wave that brought him and thousands of others enormous wealth. Now the tide is going out.”
Perhaps. I haven’t followed his career either, so this is pure speculation. But its possible he’s a super-salesman or a good manager……………but those are not at all necessarily the same as being a good investor. Corzine has his own mea culpas, but who put him in this position, anyway?
It’s a disturbing fact of life, and one that despite my cynicism I never fully grasp, that most people — even people with all the best credentials — don’t know what the hell they’re doing. I don’t think 10% of people in any field are really competent.
Corzine grew up around here in a small farming community, his dad farmed and his mom taught grade school; he attended the state university. Whatever he is, and I wonder if its “bureaucratic infighter,” he rose pretty far with it.
Although there is a place in my mind and heart, Michael, directionally for your sentiment. Really, 10%? 10% ??
Grab a scotch and go watch the sunset…… Tomorrow is another day.
I was thinking 10% might be high.
“I was thinking 10% might be high.”
Good for a laugh………..but it reminds me of a line early on in The Departed movie when “French” says to Jack Nicholson’s Whitey Bulger character: “Francis, you really should see somebody.”
“I don’t think 10% of people in any field are really competent.” The flip-side to this is that there are legions of people out there who never get recognition, or even a shot. I often wonder how many Einsteins never develop because they didn’t get the right encouragement, or had a bad science teacher at a formative time, or were just born to worthless parents who poisoned their minds.
The best thing we could do for this country is come up with a system for recognizing and guiding each and every person into what they really have a talent for.
I think I’d elaborate on Michael’s wisecrack a bit. I think that 90% of people are fully competent at 90% of their jobs. Unfortunately, there’s no such thing as 90% of a job. I think that, maybe, 5% of people are fully competent at 100% of their jobs.
A good friend of mine talks about an individual’s “highest and best use” (IIRC a term from real estate). One problem with this is the very large number of people who really, really want to do things for which they have absolutely no talent.
Ben –
I have no doubt your comment is well intentioned. But what would such a system do with someone like me?
High School Sr – Interests: math, science, golf, boinking chicks.
College: Practically just fell into engineering based on the above. Although interests expanded from just boinking chicks to boinking chicks…..beer and pot……….golf, and engineering.
First Job: Real world on the plant floor process engineering. Good stuff. Plus, lot’s of secretaries. Cool. But want something more: senior level management.
Fast Forward: MS Engineering, then MBA. Managerial job. M&A job. LBO lending job.
Ultimately: Partner – Private Equity investing. Oh, and golf and family.
Now how does this really fit into your one size fits all model? I have no problem with a guiding hand. But most successful entrepreneurs I know have rather eclectic backgrounds. They were not into the “standard model.”
Ever looked at the bios of Dave or others? I must admit. I cannot kill a mime with one finger…..
“Unfortunately, there’s no such thing as 90% of a job.”
That’s an interesting concept. In my experience, at least outside the hard sciences, all high level jobs require an element of pure judgment based on experience and skill. How does one attain 100%?
Reynolds: when you write do you know with 100% certainty that your composition is on the mark? (I doubt it)
Drew: when you invest do you know with 100% certainty that the investment will be successful? (not a chance in hell)
Dave: when you advise your clients on (systems? hardware? software?) do you guarantee with 100% certainty it will work to their expectations? (I doubt it)
Its an uncertain world. I’ve had two spine surgeries. My surgeon tells me he’s the “best.” Texas Back Institute and all that. My results? Perfect. Are all his results perfect? I doubt it.
I often wonder how many Einsteins never develop because they didn’t get the right encouragement, or had a bad science teacher at a formative time, or were just born to worthless parents who poisoned their minds.
Not very many. Damned few. How many Einstein types have there even been? Two? Three? I’d say four, Archimedes, Newton, Gauss & Einstein.* (And Archimedes didn’t even really turn out to be epochal because no one followed his path at that time.) Even BIG BRAINS like Turing and Niels Bohr don’t fit the categorization. I’m sure we’ve missed a few here and there, but not very many.
* Give Darwin a half-Einstein.
I specialize in whatever my clients will pay me to do. My masters in engineering turns 40 next year. To that I add more than 40 years of experience. Design, processes, sometimes just a confidante, a shoulder to cry on, reminding them to throw the “On” switch, sweeping out the place, whatever is necessary. How to get from Point A to Point B. I give great advice.
Not only do I not guarantee that what I’ve done will work to their expectations I guarantee that it won’t. Nothing ever works 100% to expectations and if I’ve done my job properly what I’ve done will change the expectations.
I think that 90% of practically all jobs is routine, the ordinary boring stuff that needs to get done. Most people do that part just fine. It’s the judgment thing where all too many fall down.
And then there’s salesmanship. Everybody from the guy at the Burger King counter to the chairman of the board is a salesman, the face of the company. Some recognize it; most don’t.
The best thing we could do for this country is come up with a system for recognizing and guiding each and every person into what they really have a talent for.
I would think a perpetual motion machine would be easier to build.
Dave, forget people wanting to do things they don’t have talent for – there’s another problem of people NOT wanting to do things they do have talent for.
In my case I would define competence as the ability to deliver on-time, on-spec what I said I’d deliver. So far I’ve sold 150+ titles and failed to sell 2. And I’ve never had a contracted work turned back. That doesn’t make me F. Scott Fitzgerald, but it means I’m competent.
Incompetent would be the accountant who put a number on the wrong line of a tax return resulting in the IRS threatening to seize 33k. Followed by the enrolled agent who supposedly had it all taken care of. Followed by the IRS itself actually seizing 33 grand.
We now have an actual apology from the IRS which says they’ll give it back. . . soon. Some combination of accountants, enrolled agents and IRS workers screwed me, made work for me, and probably hurt my credit rating.
And don’t get me started on lawyers.
Icepick, I remember taking some sort of aptitude/personality test as, maybe, an eigth-grader. I was eminently suited for forestry. But I was born and reared in Dallas, on the North Texas plains. What did I know from trees?
eighth. I thought that looked funny.
Michael, remember the wisecrack about 90% is just showing up? It’s the 10% of the job that you’re complaining about and on that, I’m with you. I think that very, very few are completely competent.
“Design, processes, sometimes just a confidante, a shoulder to cry on, reminding them to throw the “On†switch, sweeping out the place, whatever is necessary. How to get from Point A to Point B. I give great advice.”
Oh, how does this resonate! I have zero doubt that you do this, and with a skilled and experienced hand. But that makes you part of my crowd, often cited as “just investors”……..but really, the society of technocratic shrinks.
“Not only do I not guarantee that what I’ve done will work to their expectations I guarantee that it won’t. Nothing ever works 100% to expectations and if I’ve done my job properly what I’ve done will change the expectations.”
Exactly. It would trivialize the effort to invoke the usual “horse to water” or “hearding cats” stuff. Its hard, real hard, and an art. These are real live executives, real live people with families and attendant considerations, in a real live business environment………its a bitch to make things happen the way you want. There seems to be two schools that just don’t get it: 1) just whoop them up side the head, and 2) the Paul Krugman theoretician types.
I say kill Krugman and let’s get on with the business of people getting along with their lives.
Heh. Little hyperbole there. But you know me.
Scott Fitzgerald was a temperamental alcoholic. If you want to compare yourself to a steady competent writer, I’d use John D. MacDonald, Mr. Reynolds.
“We now have an actual apology from the IRS which says they’ll give it back. . . soon. Some combination of accountants, enrolled agents and IRS workers screwed me, made work for me, and probably hurt my credit rating.”
Heh. I got audited by the great state of NY for taxes I owed as a resident. Problem: I never lived in NY. Evidence: Home ownership papers. RE taxes papers.
No matter. Thousands of dollars later – State of NY: “You are correct. Never mind.”
A million business owners can tell similar stories. Michael – you are the Big government guy. Any comment?
This is absurd.
Drew,
What one-size-fits-all model? I never outlined one. Do you even realize how defensive your writing consistently sounds?
Janis, I suspect the reason that Michael picked Fitzgerald is because he was arguably the 20th century’s greatest prose stylist of English language fiction. The distinction he was making was one of art, I think.
I’ve read plenty of Fitzgerald. I think he’s the most European of American writers apart from Henry Adams.
I prefer Steinbeck.
Henry james
I like the great, sloppy American experience.
“In my case I would define competence as the ability to deliver on-time, on-spec what I said I’d deliver. So far I’ve sold 150+ titles and failed to sell 2. And I’ve never had a contracted work turned back. That doesn’t make me F. Scott Fitzgerald, but it means I’m competent.”
I have no problem with that, although that definition makes the 10% absurd…….but I know it was snark.
Tired and bored. Time for bed.
And Benjamin…….xxxooo. Now for my mommy to tuck me away from the mean, mean man…….
Drew:
My accountant and EA are both private businesses. They are link #1 and #2 in the chain.
Then there are the idiots (who shall remain nameless) who are my business partners who are eating my life with their fu–ing incompetence. There’s Blue Shield which denied I’d made a payment I’d clearly made, canceled my policy, and eventually also apologized. And there’s ATT which “accidentally” forgot to turn off my overseas data plan and now owes me $4,000. Audi which calls me daily to nag me about my lease which I’ve already told them I’m buying out.
Plus agents, plus lawyers, plus dentists who want me to send 3 grand to cap a tooth that makes no contact with any other tooth, plus doctors who can’t call in a scrip and pharmacies that can’t fill it, and the fact that if you want a clerk at Macy’s you have to pretend to shoplift and set off an alarm, and Costco that lost my data, and Apple that can’t pop out a broken headphone jack so gosh I’ll just have to spend another $500. How about Wells Fargo that suddenly decides they need two weeks to “clear” the exact same check they’ve cleared literally 10 times before? How about CVS deciding that because my cell is on an east coast area code it’s a good idea to robo-call me at 3 AM when I’m in Australia to nag me about refilling a scrip I’ve already filled?
And restaurants. Nope, don’t have time for that.
I could go on. I could go on for a long time. The point is that it’s not incompetent government on the left and competent business on the right. They’re both incompetent, and on a day-in, day-out basis it’s business that’s wasting more of my time.
That’s Thomas Wolfe.
Drew,
What?
The distinction he was making was one of art, I think.
Exactly.
A fun thing I like to do is go on Goodreads, which is probably the largest book review site. Books are given aggregate star ratings. My last book currently out-rates Hamlet and Gatsby.
Believe me, Janis, I do know better than to take that seriously.
What makes you rate Gatsby so highly?
Janis:
Spare and elegant prose, classic American character types, interesting narrative technique and POV, lovely description, place in history. On the down side: superficial female characters.
But I’m not especially in love with Gatsby, I just know where F. Scott F is in the big literary pyramid and where I am. If he’s a brigadier general I’m a sergeant. (And quite content to be an enlisted man.)
It is spare and elegant. I’d call it an expanded short story and get on with it.
That works for me. It’s the lesson I’m learning this year: everyone whose services I use is partly competent with percentages varying. I imagine they’d say the same about me.
” If you want to compare yourself to a steady competent writer, I’d use John D. MacDonald”
He does remind me of Meyer, in a way. And if Michael had a yacht, he just might call it the John Maynard Keynes just to piss of the Republicans in the marina.
(I’d be inclined to compare him more with Chandler, though, at least for his mocking cynicism towards a certain kind contemporary babbittry.)
sam:
Since I worship at the feet of Raymond Chandler, I’ll take that to the bank.
Have you read Condominium by MacDonald, Michael? I like to keep a copy a the Alabama coast.
I love MacDonald, I think I’ve read all the McGee novels, but not Condominium.
It was done in the vein of Airport and Inferno.
“It was done in the vein of Airport and Inferno.”
Highpoint: Fat-assed capitalist gets sucked through window fat ass first a la Goldfinger during hurricane.