This post is not about high school or hyper-brand-conscious hipsters but investment bankers. In a FT editorial yesterday, former investment banker Abigail Hofman blamed the current financial crisis on the culture of the banks. First and foremost, she argues, that culture is about greed:

Investment banks are all about making money. At the extreme, this means making money for employees not shareholders. The big revenue producers are revered. It is not considered prudent to upset them by asking too many questions. The subprime meltdown is a perfect example of the “emperor has no clothes” phenomenon. These were complex products, yet obfuscation was considered acceptable. Bank chief executives should have asked more questions. I suspect they saw the juicy profits and hoped underlings understood the risks.

But then in the next paragraph, she goes further, denouncing the “cult aspect” of investment banks: “If you work on Wall Street or in the City, you toe the party line. Despite lip-service to ‘diversity’, diversity of thinking is not encouraged.” As a result, no one asks difficult questions or challenges the logic of various practices that are bringing in money. No one wants to blow the whistle, derail the train.

It’s hard to see how it could be any other way, as asset bubbles in general require a uniformity of opinion, a sustained and unwavering effort of belief to keep them inflating, and investment banks seem to need asset bubbles to make the outsize profits they have become accustomed to since the 1980s. The discipline of staying on message, of not undermining the optimism that obviates risk, seems essential to the business model. And from there it filters out, through the business press via various quoted analysts interpreting the steady stream of economic reports, and then into the general-interest press, helping sustain consumer confidence. A climate of critical thinking and skepticism is not particularly conducive to money-making, to the Ponzi scheme-like nature of selling risk down the daisy chain. The wrong sorts of questions are only likely to jeopardize your opportunities—critical thinking seems more often than not to undermine opportunities rather than exploit or discover them.

This is because the “logic” of asset bubbles can’t bear careful scrutiny, so the energy that might otherwise go into critical investigation is instead invested in ideology, into explanations for why we shouldn’t be skeptical: “the internet has birthed a New Economy and Everything Is Different,” “We all need to belong to the Ownership Society, and home prices will never drop.”

Another way to put this: Investment banks are haunted by entropy, by the sense that investment opportunities inevitably unravel, face diminishing returns, run into natural limits. Lockstep conformity militates against this entropy, generates a solution for something unsolvable. Capitalism, then, is this logic writ large, which is perhaps why America is the most congenitally optimistic place in the world and a place where there reigns an overarching conformity, masked by the quotidian kind of individuality that we trumpet as freedom. That kind of individuality—the rebellion of self-fashioning within the larger context of a stable consumerist system—comes at the price of surrendering the kind of critical thinking that Hofman laments the absence of in the banking world. 

—Rob Horning

Clay Shirky, the technophilic author of a new book about spontaneous organizational behavior online, recently delivered this widely linked speech about how TV once managed to suck up the “social surplus” that is now being directed into building social networks and open-source applications and whatnot on the internet. He argues that the 20th century brought us more disposable leisure time, and it brought us TV to help us dissipate it.

Starting with the Second World War a whole series of things happened--rising GDP per capita, rising educational attainment, rising life expectancy and, critically, a rising number of people who were working five-day work weeks. For the first time, society forced onto an enormous number of its citizens the requirement to manage something they had never had to manage before—free time.
And what did we do with that free time? Well, mostly we spent it watching TV.

Shirky then explains that while Wikipedia took an estimated 100 million hours of human participation to create, American TV viewers spend that much time every weekend watching advertisements.

Currently, with Web 2.0, etc., society is erecting a “architecture of participation” (a term he borrows from tech-industry consultant Tim O’Reilly) which will allow people to switch gears from passive consumption of TV to active participation in collective social projects—annotating maps and debugging software and posting lolcats and correcting misinformed bloggers in comments and that sort of thing.

It’s better to do something than to do nothing. Even lolcats, even cute pictures of kittens made even cuter with the addition of cute captions, hold out an invitation to participation. When you see a lolcat, one of the things it says to the viewer is, “If you have some sans-serif fonts on your computer, you can play this game, too.” And that’s message--I can do that, too--is a big change.
This is something that people in the media world don’t understand. Media in the 20th century was run as a single race--consumption. How much can we produce? How much can you consume? Can we produce more and you’ll consume more? And the answer to that question has generally been yes. But media is actually a triathlon, it ‘s three different events. People like to consume, but they also like to produce, and they like to share.
And what’s astonished people who were committed to the structure of the previous society, prior to trying to take this surplus and do something interesting, is that they’re discovering that when you offer people the opportunity to produce and to share, they’ll take you up on that offer. It doesn’t mean that we’ll never sit around mindlessly watching Scrubs on the couch. It just means we’ll do it less.

Shirky’s vision of the future sounds great. We all benefit when we contribute our spare time to projects that in theory benefit society at large. And when people are more attuned to their productive rather than their consuming capabilities, they are probably likely to be much happier, as displaying one’s ability to make things is a quintessentially human quality and social recognition makes life worth living. But some skepticism is in order. The notion of a social surplus sounds a lot like Bataille’s accursed share. Bataille argues that in a post-scarcity society, individuals need to come up with ways to destroy excess production through various modes of luxurious waste in order to sustain economic growth. From this point of view, wastefulness is intentional, a demonstration of wealth. Squandering the surfeit of free time on sitcoms seems a variation on this. Perhaps, watching TV is not like drinking gin, as Shirky suggests, but like conspicuous consumption. It’s a triumph of our culture that we can waste entire evenings on Battlestar Galactica rather than, say, foraging for food. The point of free time is wasting it, not employing it productively in some other arena. An hour spent watching VH1 = luxury. An hour spent annotating a Google map = digital sharecropping. I don’t want to believe this, but empirical observation suggests that it’s true that many people have this attitude. Most people aren’t looking for ways to be more productive; instead they tend to seek means to consume more. And if they are given reasons to believe their manic consumption is really a kind of production in itself, so much the better. The culture industry’s main thrust in the internet era has been to do just that, make consumption feel like it’s participation, so we don’t feel bad when we don’t better avail ourselves of the “architecture of participation”. Chances are, this architecture will become more akin to a Playland at McDonald’s than the infrastructure for a social revolution.

In the quote from Shirky, a lot hinges on the inadequately defined word interesting. Likewise for his assertion that people watching TV are doing “nothing.” Some people will not be easy to convince that watching TV is equal to doing nothing, that it is not in fact “doing something interesting.” What the culture industry has traditionally done is not only mask the social surplus, as Shirky notes, but sell the passive squandering of it as a dignified social activity—watching “Must-see TV” becomes a way to participate in water-cooler conversations that occur mainly in our imaginations. The internet is a real ongoing conversation, one that opens us to risks (of embarrassment or irritation) as well as rewards. But the pretend conversation we have while passively consuming is 100 percent safe. We are also persuaded that participation and collaboration are more inconvenient than individuation and private consumption in isolation. In my life, this plays out as me playing chess against a computer when I could readily play against human opponents online. In my mind, playing a human is more rewarding, but in practice playing the computer fulfills my need for momentary, commitment-free distraction. Sharing and cooperation leads inevitably to compromise, and the main thrust of most advertising is to convince us never to compromise when pursuing what we want in our hard-earned leisure time.

In short, the marketing world and the culture industry at large invests a lot in making doing nothing feel like something, and for many of us, it does; we collaborate on the fiction with the marketers, and this curbs our inclination for the sort of collaborating Shirky talks about. Shirky does qualify his statements by saying that it only a few people to change their habits to produce a huge shift once the behavior is leveraged across the internet. And perhaps that is enough to prompt optimism. But the same forces that enable online sharing also enable deeper individuation, filtering, personalization and so on, discouraging cooperation on anyone else’s terms, limiting the usefulness of what is shared. It also extends marketing’s reach, enhancing the power of its messages about the joys of passive consumption and fantasizing about identity rather than “doing something.”

The most difficult word to define, then, is participation—to a certain degree we can’t help but participate in our culture, and Web-style interactivity has become much more prominent in that culture. But with that prominence the phenomenon becomes domesticated, becomes a new way to absorb the social surplus harmlessly, becomes the new way to watch TV. Its fruits are trivial before the fact, because most people don’t want to see themselves as revolutionaries, and many want to luxuriate in flamboyant triviality. They are already absorbed into the status quo, which perhaps is subtly shifting along the lines Shirky is suggesting but is always in the process of disguising the change. The radical breaks that futurists and techno-evangelists are always predicting is always about to happen; it can never actually come.

—Rob Horning

In my local grocery store the other day, I was flabbergasted to find that it was stocking no generic brand breakfast cereals among the Fruit Loops and Special K and whatnot. Sure, it was a city grocery store and space is at a premium, but this still seemed odd. I didn’t crack and pay the extra money for the branded product; I have been years without cereal and nothing but whim (and soy milk left over from a cooking project) was prompting me to move to end that embargo. And the brand is adding especially little to my enjoyment of cereal—I never could taste any difference, and I wasn’t going to score any style points with anyone or in my own imagination for eating Kelogg’s instead of Jewel-T. I didn’t expect my cereal brand to project any sort of message to anyone or to myself. I just wanted it to be cheap or else I was going to forgo. However, cheap is a relative thing—the absence of generics made me assume that all the cereals were overpriced, though someone else might draw the opposite conclusion.

As someone who enjoys the illusion of saving for its own sake, I always look for off-brand goods, and the unanticipated absence of generic cereals made me wonder if I was hallucinating or having false memories when remembering having bought unbranded Corn Flakes in the past. It never occurred to me that generic products at the supermarket come and go with economic conditions, as this post at Calculated Risk details. CR links to a NYT story about the recession driving consumers to come up with “creative ways” to save money on shopping: Apparently these crafty innovators are starting “to switch from name brands to cheaper alternatives, to eat in instead of dining out and to fly at unusual hours to shave dollars off airfares.” How very ingenious. I wonder how these consumers came up with these radical ideas!

The underlying assumption is that consumers only think to cut back on branded goods when they can’t afford them—that generics are what economists call inferior goods, demand for which rises as income falls. They are “inferior” because they are not the preferred option but the substitute for when the preferred option becomes prohibitively expensive. Grocery stores respond the shift in demand—or rather to the downward shift of the trigger point at which people will buy—and stock more off-brand goods, protecting their volume of sales, which are of crucial importance to their low-margin business. It’s a little disorienting to realize that they don’t automatically supply cheaper options until necessity forces them to, that is, consumers don’t ordinarily demand the cheapest options and grocers get away with stocking only expensive goods. Why they do this is probably a matter of positioning themselves in the marketplace—too many generics out of season and you risk being mistaken for Aldi.

But there is something significant though in the impulse that drives the NYT business reporters to call this sort of switching between goods “creative.” Such a rhetorical move makes it seem as though there is a huge mental leap necessary to abandon brands, when in fact it seems more natural to assume generally that a huge intellectual jump is necessary to believe that there is value in brands, that they bring enough added value to leave in their wake a category of inferior goods—generics. In other words, we default to branded products, a stance that we must learn through ideology, through subtle cues that branded goods are “normal” and the unlabeled products are suspect, inferior. Thanks to how well I’ve absorbed that ideology, I can feel rebellious and subversive when I shop generic—and keep on shopping, which is the essential upshot of the NYT piece: Consumption continues despite the diminishing consumer confidence as the recession takes hold and people grow more and more economically insecure. That people might consume less, not just in dollar terms but in terms of time spent shopping isn’t directly considered, and is hinted at though it were some insane option, rather than a typical choice made at the margin. This may be a semantic conundrum; I have a hard time getting it through my head how broad and flexible a concept consumption is for economists, and that it is different from consumerism, which is the orientation of society toward maximizing consumption for its own sake. Still, I wonder if this indicates some lump-of-consumption fallacy—that there is always some raw amount of consumption determined by the size of a population, and all that varies is the value in dollar terms assigned to it—being promulgated to make us interpret the rational choice to spend less time on consumption as a crazy whim, a desperate measure. 

—Rob Horning

In a recent editorial for the Guardian, CEPR economist Dean Baker makes a point I was struggling to make in this column. Baker does a good job of explaining how irrational, economically speaking, it was for people to jump into the housing market over the past decade.

only an ideologue would view homeownership as an end in itself. One of the reasons that millions of families face foreclosure and/or the loss of their life savings is that the ideologues of homeownership continued to promote homeownership even when it was clear that buying a home would be financially detrimental.
Recognising the risks of homeownership in a bubble wasn’t a matter of rocket science - it was simple arithmetic. The ratio of house sale prices to annual rent soared past 20 to 1 in the bubble markets, approaching 30 to 1 in the most inflated markets.
If a homeowner takes out a 7% mortgage (very low for a subprime buyer), pays 1% of the value in property tax each year, and another 1% for insurance and maintenance, then ownership costs are equal to 9% of the sale price. If the house sells for 20 times its annual rent, then this family is paying 80% more in housing costs as homeowners each year than they would pay as renters. If the house were selling for 25 times the annual rent, then the family would be paying 125% more as homeowners as they would as renters.

And the dropping prices and HELOCs assure that no equity was amassed either.

That all makes for good support for the point I was getting at in the column, which is that the pleasures of ownership are noneconomic, they are ideological and they cost extra, above and beyond what shelter you get out of the deal.

—Rob Horning

I was surprised to discover that Thomas Frank, the Baffler founder and author of What’s the Matter with Kansas? and One Market Under God and other left-leaning cultural critiques, would be writing a regular column for the Wall Street Journal‘s editorial page. I learned about it when he wrote about the Obama “bitter” crisis for the paper on Monday. His new gig is especially striking considering that he has derided the page so thoroughly in the past, making it a go-to source for conservative nonsense when he wants to make a point about some typical piece of disingenuous right-wing rhetoric. Now he’ll be sidled along next to it—if only he could know what else was on the page and debunk it as it appears. And you figure the perch was something Frank really couldn’t turn down; it’s too prominent, too tempting a place from which to polemicize. He can serve as a fifth column, preparing the way for the hoped-for takeover of business culture by sensible minds—people who see the futility of creating asset bubbles and the evil of suppressing unions and wages, who are willing to denounce the marketing racket and question the imperatives of consumer-driven growth at all costs, and so on.

But you have to wonder, What is Murdoch, et. al., up to here? It’s a move that seems akin to the NYT‘s printing Bill Kristol’s risible columns, which are fulsome fodder for liberal tut-tutting and so make a certain sense of the NYT‘s presumed readership. But Frank is no hack, like Kristol; Frank’s columns are not so easy to laugh off, nor are they rote recitations of the current state of the ideology he is supposed to represent. The WSJ used to have Alexander Cockburn write a token lefty column for its editorial page back in the 1980s, as Kathy G notes. But unlike Kathy, I don’t believe that the editors at the WSJ “see the writing on the wall, and they know they can’t ignore liberals anymore.” This does not strike me as an attempt to give credence to or acknowledge liberal readers, but maybe I underestimate the attraction Frank might have for people who otherwise wouldn’t bother with WSJ. Maybe it will drive some traffic their way on the Web, as his Monday column was probably more widely linked than the customary tripe. But maybe the editors recognized a kindred spirit, not in ideology by in rhetorical technique. Far too often, liberal polemic is earnest, self-righteous, humorlessly urging some borderline condescending concern on readers for those who can’t speak for themselves. Frank is not that kind of writer; like kindred spirit Barbara Ehrenreich, he seems to delight instead in sarcasm and the kind of haughty diction that frequently enlivens Marxist critiques while eschewing the sort of punning triviality or jargon-laden turgidity that sometimes undermines more-contemporary leftist discourse. Here’s a typical sample, from Monday :

Ah, but Hillary Clinton: Here’s a woman who drinks shots of Crown Royal, a luxury brand that at least one confused pundit believes to be another name for Old Prole Rotgut Rye. And when the former first lady talks about her marksmanship as a youth, who cares about the cool hundred million she and her husband have mysteriously piled up since he left office? Or her years of loyal service to Sam Walton, that crusher of small towns and enemy of workers’ organizations? And who really cares about Sam Walton’s own sins, when these are our standards? Didn’t he have a funky Southern accent of some kind? Surely such a mellifluous drawl cancels any possibility of elitism.

Note the ironic rhetorical questions, the juxtaposition of played-out words like “funky” with colorful, near ostentatious ones like “mellifluous.” Not to mention the absolutely perfect put down of the lazy media coverage of Clinton’s campaign stage management. It’s sardonic, unapologetically smart and allusive, and it verges on downright mean-spiritedness, and that’s what links it to the WSJ’s customary editorial voice, which is often sharpened with contempt. Frank, too, often seems nearly contemptuous, which is a great asset—it conveys confidence in left-wing ideas that you don’t walways see, and suggests strongly (just like Economist “leaders” frequently do) that you’d be stupid to disagree. Some misinterpret this rhetorical strategy as elitist, but it strikes me as just a refusal to wheedle.

Still I don’t think regular WSJ editorial page readers will be dismayed by Frank’s columns, but perhaps they’ll recognize the tone and delight in its flamboyance. 

—Rob Horning

The first nice day of spring—this past Friday, in New York City—always makes me feel suspicious and somewhat put upon, threatened. I’m supposed to be too overjoyed about it; instead I end up thinking about crowds and sweat and exposed skin I wish weren’t exposed and a general mindless air of following the orders of the sun. This may be the inevitable consequence of city life, or New York City life, where every palpable shift in the zeitgeist feels like a contrived trend to be resisted.

But here’s further evidence that people should feel lucky not to live in Manhattan. After work, I found myself in Union Square and happened to witness an event being staged there where a bunch of people wore their headphones and danced to music on their iPods in what was billed as a “silent rave.” I found this to be crushingly depressing, an all-too-perfect symbol of the way isolation and rote individualism is colonizing what is left of public space, and how even ostensibly group-oriented activities must be eviscerated from within by a self-regard that’s presumed to be primary. Let’s all get together and dance, but not to the same music—we’ll just all watch each other perform the writhing ritual of self-projection and serve as one another’s audience. That way we can reinforce that public space is just where you go to be under the microscope, where you can surveil and be surveilled as opposed to sharing any experiences or exchanging any ideas. The headphones preclude the expectation of social exchange, which can make civic participation so irritating. The “silent rave” lets you simulate community without the noisome bother of belonging to one.

Like “flash mobs,” that peculiar form of performance art where people just show up and clog the flows of commercial life with their mere being, the silent rave seemed to be a vague gesture toward participation in something by people who must lack the ingenuity to come up with something more rigorous for one another to do than simply showing up. It’s low-impact participation with a vague subversive intent that’s not directed at anything in particular. They are not protests, which must seem pretty strident and would require overt commitment to a particular political view. Instead, they feel like marketing stunts, they feel promotional. It all reminded me of the models who are hired to hang out in front fo Abercrombie and Fitch on 5th Avenue.

But I don’t know what the silent rave is promoting. iPods? A generation’s general commitment to gadgets? To mediating themselves through technology? To being apart together? Back in the old days, I imagine people sat together in parks without headphones and shared the same sensory environment. Now they can be “together” without cramping their style or compromising. That’s progress, I guess.

—Rob Horning