Rethinking Today’s Capitalism

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Emma Varvaloucas (EV): Hi everybody. I’m Emma Varvaloucas. I’m the executive director of The Progress Network. And you’re here with us tonight at It Doesn’t Have to Be This Way: Rethinking Today’s Capitalism. There is often a lag between when we go live and when people are actually allowed to get into the room. So I’m just going to repeat that one more time. Welcome to It Doesn’t Have to Be This Way: Rethinking Today’s Capitalism. We are The Progress Network. We’re an idea movement for a better future. And we run monthly events with our members, always about a different topic but with a constructive point of view.

So without further ado, I’m going to introduce our panelists, and they are both panelists and hosts tonight. They’re going to be interviewing one another, which is going to be very fun. So tonight we have with us Progress Network Member, of course, Gillian Tett. She is chair of the editorial board and editor at large stateside of the Financial Times (FT). She’s the leader [inaudible] behind the editorial initiative Moral Money, which covers the shift into responsible and sustainable investing. She also has a new book out, which I believe just came out on Tuesday, so very hot off the press, and congratulations to Gillian. The book is called Anthro-Vision: A New Way to See in Business and Life. And if you’re in the business world, you may know that it’s very focused on technology and data analysis. Here, Gillian is suggesting using a different lens, an anthropological lens, a more human lens as a way for businesses to operate.

And our second panelist/host is our founder, Zachary Karabell. Zachary is an author and investor. He’s been ringing the sustainable capitalism bell for a long time now. He writes for many different publications on economics, on history and politics. He also has a new book out. It’s called “Inside Money: Brown Brothers Harriman and the American Way of Power,” which covers in history of the financial firm Brown Brothers Harriman. And it’s a firm that has many lessons for us when it comes to the capitalism that we find ourselves in today. So with that, I’m going to turn it over to Zachary and enjoy the conversation.

Zachary Karabell (ZK): Thank you, Emma. So hi, Gillian.

Gillian Tett (GT): Hey! Great to be with you. We normally meet over dinner with wine.

ZK: So this is our virtual dinner conversation. But we thought it would be fun. For those of you who’ve been to a few of The Progress Networks events we’ve done before, they’ve been more traditionally panels and me leading a discussion with various and sundry. And Gillian and I thought that, given that we both have books out in a month-long period, Gillian’s book being this book in startling and bright red, and then my book over here in the dark, in the black.

GT: Oh, Zach, you’ve gotta show your book for the cameras.

ZK: I know. But I’ve got to reach around and have at the Buddha. So we have the two books here, and we thought it would be fun to engage in a book-to-book, author-to-author conversation between friends, given the unusual overlap, not really in topics, but kind of in sensibilities.

So, in very different ways, we’ve both written books that attempt to shed some light on the nature of capitalism and the nature of the societies that we’ve come to live in. Gillian’s is a bit more broad-based than just the lens of capitalism, given her writing over the years for the FT and other things. There’s a lot in there about, you know, is the capitalism that we currently practice the one that we should, could? Is there a more optimal and better version? And that, too, obviously is a good Progress Network, as we’ve defined it, mantra of let’s kind of look at the world, not just in terms of its manifold and many problems, but in terms of the things that we might individually and collectively do to lead ourselves in a more constructive direction, given that presumably we would want the future to be the sum of all of our hopes rather than the product of all of our fears.

So Gillian, Anthro-Vision: An unusual topic. You have this fascinating background, which you have described in the book for the first time, as like a first thing to kind of bring a personal bent into the book. But I think it explains a lot of how you… That, you know, that your stance on all the issues that you’ve been writing about, including the ones in the book, is not just one of the journalist who’s always stepping to some degree outside or on the outside looking in, but as an anthropologist. And you of course in the book also take a critical eye to journalists and their own culture. But, you know, for those who have not read the book and given that it’s out for a couple of days that may be a good number, and for those who will read the book, which will be everybody and all of their cousins and parents and fathers—Father’s Day is coming up, so that’s an important thing to remember for Anthro-Vision—tell us a little about “anthro-vision.” What is it?

GT: Sure. Well listen, thanks, Zach. I should say that it’s brilliant to be doing this talk with you because, in many ways, I think your book, which is brilliant is a kind of almost ethnography, almost an anthropological exercise in itself, looking at a bank through time and looking at the culture. And culture is at the center of your story. But in terms of my background, my background is totally weird. As many senior bankers and corporate executives have told me over the years people look at me and say, well, I’ve been a financial journalist for many years; you must have [inaudible] and a PhD. I’m technically Dr. Tett, and they assumed I had a PhD in economics or finance or an MBA, or failing all that, in astrophysics. Because finance and economics have been dominated in recent years by quantitative, data-based, numbers-based analyses. Nothing wrong with that, as I’ll say later. But that’s how it has been shaped.

And, in fact, I’ve gone into my career in a very odd way. I did a PhD in cultural anthropology. Most people who aren’t involved in social sciences think that I did basically the academic form of being Indiana Jones and going off to wacky, exotic, wild places, and studying with rituals or digging up bones or doing things like that. In fact, anthropology these days is different from how it started out in the Victorian age. It’s really about looking at modern societies and looking at Western societies as much as non-Western often. But in my case, I went off to a place called Tajikistan, Soviet Tajikistan, just north of Afghanistan, and did a classic anthropology study where I lived for over a year in a community in Tajikistan and went about studying them as an anthropologist would. Anthropologist’s try and look at human culture and systems by observing them through participant observation and essentially trying to look for cultural patterns and drawing them together in their analyses.

So I did that. After I finished my PhD, there was a brutal civil war in Tajikistan, tragically. I went off and originally became a war reporter. And then one thing led to another and I joined the FT. And for years and years, I wouldn’t say I concealed my weird past, but I certainly didn’t talk about it. Because, as I say, to bankers, it just looked hopelessly “hippy,” as one once said to me. You know, completely irrelevant. Who goes from studying Tajik wedding rituals to looking at trading floors. And then the 2008 crisis happened, and suddenly questions about culture and incentives and norms and values began to become incredibly important. And I began to, if you like, you know, come out of the closet as an anthropologist and talk about how I thought this perspective I’d learned working on the ground has shaped my work as a journalist.

And also, why I thought it had in many ways enabled me to read finance better than many other journalists before 2007, simply because I was looking at the cultural dynamic and looking at what people weren’t talking about as much as what they were talking about. So in a sense, the book I’ve written, Anthro-Vision, is an attempt to explain why I passionately believe that anthropology perspectives can help anybody understand the world better. Whether you’re a journalist, or a banker, or an accountant, or an economist, or a techie, almost any area, you can actually combine anthropology with what you’re doing as a profession because it provides a sense of context. And I can’t think of a better example than your book, frankly, Zach, which shows why culture matters. Because your story about, you know, this bank is all about how culture shaped it and how its distinctive culture put it on a different path from other institutions. But you tell me, what made you write your book?

ZK: It’s funny, the culture part, I don’t think I was nearly aware of until I wrote the book. You know, I was looking for a topic that would allow me to write about how money made America and then how America made the world, and how a particular class of people who made money then sort of write the architecture of the global system that we live in: the UN, the World Trade Organization, the Pentagon, the National Security Council—all the aperture, the world that’s been constructed. You know, the anthropologists would say the, you know, the first order principles of a lot of the systems we live in, which were made in the middle of the 20th century, were made by a small group of almost entirely white American men on the heels of World War 2. And many of them had made a lot of money in the financial world over generations.

And I was interested in how that world came to be. I was much less aware of… And so I was aware of the role of Brown Brothers Harriman, and I was aware, as a few people are, of people like Prescott Bush, right? The whole Bush family fortune comes from the partnership of Brown Brothers. And I was aware a little bit of Averell Harriman, because he was such a figure for decades, kind of an elusive one. He would have very much been someone, I think, who would have ended up in your house for dinner had you been doing that when he was around, and sat saying very little but being incredibly charming. And I was aware of that group. But I was much less aware of this kind of intense culture of the firm almost from the time it’s founded in 1800 by the father, Alexander Brown, and has just been replicated and continued and drilled into generations of Brown family partners, and then Harriman family partners, and now a firm that has none of the family really deeply involved in it, but has almost the same culture.

And it’s funny you mention that because I’ve written a few pieces over the past weeks and done a bunch of interviews, and one of the messages of the book is that we could have a better culture of capitalism. You know, we could have a culture where people believe that those who have gained immensely privately have a public responsibility, that there is a relationship between private gain and public good. And that this very elite, exclusive class that Brown Brothers epitomized, this WASP establishment elite, nonetheless had a profound driving belief in public service. And it might’ve been totally self-serving; I think you would agree that, you know, one thing you realize when you study humans is that humans are messy and complex and nuanced. So when you look for sort of binary simplicity, you force a round peg into a square hole, that you can be selfish and selfless. You can be self-serving and of service. And I think they were all these things, and the system that they made certainly served them, even if it did some good for the world.

But when I’ve talked about that culture as being important many people leap toward, “oh, well, then you’re saying we should regulate firms to make them do certain things,” or “we should pass laws that constraint action,” because those are familiar tools. Culture, for a lot of people, is this kind of fuzzy thing, right? And I guess I wonder, from your perspective, in anthropology it’s not really a fuzzy thing. Although, I think you talked about the famous anthropologist Clifford Geertz who talked about the difference between sort of soft and hard, right, soft and hard qualities. But this has been a real struggle in anthropology, but it’s a real struggle in our contemporary culture. And then if you say culture, people are like, “Yeah, yeah. Whatever. What does that do for me?”

GT: I mean, you raise a great point, Zach. Because the problem with culture is, if you ignore culture—we all kind of all know this instinctively—if you ignore cultural patterns you are in danger of failing to see half the picture at any one time. You know, if you go into a bank, if you go into any kind of social situation and just ignore the cultural assumptions that bind people together and define a group you know, if you ignore those, then you’re not seeing, you know, what’s really happening. And yet the reality is that defining what culture is is extraordinarily hard. It’s like chasing soap in the bath. And in some ways it can never be defined. It certainly can’t be defined objectively because culture is always in the eye of the beholder. So we always have this kind of black hole problem in social science, because we know there’s this thing out there that’s incredibly important, that shapes people, but we don’t know how to define it.

And, you know, people say, “well, is anthropology and science?” Well, no, it’s in many ways descriptive, it;s interpretive. It’s very hard to prove anything in anthropology. What you can do, though, is spot patterns that end up being incredibly important and illuminating. And I think in your case, in your book, the way you talk about the fact, you know, you have this company that was started by entrepreneurs, immigrant entrepreneurs who were driven both by a very strong all-American quest and a desire to make something of their lives, you know, to chase the American dream, to get profits, to get proper, you know, real recognition and money. And yet, right from the inception, they had a sense of both group solidarity—it wasn’t about one individual lording over everyone else, but a real sense of group solidarity, which was unusual—but also the sense that they were involved in cultivation, not harvest. They were reaping for the long term and trying to build something long-term. And there’s a wonderful passage at the beginning of your book where you’re talking about, you know, the scrupulousness and integrity with which the original founders insisted on behaving in the operations, even when it wasn’t necessarily serving them very well. Do you think that came out of the Irish values, or Catholic values, where did it come from? Protestant values?

ZK: I mean, yeah, they were definitely, you know, deeply of their faith, right? These were, I jokingly have said at times, you know, men of kind of ramrod rectitude with a quiet belief in their faith. It’s interesting that—and I don’t go into this hugely in the book, but as a background—the Brown family ultimately is very involved in the Presbyterian church in New York City. They are the primary backers of the Union Theological Seminary. So if those of you who ever go up toward Columbia and that huge tower um, they were really a part of that. But there was a kind of—on your point, which is fascinating—there was a moment in the sort of later part of the 19th century, where there was a near schism within the US Presbyterian church. And a lot of it revolved around one faction that wanted to focus more on God’s love, and another faction that wanted to focus more on God’s punishment. Basically a moral framework of “Is the pathway toward behavior, individually and culturally, more driven by the threat of punishment or more driven by the belief that all can be forgiven?” And it was more complicated than that. And it’s interesting that the Browns are firmly in the camp of “we should ground doctrine and theology in God’s kind of eternal love and forgiveness,” and not in the, you know, for every action there shall be consequence. Certainly in their business practices they were very focused on every action having a consequence, simply as a pragmatic reality, right? Which is why they were and remain, kind of atypically in a financial world today, relentlessly, almost obsessively focused on risk, and focused on an awareness of risk as being something that should never be out of the picture, right?

It’s not that they didn’t want huge profit. It’s just that they were intensely aware of the fact that money is powerful, alchemical stuff, and that if you mishandle it, or you lose sight of its power to destroy because you’re so focused on the power to gain, you know, you’re likely to do a lot of harm and not a lot of good. And that’s kind of just woven in, and remains very much woven into the firm. And what’s striking about that is how much that kind of has departed from a contemporary understanding of capitalism. You know, it’s kind of it is self-bounded, not because somebody said… Not because there’s a law that could be broken or an excess that will be checked, but because there’s an internal check on it. And obviously, I mean, I think from some of what you write about, where things get lost is that when self-defined communities kind of lose sight of their own context, right? I mean, maybe you could talk about that.

GT: That’s what I find fascinating about your book is that, you know, what comes through with the patriarch and all the descendants is a really strong sense of thinking about consequences of their actions and context, you know, as they actually proceed with finance. And one of the ways to define what’s gone so badly wrong with modern banking, and what led up to the 2008 crisis, is the fact that you had finance which was very much driven by people who couldn’t see the consequences of what they were doing or chose not to see, and who had lost all sense of social context to their innovations.

What do I mean by that? Well, I first started thinking about this, oddly enough, when I was working for the Financial Times in 2004. And by that stage, you know, almost you know… Yeah, 2004. So by that stage you know, a dozen years had passed since I’d been an anthropologist in Tajikistan, and, you know, I’d kept very quiet about my anthropology training, but it was still kind of embedded in my brain. And I had just taken on a new job at the FT as running the capital markets section. So covering finance and markets. And I went down to Nice, or Cannes down the Riviera, to go to a banking conference for the European Securitization Forum. And I got into this hall, and I sat down in the conference chair and thought, “wow, I’m back in Tajikistan.” Because it was just a gut, visceral feeling. Because I realized that an investment banking conference, in some ways, is a modern financial equivalent of a gigantic Tajik wedding, in that it’s a gigantic ceremonial, ritualistic affair that pulls together a scattered tribe of people from all over the place so that they can reaffirm and rebuild and recreate their social ties.

And it uses all kinds of rituals to essentially both reflect a common world view and reenforce it, and reproduce it, if you like. So I sat there in this conference hall thinking, “I’m going to analyze this investment banking conference like a Tajik wedding.” And several things hit me immediately, which are very relevant to your book. Firstly, that the financiers around me, who were the specialists in credit derivatives and securitization were in command of a type of language and jargon which no one else understood. And most importantly, they didn’t expect anyone else to understand it because they knew they operated in a pretty rarefied silo and took that for granted. Another thing that came through very clearly was that all through the day, they kept talking vaguely about how they wanted to have, you know, they were serving people… They had a very strong creation myth, which was that they had stumbled on this financial innovation that was going to make everyone better because everyone would have access to credit or cheap loans.

And so they talked a lot about their creation myth and how it was going to serve people. But I looked at the PowerPoints they put up on the screen, and there wasn’t a single face anywhere in any of them. It was all about mathematical formula and Greek letters and curves about risk measurement and stuff. And I watched it all, and I thought, “wow, you know, these are people who are doing these incredible concoctions and innovations, but it’s very much operating in a kind of ghetto of its own.” And at the time, to be honest, I didn’t realize how dangerous that would turn out to be, how the people who were in that ghetto with their creation myth were scurrying around with blinkers and engaging in things that turned out to be incredibly dangerous, because they couldn’t see the consequences of it in the real economy, or even the consequences inside their own banks, in terms of having a holistic vision of risk.

At the time I just looked at this activity and thought, “wow, this is kind of weird. I want to understand it.” But subsequently I realized that, you know, one of the biggest problems with 2008 was the financiers involved in innovation had become a bit like the philosophers in Plato’s cave, that they could see shadows of reality on the walls, but not actual reality. And there’s a very telling moment in “The Big Short,” where one of the people who’s looking at a subprime mortgage world—that’s Michael Lewis’ wonderful book and movie—goes out and actually meets a Florida stripper who’s taken out subprime mortgages, and he literally has a kind of holy sh*t moment—excuse my language—where they’re going, “wow, this is what’s actually happening with these innovations on the ground.” And what’s amazing about that is not that he saw that, but that so few bankers had actually seen it before that or even thought to go out and look at it, which by the way, is 101 anthropology, to look at the world bottom-up and try to actually engage in participant observation to see what’s really happening on the ground. The so-called bird’s-eye view. So I think when I read your book, I was thinking, “well, actually, you know, the figures in your book probably would have gone out to actually eyeball some of the end lines.” They very might well have known some of them, if not my name by the 20th century, they would have had a sense of where money was going, and would have tried to take a more holistic vision of finance, and above all else to think about consequences and context with finance. Do you think that’s fair, Zach?

ZK: I mean, I think they also would have believed… Because I remember, I was running an investment fund in 2008 2007 into 2008, and one of the things that was striking was, there were certainly a lot of people in that kind of group that were doing all these derivatives and creating these things, that were cognizant of the potential risks. They were cognizant that things could get out of hand. And there were two drivers going on. One was genuinely unfettered greed, right? Meaning that shareholder capitalism, as opposed to the partnership capitalism that had been true well until the 70s and that remained true for Brown Brothers, right? Brown brothers never goes public. They are a partnership today and an extremely viable, albeit quiet partnership. And that meant that risk was always personal, as opposed to what it was for many of the people you were in that conference with, where they never stood to lose personally as much as they stood to gain personally.

And in many ways, that remains true of multiple parts of the financial system, of hedge funds, a lot of private equity, a lot of venture capital. And I’m actually not, you know, I’m not being negative about it per se. I’m just negative about the balance within the system between that and more countervailing factors. So there was that aspect of Brown. But there was also not just the unfettered greed part; unfettered because it was structurally unfettered, not because these individuals were somehow more greedy than individuals had been in 1850. But there was also, they thought they were taming risk. They thought that all these mathematical formulas and derivatives and securitization would disperse risks sufficiently throughout a system that any one thing going wrong would be diluted, and then we’d be okay. And that’s where the Brown Brothers part is interesting because their culture—and I don’t know what really explains this, except that it was there from the get-go within Alexander Brown—was: there is no escaping risk, right?

That human desire to control the uncontrollable and tame the untamable always ends badly. And that doesn’t mean don’t take risks. It means don’t blithely believe that you’ve eliminated it. And there was a lot of that going on in 2008, and I remember being at some investment meeting where an investment bank was coming in and trying to sell some quantitative structured product that would, against the portfolio I was managing, guarantee almost no downside and provide almost all upside minus whatever the cost was of creating this thing. And I thought, “wow, that’s extraordinary. I get to be sold a derivative that tells me that I essentially can’t lose money, and I can make a lot of money, just not quite as much as I would make without it.” And I thought…

GT: Did you buy it?

ZK: No, because I remember thinking, like, this was a classic case of something that’s too good to be true. It is.

But what I did not realize in that equation is that the people selling that product, these investment banks, were also buying that product, meaning it wasn’t an entirely a process of trying to sell, you know, the rube on a magical product. It was the belief themselves that they had created a magical product. Because when people like me didn’t buy it, they just, these banks sort of held it on their balance sheets thinking, “Hey, if he doesn’t want to buy it, we’ll buy it.” And it was born, I think, out of this belief that you never would have had at Brown Brothers, that we have found the formula, we can tame risk.

GT: One of the things anthropologists are interested in is creation myth. Any society has an elite who will remain elite not just by virtue of controlling the means of production and money, but by shaping how people think. As part of that, some kind of creation story is useful in terms of propping up the elite and reproducing the status quo.  I say “useful” not because this is necessarily done as a plot, but because patterns develop that happen to support the elite, and those patterns get reproduced over time.

Looking at the bankers in 2008, and originally in 2004—and I tell this story at some length in my book—what struck me was that they were a self-enclosed tribe doing stuff that no one else understood. They were a bit like the priests in the Catholic church in medieval Europe: they spoke financial Latin, and nobody else understood it. They had confidence in what they were doing because, for the most part, the congregation sat there and dumbly accepted the fact that they spoke financial Latin, and they knew that the congregation didn’t understand it. The creation myth was that we’ve had this innovation wave. We’ve created these products for repackaging risk. We’re slicing and dicing everything, and it’s making everything safer. And therefore, it’s going to be fine. It wasn’t a deliberate con in the sense that people were conning others to believe it. They half-believed it themselves. And the most powerful way to control things is to create patterns that people are not completely aware of.

Subsequently, I realized there were some glaring intellectual errors at the heart of this creation myth. For example, the financiers would always say that they had a mark-to-market accounting system, which means that all values are supposedly marked to market prices. In reality, most of the stuff was never traded because it was too complicated. So the accountants would basically rely on model-based prices to value things on their balance sheet, which was a complete contravention of the theory and the creation myth, and yet no one saw that or commented on it. And you might think, “well, that’s kind of weird; why?” The reality is that we all do that every day in our lives. We avert our eyes from inconvenient truths or contradictions. We have tremendous tunnel vision. We focus on a few things around us and ignore other areas where there may be challenges to our creation myths, or things that just don’t fit in well with the stories we like to tell ourselves.

Do you think that there are lessons from your book about how other companies should be conducting themselves today? Do you think, for example, that a partnership structure, having people with skin in the game, is one way to make financial risk-taking more responsible?

ZK: I definitely think there are lessons. But I want to be careful when I say that, because many people will hear the word lessons and think, “if only we could return to some sort of 1950s Halcyon moment,” where we had this elite-driven system that had a sense of public service and responsibility that did actually create a much more equitable social contract. It’s the irony of this elite establishment creating a world where the average income of a worker to a CEO is 20-30 to one, versus now, where we live in a much less elite system that is highly unequal relative to then; now, it’s something like 300 to one.

So, lessons for me don’t mean let’s go back. They mean, what can we tease out of prior human experience and constructively apply to our present, in the hopes that it will create a more meaningful, balanced, egalitarian, inclusive, affluent future? I think there are a lot of lessons there, with the caveat that I try to write about a firm whose value system I ultimately admire, but whose actions over the centuries often left a huge amount to be desired, including total complicity with the slave trade, driving the United States government toward an imperial occupation of Nicaragua solely because the Brown family had loans to the government that were in jeopardy due to political instability, and an intense anti-communism at the end of World War II into the Cold War that flared without enough consideration.

But as a set of values for the present, and with the belief that we’re not going to suddenly go back to partnership capitalism, there’s an emerging mantra of stakeholder capitalism that’s supposed to, in many ways, be what a company like Brown Brothers probably embodied anyway, which is that the good of the firm meant the good of the employees. It meant the good of the surrounding community. It meant that multiple stakeholders benefited. They wouldn’t have used that term, but they would have embodied its reality.

My definition of sustainable capitalism is people self-governing because they recognize the bonds and the connections between their private interest and the public good, or their private interest and their employees or their community. I write in my book about the building of the Baltimore and Ohio Railroad in 1828, which was driven almost entirely by Alexander Brown and his sons. It’s done purely as a public works project because they are legitimately concerned that Baltimore is going to fall behind New York as an economic center—which it does—and that the only way to save that is to have a better transport network from Baltimore over the Appalachians and into the Ohio River Valley. And they do this incredibly innovative, somewhat risky project as a moonshot to pay for a steam-driven locomotive on rails, which no one had done in North America. But they do it not to make money. They do it because they think it’s vital for the community, and that if the community doesn’t thrive, they won’t thrive.

The pushback one could give—and I want to know your thoughts on this as well—are the people who say, legitimately, “Sure, that’s great. We should also have better education. There are a lot of ‘shoulds’ that we should do culturally that we fail to do. What are we going to do now? What’s going to solve it now?” And I do push back and say, “look, a lot of regulations, as good as they may be both in spirit and intent—you can’t regulate people into moral behavior, certainly not immediately. Companies and cultures and families can clearly inculcate behavior that’s more in balance. But it takes a longer time.” I’m sure people will push back on Anthro-Vision and say, “This is all very interesting. But these are descriptive observations. They don’t force change.”

GT: That’s an entirely fair criticism, frankly. And I understand if you say that. You can’t codify or force culture. What you can do is have an awareness of how culture shapes behavior. You can also start to appreciate what works and what doesn’t and see other ways to impart some of those lessons. And I think there’s an interesting question about sustainability and vision, and the difference between private companies and public companies.

First, I think your book suggests that when people have skin in the game, they are usually better incentivized to manage risk than when they don’t. It’s an obvious point. But it was forgotten so much on Wall Street in recent years. And it’s quite telling that Goldman Sachs—which I think has retained a lot of the partnership culture, even though it did go public—has often been better at taking a holistic view of risks than others. Not always, but often.

Second, when you have private financial companies or partnerships, you also often have, at their best, a sense of shared values and a wider sense of community and context; simply because a family is not totally short-term. They know they’re going to be around for a while. They’re often obsessed with legacy and inheritance and actually building ties in their community. The story that you have in your book about building the railway in Baltimore: it’s part of a recognition that a family is rooted in community, and they want to uphold that. So that becomes “stakeholderism” almost by default, or by self-defense. The more interesting question is, when you’ve got public companies with shareholders, how do you get them to be less narrow in their vision and more aware of context? And that’s essentially the issue that the Financial Times (FT) set up Moral Money to cover regularly. This is an ESG [Environmental, social, and corporate governance] platform for the FT. But it’s also a question that people are grappling with all over the place right now. Because it’s very hard to know how to define corporate purpose in a less damaging, broader way. And I suspect you can’t mandate the culture shift where everyone starts to pretend to care about the wider public.

What you can do, though, is enforce a lot more transparency, so that people both inside and outside the company can see what’s happening. And I suspect that transparency rather than overregulation is going to be the most effective way to actually start some kind of cultural shift, simply because when people can see what other people are doing, the people who are doing things that they shouldn’t be doing, or that they don’t feel proud of, often get embarrassed and change almost by default.

ZK: You have sections in your book about some of the debates of the business roundtable embracing more sustainable business practices in a full-throated fashion, partly driven by people like Larry Fink at BlackRock and others. The pushback to that has always been that they’re speaking the patois because it’s appealing and it will get good press. You talked about Walmart as another example of this.

But what’s interesting about culture is that culture is often, in our world today, reinforced not by ritual but by words, and by conversation, and by the statement of either disclosure of information, or the statement of words. And I’m with you on this. I think that the articulation of a value system, even if it was initially driven by more venal motives, creates a framework that’s very difficult to back out of. Because you’ve said that the purpose of a business is more than just returning maximum value to shareholders, and that it’s actually to have some balance between that and the societal good, and that inequality at a certain level becomes societally untenable—all of which, by the way, in the Brown Brothers world would have been a series of essentially unquestioned homilies. It has never occurred to them to not be that. And they’ve never seen any issue within that framework of making as much money as they can. But making as much money as they can was not making as much money as they could.

And that’s a really interesting thing, and it gets bounded, but it probably gets bounded by words, and a value system that gets articulated and then re-articulated, and then articulated in the brochure you hand to new employees. And we can all be cynical about this stuff. But it matters. How you talk about things matters. And how you talk about them internally and externally matters in a way that I think we underplay.

There was an interesting question in the chat, and we’ll get some in the Q&A but, you know, you’ve kind of gone around the world and looked at multiple, different variants of not just capitalism as it’s practiced in the United States, but around the world. Are there any other frameworks outside the United States, if you go to like, you know… Is London, basically the same as New York? Is Mumbai just a different flavor of the same thing as Dubai, a different flavor of the same thing as Shanghai, or do you see maybe… Are there things to be learned and gleaned?

GT: Well, I think there are things to be learned and gleaned. Both the good and the bad. You know, I mean, to put it very crudely and simplistically, you know, the UK culture is very focused on the city of London. It has been traditionally, but status is less defined within the city of London by how wealthy people are, but more by, you know, sort of, dare I say, social ties. In Germany, there’s, you know, more respect and reverence for engineering than sheer finance. Money is seen as a means to an end, not an end in itself, per se, within the economy. I think the most interesting example is Japan, where I lived for a number of years. And in fact, my first book was about a Japanese bank called initially Long-Term Credit Bank, Jürgen, that then became Shinsei. And they were fascinating because, you know, the Japanese system essentially had a, not state-controlled, but heavily government-influenced financial system for many years, where banks were really just channels of consumer savings being poured into building up manufacturing.

And there was a very different attitude towards money there, in that they didn’t really have a sense of the yield curve. It wasn’t a case of “we’re going to price money according to risk.” It was very binary. We’re either going to give you money or not. And the decision of whether to give you money or not really depended on social ties, and money was embedded in social structures and social obligations in a way that seemed quite alien to a lot of American financiers, and still seems alien to a lot of American financiers.

Some very damaging consequences of that was one reason why we ended up with a big Japanese bubble in 1990. But also some positive attitudes towards that and a sense of personal responsibility. And to give you a sense of what I mean by that: when the bank that I was writing about, and I wrote a portrait of this bank over time, a bit like your book about… When the bank went bust, as it did in 1997 the senior management essentially gave up all of their bonuses, gave up their pensions, and went on to live in penury.

One of the characters in my book, actually—the book’s called Saving the Sun—ended up in jail for a while. And there was a deep sense of remorse and having to pay a price and having to basically indicate that they had damaged other people through their actions. And that was taken for granted in Japan, that if a bank went bust and there was a financial crisis, the people in charge would pay the price. Well, we didn’t really talk about it very much at the time, we just took it for granted. And then of course we had 2008 in America, and Lehman Brothers, and when the Japanese bankers, who I’d stayed very close in touch with over the years when they saw what had happened to people like Dick Fuld and others, and they had lost their jobs, but they hadn’t actually suffered much in the way of financial penalty at all, they were absolutely horrified. They couldn’t believe it. It seemed to contravene every single idea of shame in Japanese culture that they had ever held. And frankly, I think that Americans could have learned a bit from the Japanese culture, in terms of taking personal responsibility and feeling shame for when financial companies implode because of [inaudible] risk.

ZK: Yeah, that’s really interesting. And the German kind of cultural, more bounded capitalism, right? This idea that workers and owners and managers all sort of have a seat at the table, and it wouldn’t really occur to them for that not to be the case. And again, you know, not to romanticize that or any… Like, every culture has its, as you know from looking at it, right, you’ve got your boundaries and blind spots as far as things to learn about.

I want to go to one or two more of the questions, but I do want to totally shift gears for a moment, and then we can shift gears back. Because one of the things that I created The Progress Network to do was to offset a contemporary kind of… One way in which a public discussion happens is through the media and through the reporting of what’s going on. And insofar as media has always had a negative bias, negative because that is what grabs attention, because human beings crave drama, and because, you know, “if it doesn’t bleed, it doesn’t lead.” And increasingly now, the incentives of online-driven eyeball journalism can often enhance that, which has always been chronically there. You try to shed the anthropologist lens on that cohort of which you are both a part of and not entirely. I mean, you have been as much a commentator of ideas as you have been a journalist trying to report X. Is that changeable? Or should it be changed?

GT: The culture of the media? Well, I think it’s beholden on the media to take a lens to themselves on a regular basis. Because if you’re going to go around criticizing other people, you should basically be criticizing yourself too. And the media, you know, I’m a journalist, I love journalism. I know that most journalists are actually utterly well-meaning and trying to do good job. They are sometimes hobbled by two things. One is their own tribalism, and the fact that they often live in social ghettos and I’m guilty of that like everyone else. I’m conscious of, you know, what a narrow perspective in life I can sometimes get if I just stick with my social bubble. I need to get out and actually talk to people who are different from me, and that’s at the core of anthropology. But secondly, journalists are working in such a competitive, busy, frantic, efficient world these days, which means streamlined, cut to the bone in terms of resources, but they don’t have time to do what is the 101 step in journalism, which is to not just listen to noise, what people talk about, but listen to social silence. And anthropologists are kind of obsessed with this idea of listening to social silence, of listening to what people don’t talk about, the black spaces on the map, because that’s often more revealing than what they do talk about.

By way of example the thing that, even before I became editor of the capital markets section in the Financial Times in 2005, I had gone on a sort of listening to around the city of London to see what stories we were missing. And I was very struck then that there was obsessive noise around the equity market, which everyone was writing about, and almost no attention paid to this enormous credit derivatives market, which was big and growing, but was being ignored because it was geeky and dull. And because it was wrapped up in this language, as I said earlier, that everyone liked to just ignore. So looking at social silence is crucial, but journalists often don’t have the resources or time or incentives to actually do that. And that worries me. And I hope that, you know, going forward, if anyone knows, you know, philanthropists with a few spare gazillion dollars in their pockets, that we can actually fund journalists to have the time and the luxury of the space to roam, to collide with the unexpected, to dig into dark corners, and just try to step back and see the world more broadly.

Because we need that. And not just in finance. I mean, the digital sphere is another area where you’ve got these, you know, geeky silos of people scurrying around doing stuff that we all depend on, which most of us do not understand at all, where again, there’s all kinds of social silences that we should be essentially looking into.

ZK: But I wonder, on the negative bias part, one thought experiment for the year ahead is that economically multiple parts of Europe, the United States, and then we’ll see outside of China could look extraordinarily positive economically. That doesn’t mean those rewards will be well distributed. It just means that amongst the moments in the past many, many decades, where things have roared economically, this could end up being, you know, the upside or the downside of the pandemic. And I wonder, you know, there’s such a disinclination to treat relatively good news as prima facie, right? Like there’s always a cloud somewhere that you’re not looking at. There’s always a dark, black swan hidden that we should be paying attention to. But I mean, isn’t there a way to say, sometimes things go well, right? Not every good story is a prelude to a bad story. But is there a way for journalism to do that?

GT: It’s tough. I mean, you know, I have this problem with writing about ESG, environmental social governance. You know a scandal will sell. A story about sustainability doesn’t. It’s a problem. I think it’s the same problem you face with Brown Brothers Harriman because, you know, I mean, you tell me why so few people know about the company. It’s probably because they’re a partnership. It’s also because they are deliberately boring and quiet and not necessarily good, but they’re not generating scandals every two minutes, are they?

GT: No. I mean, I actually, at the end of the book, I write about the fact that part of the problem is, you know, as much as the Oliver Stone film Wall Street with Michael Douglas playing the Michael Milken, Ivan Boesky composite of Gordon Gekko, when he says “greed is good,” as much as he’s treated as villainous in the movie, and even the way the culture kind of reacts against him—I mean, Rudy Giuliani, his whole career, the two things that make his name before he becomes mayor is prosecuting the mob and prosecuting the corrupt Wall Street Titans—those are still the people who are in its own way, perversely, the heroes. They may be the anti-heroes, but they’re still the heroes. And the same thing was true with Scorsese’s film, The Wolf of Wall Street, you know? You end up kind of loving the Leonardo DiCaprio character, or if you don’t love him, you don’t really hate him either.

GT: I think one of the reasons why your book is remarkable is that you’ve managed to create such a fascinating study out of really quite boring people.

ZK: Yeah, no, I mean, that was my big challenge in this, right? It’s like, I joked when doing the book that it was basically like writing a history of Zelig, that at every important moment in American history, there’s a Brown Brothers Harriman banker in the back row, back left, looking like a banker who has absolutely no interest in being the story, but without whom there is no story. And therefore, telling their story is telling our story. And yes, it is a problem of how do you tell the story… I once wrote a book about peace between Muslims, Christians, and Jews, and the joke was “that must be a very short book.” The problem isn’t that it’s a short history. The problem is it’s not history as we’ve come to expect it, right? The lack of conflict. And the lack of negative drama is a challenge, which is, again, part of the point of the whole Progress Network here, is to say there is a reason to pay attention to the drama of the good, as much as there is a human inclination to gravitate toward the juicy drama of the bad.

Jim Fallows, who is also part of this and you know, once said, look, part of the problem with the incentives of journalism is he could go— and he wrote a book with Deb Fallows, his wife, called Our Towns, about how a lot of American towns in an age of huge capitalist disruption are saying, “look, we live here. This is our community. What are we going to do to reinvent them?” And he said, “I can go in and report this story about how a West Virginia, former coal-mining town beat the opioid epidemic, found a new way of educating kids, and developed a culture that’s really going to lead us forward. And I’ll post that on The Atlantic, and it’ll be a 6,000-word piece, and it’ll get, you know, 25,000 hits. Or I can write a 750-word response to one of Trump’s tweets in 37 minutes and post it on the site, and it’ll get half a million hits.”

And that, you know, that’s just the nature of human energies, right? One final question before we go, because I think it’s a really important one is, a few people have asked, “okay, this is all fine and well, but what can anyone do,” other than a process? And maybe that is the answer. Maybe both of us are sort of saying, look as unsatisfying in the immediate that the answer is, adopting a different process, a different sensibility, right—a lot of your book is about the sensibility of how you approach knowledge and analysis as much as it is about any particular answer.

GT: I think trying to adopt lateral vision, not tunnel vision, trying to ask “what is the silence in this situation? What am I not hearing rather than the noise that I’m actually obsessed with?” Trying to think about consequence and context of any business situation. I think those are the key elements we need. Individuals can embrace it. They can encourage their companies and workplaces to embrace it. And I think that’s really where our two books meet, because that was one of the threads that came through in your account of your bank with the story of Brown Brothers Harriman which I think is fascinating. I know you can’t just take, you know, a McKinsey-style, you know, five-bullet-point PowerPoint explaining exactly how we can all try and be like that. But you can actually bring out some of the lessons and ponder on how we’re living now.

And the last thing I’ll make is that, actually, I think instinctually many people recognize this. I think that in many ways the rise of the sustainability movement and environmental social governance is absolutely about the search for lateral vision, not tunnel vision. And that’s what stakeholderism is. And so, I started out by talking about my weird background as an anthropologist. When I was at college studying anthropology, anthropology students were a completely different social tribe from people who wanted to become grownup bankers or economists or financiers. I mean, what did you study at college? Were you in finance then? Because if you were, we wouldn’t have ever talked to each other. And I really didn’t think the two worlds would ever meet. And yet, I joined the Financial Times, wrote about finance as a journalist, discovered that those social perspectives were very useful, and then, completely to my surprise, have now lived through this rise of the sustainability and ESG movement, where in a sense, all those bits are coming together, and it’s a rather nice demonstration in how, sometimes, life comes full circle.

ZK: No, it’s true. And it’s funny, I mean, as we end, I studied history. I got a PhD in history and international relations. And so as much as I’ve had this career in finance, I’ve been in it, but I’ve never been of it. And kind of in the spirit of your book, right, there’s always been an awareness of, this is a particular culture with a set of rules, and those rules are constructed, and they are often arbitrary. And while they may make sense, they’re also not sacrosanct. And I think for me, what everyone can do is, it’s as much taking both a critical but also compassionate eye towards systems that we are a part of and that we can change. And I feel at times I can sound sort of hopelessly idealistic and utopian about these things, but increasingly I’m just going to embrace the hopelessly idealistic and utopian about them. Because the ability for each of us to recognize our agency of change which I know is a kind of a patois today, but I think it’s also true. And part of that means being aware of systems, being aware of human limitations within those systems, which you write about so eloquently and then being able to use that sensibility to nudge them, insofar as you can, within whatever sphere you are in.

So we are at our designated witching hour. I’ve had more fun having this conversation than many, although I shouldn’t say that. I should just say, you know, every event…

GT: [Inaudible] So it’s Dr. Karabell and Dr. Tett.

ZK: Dr. Karabell and Dr. Tett. That will be how we address each other, henceforth.

GT: [Inaudible] Thank you, Zachary. It’s been great, Dr. Karabell. Really enjoyed it. And thanks to everyone who’s been watching. It’s been terrific to have you guys part of the debate.

ZK: And thank you, Dr. Tett. And thank you Ms. Emma Varvaloucas. And this will be posted on YouTube. If you have subsequent questions, you can contact us through our site, and maybe we can engage people in that conversation afterwards. Emma, do you want to lead us out?

EV: I really regret that I’m also not a doctor. But thanks everyone for joining, and as Zachary mentioned, we will email you when the recording is out. If you’re not on our mailing list, you can email us at hello@theprogressnetwork.org and we’ll send you the link. So thanks everybody.

ZK: Good night. Thank you.