The U.S. upper class: Soviet blatnoys in capitalist drag.

One thing quickly learned when studying tyranny (and lesser, more gradual, failures of states and societies such as observed in the contemporary United States) is that the ideological leanings of tyrants are largely superficial. Those are stances taken to win popular support, not sincere moral positions. Beneath the veneer, tyrants are essentially the same, whether fascist, communist, religious, or centrist in nature. Supposedly “right-wing” fascists and Nazis would readily deploy “socialist” innovations such as large public works projects and social welfare programs if it kept society stable in a way they preferred, while the supposedly “communist” elites in the Soviet Union and China were self-protecting, deeply anti-populist, and brutal– not egalitarian or sincerely socialist in the least. The U.S. upper class is a different beast from these and, thus far, less malevolent than the communist or fascist elites (although if they are unchecked, this will change). It probably shares the most in common with the French aristocracy of the late 18th-century, being slightly right-of-center and half-hearted in its authoritarianism, but deeply negligent and self-indulgent. For a more recent comparison, I’m going to point out an obvious and increasing similarity between the “boardroom elite” (of individuals who receive high-positions in established corporations despite no evidence of high talent or hard work) and an unlikely companion: the elite of the Soviet Union.

Consider the Soviet Union. Did political and economic elites disappear when “business” was made illegal? No, not at all. Did the failings of large human organizations suddenly have less of a pernicious effect on human life? No; the opposite occurred. What was outlawed, effectively, was not the corporation (corporate power existed in the government) but small-scale entrepreneurship– a necessary social function. Certainly, elitism and favoritism didn’t go away. Instead, money (which was subject to tight controls) faded in importance in favor of blat, an intangible social commodity describing social connection as well as the peddling of influence and favors. With the money economy hamstrung by capitalism’s illegality, blat became a medium of exchange and a mechanism of bribery. People who were successful at accumulating and using social resources were called blatnoys. The blatnoy elite drove their society into corruption and, ultimately, failure. But… that’s irrelevant to American capitalism, right?

Well, no. Sadly, corporate capitalism is not run by “entrepreneurs” in any sense of the word. Being an entrepreneur is about putting capital at risk to achieve a profit. Someone who gets into an elite college because a Senator owes his parents a favor, spends four years in investment banking getting the best projects because of family contacts, gets into a top business school because his uncle knows disgusting secrets about the dean of admissions, and then is hired into a high position in a smooth-running corporation or private equity firm, is not an entrepreneur. Anything but. That’s a glorified private-sector bureaucrat at best and, at worst, a brazen, parasitic trader of illicit social resources.

There are almost no entrepreneurs in the American upper class. This claim may sound bizarre, but first we must define terms– namely, “upper class”. Rich people are not automatically upper class. Steve Jobs was a billionaire but never entered it; he remained middle-class (in social position, not wealth) his entire life. His children, if they want to enter its lower tier, have a shot. Bill Gates is lower-upper class at best, and has worked very hard to get there. Money alone won’t buy it, and entrepreneurship is (by the standards of the upper class) the least respectable way to acquire wealth. Upper class is about social connections, not wealth or income. It’s important to note that being in the upper class does not require a high income or net worth; it does, however, require the ability to secure a position of high income reliably, because the upper class lifestyle requires (at a minimum) $300,000 after tax, per person, per year.

The wealth of the upper class follows from social connection, and not the other way around. Americans frequently make the mistake of believing (especially when misled on issues related to taxation and social justice) that members of the upper class who earn seven- and eight-digit salaries are scaled-up versions of the $400,000-per-year, upper-middle-class neurosurgeon who has been working intensely since age 4. That’s not the case. The hard-working neurosurgeon and the well-connected parasite are diametric opposites, in fact. They have nothing in common and could not stand to be in the same room together, because their values are too much at odds. The upper class views hard work as risky and therefore a bit undignified. It perpetuates itself because there is a huge amount of excess wealth that has congealed at the apex of society, and it’s relatively easy to exchange money and blat on an informal but immensely pernicious market.

Consider the fine art of politician bribery. The cash-for-votes scenario, as depicted in the movies, is actually very rare. The Bush family did have their their “100k club” when campaign contributions were limited to $1000-per-person, but entering that set required arranging for 100 people to donate the maximum amount. Social effort was required to curry favor, not merely a suitcase full of cash. Moreover, to walk into even the most corrupt politician’s office today offering to exchange $100,000 in cash for voting a certain way would be met with a nasty reception. Most scumbags don’t realize that they’re scumbags, and to make a bribe as overt as that is to call a politician a scumbag. Instead, politicians must be bribed in more subtle manners. Want to own a politician? Throw a party every year in Aspen. Invite up-and-coming journalists just dying to get “sources”. Then invite a few private-equity partners so the politician has a million-dollar “consulting” sinecure waiting if the voters wise up and fire his pasty ass. Invite deans of admissions from elite colleges if he has school-age children. This is an effective strategy for owning (eventually) nearly all of America’s decision makers; but it’s hard to pull off if you don’t own any of them. What I’ve described is the process of earning interest on blat and, if it’s done correctly and without scruples, the accrual can occur rapidly– for people with enough blat to play.

Why is such “blat bribery” so common? It makes sense in the context of the mediocrity of American society. Despite the image of upper management in large corporations as “entrepreneurial”, they’re actually not entrepreneurs at all. They’re not the excellent, the daring, the smartest, or the driven. They’re successful social climbers; that’s all. The dismal and probably terminal mediocrity of American society is a direct result of the fact that (outside of some technological sectors) it is incapable of choosing leaders, so decisions of leadership often come down to who holds the most blat. Those who thrive in corporate so-called capitalism are not entrepreneurs but the “beetle-like” men who thrived in the dystopia described in George Orwell’s 1984.

Speaking of this, what is corporate “capitalism”? It’s neither capitalism nor socialism, but a clever mechanism employed by a parasitic, socially-closed but internally-connected elite to provide the worst of both systems (the fall-flat risk and pain of capitalism, the mediocrity and procedural retardation of socialism) while providing the best (the enormous rewards of capitalism, the cushy safety of socialism) of both for themselves.

These well-fed, lily-livered, intellectually mediocre blatnoys aren’t capitalists or socialists. They’re certainly not entrepreneurs. Why, then, do they adopt the language and image of alpha-male capitalist caricatures more brazen than even Ayn Rand would write? It’s because entrepreneurship is a middle-class virtue. The middle class of the United States (for not bad reasons) still has a lot of faith in capitalism. Upper classes know that they have to seem deserving of their parasitic hyperconsumption, and to present the image of success as perceived by the populace at large. Corporate boardrooms provide the trappings they require for this. If the middle class were to suddenly swing toward communism, these boardroom blatnoys would be wearing red almost immediately.

Sadly, when one views the social and economic elite of the United States, one sees blatnoys quite clearly if one knows where to look for them. Fascists, communists, and the elites of corporate capitalism may have different stated ideologies, but (just as Stephen King expressed that The Stand‘s villain, Randall Flagg, can represent accurately any tyrant) they’re all basically the same guy.

Criminal Injustice: The Bully Fallacy

As a society, we get criminal justice wrong. We have an enormous number of people in U.S. prisons, often for crimes (such as nonviolent drug offenses) that don’t merit long-term imprisonment at all. Recidivism is shockingly high as well. On the face of it, it seems obvious that imprisonment shouldn’t work. Imprisonment is a very negative experience, and a felony conviction has long-term consequences for people who are already economically marginal. The punishment is rarely appropriately matched to the crime, as seen in the (racially charged) discrepancies in severity of punishment for possession of crack vs. cocaine. What’s going on? Why are we doing this? Why are the punishments inflicted on those who fail in society often so severe?

I’ll ignore the more nefarious but low-frequency ills behind our heavy-handed justice system, such as racism and disproportionate fear. Instead, I want to focus on a more fundamental question. Why do average people, with no ill intentions, believe that negative experiences are the best medicine for criminals, despite the overwhelming amount of evidence that most people behave worst after negative experiences? I believe that there is a simple reason for this. The model that most people have for the criminal is one we’ve seen over and over: The Bully.

A topic of debate in the psychological community is whether bullies suffer from low or high self-esteem. Are they vicious because they’re miserable, or because they’re intensely arrogant to the point of psychopathy? The answer is both: there are low-self-esteem bullies and high-self-esteem bullies, and they have somewhat different profiles. Which is more common? To answer this, it’s important to make a distinction. With physical bullies, usually boys who inflict pain on people because they’ve had it done to themselves, I’d readily believe that low self-esteem is more common. Most physical bullies are exposed to physical violence either by a bigger bully or by an abusive parent. Also, physical violence is one of the most self-damaging and risky forms of bullying there is. Choosing the wrong target can put the bully in the hospital, and the consequences of being caught are severe. Most physical bullies are, on account of their coarse and risky means of expression, in the social bottom-20% of the class of bullies. On the whole, and especially when one includes adults in the set, most bullies are social bullies. Social bullies include “mean girls”, office politickers, those who commit sexual harassment, and gossips who use the threat of social exclusion to get their way. Social bullies may occasionally use threats of physical violence, usually by proxy (e.g. a threat of attack by a sibling, romantic partner, or group) but their threats generally involve the deployment of social resources to inflict humiliation or adversity on other people. In the adult world, almost all of the big-ticket bullies are social bullies.

Physical bullies are split between low- and high-self-esteem bullies. Social bullies, the only kind that most people meet in adult life, are almost always high-self-esteem bullies, and often get quite far before they are exposed and brought down. Some are earning millions of dollars per year, as successful contenders in corporate competition. Low self-esteem bullies tend to be pitied by those who understand them, which is why most of us don’t have any desire to hunt down the low self-esteem bullies who bothered us as children. It’s high self-esteem bullies that gall people the most. High self-esteem bullies never show remorse, often are excellent at concealing the damage they do, even to the point of bringing action consequences of their actions to the bullied instead of to themselves, and they generally become more effective as they get older. It’s easy to detest them; it would be unusual not to.

How is the high self-esteem bully relevant to criminal justice? At risk of being harsh, I’ll assert what most people feel regarding criminals in general, because for high-self-esteem bullies it’s actually true: the best medicine for a high self-esteem bully is an intensely negative and humiliating experience, one that associates undesirable and harmful behaviors with negative outcomes. This makes high-self-esteem bullies different from the rest of humanity. They are about 3 percent of the population, and they are improved by negative, humiliating experiences. The other 97 percent are, instead, made worse (more erratic, less capable of socially desirable behavior) by negative experiences.

The most arrogant people only respond to direct punishment, because nothing else (reward or punishment) can matter to them, coming from people who “don’t matter” in their minds. Rehabilitation is not an option, because such people would rather create the appearance of improvement (and become better at getting away with negative actions) than actually improve themselves. The only way to “matter” to such a person is to defeat him. If the high-self-esteem bully’s negative experiences are paralyzing, all the better.

Before going further, it’s important to say that I’m not advocating a massive release of extreme punishment on the bullies of the world. I’m not saying we should make a concerted effort punish them all so severely as to paralyze them. There are a few problems with that. First, it’s extremely difficult to determine, on an individual basis, a high self-esteem bully from a low-self-esteem one, and inflicting severe harm on the latter kind will make him worse. Humiliating a high-self-esteem bully punctures his narcissism and hamstrings him, but doing so to a low-self-esteem bully accelerates his self-destructive addiction to pain (for self and others) and leads to erratic, more dangerous behaviors. What comes to mind is the behavior of Carl in Fargo: he begins the film as a “nice guy” criminal but, after being savagely beaten by Shep Proudfoot, he becomes capable of murder. In practice, it’s important to know which kind of bully one is dealing with before deciding whether the best response is rehabilitation (for the low self-esteem bully) or humiliation (for the high self-esteem bully). Second, if bullying were associated with extreme punishments, the people who’d tend to be attracted to positions able to affix the “bully” label would be, in reality, the worst bullies (i.e. a witch hunt). That high self-esteem bullies are (unlike most people) improved by negative experience is a fact that I believe few doubt, but “correcting” this class of people at scale is a very hard problem, and doing so severely involves risk of morally unacceptable collateral damage.

How does this involve our criminal justice policy? Ask an average adult to name the 3 people he detests most among those he personally knows, and it’s very likely that all will be high self-esteem bullies, usually (because physical violence is rare among adults) of the social variety. This creates a template to which “the criminal” is matched. We know, as humans, what should be done to high-self-esteem bullies: separation from their social resources in an extremely humiliating way. Ten years of extremely limited freedom and serious financial consequences, followed by a lifetime of difficulty securing employment and social acceptance. For the office politicker or white-collar criminal, that works and is exactly the right thing. For the small-time drug offender or petty thief? Not so much. It’s the wrong thing.

Most caught criminals are not high self-esteem bullies. They’re drug addicts, financially desperate people, sufferers of severe mental illnesses, and sometimes people who were just very unlucky. To the extent that there are bullies in prison, they’re mostly the low-self-esteem kind– the underclass of the bullying world, because they got caught, if for no other reason. Inflicting negative experiences and humiliation on such people does not improve them. It makes them more desperate, more miserable, and more likely to commit crimes in the future.

I’ve discussed, before, why Americans so readily support the interests of the extremely wealthy. Erroneously, they believe the truly rich ($20 million net worth and up) to be scaled-up versions of the most successful members of the middle class. They conflate the $400,000-per-year neurosurgeon who has been working hard since she was 5 with the parasite who earns $3 million per year “consulting” with a private equity firm on account of his membership in a socially-closed network of highly-consumptive (and socially negative) individuals. Conservatives mistake the rich for the highly productive because, within the middle class, this correlation of economic fortune and productivity makes some sense, while it doesn’t apply at all to society’s extremes. The same is at hand in the draconian approach this country takes to criminal justice. Americans project the faces of the bullies onto the criminal, assuming society’s worst actors and most dangerous failures to be scaled-up version of the worst bullies they’ve dealt with. They’re wrong. The woman who steals $350 of food from the grocery store out of desperation is not like the jerk who stole kids’ lunch money for kicks, and the man who kills someone believing God is telling him to do so (this man will probably require lifetime separation from society, for non-punitive reasons of public safety and mental-health care) is not a scaled-up version of the playground bully.

In the U.S., the current approach isn’t working, of course, unless its purpose is to “produce” more prisoners (“repeat customers”). Few people are improved by prison, and far fewer are helped by the extreme difficulty that a felony conviction creates in the post-incarceration job search. We’ve got to stop projecting the face of The Bully onto criminals– especially nonviolent drug offenders and mentally ill people. Because right now, as far as I can tell, we are The Bully. And reviewing the conservative politics of this country’s past three decades, along with its execrable foreign policy, I think there’s more truth in that claim than most people want to admit.

What made Steve Jobs rare?

Steve Jobs was one of our generation’s best innovators, if not the best. What he represented was singular and rare: a person in charge of a major company who actually had a strong and socially positive vision. Corporate executives are expected to have some quantity of vision and foresight, but so very few, across the Fortune 1000, ever actually have it that there is a certain surprise associated with learning of one who does. Most corporate executives are mediocrities if not negative in their contribution, meddling with those who are actually getting work done with constant churn and (in the negative sense) disruption. Steve Jobs, on the other hand, was integral to the success of Apple. As Apple’s posthumous tribute to him said, only he could have built that company. Unlike the typical businessman, Jobs was not especially charismatic. He was an effective salesman only because the quality of what he sold was so high; he could sell because he believed in his products. What he was is creative, courageous, disciplined, and effective. He had a sharp aesthetic sense, but also the clarity of vision to ship a real, working product.

Why do people like him appear only a few times in a generation? It’s not that there is a lack of talent. Not to denigrate Steve Jobs, because his talents are in any case uncommon, but I’d bet heavily (on statistical grounds) that there are at least a few hundred or thousand people like him out there, hacking away at long-shot startups, cloistered in academia, or possibly toiling in corporate obscurity. The issue is that people with his level of talent almost never succeed in human organizations such as large corporations. A keen aesthetic sense is a severe liability in most corporate jobs, as the corporate style of “professionalism” requires tolerance of ugliness rather than the pursuit of aesthetic integrity at all costs. Creative talent also becomes a negative in environments that expect years of unfulfilling dues-paying before one gets creative control of anything. People like Jobs can’t stand to waste time and so, in corporate America, they rarely make it. When they are set to boring work, the part of their brains not being used scream at them and that makes it impossible for them to climb the ladder.

That human organizations are poor at selecting leaders is well-known, and startups are an often-cited antidote to this problem. The issue there is that a herd mentality still exists in venture capital and startup press. The herd almost never likes people of high talent, and for every independent thinker in a true king-making role, there are twenty overfed bureaucrats making decisions based on “track record” and similarity to existing successes– a fact not in the favor of a 22-year-old Steve Jobs in 2011. To be honest, I don’t think such a person would have a chance in hell of acquiring venture capital funding on his own, unless born into the necessary connections. Elite incubators such as Y Combinator are solving this problem, and quite well, by connecting young talent with the necessary resources and connections. Are they doing enough? Will they succeed in changing the dynamics of startup funding and traction? I don’t have the foresight to answer that question yet; honestly, I have no idea. Time will tell.

I think a lot of people around my age (28) have spent some time thinking: How can I be more like Steve Jobs? That’s the wrong question to be asking. The perfect storm that enables even a moderately creative person (much less an out-and-out disruptive innovator like Jobs) to overcome the enormous obstacles human organizations throw at them is an event that occurs less often than a $100-million lottery windfall. The right question is closer to this: what can I do that makes people with immense creative talents, like Steve Jobs, more likely to succeed? So this, I believe, is a more reliable path to success and an indirect sort of greatness. It’s great to have dreams and work hard to achieve them, but it’s equally noble (and more often successful) to help others with great ideas realize theirs. Right now, most people with great ideas almost always linger in obscurity, with powerful people and institutions actively working to keep them there. That has been the case for nearly all of human history, but technology can change it.

How? I’m not sure. I spend a lot of time thinking about this issue. How can a world with so much creative talent in it (on account of having nearly 7 billion living people, at least a billion of whom now have the minimum resources to express creativity and at least a few million among those having the talent) be achieving so little? Why is there so much ugliness, inertia and failure? How do we empower people to change it? These questions are too big for me to answer, at least for now. I’m going to focus on one thing: the process of turning talent into greatness, the former being abundant and the latter being desperately uncommon. How do we get people with high talent to such a degree of skill that they can, as individual contributors, contribute to society substantially– so much so as to overcome the general mediocrity of human institutions?

This is an educational problem, but not one solved by traditional schooling. Greatness doesn’t come from completing assignments or acing tests, obviously. It requires personal initiative, a will to innovate, and courage. Then it requires recognition; people who show the desire to achieve great things should be given the resources to try. It doesn’t seem like it, but I’ve exposed an extremely difficult problem, one that I don’t know how to solve. Educational processes that encourage creativity make it extremely difficult to measure performance, and therefore fail to gain the social trust necessary to propel their pupils into positions of creative control in major organizations. On the other hand, those educational processes in which it’s easy to measure performance generally favor conformity and the ability to “game the system” over useful creative talents or skills. Moreover, there’s a variety of grade inflation that exists far beyond academia whose effect is socially pernicious.

Grade inflation seems like a “feel good” consequence of people being “too nice”, but from a zero-sum economic perspective, it actually reflects a society that stigmatizes failure heavily. If an average performance is rated at 2 (a C grade) on a 0-to-4 scale, then excellence in one course (A, 4.0) cancels out failure (F, 0.0) in another. On the other hand, if the average is 3.2 out of 4, then it takes four excellent grades to cancel out one failure. This makes failing a course substantially more costly. This reflects risk-aversion on the part of the educational system– the student who puts forth a mediocre performance in three courses is superior to one who excels in two but fails the third– and engenders risk-averse behavior on the part of students. That said, I’m not especially concerned with this problem in the educational system, which is far more forgiving of good-faith failure than most human organizations. A failed course can damage one’s average but rarely results in expulsion. I’m more worried about how this mentality plays out in real life.

This style of risk-aversion is reflected in human organizations such as corporations. An employee who has four great years followed by a bad one is likely to be fired for the damaged reputation acquired in that failed fifth year. People are measured according to their worst-case performance (reliability) rather than their best-case capability (talent). This is a problem for a person like Steve Jobs, obviously capable of hitting the highest of the high notes, but liable to show negative contribution (pissing people off) at his worst. It’s also a more general problem that leaves large organizations unable to tap their best people. Why? Those best people tend overwhelmingly to be “high-variance” people– those whose job performance becomes weak if they lose motivation, and who become so passionate about the quality of work that they invariably end up in personality conflicts. Low-variance individuals– generally lacking creativity but capable of sustaining a middling performance for decades, thereby showcasing “professionalism”– tend to win out in their stead. The creatively desolate world we observe in the leadership of major human organizations is a direct result of this.

In some cases, measuring performance at a person’s bottom rather than top makes sense. As Lord Acton said, “Judge talent at its best and character at its worst.” People who behave in a way that is outright unethical have proven themselves not worthy of trust, regardless of their best-case capabilities. On the other hand, a person like Steve Jobs fails in a mainstream corporate environment fails not because he is unethical but because he’s merely difficult. That is what is in error. In general, human organizations develop a toddler-like, black-and-white view in evaluation of their members and thereby lose the ability to discriminate between those who are outright criminal (and should be distrusted, terminated from employment, and possibly punished regardless of their talents) from those who have difficult personalities or who suffer a good-faith failure (a risk one must be able to afford if one wants to achieve anything).

There’s a solution to that problem, but a touchy one. In technology, programmers have taken to the open-source community as a means of building an organization-independent career. This reflects what academia has had for a long time: active encouragement for its members (graduate students and post-docs especially) to build reputations outside of their institutions. This allows people to demonstrate their best-case capabilites to the world at large. Unfortunately, there is an extremely touchy political matter here. Corporations and managers within them would generally prefer that subordinates not dedicate energy to the cultivation of an external reputation, a process that (a) distracts them from their “real work” and dues-paying, and (b) makes them more expensive to retain. Many large companies forbid employees to take consulting work or publish papers for this precise reason.

Now that I’ve laid out a few problems and ideas, I’ve noticed that both time (9:08 am, and I haven’t yet left for work) and word count (1683 and rising) are encouraging me to finish up. For a closing thought, I’ll admit that I don’t have many answers to the “big picture” problems here. I don’t know what it will take to fix the problems of large human organizations that lead to their pervasive mediocrity. I don’t even know if it can be done. Where to focus? Something smaller and tractable, something grass-roots.

Brilliant people, like Steve Jobs, aren’t born fully-fledged like Venus from the sea. Jobs became what he was due to a thousand influences– his friendship with Steve Wozniak, his early successes, later failures, and yet-later successes. That much is obvious. He was always talented but he became great on account of the opportunities he had– the successes and failures that refined his aesthetic sense until (in his later adulthood) it was a finished product. I also believe that there are thousands of people much like him in existence, their talents unexpressed. I don’t think we need to work hard to “find” them. These people are loud and obnoxious enough that this is an easy task. What we need to do, as much as we can, is enable such people to overcome the hurdles imposed by large human organizations more interested in protecting entrenched mediocrity than in pursuing excellence. We need to fight that battle as much as we can. And yet, we must accept that we aren’t likely to get very far. There’s more we need to do.

We need to rethink education. I’m not just talking about schooling. Instead, I’m talking about technology and business and culture. We need to remove from ourselves the notion that education is a “product” to be “consumed” by those rendered economically useless by their youth and inexperience. Education needs to be an ongoing process. It needs to pervade everything we do. Instead of writing code, managing people, or running businesses we need to focus on teaching people what we can, and on learning from them reciprocally. We need to reinvent corporate and organizational cultures outright so that talent is naturally turned into greatness, and so that excellence isn’t a weird, socially counterproductive personality trait but something that all strive toward.

Half of 56 is 28

Steve Jobs just died. His Stanford commencement speech is already legendary, but I’ll add one more link to it. Call me a “fanboy” or a crowd-follower for liking it; it really is worth listening to.

This is a poignant reminder to all of us that we may have less time than we think we do. Society, with this expressed most prominently in the early rounds of the career game, expects young people to deny their mortality– to delay creative expression and fulfilling work to a distant, prosperous future that might never come. Jobs never denied his mortality. He did what he loved. This is the only reasonable approach because, in the end, mortality refuses to be denied.