The Daily Walk of Shame: Ayn Rand

The Motley Fool ^ | 4 Nov 2009 | Alyce Lomax

[AreaMan]

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The Daily Walk of Shame: Ayn Rand http://www.fool.com/investing/general/2009/11/04/the-daily-walk-of-shame-ayn-rand.aspx Alyce Lomax November 4, 2009 This Motley Fool series examines things that just aren't right in the world of finance and investing. Here's what's got us riled today. If something's bugging you, too -- and we suspect it is -- go ahead and unload in the comments section below. Today's subject: Economic philosopher Ayn Rand died in 1982, but her legacy remains very much alive. Unfortunately, some people in positions of power have used parts of her Objectivist teachings to rationalize their own dysfunctional, damaging behavior. I definitely agree with the benefits of the "rational self-interest" Rand advocated. As a society, the individual drive for achievement inspires us onward and upward. However, some of her adherents seem more keen on the "self-interest" part than the "rational" part. Their ruthless selfishness and soulless narcissism have torpedoed our economic well-being and polluted our culture. Time to face the music, Ayn. Why you should be indignant: Ayn Rand defended selfishness as a virtue, and rejected the concept of altruism altogether. In other words: Every man (and woman) for him- or herself! Don't feel bad about trampling others to get what you want! It's all about you! Um, no thank you. Needless to say, the prevalence of that mind-set has screwed us all over, big time. Here are just a few examples of the rampant self-absorption Rand's teachings may have inspired: Remember the revelations from last year's Congressional hearings regarding Lehman Brothers CEO Dick Fuld? Apparently, when approached about conciliatory pay cuts to make up for poor performance, Fuld dismissed advocates of the idea by writing: "Don't worry -- they are only people who think about their own pockets." Pot, meet kettle. Chesapeake Energy's (NYSE: CHK) Chairman and CEO Aubrey McClendon faced heat for his 2008 $112.5 million compensation package. That hefty paycheck made him the highest-paid CEO in the U.S., even though the stock fell 59%. Even worse, the company's board approved paying McClendon a huge bonus designed to help him buy back Chesapeake shares he lost in a margin call. It also OK'd paying McClendon $12.1 million for maps and artwork from his personal collection. Somewhere, Rand must be giving him a great big thumbs-up. Many bailed-out bankers are doing pretty darn well, despite their companies' reliance on public funds to survive. Word of bonuses for AIG (NYSE: AIG), one of the poster children for the parade of companies that committed EPIC FAILS, stirred up outrage among many taxpayers. But hey, those executives worked hard at failing! No one could have failed quite like they did! They deserve that money! Unfortunately, the business world's current cowardly self-involvement far overshadows the executive heroes who responsibly realize that their interests extend beyond the contents of their own pockets. It's truly sad that ethical CEOs who espouse common sense and modest compensation, like Costco's (Nasdaq: COST) Jim Sinegal, could almost be considered eccentric mavericks in corporate America. What now: I avidly defend individual achievement and the free market. But unless they're shaped by personal responsibility and rock-solid ethics, those ideals can't work. Unlike Rand, I believe some forms of altruism are commendable, as long as no coercion is involved. We should all be free to make our own choices, including the strong, courageous decision not to be completely self-centered. It's not healthy to shut down our capacity for compassion, or to ignore how our actions affect other people in business or our everyday lives. When Whole Foods Market's (Nasdaq: WFMI) John Mackey gave the Fool his presentation on conscious capitalism, he expressed similar philosophical differences with Rand. He also pointed out that Rand's brand of narcissism generally doesn't make people happy at all. Despite my differences with Rand, I do respect much of her philosophy. "Throughout the centuries," she once wrote, "there were men who took first steps down new roads armed with nothing but their own vision." Within that spirit lies the beauty of the marketplace, where great companies like Google (Nasdaq: GOOG) and Apple (Nasdaq: AAPL) can create world-changing products. Ruthless selfishness, on the other hand, is a path to destruction -- parasitic, maybe even sociopathic, behavior. We've seen far too much of it. Shame on Ayn Rand, and on those so enamored of her philosophy that they can't reject its weaker, less practical aspects. It shouldn't be hard to jettison the more dangerous, ill-conceived elements of a philosophy, especially when they threaten all that's good about capitalism, freedom, and our economy. Out-of-control selfishness doesn't build; it destroys.
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[Lurker]

In other words:

Another idiot who hasn't read a word of Rand. Yawn....

Try actually reading "The Virtue Of Selfishness" sometime.

Motley Fool...emphasis on "fool".

[RatsDawg]

Where is the barf alert?

I wonder if this Motley Fool would rather read Marx?

[SJSAMPLE]

Agreed.
They think taking care of yourself automatically means starting up a death camp.

If more people, hopefully everybody, began to think about themselves, we wouldn’t need soup kitchens and homeless shelters.

He ought to be ashamed.

[DManA]

All his examples are in the private sector. The ruthlessly self interested bureaucrats in DC are 10X more dangerous because there’s no check on this destructive hoard like there is in the free market.

[SoDak]

From her bio:

Alyce Lomax is yet another English major gone astray, having wandered quite by accident into the financial information field.

Alyce? go back to English, please.

[domenad]

My words exactly - this idiot never read Ayn Rand. She never said “Trample everyone”, but Motley Fool is no different than the guy at the track who will tell you what horse is a lock for five dollars. If they were so good, they could just use the info themselves and be multibillionaires. They’re the actual scum they claim to reject.

[ZGuy]

I don’t know why anyone reads TMF. Their articles are head-shakingly bad. Also, a couple of years ago I read a piece they did on ten sure fire stock picks. I I saved the article and checked up on them one year later. Half were bankrupt and four had major losses. Only one had a positive return and it was less than 10%. TMF? Why waste my time.

[andy58-in-nh]

Those who cannot distinguish between rational self-interest and mindless self-centeredness cannot claim to understand Ayn Rand’s work. Likewise, she rejected “altruism” because it was motivated not by value but by its precise opposite. Generosity, on the other hand, is a virtue when its object is a person or thing that one actually values. “Altruism” is giving a street bum a dollar so he can go get drunk in the vain hope he spends it on something else.

[freestyle]

They (the left) really do tell you who they're scared of don't they?

Reading this, I'd think Rand is as "evil" as Sarah Palin, Fox and Rush Limbaugh!

I hope people do take a look at what Ayn Rand was about. She said back in the '60's that the battle is between the Capitalist and the Statist. She hammered the statist even more than Mark Levin did in Liberty & Tyranny.

As for believing in irrational selfishness, i.e. "trampling on others", that is a blatant LIE. And the author wouldn't have to research for more than 3 minutes into Ayn Rand to know that. Ayn Rand was consistent in her philosophy and principles based on individual's rights. If *ANY* person or government was "trampling" on another's rights that is seen as abhorrent.

[Sherman Logan]

The examples of outrageous compensation for CEOs of companies losing money may or may not be justified.

2008 $112.5 million compensation package. That hefty paycheck made him the highest-paid CEO in the U.S., even though the stock fell 59%.

Let's assume that without his sterling leadership decisions the stock would have fallen 89%. In such a case the compensation would be entirely justified.

OTOH, many of the ridiculous compensation stories of the rahrah days were pretty obviously examples of a guy who was just standing around when the jackpot hit. IOW, he was lucky enough to be there when the bubble was at its peak. The company's excellent performance was not a result of his leadership, but rather of external forces. It seems ludicrous to compensate people massively for such things.

I have no idea how to separate out compensation for actual performance as compared to compensatin for being present, but I think it should be looked at.

[sig226]

“Altruism” is giving a street bum a dollar so he can go get drunk in the vain hope he spends it on something else.

not even. the motive to give to the bum is because he 'needs' it.

[Myrddin]

I've read Rand's work. This idiot obviously has not. The misrepresentations are sufficient for me to label the rest of the article as a the work of an uneducated twit who seeks to deceive the reader. No thanks.

[cizinec]

Rand’s failings are her arguments as to *why* ethics are necessary, not whether or not there should be any.

I disagree with Rand on a number of issues, but this is just plain BS.

[mrmeyer]

My thoughts exactly.

"Out-of-control selfishness doesn't build; it destroys."

Spoken like a true statist. Control this, regulate that...blah blah blah. Is this fool volunteering to be the new Czar of good intentions?

[andy58-in-nh]

not even. the motive to give to the bum is because he 'needs' it.

I might argue that's not "altruism" because it lacks even a hopeful rationale - instead, it is an act of human sacrifice; the trading of value for nothing. But it ought to sound familiar. It's the Liberal Creed: one person's need is a claim on another person's rights.

[GeronL]

Please. Not even close.

[Mr. Jeeves]

Ayn Rand defended selfishness as a virtue, and rejected the concept of altruism altogether. In other words: Every man (and woman) for him- or herself! Don't feel bad about trampling others to get what you want! It's all about you!

This writer never read any of Rand's work - she's just quoting the emotional opinions of other commentators, like the MSM does when they put words in Rush Limbaugh's mouth.

[GeronL]

do you think the government should do the “looking at”?

[Sherman Logan]

Nope.

The Board of Directors would be my first choice, but too often they seem to be dominated by executives who sit on each others’ Boards and rubber-stamp ridiculous compensation packages for each other.

The stockholders should be the ones who object to this kind of behavior, but they seem to mostly be institutional investors who don’t care as long as the stock is going up.

[FredZarguna]

In the comments section of this putative column, the author claims to have read Rand. I suspect that Alyce has read Cliff Notes of The Fountainhead or Atlas Shrugged and is BS'ing the rest of us about having actually read Rand; because otherwise she is confessing to having possibly the worst reading comprehension of any actually literate person I've ever seen. Or perhaps she isn't literate: she is after all a self-confessed English Major, which is not a very encouraging indicator.

Alyce needs to take a frog-walk of her own down the "walk of shame." Anyone who misrepresents another's words as cluelessly as this deserves to be the object of ridicule.

[snowrip]

Who listens to the Motley Idiot anymore?

[TopQuark]

"Their ruthless selfishness and soulless narcissism have torpedoed our economic well-being and polluted our culture."

More anti-capitalist propaganda. Just like the MSM this author speaks of Wall Street "torpedo[ing] our economic well-being" as if it were truth, even self-evident one that requires no proof.

The irony is, this "writer" works for a financial company that profits directly from trading securities. Another Soros-like socialist.

[sig226]

i think that came out in an argument between hank rearden and one of his family members in atlas shrugged. according to lilly or phillip or one of the other looters, giving something to someone who will appreciate it is meaningless, but giving something to someone who will discard or abuse the gift is altruistic because the giver sacrifices the gift. as you put it, trading value for nothing.

i won’t give money to bums because i know that they will use it to feed their alcoholism. the liberal mindset says that i should give money to bums precisely because they are going to feed their alcoholism. then i would be sacrificing something (my sanity.)

[TopQuark]

"many of the ridiculous compensation stories of the rahrah days were pretty obviously examples of a guy who was just standing around when the jackpot hit."

It's not even that. Anything more than a few million, perhaps even $20, is usually deferred compensation.

Imagine that you and your employer agree, for tax reasons, that you will collect 50% of what you earned that year. The remainder will invested into some mutual fund. Upon retirement (or other departure) in 20 years, how much do you think it will be worth? If your salary and bonus are on the order of 3M, say --- less than football players and anchormen of national news get --- and you invest $1.5M annually for 20 years, you can easily arrive at $75M.

The other big portion of those compensation packages are options granted long ago. Even with the stock price decline, those options may still be very valuable.

The problem is, the MSM media presents that compensation as bonues. Just a falsehood designed to entice the envy and hatred of the "masses" towards the "rich." Marx would be proud.

[Sherman Logan]

I’m not sure you’re getting my point.

I have no problem whatsoever with a guy who provides great value to his employer or to society at large being massively rewarded.

However, it seems to me a lot of these high-compensation guys are probably not really providing that much added value. Are there really so few people who can do their job that these rates of compensation actually constitute true market value? Most of these guys aren’t inventing new businesses or new business models, they’re keeping an existing system running.

I am extremely skeptical these compensation rate are really market value, although willing to be convinced otherwise.

[TopQuark]

"However, it seems to me a lot of these high-compensation guys are probably not really providing that much added value."

The markets speaks every minute. The minute they don't, they are typically out.

"Are there really so few people who can do their job that these rates of compensation actually constitute true market value?"

Yes. This seems counter-intuitive ONLY because if the tradition, according to which "the manager is just like the rest of us only a better behind-kisser." People are smart enough to understand that just because they drive cars for decades they don't become automotive engineers. And yet they widely believe that just by observing management they know what managers do. It did not help, of course, that widespread professional development of general managers (MBAs) is a relatively new phenomenon.

The truth is, CEOs are NOT like the rest of us; nor are they like entrepreneurs of whom you also spoke). They have organizational talent. I respectfully submit to you that you view inventors' riches as justified because you grand those people talent. No shame for a talent to become very rich. It easy to relate to them: entrepreneurs can show a NEW product or service that was nonexistent before them.

Well, CEOs and other top execs also have talent, which is harder to understand and observe (for most people, observation amounts to working for the respetice company or using its products --- none of which really helps). It is talent to lead an existing organization, which often requires its evolution rather than revolution.

"Most of these guys aren’t inventing new businesses or new business models, they’re keeping an existing system running."

Exactly. You tacitly --- and falsely, I am sorry to say --- assume that this requires not talent but just "being there." It's a very different talent, but talent nonetheless. Most of entrepreneurs are known to ruin their initially successful companies -- precisely because that which made them successful initially must be replaced by new and different skills once the company IS successful. They typically refuse to do so ("Don't teach me; I started this company; and I didn't have any MBA when I made my first million is sales, etc.")

[ A great counter-example is Bill Gates, who was not that successfully as entrepreneur (there are plenty of errors he committed, which are not popular to bring up nowadays), but he is a rare individual who truly grew with the business and understood at, at some point, it MUST be given to lawyers, accountants, etc. to be managed professionally. ]

The upshot is, running an ongoing concern requires a different and less understandable talent than starting a new company or inventing a new product.

"I am extremely skeptical these compensation rate are really market value,"

To be sure, as in any area of life, there are aberrations. But as a rule, yes, the (labor) market is what determines the compensation level and scheme. And, once you realize that, unlike middle managers or line workers, top management requires talent, their "salaries" become no longer disturbing. This is because your reference point changed at once. Instead of comparing CEO's salary to that of an engineer working for the same company, you compare them to entertainers, basketball players, etc.

Adam Sandler makes $30M per movie that he makes in six weeks. Jay Leno makes about $45M per year leading a staff of a couple of dozen people. Michael Jordan in his time (different dollars) was making about $40M/year. Rush Limbaugh makes about $60M. No national anchorman and women on "The View" make no less than $6M/year. And CEO that leads tens of thousands of people does not get anywhere on the same scale (their supply still exceeds that of TV personalities and basketball stars). But their seemingly huge compensation no longer looks that huge once proper reference point is established.

[ Incidentally, the parallel continues even with bonuses. Everyone and his dog is asking why some CEOs receive bonuses when the company incurs losses. Well, Jay Leno's compensation is NOT tied to profits of NBC; nor Jordan's compensation depends on whether his team wins or loses. CEOs compensation is often tied to specific targets other than profits. The same is true for star traders on Wall Street: if (s)he brought $100M in profits, why should (s)he not get an accordingly large commission even if the company as a WHOLE has losses? ]

"although willing to be convinced otherwise."

That's why I responded in some detail. :)

[andy58-in-nh]

It may be a secret to some, but the man who denies a bum a buck to go get loaded is a far greater lover of humanity than the one who casually tosses him a five and spends the rest of the day feeling noble about his "charity".

But I know, because you're here: you already knew that. Liberals define "good deeds" as acts of pity and self-sacrifice. Conservatives define them as acts of honor and respect.

[mjp]

to rationalize their own dysfunctional, damaging behavior.

this person is confusing subjectivistic egotism with rational egoism. When one tries to gain a value for himself by doing something that is self destructive or violating the rights of another, he is a subjectivistic egotist not a rational egoist