And that’s why the Greeks invented hubris.

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When VH1 does its nostalgia show for the decade of the Twentysies (which will cover the years 1998-2008, sorta like “the Sixties” actually means roughly 1967-1975), its theme will be hubris.  Lotsa people getting too big for their britches, thinking they know something nobody else knows, and that that knowledge means the normal rules don’t apply to them; in the end, they flame out, sometimes destroying themselves in the process, but always destroying lots of innocent by-standers.

It starts off in the late Clinton years, when Sen. Phil Gramm and a guy in the White House named Lawrence Summers (I wonder what ever happened to that dude . . . hmmmm) decided they and their Wall Street confreres suddenly understood America’s financial system better than anybody else ever had.  This special knowledge informed them that the usual rules didn’t apply anymore; that huge, multifarious financial institutions no longer presented a threat to the American economy, and the 70-year-old rules preventing banks and insurance companies from spreading into each others’ industries were no longer needed.  Pres. Clinton agreed, and bye-bye Glass-Steagall Act.

Next comes Enron.  That was basically a case of some guys who thought they had a deeper understanding of energy markets than anybody else.  Ever.  First they convinced their peers that their nonsense was real, but too complex for anybody but “the smartest guys in the room” to understand.  Next they used that social leverage to build a wall of secrecy around what they were doing.  And last they ran their company straight into the ground, in the process throwing hundreds of people out of work and causing rolling blackouts all up and down the West Coast.

The next example is Dick Cheney.  First he convinced himself that he and his inner circle were the only ones who really knew how the world worked, the only ones who really knew what Saddam Hussein was up to, the only ones who really understood what was necessary to interrogate terrorism suspects, the only ones who really knew how to keep the country safe.  Next he built a wall of secrecy around what he was doing.  And last he ran the country into the ground in Iraq.  He walks away with a limp, but for the rest of us it cost trillions of dollars, thousands of American lives, tens of thousands of Iraqi lives, millions of Iraqi refugees, and lost ground in our other war (the one where the people who attacked us actually are) and in America’s global influence.

Then there’s Karl Rove, another big fan of secrecy who thought he knew more than anybody else, thought he understood America better than anybody else, thought there was such a thing in America as a “permanent majority” and he knew how to build it.  That I-have-special-secret-knowledge attitude is how he drove his party into the ground.  As he famously said the night before the 2006 elections, all those polling companies had “their math,” but he had “THE math.”  Oops.  He walked away relatively unscathed, though with his reputation for brilliance diminished.  The rest of us have to deal with the mess he created — a fouled Justice Department and a two-party political system with only one functioning party.

Now, at the end of the Decade of Hubris (we hope), we have pretty much everybody in the financial industry, who all convinced themselves they alone had special insight into how securities markets worked, insight that seemed to lift the normal rules of supply and demand and no free lunches.  They’ve all made out like bandits, but pretty well sunk the rest of us.

That’s a nice bookend to the beginning of the Decade of Hubris, and . . . hey! there’s that Larry Summers guy in the White House again!  Seems he walked away unscathed.  So did Phil Gramm, who left the senate and became vice chairman of UBS, a huge Swiss bank.  He was in charge of . . . wait for it . . . lobbying the U.S. government on mortgage issues.  And, of course, Bill Clinton walked away from this unharmed, too, and now is worth millions.

So here are a few lessons I’ve learned from America’s last 10 years:

  1. If you find yourself thinking, “Nobody gets this but me,” you’re the one who doesn’t get it.
  2. Secret knowledge is not knowledge.  It’s cultivated ignorance.
  3. If you screw up, make it huge.  That way, everybody has to pay but you.
  4. Taking regulatory advice from Larry Summers or Phil Gramm is right up there with getting involved in a land war in Asia.  (A perfectly symmetrical irony, since a) Summers is Obama’s lead economic adviser and Gramm was John McCain’s; and b) we’re currently involved in 2 land wars in Asia.)
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One Response to “And that’s why the Greeks invented hubris.”

  1. michaellasley Says:

    Here’s a little quote via Freakonomics blog. About the Glass-Steagall Act when it was getting repealed in ’99:

    “I think we will look back in 10 years’ time and say we should not have done this, but we did because we forgot the lessons of the past, and that that which is true in the 1930’s is true in 2010.” That’s Sen. Byron Dorgan (D.-North Dakota), from a 1999 Times article on the repeal of the Glass-Steagall Act. The repeal was a major step toward deregulating the banking industry, which probably helped germinate our current financial mess, and (unintentionally) contained the damage somewhat as the meltdown began.

    Also: is there anything the Greeks couldn’t do?

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