“It is easier for a camel to go through the eye of a needle, than for a rich man to enter the kingdom of God.”
–Jesus, Matthew 19:24
If you haven’t been watching “Silicon Valley,” HBO’s hilarious spoof of the technology boom, you might want to give it a look. The series features five nerdy guys who happen to be super-smart and highly adept at developing technological breakthroughs that would make them very rich if they could just figure out how the business world works. In the course of their fumbling efforts to cash in on their brilliance, they meet folks who have made it big and are all too anxious to add to their fortunes by “investing” in Pied Piper, the nerdy guys’ company.
Russ Hanneman is one such fellow, and he’s been bedeviling the Pied Piper guys in this season’s episodes. Hanneman is a self-absorbed narcissistic billionaire who gained his wealth by “putting radio on the internet.” But things don’t always go so well for billionaires, and in a recent episode such a fate befalls Hanneman. It seems that several of his investments have crashed, resulting in a loss of $200 million. That loss means his net worth is now only $986 million; hence, if you “round down,” as he sadly notes, he’s no longer a billionaire.
The humor is obvious. The series, co-created by Mike Judge, who created the “Beavis and Butthead” TV series and also wrote and directed “Office Space” and “Ideocracy” (both highly inventive films), lampoons techno geeks and their beneficiaries with characters like Hanneman. These are largely humorless and often clueless types who have singular focuses that sometimes provide them with a bundle of income. In Hanneman’s case, the wealth he acquires becomes his identity, so much so that he considers it a personal crisis, if not a disaster, that he is no longer a full-fledged billionaire.
When Hanneman decries his financial reversal to the guys, they are slightly incredulous, since they are struggling just to keep their business alive due to a series of miscalculations and inept business practices. Hanneman, though, is in his own world, one that consists of investing bundles of money in various enterprises as he seeks to add to his fortune, while he lives a life of opulence and depravity that includes not even picking up his dog’s poop on the floor of his home.
Do such people really exist? Probably not to the comic extent portrayed in the show, but Hanneman’s character does resemble a class of individuals in American society. They are the new super-rich who have amassed fortunes far beyond anything they actually need and yet always seem to want more. Ironically, the “more” they seek often results from little to no work on their part.
And, of course, I’m referring to capital gains here, as opposed to retained earnings. The latter is what a working stiff has left after all expenses are paid. It’s the net profit line on a standard P&L statement for a small business owner, the result of work, the old-fashioned, get-your-hands-dirty, kind.
Capital gains, on the other hand, are what result from sales of investments by individuals from assets they previously acquired (or inherited). They are the result of non-work by the individual, who may not even have put any thought into the investment (hey, that’s what financial advisors do for the super-rich).
Typically, when an individual’s retained earnings are low, the individual must roll up his or her sleeves and increase productivity, i.e., work harder. But for the super-rich, the remedy for reduced capital gains (or in Hanneman’s case, actual balance sheet losses) is often nothing more stressful than firing a financial advisor (or maybe switching to a new investment). And, to continue the comparison, the difference in net gain will often be significant. Retained earnings can increase marginally with greater work productivity, while capital gains can increase dramatically with minimal, if any, actual work done by the investor.
Now let’s think about the American dream, juxtaposed with the American reality. The American dream posits that with hard work an individual can have a good life, i.e., home ownership, a college fund for the kids, nice two week vacations every year, and maybe a little rainy day nest egg to cover unforeseen crises. The American reality, on the other hand, is that for at least the last forty years, income levels have been stagnant for most working Americans. Thus, they have had to work harder just to make ends meet.
But the super-rich are in a different category entirely. They already have realized the American dream, often without working any harder than the average American, and their lives are much like Hanneman’s, i.e., they fret over paper losses that have no adverse impact on their life styles or their ability to make a lot more money by changing investment strategies.
In “Broadcast News,” the classic 1987 comedy about the television news industry, the network is forced to lay off scores of workers when the ratings drop. As he watches many of his staff pack up their belongings and leave the office on their way to unemployment lines, the evening news anchor, played by Jack Nicholson, asks rhetorically if there is anything he could do to alleviate their plight.
“Well,” says the network’s news president, “you could give up a million or two of your eight-million dollar salary.”
Of course, he doesn’t, but the point bears consideration, not on an individual basis but as a matter of national policy. The concept may sound un-American, but is it entirely inconsistent with the underlying principles on which the nation was founded? The founders sought to establish a land of equal opportunity, but it is hard to imagine that they envisioned the creation of a class of the super-rich who acquired or inherited much of their wealth in the same manner that English barons and monarchs did. Capital gains were not part of the founders’ conceptualization of America. Retained earnings were.
Yes, I’m talking about the redistribution of inherited or “unearned” wealth, the wealth of the super-rich. It’s radical, but what would Jesus say?