The Gods of New York, by Jonathan Mahler

A witty, fast paced roller-coaster ride through 1980s New York.

New York in the 1970s was a city in debt and seemingly terminal decline. Its manufacturing base had been eviscerated. Poverty was endemic and crime at an all time high. New York needed money. Then came the 1980s, and Reaganomics and deregulation. Boom! The town was back in business. It pivoted from old school industry to computerised finance. Digitising stocks and money put them on steroids. People became extremely wealthy.

Gods of New York covers four years at the end of the 80s: 1986-1989. Mayor Ed Koch sought and won an historic third term. But there was much strife afflicting the city - racially motivated violence, the AIDS crisis, high level corruption, poverty, homelessness, drug addiction and the mentally unwell living on the streets. For every societal ill there was a charismatic if controversial advocate. The list of such characters is mesmerising: Black activist Reverend Al Sharpton, AIDS crisis agitator Larry Kramer, film maker Spike Lee, disease specialist Anthony Fauci and crime fighting lawyer Rudy Giuliani, to name a few. There are also plenty of less famous characters, such as Joyce Brown, a homeless woman turned celebrity. The city had tried to have her institutionalised, but she fought through the courts to be allowed to return to the street.

Hovering above the city is Donald Trump, a glittering success and a figure of undisputed economic prowess. Throughout the late 80s Trump would back himself into a corner by over investing in the Atlantic City casino scene, just at a time when punters had no money and were pulling in their spending. And yet the banks continued to lend him staggering amounts of money. His debts became so eye-watering that the banks essentially couldn’t let him fail.

Author and journalist Jonathan Mahler does a brilliant job of building a compelling narrative around the events, scandals and crimes of the day. (A lot of time is devoted to harrowing crime cases.) He has a witty style and clever turn of phrase, able to distill the cultural and economic movements of the time into pithy one liners. The picture that emerges of New York is of a place that is terribly fractured and extreme. A city of dreadful poverty, entrenched racism, drug addiction, homelessness and mental illness. Why, one wonders, so many problems in a city that is an economic engine room of the world economy? The book doesn’t end on a cheery note, with Jonathan Mahler asserting that these divisions, between rich and poor, black and white, have only become more entrenched.  

An entertaining and insightful portrait of a complex city. New York may be cruel and unforgiving, but it produces extraordinary people and cultural movements. 

The Gods of New York, by Jonathan Mahler. Published by Hutchinson Heinemann. $36.99

NOV25

The Age of Surveillance Capitalism, by Shoshana Zuboff

How the future was sold

Considered a landmark text on big tech and the internet in general, I've finally got around to reading it. No wonder it took me so long. On the upside, it's quite an extraordinary work, deeply moral, almost an activist's manual on how to combat the big tech companies. On the downside, it's a tough read. The prose is really dense and, to my mind at least, it's overwritten. Too many long words and torturous sentences. Which is a shame, because this book deserves to reach even more readers than it already does. 

Surveillance Capitalism argues many things, but if I could try to summarise, the main point is that all of our data (all those thousands of google searches, posts, messages, emails etc.) is being captured, amassed, analysed and packaged into "prediction products". Big tech now knows so much about us they can predict our behavior, even our future. In fact, they know more about us than we know about ourselves. This is all done by way of a one way mirror. We volunteer all our data, really thinking it's being done anonymously, but behind the veil complete profiles are being built. There's no transparency on what's being done with our data and government has completely failed to regulate. 

What Zuboff describes is a Faustian pact. We've sold our souls to the devil. The digital treats we get for free are so seductive it's lulled us into this terrible complacency. My personal analogy is from H.G. Wells The Time Machine. We are like the innocent Eloi, lacking in curiosity about how we get all these free treats, being fattened up by the Morlocks for slaughter.  

The book also takes a long, philosophical view of capitalism, demonstrating that "surveillance capitalism" (Zuhoff's coined the term in 2014) is something completely unprecedented. It's come out of  nowhere, which in part answers why governments have been slow to regulate it. Nevertheless, it's urgent that it is regulated, and well regulated. Its power is frightening. The capitalism of the last 150 years sowed the seeds for our current climate disaster. Surveillance capitalism now threatens to commercialise our very psyches. Will we lose our souls in the bargain?

After reading Surveillance Capitalism, living in ignorance is no longer possible.

The Age of Surveillance Capitalism: The Fight for a Human Future at the New Frontier of Power, by Shoshana Zuboff. Published by Profile Books. 2019

Enron: Anatomy of Greed, by Brian Cruver

Written by a young insider who barely lasted a year in the company before the whole thing started to fall to pieces, Brian Cruver lifts a veil on the groovy, irresistible Enron culture that so attracted young business school graduates.

Cruver starts off by describing his pleasure and excitement at being hired by Enron. Everything about the place – from its architecture to its aggressive business culture – was Cruver’s dream come true. Dubbed the millionaires factory, Cruver aspired to joining that club too. However, small things niggled from day one. His friend, who worked at a stock broking company, would constantly call Cruver with unsettling bits of information about Enron that he'd just read, casting doubt on the company.

Turns out, his friend was right. As Cruver says in the beginning of the book, no one at Enron wanted to believe that the company was in deep trouble. They just wanted to believe that the amazing profits would roll on forever. That is, they wanted to believe money would continue to grow on trees.

Now I know that these people work hard, study long to get where they are, and deserve to be rewarded for their effort. But one has to wonder about these companies that have amazing stock prices and are called ‘millionaire factories’. Shouldn’t someone be questioning the whole culture of making massive amounts of money? Don't business schools teach their students the very basics of balance sheets? Aren't they taught economic history, like the fact that Ponzi schemes always come undone?

Don't get me wrong, I love our capitalist system. I love the creativity of making and selling. I love the technological innovations that the market has fostered. Yet when we get to the point of wanting to make loads and loads of money for no other reason than to be rich, not comfortable, then something’s wrong.

I thought Brian Cruver would wrap his book up with some sort of lesson that had been learnt. Rather, Cruver tries to figure out what greed actually means. Boy oh boy!

"When does desire – for money or material goods or whatever – become excessive? We live in a world in which desire builds things, invents things, cures things, and discovers things. But when does this desire become gratuitous? Is it excessive to want a better life – to want more adventure, a bigger house, a nicer car, fancier clothes, or premium dog food?"

Premium dog food? Obviously, Cruver is confusing basic human creativity with greed. Humans often want to create things – cures for illness, great inventions – not because it will make them more money than they can ever possibly spend, but because they have an instinctive need to create something, or do something that will help others.

There’s a line that commonly goes around that if we paid politicians more, we would get better ones. But I seriously doubt this. Australia’s two top pollies, Malcolm Turnbull and Kevin Rudd, have millions and millions of dollars in the bank. Would giving them more money improve their performance? I doubt it. This seems to be the argument Cruver is following, a common business argument: if you reward people with enough money, no matter what type of person they are, you will get the best results. We’ve seen this culture develop into huge pay packets for CEOs and the upper management echelons. Yet look at the corporate America now!

Here is the author again on greed:

"I don’t think it’s that simple. I think greed – or excessive desire – is defined by the means, not the end. It’s the behaviour that should be tested for excessiveness. Greedy is a term that applies to someone who lies, cheats and steals in the name of possessing more than they need or even desire. Financial success alone doesn’t equal greed, but being a scumbag with financial success does – that’s where the line should be drawn."

All of this ‘moral grappling’ about greed doesn’t seem convincing to me. Cruver joined Enron because he wanted to be one of those people who could make millions. Moreover, he wanted to make millions by creating ever more arcane and sophisticated financial products and flogging them off to whoever he could convince needed them. Indeed, in the book, he had a hard time trying to get buyers for his bankruptcy derivatives.

This is one of those fairly stock standard insider books. Cruver has a decent sense of humour and a way of describing events. Also, I very much appreciated his description of how derivatives actually work. It’s probably the first time I’ve properly understood them.

He also gives the reader all the details they need to know about the sudden decline and fall of Enron. Yet his own analysis of the whole affair, what it means culturally and economically, is pretty thin and unimpressive. It’s hard to see the greed of Cruver’s generation of M.B.A graduates producing anything of great social benefit, unless you find highly artificial financial products a boon to society.

The Clean Industrial Revolution, by Ben McNeil

This book endeavours to look on the bright side of global warming: all the new business opportunities that it will create. Going by all the good news provided in The Clean Industrial Revolution, you’d have to wonder why politicians and business people aren’t rushing headlong to get in first and take advantage of this so called ‘clean’ revolution.

If anything, this book makes a good compliment to Guy Pearse’s work. McNeil marshals a lot of economic data and modelling, from reputable sources, to clearly demonstrate that countries that take the initiative and green their economy, that is, invest heavily in renewable energy and its related industries will reap an economic windfall.

Countries that don’t will find themselves in a K-hole. He cites the example of Saudi Arabia, whose economy is totally dependent on oil. This puts their economy in an extraordinarily precarious position. Contrast this to Finland, and its Nokia company, that invested heavily in research and development and now leads the world in mobile phones.

McNeil even cites American behemoth General Electric as being ahead of the curve on this, with their impressive capture of the green market.

It is this demand for sustainable energy that will punish lazy industries and reward innovative ones. Remember what happened during the oil shocks of the 70s, when the price of oil went through the roof? It forced Americans to come up with more energy efficient technologies.

Whether you think global warming is a load of baloney or not, the reality is the world is moving to technologies that are more efficient and pollute less. If you want to take advantage of this, better get a wriggle on and face the future that is coming.

In short, this will be a huge, major stuctural change to our economy, bigger even than of that ushered in by the Hawke Keating years.

This is a calm, accessible book that makes its arguments clearly and simply. McNeil is a your regular mild mannered scientist, keeping his cool in a debate that is often emotional and heated.

As I said before, he backs up a lot of the material that Guy Pearse presents in his books. The advantage with the McNeil book is that it’s written for a wider audience.

It’s ironic, though, that advanced western technology got us into this mess, and now it has to get us out again. Let’s hope so-called clean energy is precisely that, and doesn’t contain some unforseen negative.

Traders, Guns and Money, by Satyajit Das

I only made it two thirds the way through this book, but thought I would jot down a few notes about it anyway. It’s rare for me not to get through to the end of a book, but the tone of Traders, Guns and Money became so rancid, and the arcane financial formulas so tricky to follow (I always failed maths at school), that I felt exhausted and just couldn’t go on reading.

I’ve always enjoyed Satyajit Das’s public appearances and commentary on the global financial crisis. He is witty and smart. And this book is often very amusing and entertaining. It’s also invaluable as a peek inside the real world of high finance, with all the gloss removed and the real characters, flaws and all, exposed. Some of it will indeed make your jaw drop.

Yet you wonder, with Das being so breathtakingly cynical about it, how he worked in the area for so long. Then again, maybe not, as I myself have worked in the very lower rungs of finance myself for close to ten years. Maybe he was just trapped. (Interestingly, the book blurb says he is ‘passionate about wildlife’ and has written a book on the subject. I should also note he thinks climate change should be tackled as a matter of high priority.)

If you’re interested in the complicated and shadowy world of finance, then this book your will find a roller coaster of a ride.

One last note: he's been writing a four part series in the fairfax media, which you should read.

End of the age of plentiful debt

Recipe for world recovery may be a fizzer

Welch: An American Icon, by Janet Lowe

Janet Lowe has written another book on Jack Welch and General Electric called Jack Welch Speaks: Wisdom from the World’s Greatest Business Leader, which I reviewed recently on this online journal.

There is much to admire in Janet Lowe’s books on Welch and GE. She really gives you the good and bad in equal measure. This isn’t some ‘gee whiz’, how can I be more like Jack Welch manual. Instead she really carves up and dishes out some of the severest criticisms of Welch and the way he has run GE, agreeing that there are ‘grains’ of truth in them.

By the same token, she clearly demonstrates Welch’s achievements. Reading through her book you find yourself trying to figure out where the author really stands on Jack Welch. Is she for or against? For this reader it was impossible to tell, which is surely a sign of a smart, balanced writer.

Hence, this book, like Lowe’s last on Welch and General Electric has many purposes and will be of use to a wide variety of readers. For fans, for academics, for business people, for critics, for investors, or for the merely curious lay reader, all will find something of use in this handy guide to Jack Welch and GE.

The book also comes with some very handy appendixes. There’s a time line of GE, the GE values, GE’s performance figures, a list of its dizzying array of businesses, and the CERES statement of principles (Coalition for Environmentally Responsible Economics) that GE refused to sign on for.

To get a good overall picture of General Electric, the good, the bad and the ugly, then I highly recommend this absorbing book. It has plenty of food for thought.

Winning, by Jack Welch

I was aimlessly wandering around my local library recently and saw this book sticking out. As an employee of General Electric I thought I better give it a go. I’ve worked at GE for quite some time. Maybe this book would finally help me to understand my employer.

I’ve read one other book on GE, a critical investigation of GE’s corporate culture and business practices, as put in place by Jack Welch. (A review of it is linked on my articles page, but I can’t at the moment recall the title and author of the book. I bought a copy, lent it to a fellow employee, and was given $30 by this same employee and instructed to purchase another copy as they wanted to keep mine!)

Quite a bit of controversy surrounds Jack Welch’s tenure as CEO of GE (from 1981-2001, if memory serves me correctly.) He was nicknamed ‘neutron’ Jack, because after he was done with a business all the people had gone (sacked, or ‘let go’), and only the building remained.

In short, Welch’s business model was to cut loose any businesses that were not performing, and push the ones that were doing well to become super performers. When Welch got into the financial services caper, he was amazed at how easy it was to make money out of these businesses. (Hence today some 40% of GE’s businesses are in financial services.)

Being a bleeding heart lefty, I’m naturally at odds with Welch’s tooth-and-claw capitalism. Reading through Welch’s ‘Winning’, I kept thinking of Ayn Rand, and how she would approve of many of Jack’s Darwinian prescriptions. It’s perform or die in Jack Welch’s world. You’re also the type of person who will love the work you do, and love working long hours and ‘squeezing the lemon’, Welch’s term for running super efficient businesses.

I must admit, a lot of what he says is really simple common sense. His adherence to the importance of candour in business is totally spot on. In a work environment you need people to be able to voice their opinions honestly. There was one section in the book that really impressed me, where Welch said that people deserve to be heard out and to be respected. In this sort of environment you can tell your boss what you honestly think of how something is being done, and this won’t be taken personally.

Welch admits that speaking candidly can be difficult for people at times, both those giving and receiving candid opinions, but that it is essential.

So I agree with a lot of what Welch says on these subjects. He knows how a business should run as a machine. However, if you don’t fit into this machine, then you’re out the door. If you’re primary value is not in making a lot of money, consistently, and in impressive amounts, then you’re out the door.

This is where the controversy arises. Welch’s example is followed all across corporate America. Has this even more pronounced Darwinian approach been a bad thing? (Interestingly, in my experience, GE has a quite liberal, progressive social attitude. Some could even call it politically correct.)

What’s the take away from ‘Winning’? For uber-manager’s like Welch, the corporate world is a big chess board (hence his obsession with 'winning', one would presume.) This is the sort of capitalism where businesses are bought and sold, but not created. (Welch almost comes across as timid when discussing what he calls ‘organic growth’, or creating new businesses. Funny how he has to come up with this special expression to describe what most small business operators do.)

So people like Welch are not innovators. They don’t create new things. Frankly, they’re not interested in doing so, because that would involve too much risk. It would also demand creativity, vision and an ability to dream.

I wonder what the future holds for Jack Welch’s business model, with the advance of China, a communist country with a booming economy set to overtake the US economy in so many decades. Will people be quoting Jack Welch in 2050, and looking back to him for inspiration?

I wouldn’t have the foggiest. I merely ask the question because it seems interesting that he is such a feted business figure just when the heydays of American industry seem on the verge of being eclipsed. Welch made money by slashing and burning, but not by creating something entirely new, like Bill Gates or Henry Ford.

Welch is a successful game player, a super manager, but not an innovator or creator. He plays to win. But that's all.

PS: It should be noted that his third wife, Suzy, helped Welch with the text of this book.