Capitalism in crisis: U.S. billionaires worry about the survival of the system that made them rich

[Mockingbird]

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PALO ALTO, Calif. — A perfect California day. The sun was shining, a gentle breeze was blowing and, at a Silicon Valley coffee shop, Rep. Ro Khanna was sitting across from one of his many billionaire constituents discussing an uncomfortable subject: the growing unpopularity of billionaires and their giant tech companies.

 

“There’s some more humility out here,” Khanna (D-Calif.) said.

 

The billionaire on the other side of the table let out a nervous laugh. Chris Larsen was on his third start-up and well on his way to being one of the wealthiest people in the valley, if not the world.

 

“Realizing people hate your guts has some value,” he joked.

 

For decades, Democrats and Republicans have hailed America’s business elite, especially in Silicon Valley, as the country’s salvation. The government might be gridlocked, the electorate angry and divided, but America’s innovators seemed to promise a relatively pain-free way out of the mess. Their companies produced an endless series of products that kept the U.S. economy churning and its gross domestic product climbing. Their philanthropic efforts were aimed at fixing some of the country’s most vexing problems. Government’s role was to stay out of the way.

 

Now that consensus is shattering. For the first time in decades, capitalism’s future is a subject of debate among presidential hopefuls and a source of growing angst for America’s business elite. In places such as Silicon Valley, the slopes of Davos, Switzerland, and the halls of Harvard Business School, there is a sense that the kind of capitalism that once made America an economic envy is responsible for the growing inequality and anger that is tearing the country apart.

 

On a quiet weekday at a strip-mall coffee shop, the conversation between Khanna and Larsen turned to what went so wrong.

 

Americans still loved technology, Khanna said, but too many of them felt locked out of the country’s economic future and were looking for someone to blame.

 

“What happened to us?” he imagined people in these left-behind places asking.

 

Part of Khanna’s solution was to sign on as co-chairman of the presidential campaign of Sen. Bernie Sanders (I-Vt.), the democratic socialist who rose to the national stage by railing against “the handful of billionaires” who “control the economic and political life of this nation,” and who disproportionately live in Khanna’s district.

 

The other part of Khanna’s solution was to do what he was doing now, talking to billionaire tech executives like Larsen who worried that the current path for both capitalism and Silicon Valley was unsustainable. Boosted by a cryptocurrency spike last year, Larsen’s net worth had briefly hit $59 billion, making him the fifth-richest person in the world before the currency’s value fell.

 

Without an intervention, he worried that wealth would continue to pile up in Silicon Valley and anger in the country would continue to grow.

 

The 2008 financial crisis may have revealed the weaknesses of American capitalism. But it was Donald Trump’s election and the pent-up anger it exposed that left America’s billionaire class fearful for capitalism’s future.

 

'Middle of a revolution'

 

Khanna was elected in 2016, just as the anxiety started to spread. In Europe, far-right nationalist parties were gaining ground. Closer to home, socialists and Trump-inspired nationalists were winning state and congressional elections.

 

Conversations of the sort that Khanna was having with Larsen were now taking place in some of capitalism’s most rarefied circles including Harvard Business School, where last fall Seth Klarman, a highly influential billionaire investor, delivered what he described as a “plaintive wail” to the business community to fix capitalism before it was too late.

 

The setting was the opening of Klarman Hall, a new $120 million conference center, built with his family’s donation. “It’s a choice to pay people as little as you can or work them as hard as you can,” he told the audience gathered in the 1,000-seat auditorium. “It’s a choice to maintain pleasant working conditions . . . or harsh ones; to offer good benefits or paltry ones.” If business leaders didn’t “ask hard questions about capitalism,” he warned that they would be asked by “ideologues seeking to point fingers, assign blame and make reckless changes to the system.”

 

Six months after that speech, Klarman was struck by how quickly his dire prediction was coming to pass. Leading politicians, such as Trump, Sanders and Sen. Elizabeth Warren (D-Mass.), were advocating positions on tariffs, wealth taxes and changes in corporate governance that would have been unthinkable a few years ago.

 

Klarman wasn’t opposed to more progressive taxation or regulation. But he worried that these new proposals went much too far. “I think we’re in the middle of a revolution — not a guns revolution — but a revolution where people on both extremes want to blow it up, and good things don’t happen to the vast majority of the population in a revolution,” he said.

 

He wasn’t the only one who felt a sense of alarm. One of the most popular classes at Harvard Business School, home to the next generation of Fortune 500 executives, was a class on “reimagining capitalism.” Seven years ago, the elective started with 28 students. Now there were nearly 300 taking it. During that period the students had grown increasingly cynical about corporations and the government, said Rebecca Henderson, the Harvard economist who teaches the course.

 

“What the trust surveys say is what I see,” she said. “They are really worried about the direction in which the U.S. and the world is heading.”

 

A few dozen of those students spent their winter break reading “Winners Take All,” a book by Anand Giridharadas, a journalist and former McKinsey consultant, that had hit the bestseller list and was provoking heated arguments in places like Silicon Valley, Davos and Harvard Business School. Giridharadas’s book was a withering attack on America’s billionaire class and the notion that America’s iconic capitalists could use their wealth and creativity to solve big social and economic problems that have eluded a plodding and divided government.

 

This spring, Giridharadas took his argument to Klarman Hall. He slammed Mark Zuckerberg, taking aim at the Facebook founder’s $100 million effort to fix Newark’s faltering schools and his $3 billion push to end disease in a generation. “I’m glad he’s trying to get rid of all the diseases, [but] I wish Facebook wasn’t a plague,” Giridharadas said.

 

He trashed Starbucks CEO Howard Schultz’s independent presidential run as an effort to protect the interests of the uber-wealthy. And he lambasted the notion, frequently championed by the likes of Bill Gates and Barack Obama, that Silicon Valley’s innovations would disrupt old hierarchies and spread capitalism’s rewards. “Really?” Giridharadas asked. “Now five companies control America, instead of 100! And a lot of those companies are whiter and more male than the ones they disrupted.”

 

For many of the students, schooled in the notion that business could make a profit while making the world a better place, Giridharadas’s ideas were both energizing and disorienting. Erika Uyterhoeven, a second-year student, recalled one of her fellow classmates turning to her when Giridharadas was finished.

 

“So, what should we do?” her colleague asked. “Is he saying we shouldn’t go into banking or consulting?”

 

Added another student: “There was a palpable sense of personal desperation.”

 

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read more: https://www.washingtonpost.com/politics/capitalism-in-crisis-us-billionaires-worry-about-the-survival-of-the-system-that-made-them-rich/2019/04/20/3e06ef90-5ed8-11e9-bfad-36a7eb36cb60_story.html?noredirect=on&utm_term=.708f814a4d41

Edited April 21, 2019 by Mockingbird