Saturday, October 4, 2008

"We are all losers now"
Tom Smith

A rather remarkable essay, for its candor anyway, from Judith Warner at the New York Times. The gist of the essay is, the great wealth of the financial types has changed life in the city (especially New York) by making everybody else feel poor and inadequate, and unable to afford the real estate and other nice stuff. So, you would think, Judith tells us, we would get some joy at the comeuppance of the Wall Street fat cats. But instead it's just depressing.

As plenty of people know, I'm no expert at avoiding envy, but Jeez, I'm not in this league at all. One of the commentators to the post describes actually looking at herself in the mirror and crying over not having made a financial success of herself, compared to the various traders, hedge fund heros, etc. she shares her city with. I think perhaps there is a bit of taking personal responsibility missing here, and also some confusion about values. When I was a kid, if I felt sorry for myself conspicuously, my mother would make fun of me. I think she viewed it as an essential service Irish women could confer on Irish men.

Quite a few years ago, when I was too young to appreciate all that I was giving up, I decided to get out of practicing corporate law and into teaching, which pays a lot less. A second or third year associate at a big corporate law firm might well make more money than I do. Yet I never have regretted the decision, because I practiced law in a big firm for four years or so, and so know what my life would be like had a chosen the other path. I remember what the poet said: Two roads diverged in the yellow wood/And I, I took the road less traveled by/ And that's what really fucked me. Just kidding. Whenever I wonder if I should have stayed, made partner (probably at some lesser firm than the one I was at, unless I figured out a way to put myself on a continuous caffeine drip) and pulled down a million a year or so, I ask myself what I would be doing at that moment if I had done that, and the answer is easy. I would be working, in my office or on the road. I would be reading through a merger agreement, trying to get the investment banker to return my phone calls, trying to get an associate to hurry and finish something. I would not be sitting on my patio, reading a book of my choosing, wondering if I should have stayed in the practice of law. I don't have the slightest doubt that I am happier doing what I am doing, even though I am a lot poorer than I would have been, assuming I could have somehow gotten myself to perform well at a job I did not like very much, mainly because there was so much of it.

I also think that people so tormented by relative financial unsuccess that they end up crying do not appreciate how costly it is in personal terms to commit oneself to making a lot of money. There may be such a thing as easy money, but it is vanishingly rare. Investment bankers and corporate lawyers work very, very hard. The top end corporate lawyers these days bill 2500 to 3000 hours a year. Think about that. To bill 3000 hours you need to bill 60 hours a week, 50 weeks a year. To bill 10 hours a day, 6 days a week, you are going to have to be in the office at least 12 hours each day, and more likely 13. That's 8 in the morning to 8 at night, 6 days a week. The guy I knew who billed those kinds of hours was one of the leading lawyers in his field until he dropped dead in his early fifties, leaving a wife and daughter who had probably not seen a lot of him.

Another insight about this I got from the chapter on wealth distribution in an old edition of Posner's Economic Analysis of Law. He noted in passing that one thing that explained unequal distribution is that people have different preferences for wealth. Some people value it more than others. Explaining things with preferences is considered poor economics, but it sure as heck is good psychology. You see this in Plato's Republic, or perhaps another of his tedious dialogues, in which Socrates says to some rich, old gent something like "I observe you are not an asshole. Am I right in thinking you inherited your money rather than made it yourself?" He then goes on to say people who made a lot of money are overly fascinated by it and their own skill in having gotten it. In my experience, that is really true. I also observed older men making what looked to me terrible sacrifices, especially of their families, in pursuing their careers at the big DC law firm I was at. One story that made the rounds was of an associate who took a call from the daughter of a top partner. She was in the ICU after a suicide attempt. He was working to finish something for a client, and refused to take the call, which had been put through to the conference room. He sent an associate to take the call and tell her he could not come to the phone. The daughter pleaded with the associate, the associate went back to the partner, but she could not get him to come to the phone. I knew the associate in this story, and I don't think it's apocryphal.

The thing is, markets are pretty efficient. Wealth has a price, and it's far from free. To get it, you have to compete with others who not only have as much brains as you do, but who may well be willing to give up more than you to get it. I used to think I liked money more than most people, but that was before I met the people who really like it, or really want it anyway, and are willing to do a lot more than I am to get it. Of course, some people are always going to be more talented or luckier than oneself, enough so that wealth just falls into their laps. That's often not such a good thing either, though like most people, I would be willing to give it a try.

The other thing I would say to these people crying over being middle class instead of urban very upper middle to upper class is, why not just try avoiding the people and places that make you feel poor? Nobody says you have to brood over the ads in the New Yorker and New York Times magazine. Most of it is just utter rubbish anyway. Handbags that will look stupid a few years from now, tacky jewelry, uncomfortable shoes. Fight Club got that right in its excoriation of working in a job you hate so you can buy shit you don't need. Not that you should blow anything up.

But honestly, this attitude of, I became an artist, non profit worker, teacher, writer, whatever, and now I'm not rich like the guys who went into banking, boo hoo hoo -- I mean, honestly, cowboy up and get a life. If you feel this way, more stuff is probably the least of what you need.

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Tom Smith


This seems largely right to me. But mostly, I just really enjoyed the very accurate rendering of Plato!

Posted by: Matt | Oct 4, 2008 1:53:58 PM

Professor Smith, excellent post. It's stuff like this that keeps me coming back.

Posted by: Marek | Oct 4, 2008 6:02:16 PM

That is commendable if you aren't consumed with envy for those who make more money than you, but it doesn't seem to be typical of law professors, at least those who blog. Most of them seem incensed at how much money is made by people in the private sector (many of whom weren't even on law review!).

I note that, although you seem morally superior to the average law professor, some of the people you talk about don't have your consolations. Many people bill 2500 hours a year for eight years, but don't have that mysterious combination of luck and skill that enables them to make partner at a top ten law firm, and end up as counsels at Cadwalader or Fried Frank or someplace, where they make a lot more than a law professor (say $350K), but nothing like a partner at Davis Polk. It's harder for these people to be philosophical, since their relative misfortune isn't the result of conscious choices they made.

Posted by: y81 | Oct 4, 2008 7:53:07 PM

y81-- not to doubt you, but I've never actually seen a law professor blogger express envy or disapproval of a private sector lawyer getting paid too much. I don't hear law professors around my school say that either. If you have any links to blog posts on this, I would be curious to see them.

I have heard political theory, humanities etc. professors express great outrage at how much lawyers, bankers etc. make, but the ones I'm thinking of were total lefties, who thought the state should determine salaries.

Posted by: Tom Smith | Oct 5, 2008 11:45:11 AM

Tom, what makes you think the partner pulling down a million a year isn't dripping with envy at those who have more? The fact is that unless your wealth is in the 11-figure range, there are still people doing much, much better than you, and if you've worked really, really hard to get rich, then the fact that there are people way ahead of you in the money game is even more likely to stick in your craw.

What this example illustrates is that the root of envy is lack of perspective. Why, Tom, would you even bother to write a blog posting about the one decision in your life that resulted in your being quite a bit less rich than you might have been, rather than the numerous decisions--not to mention the myriad accidents of fate over which you had no control--that made you one of the very few most materially fortunate people ever to have lived anywhere, at any time? As far as I can tell from your blog, you're physically and mentally healthy, your material needs are splendidly taken care of, and you have more toys, luxuries and amusements than anyone is entitled to complain about. (That you have considerable time to indulge in them is just icing on the cake.) The existence of a very tiny number of people whose lives are different from yours primarily in that they have more toys, luxuries and amusements than you do, seems so insignificant compared to the many disasters you've avoided, and the blessings you've known, as not to be worth mentioning.

As Ben Zoma said, "Who is rich? The one who is happy with his lot." Chances are that by his standards, you're a lot richer than any partner pulling down a million a year. Why cut into that wealth even a tiny bit by comparing your monetary income with theirs?

Posted by: Dan Simon | Oct 5, 2008 1:16:27 PM

Dan-- Quite true and well taken. The reason I wrote it was Judith Warner's essay, which is worth a read and quite striking. I'm just powerfully impressed by how much envy drives a lot of what I read in the NY Times.

I also agree and have seen first hand how envious the very wealthy can be of the very, very wealthy. A guy I know was recently going on about another guy who lives in a $60M estate in Beverley Hills, even though he himself lives in a $10M estate in Rancho Santa Fe.

But it works the other way as well. There are people out where I live who obviously look down on me because I could not rebuild a motorcycle, have been to college and have no tattoos. It's not just defensive; they really think they're better. The natives we encountered in the Peruvian rain forest obviously viewed us as clueless tourist gringo vermin, just good for exploiting, while we pitied them for being covered in lice. I think most people find reasons to think they are better than most other people, the way 80 percent of drivers consider themselves above average.

Posted by: Tom Smith | Oct 5, 2008 1:33:26 PM

You should get a tattoo, Tom- either your kids would think it was great and admire you, which would be good, or else they'd think tattoos must really be square now and not get any which would also be good. So it's win-win.

Posted by: Matt | Oct 5, 2008 8:37:34 PM

I guess my post was unclear. I haven't seen any lawbloggers complaining about private sector lawyer incomes, but I have seen lots of lawbloggers complaining about investment banker and real estate developer incomes. Check out Zywicki and Bernstein at Volokh Conspiracy.

Posted by: y81 | Oct 6, 2008 8:53:49 AM

Just to make clear--I don't begrudge the bankers for being rich or making a lot of money. Bravo for them. I do begrudge them for making a lot of money on the upside and then refusing to eat their losses on the downside by asking for a no-strings government bailout. That's a big, big difference.

Posted by: Todd Zywicki | Oct 6, 2008 11:04:59 AM

anyone know which socratic dialogue he paraphrases?

Posted by: hlsdood | Oct 6, 2008 1:28:42 PM

found it; republic book 1. exchange with cephalus

Posted by: hlsdood | Oct 6, 2008 1:32:24 PM

This is probably not a productive discussion, but I have to point out that, say, Stan O'Neal is not in fact asking anyone for anything, being retired to private life, that Dick Fuld has lost a lot of money, etc. So I think Prof. Zywicki's claim is specious and motivated by envy.

Posted by: y81 | Oct 6, 2008 2:28:27 PM

This is a very good post~!

Posted by: anon | Oct 9, 2008 2:12:48 PM

What a terrific post. Thanks.

Posted by: larry | Oct 10, 2008 10:56:39 AM