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Capitalism 2.0: Excess, Hedonism, Value

Posted on Sunday, Apr 5th 2009

We have discussed the role of the creator versus the role of the speculator. Let’s also discuss what are the outcomes of compensating creators over speculators. I would submit, speculators tend to have a less than compelling vision about what to do with wealth, whereas creators often have equally creative ideas about how to continue to create more value. While speculators gravitate toward excess and hedonism, creators gravitate toward further creativity.

Here’s Ayn Rand’s writing on Hedonism: “I am profoundly opposed to the philosophy of hedonism. Hedonism is the doctrine which holds that the good is whatever gives you pleasure and, therefore, pleasure is the standard of morality. Objectivism holds that the good must be defined by a rational standard of value, that pleasure is not a first cause, but only a consequence, that only the pleasure which proceeds from a rational value judgment can be regarded as moral, that pleasure, as such, is not a guide to action nor a standard of morality. To say that pleasure should be the standard of morality simply means that whichever values you happen to have chosen, consciously or subconsciously, rationally or irrationally, are right and moral. This means that you are to be guided by chance feelings, emotions and whims, not by your mind. My philosophy is the opposite of hedonism. I hold that one cannot achieve happiness by random, arbitrary or subjective means. One can achieve happiness only on the basis of rational values. By rational values, I do not mean anything that a man may arbitrarily or blindly declare to be rational. It is the province of morality, of the science of ethics, to define for men what is a rational standard and what are the rational values to pursue.”

The lack of deep thinking and the non-desire for value creation has become deep-seated in our culture today because of the screwed up compensation structure that has been systematically rewarding speculators over creators.

As a result, our youth want to become speculators. They want to amass as much money as possible. The defining value is greed, with no real attention to the method of acquiring wealth. The content of their days. The sum of their production.

For creators, wealth is a bi-product. May be, a score-card. For speculators, wealth is the end, not a means to the end. And they, therefore, often do not know what to do with wealth other than buying 18 houses, $15,000 bottles of wine, and other equally mindless activities.

An example from my personal experience. I have been asked by Hedge Fund managers if I could become a “source” of bad news for them. Intellectually, I possibly could. I certainly have a deep network in Silicon Valley. But how would I wake up in the morning and look at myself in the mirror if that became my business, my ‘means’ of acquiring wealth, the content of my days?

You see, those who are in the business of “building” don’t like this destructive component of the financial market, and it triggers some visceral nauseating reaction in us.

I prefer to live with less, but stay consistent with my intrinsic sense of value creation.

And for the moment, one of those intrinsic senses has driven me to writing (including about philosophy), an activity that pays very little in dollar terms!

This segment is a part in the series : Capitalism 2.0

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If you are a speculator, creativity may make you rich through dubious means. If you are creative, you can get rich – but let me quote David Bornstein in an interview with Kawasaki in Reality Check: “If you are phenomenally successful, you don’t get rich—you change the world.”

Marylene Delbourg-Delphis Sunday, April 5, 2009 at 11:06 AM PT

Great quote. I have to constantly remind myself of my own definition of success, and not get caught up in how our culture usually defines it. I do believe American culture can be changed over time if we continue to speak out and remind ourselves of what really makes a difference. Thanks!

Nancy Miller Sunday, April 5, 2009 at 12:46 PM PT

Since when are all investors considered “speculators”. Are these hedonistic speculators the same people who are backing venture capital starts like Google? Are snake-oil salesmen considered to be enterprising creators? It’s a pretty absurd viewpoint you have. Maybe you should go work for a hedge fund so you actually know what you are talking about.

what_is_this_Crap Sunday, April 5, 2009 at 6:40 PM PT

No, I think good early stage venture capitalists who take real risks and foster real innovation are a critical piece of Capitalism 2.0.

But we need to distinguish between those and the speculators.

At the moment, the system doesn’t do a good job of doing so.

Sramana Mitra Sunday, April 5, 2009 at 7:05 PM PT

I hope we are not lumping all financial engineering into the realm of ‘the speculator’. The financial engineering behind loans, behind insurance are all creative and add a lot to the world.

Now the same principals can be misused and have been and the result is disastrous. But should Einstein’s creativeness be misused it would be a lot worse.

I agree that rewarding speculators is not productive, but defining speculation is the hard part. When do the line get crossed.

As far a gravitating towards excess, hedonism etc. I think it is more about who you are as opposed to how you made your wealth. Some like Warren Buffet, a speculator (if investors who do not create are speculators) can hardly be accused of excess and Larry Ellison who oversaw the creation of a key piece of technology could hardly be considered spartan.

Jagdambha Bilasia Monday, April 6, 2009 at 12:30 AM PT

When a person invests in something where the loss or profit doesn’t depend on the performance of any individual(s) or entity we call it speculation?

If the loss or profit depends on the performance of some individual(s) or entity we call it investment?

Greg Monday, April 6, 2009 at 9:54 AM PT

I kind of like that definition, Greg.

The key is adding value versus pure gambling / free-riding on others.

Sramana Mitra Monday, April 6, 2009 at 10:08 AM PT

Just in principle, I don’t think ANYBODY should profit when a company’s stock price goes down.

The whole idea of having a stock market is to invest the capital needed to grow the business that is providing something worthwhile to the world and then share in the profits.

Short selling is just plain wrong, in my opinion. Nothing but greed. Provide something of value, and the money will follow as a natural consequence.

Jeanne Perdue Monday, April 6, 2009 at 5:19 PM PT

A compelling piece, Sramana, as always.
Reminds of my favorite quote really education:

In other countries like Singapore, education is seen as an investment. In our country, it’s seen as an expense…

Dave Marain Monday, April 12, 2010 at 5:42 AM PT