America’s dumb elites risk fomenting a revolution

February 14, 2014

By Rob Cox
The author is a Reuters Breakingviews columnist. The opinions expressed are his own.

Why do so many of America’s wealthy elite seem hell-bent to foment a revolution? After all, the world’s plutocrats agreed at their annual confab in Davos last month that the big tail risk for Western economies is social unrest, spurred by rising financial inequality. The tail becomes fatter when One Percenters like AOL boss Tim Armstrong, realty mogul Sam Zell and venture capitalist Tom Perkins go pick fights with the little guy.

Armstrong stoked the fires of class conflict last week during his justification of the internet company’s planned reduction in employee retirement benefits. He talked up the company’s generous healthcare benefits, referring to the “million dollars each” paid for the care of two AOL employees’ “distressed babies.”

Armstrong sounded nosy and penny-pinching about healthcare, not to mention cheap about pensions. After a public outcry, including the hot breath of rebellion from the readers of AOL’s own Huffington Post, he expressed regret. A few days later, the company backtracked on the benefits cut. But the damage was done.

Sadly, Armstrong has plenty of company. Chicago property developer Zell, whose wealth Forbes puts at $4 billion, told Bloomberg Television last week that “the 1 percent work harder. The 1 percent are much bigger factors in all forms of our society.” It is hard to sound more self-satisfied.

Moreover, Zell thought he was helping Perkins, who had taken the “like-the-Nazis” meme to a new low. In a January letter to the Wall Street Journal, he compared complaints about gentrification in San Francisco to the persecution of Jews. Even after provoking widespread scorn for his comments, Perkins keeps digging, saying last night: “Some of the Jews were extremely wealthy. I think the parallel holds.”

It sounds like Armstrong, Zell and Perkins skipped Davos this year. Other members of the elite, who did pick up on the gathering concern about the unwashed and underemployed, would be wise to explain the risks to their arrogant brethren.

Though the French Revolution preceded the invention of the Gini Coefficient by more than a century, it was essentially a conflict over the division of economic spoils. The outsized share claimed by callous monarchs, aristocrats and clerics became too much for the citizenry to bear. The lesson from that revolution is still clear today: the inflammation of class distinctions is never good for business.

Comments

It’s fascinating how some senior executives (not all) become so disconnected with reality. Over decades of experience in corporate America I learned that the best executives listen to subordinate managers. They encourage dissent, so long as thoughtful, meaningful solutions are put forward. The best exec’s often skip over their direct reports and communicate directly with staff farther down the corporate ladder. They foster a culture of openness. The best exec’s possess at minimum some sense of humility, they understand that they live in isolation and are usually receiving filtered information from subordinates. They strive to minimize that isolation, even though that means getting out of their comfort zone.

Generalized comments like Sam Zell’s “The 1% work harder” show an arrogance and ignorance that seems to have grown over the past 20 years or so. Certainly some of the wealthy do work harder, but I’d argue that many do not. Comments like Sam’s are just silly.

Sam’s problem is that none of his friends or subordinates are apparently willing to challenge his bigotry and arrogance. They probably can’t, he’d fire them. When you see a powerful person put their foot in their mouth that’s usually the problem. He may be wealthy but he is to be pitied. In spite of the people around him he’s really terribly alone in the world.

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