Weekly Read Compilation December 8, 2013 WEEKLY READ COMPILATION
Forum for Multidisciplinary Thinking
Compilation of curated interestingness om various disciplines covering articles, essays, interviews, books,videos etc
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Forum for Multidisciplinary Thinking !1 Weekly Read Compilation December 8, 2013
Harnessing the Science of Persuasion by Robert B. Cialdini
A lucky few have it; most of us do not. A handful of gifted “naturals” simply know how to capture an audience, sway the undecided, and convert the opposition. Watching these masters of persuasion work their magic is at once impressive and frustrating. What’s impressive is not just the easy way they use charisma and eloquence to convince others to do as they ask. It’s also how eager those others are to do what’s requested of them, as if the persuasion itself were a favor they couldn’t wait to repay.
The frustrating part of the experience is that these born persuaders are often unable to account for their remarkable skill or pass it on to others. Their way with people is an art, and artists as a rule are far better at doing than at explaining. Most of them can’t offer much help to those of us who possess no more than the ordinary quotient of charisma and eloquence but who still have to wrestle with leadership’s fundamental challenge: getting things done through others. That challenge is painfully familiar to corporate executives, who every day have to figure out how to motivate and direct a highly individualistic work force. Playing the “Because I’m the boss” card is out. Even if it weren’t demeaning and demoralizing for all concerned, it would be out of place in a world where cross-functional teams, joint ventures, and intercompany partnerships have blurred the lines of authority. In such an environment, persuasion skills exert far greater influence over others’ behavior than formal power structures do.
Which brings us back to where we started. Persuasion skills may be more necessary than ever, but how can executives acquire them if the most talented practitioners can’t pass them along? By looking to science. For the past five decades, behavioral scientists have conducted experiments that shed considerable light on the way certain interactions lead people to concede, comply, or change. This research shows that persuasion works by appealing to a limited set of deeply rooted human drives and needs, and it does so in predictable ways. Persuasion, in other
Forum for Multidisciplinary Thinking !2 Weekly Read Compilation December 8, 2013 words, is governed by basic principles that can be taught, learned, and applied. By mastering these principles, executives can bring scientific rigor to the business of securing consensus, cutting deals, and winning concessions. In the pages that follow, I describe six fundamental principles of persuasion and suggest a few ways that executives can apply them in their own organizations.
The Principle of Liking:
People like those who like them.
The Application:
Uncover real similarities and offer genuine praise.
The retailing phenomenon known as the Tupperware party is a vivid illustration of this principle in action. The demonstration party for Tupperware products is hosted by an individual, almost always a woman, who invites to her home an array of friends, neighbors, and relatives. The guests’ affection for their hostess predisposes them to buy from her, a dynamic that was confirmed by a 1990 study of purchase decisions made at demonstration parties. The researchers, Jonathan Frenzen and Harry Davis, writing in the Journal of Consumer Research, found that the guests’ fondness for their hostess weighed twice as heavily in their purchase decisions as their regard for the products they bought. So when guests at a Tupperware party buy something, they aren’t just buying to please themselves. They’re buying to please their hostess as well.
What’s true at Tupperware parties is true for business in general: If you want to influence people, win friends. How? Controlled research has identified several factors that reliably increase liking, but two stand out as especially compelling—similarity and praise. Similarity literally draws people together. In one experiment, reported in a 1968 article in the Journal of Personality, participants stood physically closer to one another after learning that they shared political beliefs and social values. And in a 1963 article in American Behavioral Scientists, researcher F. B. Evans used demographic data from insurance company records to demonstrate that
Forum for Multidisciplinary Thinking !3 Weekly Read Compilation December 8, 2013 prospects were more willing to purchase a policy from a salesperson who was akin to them in age, religion, politics, or even cigarette-smoking habits.
Managers can use similarities to create bonds with a recent hire, the head of another department, or even a new boss. Informal conversations during the workday create an ideal opportunity to discover at least one common area of enjoyment, be it a hobby, a college basketball team, or reruns of Seinfeld. The important thing is to establish the bond early because it creates a presumption of goodwill and trustworthiness in every subsequent encounter. It’s much easier to build support for a new project when the people you’re trying to persuade are already inclined in your favor.
Praise, the other reliable generator of affection, both charms and disarms. Sometimes the praise doesn’t even have to be merited. Researchers at the University of North Carolina writing in the Journal of Experimental Social Psychology found that men felt the greatest regard for an individual who flattered them unstintingly even if the comments were untrue. And in their book Interpersonal Attraction (Addison-Wesley, 1978), Ellen Berscheid and Elaine Hatfield Walster presented experimental data showing that positive remarks about another person’s traits, attitude, or performance reliably generates liking in return, as well as willing compliance with the wishes of the person offering the praise.
Along with cultivating a fruitful relationship, adroit managers can also use praise to repair one that’s damaged or unproductive. Imagine you’re the manager of a good-sized unit within your organization. Your work frequently brings you into contact with another manager—call him Dan —whom you have come to dislike. No matter how much you do for him, it’s not enough. Worse, he never seems to believe that you’re doing the best you can for him. Resenting his attitude and his obvious lack of trust in your abilities and in your good faith, you don’t spend as much time with him as you know you should; in consequence, the performance of both his unit and yours is deteriorating.
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The research on praise points toward a strategy for fixing the relationship. It may be hard to find, but there has to be something about Dan you can sincerely admire, whether it’s his concern for the people in his department, his devotion to his family, or simply his work ethic. In your next encounter with him, make an appreciative comment about that trait. Make it clear that in this case at least, you value what he values. I predict that Dan will relax his relentless negativity and give you an opening to convince him of your competence and good intentions.
The Principle of Reciprocity:
People repay in kind.
The Application:
Give what you want to receive.
Praise is likely to have a warming and softening effect on Dan because, ornery as he is, he is still human and subject to the universal human tendency to treat people the way they treat him. If you have ever caught yourself smiling at a coworker just because he or she smiled first, you know how this principle works.
Charities rely on reciprocity to help them raise funds. For years, for instance, the Disabled American Veterans organization, using only a well- crafted fund-raising letter, garnered a very respectable 18% rate of response to its appeals. But when the group started enclosing a small gift in the envelope, the response rate nearly doubled to 35%. The gift— personalized address labels—was extremely modest, but it wasn’t what prospective donors received that made the difference. It was that they had gotten anything at all.
What works in that letter works at the office, too. It’s more than an effusion of seasonal spirit, of course, that impels suppliers to shower gifts on purchasing departments at holiday time. In 1996, purchasing managers admitted to an interviewer from Inc. magazine that after having accepted a gift from a supplier, they were willing to purchase products and services
Forum for Multidisciplinary Thinking !5 Weekly Read Compilation December 8, 2013 they would have otherwise declined. Gifts also have a startling effect on retention. I have encouraged readers of my book to send me examples of the principles of influence at work in their own lives. One reader, an employee of the State of Oregon, sent a letter in which she offered these reasons for her commitment to her supervisor:
He gives me and my son gifts for Christmas and gives me presents on my birthday. There is no promotion for the type of job I have, and my only choice for one is to move to another department. But I find myself resisting trying to move. My boss is reaching retirement age, and I am thinking I will be able to move out after he retires... [F]or now, I feel obligated to stay since he has been so nice to me.
Ultimately, though, gift giving is one of the cruder applications of the rule of reciprocity. In its more sophisticated uses, it confers a genuine first- mover advantage on any manager who is trying to foster positive attitudes and productive personal relationships in the office: Managers can elicit the desired behavior from coworkers and employees by displaying it first. Whether it’s a sense of trust, a spirit of cooperation, or a pleasant demeanor, leaders should model the behavior they want to see from others.
The same holds true for managers faced with issues of information delivery and resource allocation. If you lend a member of your staff to a colleague who is shorthanded and staring at a fast-approaching deadline, you will significantly increase your chances of getting help when you need it. Your odds will improve even more if you say, when your colleague thanks you for the assistance, something like, “Sure, glad to help. I know how important it is for me to count on your help when I need it.”
The Principle of Social Proof:
People follow the lead of similar others.
The Application:
Use peer power whenever it’s available.
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Social creatures that they are, human beings rely heavily on the people around them for cues on how to think, feel, and act. We know this intuitively, but intuition has also been confirmed by experiments, such as the one first described in 1982 in the Journal of Applied Psychology. A group of researchers went door-to-door in Columbia, South Carolina, soliciting donations for a charity campaign and displaying a list of neighborhood residents who had already donated to the cause. The researchers found that the longer the donor list was, the more likely those solicited would be to donate as well.
To the people being solicited, the friends’ and neighbors’ names on the list were a form of social evidence about how they should respond. But the evidence would not have been nearly as compelling had the names been those of random strangers. In an experiment from the 1960s, first described in the Journal of Personality and Social Psychology, residents of New York City were asked to return a lost wallet to its owner. They were highly likely to attempt to return the wallet when they learned that another New Yorker had previously attempted to do so. But learning that someone from a foreign country had tried to return the wallet didn’t sway their decision one way or the other.
The lesson for executives from these two experiments is that persuasion can be extremely effective when it comes from peers. The science supports what most sales professionals already know: Testimonials from satisfied customers work best when the satisfied customer and the prospective customer share similar circumstances. That lesson can help a manager faced with the task of selling a new corporate initiative. Imagine that you’re trying to streamline your department’s work processes. A group of veteran employees is resisting. Rather than try to convince the employees of the move’s merits yourself, ask an old-timer who supports the initiative to speak up for it at a team meeting. The compatriot’s testimony stands a much better chance of convincing the group than yet another speech from the boss. Stated simply, influence is often best exerted horizontally rather than vertically.
The Principle of Consistency:
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People align with their clear commitments.
The Application:
Make their commitments active, public, and voluntary.
Liking is a powerful force, but the work of persuasion involves more than simply making people feel warmly toward you, your idea, or your product. People need not only to like you but to feel committed to what you want them to do. Good turns are one reliable way to make people feel obligated to you. Another is to win a public commitment from them.
My own research has demonstrated that most people, once they take a stand or go on record in favor of a position, prefer to stick to it. Other studies reinforce that finding and go on to show how even a small, seemingly trivial commitment can have a powerful effect on future actions. Israeli researchers writing in 1983 in the Personality and Social Psychology Bulletin recounted how they asked half the residents of a large apartment complex to sign a petition favoring the establishment of a recreation center for the handicapped. The cause was good and the request was small, so almost everyone who was asked agreed to sign. Two weeks later, on National Collection Day for the Handicapped, all residents of the complex were approached at home and asked to give to the cause. A little more than half of those who were not asked to sign the petition made a contribution. But an astounding 92% of those who did sign donated money. The residents of the apartment complex felt obligated to live up to their commitments because those commitments were active, public, and voluntary. These three features are worth considering separately.
There’s strong empirical evidence to show that a choice made actively— one that’s spoken out loud or written down or otherwise made explicit —is considerably more likely to direct someone’s future conduct than the same choice left unspoken. Writing in 1996 in the Personality and Social Psychology Bulletin, Delia Cioffi and Randy Garner described an experiment in which college students in one group were asked to fill out
Forum for Multidisciplinary Thinking !8 Weekly Read Compilation December 8, 2013 a printed form saying they wished to volunteer for an AIDS education project in the public schools. Students in another group volunteered for the same project by leaving blank a form stating that they didn’t want to participate. A few days later, when the volunteers reported for duty, 74% of those who showed up were students from the group that signaled their commitment by filling out the form.
The implications are clear for a manager who wants to persuade a subordinate to follow some particular course of action: Get it in writing. Let’s suppose you want your employee to submit reports in a more timely fashion. Once you believe you’ve won agreement, ask him to summarize the decision in a memo and send it to you. By doing so, you’ll have greatly increased the odds that he’ll fulfill the commitment because, as a rule, people live up to what they have written down.
Research into the social dimensions of commitment suggests that written statements become even more powerful when they’re made public. In a classic experiment, described in 1955 in the Journal of Abnormal and Social Psychology, college students were asked to estimate the length of lines projected on a screen. Some students were asked to write down their choices on a piece of paper, sign it, and hand the paper to the experimenter. Others wrote their choices on an erasable slate, then erased the slate immediately. Still others were instructed to keep their decisions to themselves.
The experimenters then presented all three groups with evidence that their initial choices may have been wrong. Those who had merely kept their decisions in their heads were the most likely to reconsider their original estimates. More loyal to their first guesses were the students in the group that had written them down and immediately erased them. But by a wide margin, the ones most reluctant to shift from their original choices were those who had signed and handed them to the researcher.
This experiment highlights how much most people wish to appear consistent to others. Consider again the matter of the employee who has been submitting late reports. Recognizing the power of this desire, you should, once you’ve successfully convinced him of the need to be
Forum for Multidisciplinary Thinking !9 Weekly Read Compilation December 8, 2013 more timely, reinforce the commitment by making sure it gets a public airing. One way to do that would be to send the employee an e-mail that reads, “I think your plan is just what we need. I showed it to Diane in manufacturing and Phil in shipping, and they thought it was right on target, too.” Whatever way such commitments are formalized, they should never be like the New Year’s resolutions people privately make and then abandon with no one the wiser. They should be publicly made and visibly posted.
More than 300 years ago, Samuel Butler wrote a couplet that explains succinctly why commitments must be voluntary to be lasting and effective: “He that complies against his will/Is of his own opinion still.” If an undertaking is forced, coerced, or imposed from the outside, it’s not a commitment; it’s an unwelcome burden. Think how you would react if your boss pressured you to donate to the campaign of a political candidate. Would that make you more apt to opt for that candidate in the privacy of a voting booth? Not likely. In fact, in their 1981 book Psychological Reactance (Academic Press), Sharon S. Brehm and Jack W. Brehm present data that suggest you’d vote the opposite way just to express your resentment of the boss’s coercion.
This kind of backlash can occur in the office, too. Let’s return again to that tardy employee. If you want to produce an enduring change in his behavior, you should avoid using threats or pressure tactics to gain his compliance. He’d likely view any change in his behavior as the result of intimidation rather than a personal commitment to change. A better approach would be to identify something that the employee genuinely values in the work-place—high-quality workmanship, perhaps, or team spirit—and then describe how timely reports are consistent with those values. That gives the employee reasons for improvement that he can own. And because he owns them, they’ll continue to guide his behavior even when you’re not watching.
The Principle of Authority:
People defer to experts.
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The Application:
Expose your expertise; don’t assume it’s self-evident.
Two thousand years ago, the Roman poet Virgil offered this simple counsel to those seeking to choose correctly: “Believe an expert.” That may or may not be good advice, but as a description of what people actually do, it can’t be beaten. For instance, when the news media present an acknowledged expert’s views on a topic, the effect on public opinion is dramatic. A single expert-opinion news story in the New York Times is associated with a 2% shift in public opinion nationwide, according to a 1993 study described in the Public Opinion Quarterly. And researchers writing in the American Political Science Review in 1987 found that when the expert’s view was aired on national television, public opinion shifted as much as 4%. A cynic might argue that these findings only illustrate the docile submissiveness of the public. But a fairer explanation is that, amid the teeming complexity of contemporary life, a well-selected expert offers a valuable and efficient shortcut to good decisions. Indeed, some questions, be they legal, financial, medical, or technological, require so much specialized knowledge to answer, we have no choice but to rely on experts.
Since there’s good reason to defer to experts, executives should take pains to ensure that they establish their own expertise before they attempt to exert influence. Surprisingly often, people mistakenly assume that others recognize and appreciate their experience. That’s what happened at a hospital where some colleagues and I were consulting. The physical therapy staffers were frustrated because so many of their stroke patients abandoned their exercise routines as soon as they left the hospital. No matter how often the staff emphasized the importance of regular home exercise—it is,in fact, crucial to the process of regaining independent function—the message just didn’t sink in.
Interviews with some of the patients helped us pinpoint the problem. They were familiar with the background and training of their physicians, but the patients knew little about the credentials of the physical therapists who were urging them to exercise. It was a simple matter to
Forum for Multidisciplinary Thinking !11 Weekly Read Compilation December 8, 2013 remedy that lack of information: We merely asked the therapy director to display all the awards, diplomas, and certifications of her staff on the walls of the therapy rooms. The result was startling: Exercise compliance jumped 34% and has never dropped since.
What we found immensely gratifying was not just how much we increased compliance, but how. We didn’t fool or browbeat any of the patients. We informed them into compliance. Nothing had to be invented; no time or resources had to be spent in the process. The staff’s expertise was real—all we had to do was make it more visible.
The task for managers who want to establish their claims to expertise is somewhat more difficult. They can’t simply nail their diplomas to the wall and wait for everyone to notice. A little subtlety is called for. Outside the United States, it is customary for people to spend time interacting socially before getting down to business for the first time. Frequently they gather for dinner the night before their meeting or negotiation. These get-togethers can make discussions easier and help blunt disagreements—remember the findings about liking and similarity—and they can also provide an opportunity to establish expertise. Perhaps it’s a matter of telling an anecdote about successfully solving a problem similar to the one that’s on the agenda at the next day’s meeting. Or perhaps dinner is the time to describe years spent mastering a complex discipline —not in a boastful way but as part of the ordinary give-and-take of conversation.
Persuasion Experts, Safe at Last Thanks to several decades of rigorous empirical research by behavioral scientists, our understanding of the how and why of persuasion has never been broader, deeper, or more detailed. But these scientists aren’t the first students of the subject. The history of persuasion studies is an ancient and honorable one, and it has generated a long roster of heroes and martyrs.
A renowned student of social influence, William McGuire, contends in a chapter of the Handbook of Social Psychology, 3rd ed. (Oxford University Press,1985) that scattered among the more than four
Forum for Multidisciplinary Thinking !12 Weekly Read Compilation December 8, 2013 millennia of recorded Western history are four centuries in which the study of persuasion flourished as a craft. The first was the Periclean Age of ancient Athens, the second occurred during the years of the Roman Republic, the next appeared in the time of the European Renaissance, and the last extended over the hundred years that have just ended, which witnessed the advent of large-scale advertising, information, and mass media campaigns. Each of the three previous centuries of systematic persuasion study was marked by a flowering of human achievement that was suddenly cut short when political authorities had the masters of persuasion killed. The philosopher Socrates is probably the best known of the persuasion experts to run afoul of the powers that be.
Information about the persuasion process is a threat because it creates a base of power entirely separate from the one controlled by political authorities. Faced with a rival source of influence, rulers in previous centuries had few qualms about eliminating those rare individuals who truly understood how to marshal forces that heads of state have never been able to monopolize, such as cleverly crafted language, strategically placed information, and, most important, psychological insight.
It would perhaps be expressing too much faith in human nature to claim that persuasion experts no longer face a threat from those who wield political power. But because the truth about persuasion is no longer the sole possession of a few brilliant, inspired individuals, experts in the field can presumably breathe a little easier. Indeed, since most people in power are interested in remaining in power, they’re likely to be more interested in acquiring persuasion skills than abolishing them.
Granted, there’s not always time for lengthy introductory sessions. But even in the course of the preliminary conversation that precedes most meetings, there is almost always an opportunity to touch lightly on your relevant background and experience as a natural part of a sociable exchange. This initial disclosure of personal information gives you a chance to establish expertise early in the game, so that when the discussion turns to the business at hand, what you have to say will be accorded the respect it deserves.
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The Principle of Scarcity:
People want more of what they can have less of.
The Application:
Highlight unique benefits and exclusive information.
Study after study shows that items and opportunities are seen to be more valuable as they become less available. That’s a tremendously useful piece of information for managers. They can harness the scarcity principle with the organizational equivalents of limited-time, limited-supply, and one-of-a-kind offers. Honestly informing a coworker of a closing window of opportunity—the chance to get the boss’s ear before she leaves for an extended vacation, perhaps—can mobilize action dramatically.
Managers can learn from retailers how to frame their offers not in terms of what people stand to gain but in terms of what they stand to lose if they don’t act on the information. The power of “loss language” was demonstrated in a 1988 study of California home owners written up in the Journal of Applied Psychology. Half were told that if they fully insulated their homes, they would save a certain amount of money each day. The other half were told that if they failed to insulate, they would lose that amount each day. Significantly more people insulated their homes when exposed to the loss language. The same phenomenon occurs in business. According to a 1994 study in the journal Organizational Behavior and Human Decision Processes, potential losses figure far more heavily in managers’ decision making than potential gains.
In framing their offers, executives should also remember that exclusive information is more persuasive than widely available data. A doctoral student of mine, Amram Knishinsky, wrote his 1982 dissertation on the purchase decisions of wholesale beef buyers. He observed that they more than doubled their orders when they were told that, because of certain weather conditions overseas, there was likely to be a scarcity of foreign beef in the near future. But their orders increased 600% when they were informed that no one else had that information yet.
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The persuasive power of exclusivity can be harnessed by any manager who comes into possession of information that’s not broadly available and that supports an idea or initiative he or she would like the organization to adopt. The next time that kind of information crosses your desk, round up your organization’s key players. The information itself may seem dull, but exclusivity will give it a special sheen. Push it across your desk and say, “I just got this report today. It won’t be distributed until next week, but I want to give you an early look at what it shows.” Then watch your listeners lean forward.
Allow me to stress here a point that should be obvious. No offer of exclusive information, no exhortation to act now or miss this opportunity forever should be made unless it is genuine. Deceiving colleagues into compliance is not only ethically objectionable, it’s foolhardy. If the deception is detected—and it certainly will be—it will snuff out any enthusiasm the offer originally kindled. It will also invite dishonesty toward the deceiver. Remember the rule of reciprocity.
Putting It All Together
There’s nothing abstruse or obscure about these six principles of persuasion. Indeed, they neatly codify our intuitive understanding of the ways people evaluate information and form decisions. As a result, the principles are easy for most people to grasp, even those with no formal education in psychology. But in the seminars and workshops I conduct, I have learned that two points bear repeated emphasis.
First, although the six principles and their applications can be discussed separately for the sake of clarity, they should be applied in combination to compound their impact. For instance, in discussing the importance of expertise, I suggested that managers use informal, social conversations to establish their credentials. But that conversation affords an opportunity to gain information as well as convey it. While you’re showing your dinner companion that you have the skills and experience your business problem demands, you can also learn about your companion’s background, likes, and dislikes—information that will help you locate
Forum for Multidisciplinary Thinking !15 Weekly Read Compilation December 8, 2013 genuine similarities and give sincere compliments. By letting your expertise surface and also establishing rapport, you double your persuasive power. And if you succeed in bringing your dinner partner on board, you may encourage other people to sign on as well, thanks to the persuasive power of social evidence.
The other point I wish to emphasize is that the rules of ethics apply to the science of social influence just as they do to any other technology. Not only is it ethically wrong to trick or trap others into assent, it’s ill- advised in practical terms. Dishonest or high-pressure tactics work only in the short run, if at all. Their long-term effects are malignant, especially within an organization which can’t function properly without a bedrock level of trust and cooperation.
That point is made vividly in the following account, which a department head for a large textile manufacturer related at a training workshop I conducted. She described a vice president in her company who wrung public commitments from department heads in a highly manipulative manner. Instead of giving his subordinates time to talk or think through his proposals carefully, he would approach them individually at the busiest moment of their workday and describe the benefits of his plan in exhaustive, patience-straining detail. Then he would move in for the kill. “It’s very important for me to see you as being on my team on this,” he would say. “Can I count on your support?” Intimidated, frazzled, eager to chase the man from their offices so they could get back to work, the department heads would invariably go along with his request. But because the commitments never felt voluntary, the department heads never followed through, and as a result the vice president’s initiatives all blew up or petered out.
This story had a deep impact on the other participants in the workshop. Some gulped in shock as they recognized their own manipulative behavior. But what stopped everyone cold was the expression on the department head’s face as she recounted the damaging collapse of her superior’s proposals. She was smiling.
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Nothing I could say would more effectively make the point that the deceptive or coercive use of the principles of social influence is ethically wrong and pragmatically wrongheaded. Yet the same principles, if applied appropriately, can steer decisions correctly. Legitimate expertise, genuine obligations, authentic similarities, real social proof, exclusive news, and freely made commitments can produce choices that are likely to benefit both parties. And any approach that works to everyone’s mutual benefit is good business, don’t you think? Of course, I don’t want to press you into it, but, if you agree, I would love it if you could just jot me a memo to that effect.
Robert B. Cialdini is the Regents’ Professor of Psychology at Arizona State University and the author of Influence: Science and Practice (Allyn & Bacon, 2001), now in its fourth edition. Further regularly updated information about the influence process can be found at www.influenceatwork.com.
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The Neuroscientist Who Discovered He Was a Psychopath
Compared to a control brain (top), neuroscientist James Fallon’s brain (bottom) shows significantly decreased activity in areas of the frontal lobe linked to empathy and morality—anatomical patterns that have been linked with psychopathic behavior. Image via James Fallon
One afternoon in October 2005, neuroscientist James Fallon was looking at brain scans of serial killers. As part of a research project at UC Irvine, he was sifting through thousands of PET scans to find anatomical patterns in the brain that correlated with psychopathic tendencies in the real world.
“I was looking at many scans, scans of murderers mixed in with schizophrenics, depressives and other, normal brains,” he says. “Out of serendipity, I was also doing a study on Alzheimer’s and as part of that, had brain scans from me and everyone in my family right on my desk.”
James Fallon’s new book, The Psychopath Inside
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“I got to the bottom of the stack, and saw this scan that was obviously pathological,” he says, noting that it showed low activity in certain areas of the frontal and temporal lobes linked to empathy, morality and self- control. Knowing that it belonged to a member of his family, Fallon checked his lab’s PET machine for an error (it was working perfectly fine) and then decided he simply had to break the blinding that prevented him from knowing whose brain was pictured. When he looked up the code, he was greeted by an unsettling revelation: the psychopathic brain pictured in the scan was his own.
Many of us would hide this discovery and never tell a soul, out of fear or embarrassment of being labeled a psychopath. Perhaps because boldness and disinhibition are noted psychopathic tendencies, Fallon has gone all in towards the opposite direction, telling the world about his finding in a TED Talk, an NPR interview and now a new book published last month, The Psychopath Inside. In it, Fallon seeks to reconcile how he—a happily married family man—could demonstrate the same anatomical patterns that marked the minds of serial killers.
“I’ve never killed anybody, or raped anyone,” he says. “So the first thing I thought was that maybe my hypothesis was wrong, and that these brain areas are not reflective of psychopathy or murderous behavior.”
But when he underwent a series of genetic tests, he got more bad news. “I had all these high-risk alleles for aggression, violence and low empathy,” he says, such as a variant of the MAO-A gene that has been linked with aggressive behavior. Eventually, based on further neurological and behavioral research into psychopathy, he decided he was indeed a psychopath—just a relatively good kind, what he and others call a “pro- social psychopath,” someone who has difficulty feeling true empathy for others but still keeps his behavior roughly within socially-acceptable bounds.
It wasn’t entirely a shock to Fallon, as he’d always been aware that he was someone especially motivated by power and manipulating others, he says. Additionally, his family line included seven alleged murderers, including
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Lizzie Borden, infamously accused of killing her father and stepmother in 1892.
But the fact that a person with the genes and brain of a psychopath could end up a non-violent, stable and successful scientist made Fallon reconsider the ambiguity of the term. Psychopathy, after all, doesn’t appear as a formal diagnosis in the Diagnostic and Statistical Manual of Mental Disorders in part because it encompasses such a wide range of symptoms. Not all psychopaths kill; some, like Fallon, exhibit other sorts of psychopathic behavior.
“I’m obnoxiously competitive. I won’t let my grandchildren win games. I’m kind of an asshole, and I do jerky things that piss people off,” he says. “But while I’m aggressive, but my aggression is sublimated. I’d rather beat someone in an argument than beat them up.”
Why has Fallon been able to temper his behavior, while other people with similar genetics and brain turn violent and end up in prison? Fallon was once a self-proclaimed genetic determinist, but his views on the influence of genes on behavior have evolved. He now believes that his childhood helped prevent him from heading down a scarier path.
“I was loved, and that protected me,” he says. Partly as a result of a series of miscarriages that preceded his birth, he was given an especially heavy amount of attention from his parents, and he thinks that played a key role.
This corresponds to recent research: His particular allele for a serotonin transporter protein present in the brain, for example, is believed to put him at higher risk for psychopathic tendencies. But further analysis has shown that it can affect the development of the ventromedial prefrontal cortex (the area with characteristically low activity in psychopaths) in complex ways: It can open up the region to be more significantly affected by environmental influences, and so a positive (or negative) childhood is especially pivotal in determining behavioral outcomes.
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Of course, there’s also a third ingredient, in addition to genetics and environment: free will. “Since finding all this out and looking into it, I’ve made an effort to try to change my behavior,” Fallon says. “I’ve more consciously been doing things that are considered ‘the right thing to do,’ and thinking more about other people’s feelings.”
But he added, “At the same time, I’m not doing this because I’m suddenly nice, I’m doing it because of pride—because I want to show to everyone and myself that I can pull it off.”
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7 Epic Fails Brought to You By the Genius Mind of Thomas Edison Despite popular belief, the inventor wasn’t the “Wiz” of everything By Erica R. Hendry
Almost can name the man that invented the light bulb.
Thomas Edison was one of the most successful innovators in American history. He was the “Wizard of Menlo Park,” a larger-than-life hero who seemed almost magical for the way he snatched ideas from thin air.
But the man also stumbled, sometimes tremendously. In response to a question about his missteps, Edison once said, “I have not failed 10,000 times—I’ve successfully found 10,000 ways that will not work.”
Leonard DeGraaf, an archivist at the Thomas Edison National Historical Park, explores the inventor’s prolific career in his new book, Edison and the Rise of Innovation. The author offers new documents, photographs and insight into Edison’s evolution as an inventor, not to forget those creations that never saw wild success.
“One of the things that makes Edison stand out as an innovator was he was very good at reducing the risk of innovation—he’s not an inventor that depends on just one thing,” DeGraaf says. “He knows that if one idea or one product doesn’t do well he has others…that can make up for it.”
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Chances are you haven’t heard of Edison’s botched ideas, several of which are highlighted here, because the Ohio native refused to dwell on them. DeGraaf says, “Edison’s not a guy that looks back. Even for his biggest failures he didn’t spend a lot of time wringing his hands and saying ‘Oh my God, we spent a fortune on that.’ He said, ‘we had fun spending it.’”
The automatic vote recorder
Edison, who made an early name for himself improving the telegraph, moved to Boston in 1868 to expand his network and find investors. By night, he worked the wires, taking press reports from New York for Western Union. By day, he experimented with new technologies—one of which was his first patented invention, an electrographic vote recorder.
The device allowed officials voting on a bill to cast their decision to a central recorder that calculated the tally automatically. Edison dreamed the invention would “save several hours of public time every day in the session.” He later reflected, “I thought my fortune was made.”
But when he took the vote recorder to Washington, Edison was met with a different reaction. “Political leaders said, ‘Forget it,’” DeGraaf says. There was almost no interest in Edison’s device because politicians feared it hurt the vote trading and maneuvering that happens in the legislative process (much in the way some feared bringing cameras to hearings, via CSPAN, would lead to more grandstanding instead of negotiating).
It was an early lesson. From that point on, DeGraaf says, “He vowed he would not invent a technology that didn’t have an apparent market; that he wasn’t just going to invent things for the sake of inventing them but… to be able to sell them. I have to suspect that even Edison, as young and inexperienced innovator at that point, would have had to understand that if he can’t sell his invention, he can’t make money.”
Electric pen
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As railroads and other companies expanded in the late 19th century, there was a huge demand for tools administrative employees could use to complete tasks—including making multiple copies of handwritten documents—quicker.
Enter the electric pen. Powered by a small electric motor and battery, the pen relied on a handheld needle that moved up and down as an employee wrote. Instead of pushing out ink, though, the pen punched tiny holes through the paper’s surface; the idea was employees could create a stencil of their documents on wax paper and make copies by rolling ink over it, “printing” the words onto blank pieces of paper underneath.
Edison, whose machinist, John Ott, began to manufacture the pens in 1875, hired agents to sell the pens across the Mid-Atlantic. Edison charged agents $20 a pen; the agents sold them for $30.
The first problems with the invention were purely cosmetic: the electric pen was noisy, and much heavier than those employees had used in the past. But even after Edison improved the sound and weight, problems persisted. The batteries had to be maintained using chemical solutions in a jar. “It was messy,” says DeGraaf.
By 1877, Edison was involved in the telephone and thinking about what would eventually become the phonograph; he abandoned the project, assigning the rights to Western Electric Manufacturing Co. Edison received pen royalties into the early 1880s.
Even though the electric pen wasn’t a home run for Edison, it paved the way for other innovators. Albert B. Dick purchased one of the pen’s patented technologies to create the mimeograph, a stencil copier that spread quickly from schools to offices to churches, DeGraaf says. And while it’s hard to trace for sure, the electric pen is also often considered the predecessor of the modern tattoo needle.
The tinfoil phonograph
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Edison debuted one of his most successful inventions, the phonograph, in 1888. “I’ve made some machines, but this is my baby and I expect it to grow up to be a big feller and support me in my old age,” he once quipped. But getting a perfected machine to market was a journey that took nearly a decade—and plenty of trial and error.
Edison’s entrée into sound recording in the 1870s was in some ways an accident. According to DeGraaf, Edison was handling the thin diaphragm the early telephone used to convert words into electromagnetic waves and wondered if reversing the process would allow him to play the words back. It worked. At first, Edison modeled the invention on spools of paper tape or grooved paper discs, but eventually moved on to a tinfoil disc. He developed a hand-cranked machine called the tinfoil phonograph; as he spoke into the machine and cranked the handle, metal points traced grooves into the disc. When he returned the disc to the starting point and cranked the handle again, his voice rang back from the machine. (The machine even worked on Edison’s first test: the children’s rhyme “Mary Had a Little Lamb.”)
Reporters and scientists were blown away by the invention; DeGraaf argues it helped make Edison a household name. He took the device to demonstrations up and down the East Coast—even making a midnight visit to President Rutherford B. Hayes at the White House—and eventually organized exhibitions across the country.
Edison imagined music boxes, talking clocks and dolls, speech education tools and talking books for the blind. But without a clear marketing strategy, the device did not have a target purpose or audience. As the man who ran the exhibition tour told Edison, “interest [was soon] exhausted.” Only two small groups were invested in it, those who could afford to indulge in the novelty and scientists interested in the technology behind it.
The machine also took skill and patience. The tinfoil sheet was delicate and easily damaged, which meant it could only be used once or twice and couldn’t be stored for a long period of time.
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When Edison revisited the machine 10 years later, he was more involved in both the marketing and the medium—which he eventually changed to a wax cylinder— and his invention took off.
The Talking Doll
When he opened a lab in West Orange, New Jersey, in late 1887, Edison decided he wanted to turn out new inventions quickly and hand them over to factories to be manufactured and sold; what he earned from those sales would be put back into the lab.
“He didn’t want to do complicated things, he wanted to do projects he could turn out in a short time and [that would] turn a quick profit,” DeGraaf says.
Among the first of these attempts was the talking doll. (If you’ve ever owned a talking doll—and who didn’t love the pull-string Woody from Toy Story—you ought to thank Edison.) Edison crafted a smaller version of his phonograph and put it inside dolls he imported from Germany. He hoped to have the doll ready for Christmas 1888, but production issues kept the toys from hitting the market until March 1890.
Almost immediately, the toys began coming back.
Consumers complained they were too fragile and broke easily in the hands of young girls; even the slightest bump down the stairs could cause the mechanism to come loose. Some reported that the toy’s voice grew fainter after only an hour of use. Beyond that, the dolls didn’t exactly sound like sweet companions—their voice was “just ghastly,” DeGraaf says.
Edison reacted quickly—by April, less than a month after they were first shipped to consumers, the dolls were off the market. The swift move was one of the strongest indications of Edison’s attitude toward failure and how he operated when faced with it, DeGraaf says.
Ore mills and separators
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For years, Edison corresponded with miners throughout the United States. The deposits of ore along the East Coast, Ohio and Pennsylvania were littered with nonferrous rock that had to be removed before the ore was smelted, DeGraaf explains. In 1890, Edison envisioned an ore separator with powerful electromagnets that could parse the fine ore particles from rocks, depositing them into two different bins.
But he wasn’t alone: at the same time, there were more than 20 small- scale ore separators being tested on Eastern iron beds. To give himself a competitive advantage, Edison constructed several large-scale plants he believed could process up to 5,000 tons of ore a day, DeGraaf says. After opening and closing a few small experimental plants, he constructed a plant near Ogdensburg, New Jersey, which gave him access to 19,000 acres of minerals.
Edison managed the plant in Ogdensburg—a change of pace for the inventor. The endeavor presented issues from the very beginning. The giant crushing rolls—5-foot by 6-foot tools Edison hoped would crush rocks up to six tons—that were crucial to the plant’s operations were all but useless when they debuted in 1894. As Edison redesigned them, his employees discovered the plant’s elevators had deteriorated, which meant he would have to rebuild an entirely new elevator system. Edison could never quite get the lab to full capacity. He rejiggered machines a dozen times over at all steps in the process, from crushing to separating and drying. The work came with a hefty price tag, with which Edison nor his investors could cover. Ore milling was a failed experiment Edison took a decade to let go—an uncharacteristically long time for the quick- stepping innovator.
The Edison Home Service Club
Before there was Netflix or Redbox, there was the Edison Home Service Club.
In the 1900s, Edison’s National Phonograph Co. rolled out a number of less expensive machines so people could bring entertainment—mostly
Forum for Multidisciplinary Thinking !27 Weekly Read Compilation December 8, 2013 music—into their homes. His and the other major phonograph companies, including Victor and Columbia, manufactured the machines as well as the records they played.
Edison believed his records were superior, DeGraaf says, and thought giving buyers access to more of his catalog was the only way to prove it. He rolled out the club in 1922, sending subscribers 20 records in the mail each month. After two days, they selected the records they wanted to order and sent the samples on to the next subscriber.
The service worked well in small clusters of buyers, many of them in New Jersey. Edison refused to let celebrities endorse his product or do much of any widespread advertising; Victoria and Columbia both had much more effective mass circulation advertising campaigns that stretched across the country, something that was “way beyond Edison’s ability,” DeGraaf says. “The company just didn’t have the money to implement [something like that] on a national scale.”
Up until this point, most markets were local or regional. “They’re not operating on a national basis and the success is contingent on very close personal relationships between the customer and the business person,” DeGraaf says—which is exactly what Edison tried to achieve with the club and other plans for the phonograph, including a sub-dealer plan that placed the records and devices in stores, ice cream parlors and barbershops for demonstrations, then tasked the owners with sending Edison the names of potential buyers.
The key to mass marketing is lowering the cost of a product and recovering profits by selling more of it—but “ that was a radical idea in the 1880s and 1890s and there were some manufacturers”—Edison among them— “that just didn’t believe you’d be able to succeed that way,” DeGraaf says.
“Mass marketing today is so ubiquitous and successful we assume it’s just common sense, but it’s a commercial behavior that had to be adopted and understood,” says DeGraaf.
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Home Projecting Kinetoscope
After early success with the motion picture camera, Edison introduced a motion picture projector for non-commercial use in 1912, with the idea they could serve as important educational tools for churches, schools and civic organizations, and in the home.
The machines were just too expensive, though, and he struggled to create a catalog of films that appealed to customers. Of the 2,500 machines shipped out to dealers, only 500 were sold, DeGraaf says.
Some of the kinetoscope’s issues mirrored the problems Edison encountered in other failed projects. “Edison is a very good hardware guy, but he does have problems with software,” DeGraaf says. The cylinder player that powered the tinfoil phonograph worked beautifully, for instance, but it was the disc that caused Edison problems; with home theater, the films themselves, not the players, were faulty.
Edison experimented with producing motion pictures, expanding his catalog to include one- and two–reel movies from documentaries to comedies and dramas. In 1911, he made $200,000 to $230,000 a year— between $5.1 and $5.8 million in today’s dollars— from his business. But by 1915, people favored long feature films over educational films and shorts. “For whatever reason Edison was not delivering that,” says DeGraaf. “Some dealers told him point blank, you’re not releasing films that people want to see and that’s a problem.”
“That’s part of the problem with understanding Edison—you have to look at what he does and what other people are saying around him, because he doesn’t spend a lot of time writing about what he’s doing— he’s so busy doing it,” DeGraaf explains. “I think he has impatience with that sort of navel gazing.”
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Lunch with the FT: Ha-Joon Chang
©Jimmy Turrell
Ha-Joon Chang’s hands are chopping the air like helicopter blades. He whirrs them in a tight 360-degree spin or brings them down on the beat like a conductor. Sometimes he tightens his fists to emphasise frustration, or holds his hands flat – palms upwards, fingers splayed – as though weighing two bags of rice. At one point he stretches both arms over his head before bringing them together as if along an invisible monkey bar. What could be prompting so much passion? You guessed it. We are talking economics.
In Chang’s hands, though, economics is not dry. The 50-year-old South Korean-born academic is the author of several bestselling books on the subject, leavened with wit and bearing provocative titles such as 23 Things They Don’t Tell You About Capitalism (2010) and Bad Samaritans: The Guilty Secrets of Rich Nations and the Threat to Global Prosperity (2007). His 23 Things, which claims that free markets don’t exist and that the washing machine changed society more than the internet, has sold 650,000 copies and been translated into 32 languages. All in all, he estimates, his books have been bought by more than 1.3m people – not bad for an economist who turned up in Cambridge 27 years ago barely able to speak English. Yet in an email sent before we meet, he spells out an irony. “I am one of the most successful economists, according to what markets tell us, though most of my professional colleagues, who are much keener to accept market outcomes than I am, would dismiss me as a crank or – the worst of all abuses among economists – a ‘sociologist’.”
Chang conducts his guerrilla war against economic orthodoxy from a cramped office at Cambridge university’s Sidgwick site. For him, economics is a tool for changing the world, not for explaining why the world is as we find it. He is a reader at Cambridge rather than a full professor, a relative sidelining he attributes to his heterodox approach. “I
Forum for Multidisciplinary Thinking !30 Weekly Read Compilation December 8, 2013 don’t do maths,” he says, blinking softly through his round, silver-rimmed spectacles. “A lot of economists think I’m not an economist.”
He is, though, a star with a big following. In the wake of the global financial crisis, organisations such as the International Monetary Fund – which used to regard him as “an oddity” – regularly invite him to speak. Still, he reckons the economics profession overall remains resistant to fresh ideas, clinging to its status as a pseudoscience undergirded by unbreakable mathematical rules. “These things do not change overnight. The German physicist Max Planck once said science progresses one funeral at a time.”
We have come to the Rice Boat, a Keralan restaurant specialising in south Indian cuisine. A 10-minute walk from Chang’s office, it has become his unofficial canteen. The restaurant is large and, when we walk in, entirely empty, though Chang assures me it’s heaving in the evenings. The walls are a garish yellow and hung with the sort of Indian paintings you might find at a car-boot sale. The bathroom lights don’t work and I am handed a lightsaber-type wand to negotiate the darkness. The food, despite the unpromising surroundings, turns out to be excellent.
Chang recommends chicken, lamb and tuna cutlets as a starter followed by Kerala red fish curry and the restaurant’s “famous” Kerala beef fry. “You can have beef here because they are Christians.” We also choose appam, a spongy pancake made with fermented rice and coconut milk, some chapattis, and a portion of Kerala boiled rice, which Chang explains is fluffier than the Basmati variety. I wonder if he’d like to join me for a beer. “I don’t drink at lunchtime because I’m very weak at alcohol like most Asians,” he says apologetically, ordering a sweet lassi instead. I decide not to let down the journalistic profession and select a bottle of Konrad 11, a sharp and tangy Czech lager.
. . .
Chang is dressed in academic casual, an open-neck shirt and slacks. His fringe is as jagged as a graph of booms and busts – absent Keynesian countercyclical spending – and his kindly face boyishly pudgy. As he
Forum for Multidisciplinary Thinking !31 Weekly Read Compilation December 8, 2013 marshals argument after argument against his intellectual enemies, I think of a teddy bear savaging a Rottweiler.
“The predominant view in the profession is that there’s one particular way of doing economics. It’s basically to set up some mathematical model, the more complicated the better,” he says, advocating instead what he calls a multidisciplinary approach. “In a biology department, you have people doing all sorts of different things. So some do DNA analysis, others do anatomy, some people go and sit with gorillas in the forests of Burundi, and others do experiments with rats. But they are called biologists because biologists recognise that living organisms are complex things and you cannot understand them only at one level. So why can’t economists become like that? Yes, you do need people crunching numbers, but you also need people going to factories and doing surveys, you need people watching political changes to see what’s going on.”
The cutlets arrive with a clatter. Chang squeezes on lemon juice and cuts them up so we can share. The chicken is sumptuously juicy.
Doesn’t the success of Freakonomics (2005), written by Steven Levitt and Stephen Dubner, disprove his notion that economics is closed to new approaches? “They don’t get huge brownie points for writing for the general public because a lot of economists have a very dim view of what the general public can understand,” he says. “But the Freakonomics guys are accepted as part of the mainstream because they have this very particular view of human behaviour, which is ‘rational choice’. That is: ‘We are all selfish, we basically do our best to promote our self-interest and that choice is made in a rational way.’ ”
“I don’t take that view,” he says, cramming in a piece of lamb before he continues. “Rational thinking is an important aspect of human nature, but we have imagination, we have ambition, we have irrational fear, we are swayed by other people, we get indoctrinated and we get influenced by advertising,” he says. “Even if we are actually rational, leaving it to the market may produce collectively irrational outcomes. So when a bubble develops it is rational for individuals to keep inflating the bubble, thinking
Forum for Multidisciplinary Thinking !32 Weekly Read Compilation December 8, 2013 that they can pull out at the last minute and make a lot of money. But collectively speaking . . . ” His hands create a bomb blast above the cutlets.
Today the economics profession is like the Catholic clergy that refused to translate the Bible, so unless you knew Latin you couldn’t read it - Ha-Joon Chang He takes a slurp of lassi and smiles beatifically. I ask how the economics profession has been hijacked by a single methodology. “Hijacked, yes. I think that’s right,” he says, evidently pleased with my choice of word. “Unfortunately, a lot of economists wanted to make their subject a science. So the more what you do resembles physics or chemistry the more credible you become. The economics profession is like the Catholic clergy. In the old days, they refused to translate the Bible, so unless you knew Latin you couldn’t read it. Today, unless you are good at maths and statistics, you cannot penetrate the economic literature.”
This, he says, leaves economic decision-making to a high priesthood of technocrats and central bankers. “Fat chance that a union official in Bradford will be able to beat the academic spouting rational choice theory,” he says. This – and here is his punchline – suits those with money and power. “If you have a professor from MIT or Oxford saying that things are as they are because they have to be, then as a person benefiting from the status quo you can’t be happier.”
. . .
As our main course arrives the table begins to fill with a fantastic array of curries and breads. I’m famished and eating faster than Chang. The beef, full of competing flavours, is particularly terrific. “A lot of social democrats bought into that fairy tale [of market perfection],” he says. “That’s why I am writing these popular books, because people have been told a very particular story and they need some antidote to it. I’m not saying I have some kind of monopoly over truth, but at least you need to hear a different side of the story.”
We turn to his childhood, when he witnessed first-hand how economic policies can transform a country’s fortunes. He was born in Seoul in
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1963. His father was a finance ministry official and his mother a teacher. Two years before Chang was born, Korea’s gross domestic product per capita was $82 compared with $179 in Ghana. He remembers how red the soil was in Seoul, now one of the world’s most neon-filled cities, because all the trees had been cut down for firewood. “I wasn’t deprived,” says Chang, who grew up in a house with two maids and the neighbourhood’s first television set. “But poverty was everywhere.”
Park Chung-hee had recently seized power in a military coup. Korea established a steel industry, a seemingly eccentric choice for a country without iron ore (it had to import it from Australia and Canada) or coking coal. Yet steel became a foundation of Korea’s industrial success. Chang believes that Park, though a dictator, made some smart choices and that the only countries to have prospered are those that ignored the siren call of free markets and comparative advantage – the idea that you stick to growing bananas if you’re a tropical island – and planned their escape from poverty.
Chang took those ideas with him to Cambridge in 1986, where he studied first for a masters and then a PhD on industrial policy. His first impression was how quiet England was. “In those days, everything closed at five o’clock and nothing was open on Sunday. Coming from Asia, it was like walking into a ghost town.” But the UK also had its charms: “I used to joke that I came to England – not to the US where most Koreans go – because I like Arthur Conan Doyle and Agatha Christie.”
His studies consolidated his thinking. Countries, he argued, needed to develop their capabilities, just as a child’s potential is stretched in school. In 1955, for example, when General Motors alone was producing 3.5m cars, Japan had 11 or 12 manufacturers collectively producing 70,000. “From the short-term point of view, it was madness for Japan to try to develop an auto industry,” he says. “Except that the Japanese realised, ‘We will get nowhere if we stick to what we are already good at, like silk.’ ”
But can’t the protection of infant industries go terribly wrong? In countries such as Argentina and India, closed economies led to lazy monopolies selling shoddy goods in the name of self-sufficiency. Chang
Forum for Multidisciplinary Thinking !34 Weekly Read Compilation December 8, 2013 agrees. Only those states that forced their entrepreneurs to compete internationally succeeded, he says. “In Bad Samaritans, I have this chapter called ‘My Six-Year Old Son Should Get a Job’. I’m trying to explain that the reason I don’t send this little guy to the labour market is because I believe that it pays, in the long run, for him to have an education rather than shining shoes and selling chewing gum. Protection is given with a view to eventually pushing your companies into the world market in the same way that you send your kids to school but [you] don’t subsidise them until they’re 45.”
He tears the appam and hands me a piece. It’s airy and faintly sweet and wonderful for mopping up the curry. “We have been led to believe that the market is some kind of natural phenomenon. But in the end, the market is a political construct.” The regulations around us – for instance those banning child labour or private money-printing – are invisible, he says. He cites the example of how Park’s government engineered a 30 per cent jump in wages through a massive shrinkage of the labour force. It was achieved, he explains, by making education compulsory up to the age of 12, removing at a stroke millions of children from the labour pool. Policy changed the market reality.
. . .
As Chang turns to the fish curry, I ask about his family. He met his Korean wife in 1992 and married her the following year. “As a good Korean I am very impatient,” he grins. He has two children. His son, now 13, is still being sheltered at school from a career in shoe shining. His daughter is reading history at Oxford university. So she’s broken out of the economics trap, I say. “Good for her,” he replies, raising his lassi.
We order a double espresso for Chang and black filter coffee for me. We’ve been talking for nearly two hours but he still has bags of energy and I still have bags of questions. What’s all this about the washing machine and the internet?
“I was not trying to dismiss the importance of the internet revolution but I think its importance has been exaggerated partly because people
Forum for Multidisciplinary Thinking !35 Weekly Read Compilation December 8, 2013 who write about these things are usually middle-aged men who have never used a washing machine,” he replies. “It’s human nature to think that the changes you are living through are the most momentous, but you need to put these things into perspective. I brought up the washing machine to highlight the fact that even the humblest thing can have huge consequences. The washing machine, piped gas, running water and all these mundane household technologies enabled women to enter the labour market, which then meant that they had fewer children, had them later, invested more in each of them, especially female children. That changed their bargaining positions within the household and in wider society, giving women votes and endless changes. It has transformed the way we live.”
Finally, I ask whether he thinks economics is a moral pursuit. Chang’s starting point seems to be that economic policies can make the world better. “Moral dilemmas are unavoidable,” he says as I signal for the bill. “Don’t forget that, at least in this country, economics used to be a branch of moral philosophy. Adam Smith, Karl Marx, Joseph Schumpeter – they’re not just writing about economics, but about politics and culture and society and morality.” He drains his cup. “How has this wonderful subject we call economics become so narrow-minded? I find that really sad.”
David Pilling is the FT’s Asia editor
------
Rice Boat
37 Newnham Road, Cambridge
Sweet lassi £2.50
Konrad 11 beer £4.00
Cutlet platter £13.25
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Kerala red fish curry £10.00
Kerala beef fry £10.00
Boiled rice £2.50
Appam £2.50
Chapatti £2.25
Double espresso £3.00
Coffee £2.50
Total (incl service) £58.75
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My week as an Amazon insider By Carole Cadwalladr (The Observer)
Boxing clever: staff at Amazon's Swansea warehouse prepare for one of its busiest days. Photograph: Rex Features
The first item I see in Amazon's Swansea warehouse is a package of dog nappies. The second is a massive pink plastic dildo. The warehouse is 800,000 square feet, or, in what is Amazon's standard unit of measurement, the size of 11 football pitches (its Dunfermline warehouse, the UK's largest, is 14 football pitches). It is a quarter of a mile from end to end. There is space, it turns out, for an awful lot of crap.
But then there are more than 100m items on its UK website: if you can possibly imagine it, Amazon sells it. And if you can't possibly imagine it, well, Amazon sells it too. To spend 10½ hours a day picking items off the shelves is to contemplate the darkest recesses of our consumerist desires, the wilder reaches of stuff, the things that money can buy: a One Direction charm bracelet, a dog onesie, a cat scratching post designed to look like a DJ's record deck, a banana slicer, a fake twig. I work mostly in the outsize "non-conveyable" section, the home of diabetic dog food, and bio-organic vegetarian dog food, and obese dog food; of 52in TVs, and six-packs of water shipped in from Fiji, and oversized sex toys – the 18in double dong (regular-sized sex toys are shelved in the sortables section).
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On my second day, the manager tells us that we alone have picked and packed 155,000 items in the past 24 hours. Tomorrow, 2 December – the busiest online shopping day of the year – that figure will be closer to 450,000. And this is just one of eight warehouses across the country. Amazon took 3.5m orders on a single day last year. Christmas is its Vietnam – a test of its corporate mettle and the kind of challenge that would make even the most experienced distribution supply manager break down and weep. In the past two weeks, it has taken on an extra 15,000 agency staff in Britain. And it expects to double the number of warehouses in Britain in the next three years. It expects to continue the growth that has made it one of the most powerful multinationals on the planet.
Right now, in Swansea, four shifts will be working at least a 50-hour week, hand-picking and packing each item, or, as the Daily Mail put it in an article a few weeks ago, being "Amazon's elves" in the "21st-century Santa's grotto".
If Santa had a track record in paying his temporary elves the minimum wage while pushing them to the limits of the EU working time directive, and sacking them if they take three sick breaks in any three-month period, this would be an apt comparison. It is probably reasonable to assume that tax avoidance is not "constitutionally" a part of the Santa business model as Brad Stone, the author of a new book on Amazon, The Everything Store: Jeff Bezos and the Age of Amazon, tells me it is in Amazon's case. Neither does Santa attempt to bully his competitors, as Mark Constantine, the founder of Lush cosmetics, who last week took Amazon to the high court, accuses it of doing. Santa was not called before the Commons public accounts committee and called "immoral" by MPs.
For a week, I was an Amazon elf: a temporary worker who got a job through a Swansea employment agency – though it turned out I wasn't the only journalist who happened upon this idea. Last Monday, BBC's Panorama aired a programme that featured secret filming from inside the same warehouse. I wonder for a moment if we have committed the
Forum for Multidisciplinary Thinking !39 Weekly Read Compilation December 8, 2013 ultimate media absurdity and the show's undercover reporter, Adam Littler, has secretly filmed me while I was secretly interviewing him. He didn't, but it's not a coincidence that the heat is on the world's most successful online business. Because Amazon is the future of shopping; being an Amazon "associate" in an Amazon "fulfilment centre" – take that for doublespeak, Mr Orwell – is the future of work; and Amazon's payment of minimal tax in any jurisdiction is the future of global business. A future in which multinational corporations wield more power than governments.
But then who hasn't absent-mindedly clicked at something in an idle moment at work, or while watching telly in your pyjamas, and, in what's a small miracle of modern life, received a familiar brown cardboard package dropping on to your doormat a day later. Amazon is successful for a reason. It is brilliant at what it does. "It solved these huge challenges," says Brad Stone. "It mastered the chaos of storing tens of millions of products and figuring out how to get them to people, on time, without fail, and no one else has come even close." We didn't just pick and pack more than 155,000 items on my first day. We picked and packed the right items and sent them to the right customers. "We didn't miss a single order," our section manager tells us with proper pride.
At the end of my first day, I log into my Amazon account. I'd left my mum's house outside Cardiff at 6.45am and got in at 7.30pm and I want some Compeed blister plasters for my toes and I can't do it before work and I can't do it after work. My finger hovers over the "add to basket" option but, instead, I look at my Amazon history. I made my first purchase, The Rough Guide to Italy, in February 2000 and remember that I'd bought it for an article I wrote on booking a holiday on the internet. It's so quaint reading it now. It's from the age before broadband (I itemise my phone bill for the day and it cost me £25.10), when Google was in its infancy. It's littered with the names of defunct websites (remember Sir Bob Geldof's deckchair.com, anyone?). It was a frustrating task and of pretty much everything I ordered, only the book turned up on time, as requested.
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But then it's a phenomenal operation. And to work in – and I find it hard to type these words without suffering irony seizure – a "fulfilment centre" is to be a tiny cog in a massive global distribution machine. It's an industrialised process, on a truly massive scale, made possible by new technology. The place might look like it's been stocked at 2am by a drunk shelf-filler: a typical shelf might have a set of razor blades, a packet of condoms and a My Little Pony DVD. And yet everything is systemised, because it has to be. It's what makes it all the more unlikely that at the heart of the operation, shuffling items from stowing to picking to packing to shipping, are those flesh-shaped, not-always-reliable, prone-to- malfunctioning things we know as people.
It's here, where actual people rub up against the business demands of one of the most sophisticated technology companies on the planet, that things get messy. It's a system that includes unsystemisable things like hopes and fears and plans for the future and children and lives. And in places of high unemployment and low economic opportunities, places where Amazon deliberately sites its distribution centres – it received £8.8m in grants from the Welsh government for bringing the warehouse here – despair leaks around the edges. At the interview – a form-filling, drug- and alcohol-testing, general-checking-you-can-read session at a local employment agency – we're shown a video. The process is explained and a selection of people are interviewed. "Like you, I started as an agency worker over Christmas," says one man in it. "But I quickly got a permanent job and then promoted and now, two years later, I'm an area manager."
Amazon will be taking people on permanently after Christmas, we're told, and if you work hard, you can be one of them. In the Swansea/ Neath/Port Talbot area, an area still suffering the body blows of Britain's post-industrial decline, these are powerful words, though it all starts to unravel pretty quickly. There are four agencies who have supplied staff to the warehouse, and their reps work from desks on the warehouse floor. Walking from one training session to another, I ask one of them how many permanent employees work in the warehouse but he mishears me and answers another question entirely: "Well, obviously not everyone will
Forum for Multidisciplinary Thinking !41 Weekly Read Compilation December 8, 2013 be taken on. Just look at the numbers. To be honest, the agencies have to say that just to get people through the door."
It does that. It's what the majority of people in my induction group are after. I train with Pete – not his real name – who has been unemployed for the past three years. Before that, he was a care worker. He lives at the top of the Rhondda Valley, and his partner, Susan (not her real name either), an unemployed IT repair technician, has also just started. It took them more than an hour to get to work. "We had to get the kids up at five," he says. After a 10½-hour shift, and about another hour's drive back, before picking up the children from his parents, they got home at 9pm. The next day, they did the same, except Susan twisted her ankle on the first shift. She phones in but she will receive a "point". If she receives three points, she will be "released", which is how you get sacked in modern corporatese.
The Observer's Carole Cadwalladr outside the warehouse where she worked for a week. Photograph: Stephen Shepherd for the Observer
And then there's "Les", who is one of our trainers. He has a special, coloured lanyard that shows he's an Amazon "ambassador", and another
Forum for Multidisciplinary Thinking !42 Weekly Read Compilation December 8, 2013 that says he's a first aider. He's worked at the warehouse for more than a year and over the course of the week I see him, speeding across the floor, going at least twice the rate I'm managing. He's in his 60s and tells me how he lost two stone in the first two months he worked there from all the walking. We were told when we applied for the jobs that we may walk up to 15 miles a shift. He'd been a senior manager in the same firm for 32 years before he was made redundant and landed up here. How long was it before you got a permanent job, I ask him. "I haven't," he says, and he holds up his green ID badge. Permanent employees have blue ones, a better hourly rate, and after two years share options, and there is a subtle apartheid at work.
"They dangle those blue badges in front of you," says Bill Woolcock, an ex-employee at Amazon's fulfilment centre in Rugeley, Staffordshire. "If you have a blue badge you have better wages, proper rights. You can be working alongside someone in the same job, but they're stable and you're just cannon fodder. I worked there from September 2011 to February 2012 and on Christmas Eve an agency rep with a clipboard stood by the exit and said: 'You're back after Christmas. And you're back. And you're not. You're not.' It was just brutal. It reminded me of stories about the great depression, where men would stand at the factory gate in the hope of being selected for a few days' labour. You just feel you have no personal value at all."
Why haven't they given you a proper job, I ask Les, and he shrugs his head but elsewhere people mutter: it's friends of the managers who get the jobs. It's HR picking names at random. It's some sort of black magic nobody understands. Walking off shift in a great wave of orange high-vis vests, I chat to another man in his 60s. He'd been working in the Unity mine, near Neath, he told me, until a month ago, the second time he'd been laid off in two years. He'd worked at Amazon last Christmas too. "And they just let me go straight after, no warning or anything. And I couldn't have worked any harder! I worked my socks off!"
When I put the question to Amazon, it responded: "A small number of seasonal associates have been with us for an extended period of time and we are keen to retain those individuals in order that we can provide
Forum for Multidisciplinary Thinking !43 Weekly Read Compilation December 8, 2013 them with a permanent role when one becomes available. We were able to create 2,300 full-time permanent positions for seasonal associates in 2013 by taking advantage of Christmas seasonality to find great permanent employees but, unfortunately, we simply cannot retain 15,000 seasonal employees."
And this is what Amazon says about its policy relating to sickness: "Amazon is a company in growth and we offer a high level of security for all our associates. Like many companies, we employ a system to record employee attendance. We consider and review all personal circumstances in relation to any attendance issues and we would not dismiss anyone for being ill. The current systems used to record employee attendance is fair and predictable and has resulted in dismissals of 11 permanent employees out of a workforce of over 5,000 permanent employees in 2013."
It's worth noting that agency workers are not Amazon employees.
There's no doubt that it is hard, physical work. The Panorama documentary majored on the miles that Adam walked, the blisters he suffered, the ridiculous targets, and the fact that you're monitored by an Orwellian handset every second of every shift. As an agency worker, you're paid 19p an hour over the minimum wage – £6.50 – and the shifts are 10½ hours long. But lots of jobs involve hard, physical work. That's not the thing that bothers people. Almost everybody remains stoical in the face of physical discomfort and exhaustion. And they're Welsh: there's a warmth and friendliness from almost everyone who works there. My team leader is no corporate droid. He started on the shop floor, sounds like Richard Burton, and is gently encouraging. And yet.
"I've worked everywhere," a forklift truck driver tells me. "And this is the worst. They pay shit because they can. Because there's no other jobs out there. Trust me, I know, I tried. I was working for £12 an hour in my last job. I'm getting £8 an hour here. I worked for Sony before and they were strict but fair. It's the unfairness that gets you here."
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An unfairness that has no outlet. In the wake of the BBC documentary, Hywel Francis, the MP for Aberavon, managed to get a meeting last week with Amazon's director of public policy, a meeting he's been trying to get for years. He's reluctant to speak about the complaints he's heard from his constituents but says that "the plant is exceptional in the local area in having no union representation. It's been a long haul to even get in there and find out what is going on." It's been a black hole where the lack of any checks upon its power has left a sense that everything is pared to the absolute bone – from the cheapest of the cheap plastic safety boots, which most long-term employees seem to spend their own money replacing with something they can walk in, to the sack-you-if-you're-sick policy, to the 15-minute break that starts wherever you happen to be in the warehouse. On my third morning, at my lowest point, when my energy has run out and my spirits are low, it takes me six minutes to walk to the airport-style scanners, where I spend a minute being frisked. I queue a minute for the loos, get a banana out of my locker, sit down for 30 seconds, and then I get up and walk the six minutes back to my station.
To work at Amazon is to spend your days at the coalface of consumerism. To witness our lust for stuff. This year's stuff includes great piles of Xboxes and Kindles and this season's Jamie Oliver cookbook, Save With Jamie (you want to save with Jamie? Don't buy his sodding book), and Paul Hollywood's Pies & Puds, and Rick Stein's India.
The celebrity chef cookbooks incense me. They don't even bother taking them out of the boxes. They lie in great EU butter mountain-sized piles at the ends of the aisle. Cook an egg on the telly and it's like being given a licence to print money for all eternity. The vast majority of people working in the warehouse are white, Welsh, working class, but I train with a man who's not called Sammy, and who isn't an asylum seeker from Sudan, but another country, and I spend an afternoon explaining to him what the scanner means when it tells him to look for a Good Boy Luxury Dog Stocking or a Gastric Mind Band hypnosis CD.
It's the Barbie Doll girl's Christmas advent calendar, however, that nearly breaks me. I traipse back and forth to section F, where I slice open a box,
Forum for Multidisciplinary Thinking !45 Weekly Read Compilation December 8, 2013 take another Barbie advent calendar, unpick the box and put it on the recycling pile, put the calendar, which has been shipped from China, passed from the container port to a third-party distributor and from there to the Amazon warehouse, on to my trolley and pass it to the packers, where it will be repackaged in a different box and finally reach its ultimate destination: the joy in a small child's heart. Because nothing captures the magic of Christmas more than a picture of a pneumatic blonde carrying multiple shopping bags. You can't put a price on that (£9.23 with free delivery).
Amazon's arrival has coincided with the decline of the high street in nearby town Briton Ferry. Photograph: Stephen Shepherd for the Observer
We want cheap stuff. And we want to order it from our armchairs. And we want it to be delivered to our doors. And it's Amazon that has worked out how to do this. Over time, like a hardened drug user, my Amazon habit has increased. In 2002, I ordered my first non-book item, a This Life series 1 video; in 2005, my first non-Amazon product, a secondhand copy of a biography of Patricia Highsmith; and in 2008, I
Forum for Multidisciplinary Thinking !46 Weekly Read Compilation December 8, 2013 started doing the online equivalent of injecting intravenously, when I bought a TV on the site. "We are the most customer-centric company on earth," we're told in our induction briefing, shortly before it's explained that if we're late we'll get half a point, and after three of them we're out. What constitutes late, I ask. "A minute," I'm told.
I grew up in South Wales and saw first-hand how the 1980s recession slashed a brutal gash through everything, including my own extended family. I've always known that there's only a tissue-thin piece of luck between very different sorts of lives. But then my grandfather worked in a warehouse in Swansea. In my case, there really is only a tissue-thin piece of luck between me and an Amazon life. I have a lot of time to think about this during my 10½-hour day.
At the Neath working men's club down the road, one of the staff tells me that Amazon is "the employer of last resort". It's where you get a job if you can't get a job anywhere else. And it's this that's so heartbreaking. What did you do before, I ask people. And they say they're builders, hospitality managers, marketing graduates, IT technicians, carpenters, electricians. They owned their own businesses, and they were made redundant. Or the business went bust. Or they had a stroke. Or their contract ended. They are people who had skilled jobs, or professional jobs, or just better-paying jobs. And now they work for Amazon, earning the minimum wage, and most of them are grateful to have that.
Amazon isn't responsible for the wider economy, but it's the wider economy that makes the Amazon model so chilling. It's not just the nicey nice jobs that are becoming endangered, such as working in a bookshop, as Hugh Grant did in Notting Hill, or a record store, as the hero did in Nick Hornby's High Fidelity, or the jobs that have gone at Borders and Woolworths and Jessops and HMV, it's pretty much everything else too. Next in line is everything: working in the shoe department at John Lewis, or behind the tills at Tesco, or doing their HR, or auditing their accounts, or building their websites, or writing their corporate magazines. Swansea's shopping centre down the road is already a planning disaster; a wasteland of charity shops and what Sarah Rees of Cover to Cover
Forum for Multidisciplinary Thinking !47 Weekly Read Compilation December 8, 2013 bookshop calls "a second-rate Debenhams and a third-rate Marks and Spencer".
"People know about their employment practices, and all the delivery men hate them, but do people remember that when they click? Probably not. We try and kill them with kindness," she says. "You can't put the genie back in the bottle." But then there is nothing else to try and kill them with. It's cheaper, often for her, to order books on Amazon than through her distributor. "We're upfront about it and tell people, but there is just no way to compete with them on price."
There is no end to Amazon's appetite. "It's expanding in every conceivable direction," Brad Stone tells me. "It's why I called my book The Everything Store. Their ambition is to sell everything. They already have their digital services and their enterprise services. They've just started selling art. Apparel is still very immature and is set for expansion. Groceries are the next big thing. They're going very strongly after that because it will cut down costs elsewhere. If they can start running their own trucks in major metro areas, they can cut down the costs of third- party shippers."
In the UK, I point out, everyone already delivers groceries: Tesco, Asda, Waitrose, Sainsbury's. "I suspect they'll acquire," he says. And everywhere it kills jobs. Shops employ 47 people for every $10m in sales, according to research done by a company called ILSR. Amazon employs only 14 people per $10m of revenue. In Britain, it turned over £4.2bn last year, which is a net loss of 23,000 jobs. And even the remaining jobs, the hard, badly paid jobs in Amazon's warehouses, are hardly future-proof. Amazon has just bought an automated sorting system called Kiva for $775m. How many retail jobs, of any description, will there be left in 10 years' time?
Our lust for cheap, discounted goods delivered to our doors promptly and efficiently has a price. We just haven't worked out what it is yet.
It's taxes, of course, that pay for the roads on which Amazon's delivery trucks drive, and the schools in which its employees are educated, and the hospitals in which their babies are born and their arteries are
Forum for Multidisciplinary Thinking !48 Weekly Read Compilation December 8, 2013 patched up, and in which, one day, they may be nursed in their dying days. Taxes that all its workers pay, and that, it emerged in 2012, it tends not to pay. On UK sales of £4.2bn in 2012, it paid £3.2m in corporation tax. In 2006, it transferred its UK business to Luxembourg and reclassified its UK operation as simply "order fulfilment" business. The Luxembourg office employs 380 people. The UK operation employs 21,000. You do the math.
Brad Stone tells me that tax avoidance is built into the company's DNA. From the very beginning it has been "constitutionally oriented to securing every possible advantage for its customers, setting the lowest possible prices, taking advantage of every known tax loophole or creating new ones". It's something that Mark Constantine, the co-founder of Lush cosmetics, has spent time thinking about. He refuses to sell through Amazon, but it didn't stop Amazon using the Lush name to direct buyers to its site, where it suggested alternative products they might like.
"It's a way of bullying businesses to use their services. And we refused. We've been in the high court this week to sue them for breach of trademark. It's cost us half a million pounds so far to defend our business. Most companies just can't afford that. But we've done it because it's a matter of principle. They keep on forcing your hand and yet they don't have a viable business model. The only way they can afford to run it is by not paying tax. If they had to behave in a more conventional way, they would struggle.
"It's a form of piracy capitalism. They rush into people's countries, they take the money out, and they dump it in some port of convenience. That's not a business in any traditional sense. It's an ugly return to a form of exploitative capitalism that we had a century ago and we decided as a society to move on from."
In Swansea I chat to someone whose name is not Martin for a while. It's Saturday, the sun is shining and the warehouse has gone quiet. We've been told to stop picking. The orders have been turned off like a tap. "It's the weather," he says. "When it rains, it can suddenly go mental." We clear away boxes and the tax issue comes up. "There was a lot of anger
Forum for Multidisciplinary Thinking !49 Weekly Read Compilation December 8, 2013 here," he says. "People were very bitter about it. But I'd always say to them: 'If someone told you that you could pay less tax, do you honestly think you would volunteer to pay more?'" He's right. And the people who were angry were also right. It's an unignorable fact of modern life that, as Stuart Roper of Manchester Business School tells me, "some of these big brands are more powerful than governments. They're wealthier. If they were countries, they would be pretty large economies. They're multinational and the global financial situation allows them to ship money all over the world. And the government is so desperate for jobs that it has given away large elements of control."
It's a mirror image of what is happening on the shop floor. Just as Amazon has eroded 200 years' worth of workers' rights through its use of agencies and rendered a large swath of its workers powerless, so it has pulled off the same trick with corporate responsibility. MPs like to slag off Amazon and Starbucks and Google for not paying their taxes but they've yet to actually create the legislation that would compel them to do so.
"They are taking these massive subsidies from the state and they are not paying back," says Martin Smith of the GMB union. "Their argument is that they are creating jobs but what they are doing is displacing and replacing other jobs. Better jobs. And high street shops tend to pay their taxes. There is a £120bn tax gap that is only possible because the government pay tax benefits to enable people to survive. When companies pay the minimum wage they are in effect being subsidised by the taxpayer."
Back in Swansea, on the last break of my last day, I sit and chat with Pete and Susan from the Rhondda and Sammy, the asylum seeker from Sudan. Susan still wants a permanent job but is looking more doubtful about it happening. Her ankle is still swollen. Her pick rate has been low. We've been told that next week, the hours will increase by an hour a day and there will be an extra day of compulsory overtime. It will mean getting their children up by 4.30am and Pete is worried about finding a baby- sitter at three days' notice. When I ask Sammy how the job compares
Forum for Multidisciplinary Thinking !50 Weekly Read Compilation December 8, 2013 with the one he had in Sudan, where he was a foreman in a factory, he thinks for a minute then shrugs: "It's the same."
There have always been rubbish jobs. Ian Brinkley, the director of the Work Foundation, calls Amazon's employment practices "old wine in new bottles". Restaurants and kebab shops have done the same sort of thing for years. But Amazon is not a kebab shop. It's the future. Which may or may not be something to think about as you click "add to basket".
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Here's why Wall Street has a hard time being ethical
A new report finds 53% of financial services executives say that adhering to ethical standards inhibits career progression at their firm. A former Wall Street trader describes why By Chris Arnade
My first year on Wall Street, 1993, I was paid 14 times more than I earned the prior year and three times more than my father's best year. For that money, I helped my company create financial products that were disguised to look simple, but which required complex math to properly understand. That first year I was roundly applauded by my bosses, who told me I was clever, and to my surprise they gave me $20,000 bonus beyond my salary.
The products were sold to many investors, many who didn’t fully understand what they were buying, most of them what we called “clueless Japanese.” The profits to my company were huge – hundreds of millions of dollars huge. The main product that made my firm great money for close to five years was was called, in typically dense finance jargon, a YIF, or a Yield Indexed Forward.
Eventually, investors got wise, realizing what they had bought was complex, loaded with hidden leverage, and became most dangerous during moments of distress.
I never did meet the buyers; that was someone else's job. I stayed behind the spreadsheets. My job was to try to extract as much value as possible through math and clever trading. Japan would send us faxes of documents from our competitors. Many were selling far weirder products and doing it in far larger volume than we were. The conversation with our Japanese customers would end with them urging us on: “We can’t fall behind.”
When I did ask, rather naively, if this was all kosher, I would be assured multiple times that multiple lawyers and multiple managers had approved the sales.
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One senior trader, consoling me late at night, reminded me, “You are playing in the big leagues now. If a customer wants a red suit, you sell them a red suit. If that customer is Japanese, you charge him twice what it costs.”
I rationalized that our group was careful by Wall Street standards, trying to stay close to the letter of the law. We tried to abide by an unwritten "five-point rule": never intentionally make more than five percentage points of profit from a customer.
Some competitors didn’t care about the rule. They were making 7% or 10% profit per trade from clients, selling exotic products loaded with hidden traps. I assumed they would eventually face legal charges, or at least public embarrassment, for pushing so clearly away from the spirit of the law.
They didn’t. Rather, they got paid better, were lauded as true risk takers, and offered big pay packages to manage similar businesses.
Being paid very well also helped ease any of my concerns. Feeling guilty, kid? Here take a big check. I was, for the first time in my life, feeling valued for my math skills – the ones I had to hide throughout my childhood, so as not be labeled a nerd or egghead. Ego and money are nice salves for any potential feeling of guilt.
After a few years on Wall Street it was clear to me: you could make money by gaming anyone and everything. The more clever you were, the more ingenious your ability to exploit a flaw in a law or regulation, the more lauded and celebrated you became.
Nobody seemed to be getting called out. No move was too audacious. It was like driving past the speed limit at 79 MPH, and watching others pass by at 100, or 110, and never seeing anyone pulled over.
Wall Street did nod and wave politely to regulators’ attempts to slow things down. Every employee had to complete a yearly compliance training, where he was updated on things like money laundering,
Forum for Multidisciplinary Thinking !53 Weekly Read Compilation December 8, 2013 collusion, insider trading, and selling our customers only financial products that were suitable to them.
By the early 2000s that compliance training had descended into a once-a- year farce, designed to literally just check a box. It became a one-hour lecture held in a massive hall. Everyone had to go once, listen to the rushed presentation, and then sign a form. You could look down at the audience and see row after row of blue buttoned shirts playing on their Blackberries. I reached new highs on Brick Breaker one year during compliance training. My compliance education that year was still complete.
By 2007 the idea of ethics education fell even further. You didn't even need to show up to a lecture hall; you just had to log on to an online course. It was one hour of slides that you worked through, blindly pushing the “forward” button while your attention was somewhere else. Some managers, too busy for such nonsense, even paid younger employees to sit at their computers and do it for them.
As Wall Street grew, fueled by that unchecked culture of risk taking, traders got more and more audacious, and corruption became more and more diffused through the system. By 2006 you could open up almost any major business, look at its inside workings, and find some wrongdoing.
After the crash of 2008, regulators finally did exactly that. What has resulted is a wave of scandals with odd names; LIBOR fixing, FX collusion, ISDA Fix.
To outsiders they sound like complex acronyms that occupy the darkest corners of Wall Street, easily dismissed as anomalies. They are not. LIBOR, FX, ISDA Fix are at the very center of finance, part of the daily flow of trillions of dollars. The scandals are scarily close to what some on Wall Street believe is standard business practice, a matter of shades of grey.
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I imagine the people who are named in the scandals are genuinely confused as to why they are being singled out. They were just doing what almost everyone else was, maybe just more aggressive, more reckless. They were doing what they had been trained to do: bending the rules, pushing as far as they could to beat competitors. They had been applauded in the past for their aggressive risk taking, no doubt. Now they are just whipping boys.
That's the paradox at the core of the settlements we're seeing: where is the real responsibility? Others were doing it, yes. Banks should be fined, yes. But somebody should be charged. Yet the people who really should be held accountable have not. They are the bosses, the managers and CEOs of the businesses. They set the standard, they shaped the culture. The Chuck Princes, Dick Fulds, and Fred Goodwins of the world. They happily shepherded and profited from a Wall Street that spun out of control.
A precedent needs to be set, to slow down Wall Street’s wild behavior. A reminder that rules are there to be followed, not exploited. The managers knew what was going on. Ask anyone who works at a bank and they will tell you that.
The excuse we have long accepted is ignorance: that these leaders couldn't have known what was happening. That doesn't suffice. If they didn't know, it's an even larger sin.
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5 Lessons in Contentment from Billionaires Warren Buffett & Charlie Munger By Leo Babauta
I sat in a crowd of 45,000 about 10 days ago, watching super-billionaire investors Warren Buffett and Charlie Munger riff off each other and deliver quick wit and worldly wisdom about finances and life in general, at the famous Berkshire Hathaway Annual Shareholders Meeting in Omaha.
As I listened to these titans of the investing world, it struck me how content they are.
Not just content because they have all the riches in the world and all their needs met (they do), but because they understand fundamentals of contentment with life, which I believe is a superpower.
It was amazing to listen to these two masters talk about investing, but learn lessons in contentment throughout the investing advice.
Today, to go along with my new, free ebook, The Little Book of Contentment, I’d like to share what I learned from Warren and Charlie.
I’d like to thank my friends Jake & Lonnie of Farnham Street Investments (and Mike & Scott of Cumbre Capital) for the once-in-a-lifetime trip.
Lessons in Contentment from Warren & Charlie
The key lessons:
“Find what turns you on.” Warren said this in response to a question about what advice he’d give to his younger self 50 years ago. He wasn’t talking about sex, but about what you do for a living. And while we’ve all heard “Do what you love”, it’s telling that this is the one thing he’d tell his younger self — it’s that important to happiness. If you do what turns you on, you will be much further along the road to contentment.
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Don’t worry about what everyone else is doing. Charlie, who is impressively intelligent, said one of the big advantages that Berkshire Hathaway has had is that Warren & Charlie don’t need to worry about what everyone else is doing (in the investment world). Too many people get caught up in watching everyone else, and letting that influence them, that they lose their inner compass. Instead, figure out the guiding principles that matter the most to you, and let go of the need to check on what everyone else is doing, and the need to compare what you’re doing with everyone else.
Know your strengths. These two guys are very aware of their limitations — they almost never invest in tech companies, for example, because they don’t understand it well — and instead of feeling the need to go into their weak areas, they stay with their strong areas. They know what they’re strong at, and focus on that. Letting go of the need to do everything, and being happy with focusing on less, is an important contentment lesson.
Fewer and higher quality. Warren & Charlie have a “fewer is better” investment philosophy, where they aren’t nearly as active as your usual Wall Street investor … but they focus on a handful of really strong investments. Warren suggests that investors imagine they have a punchcard with 20 punch holes … once you make 20 investments in your lifestime, your punchcard is used up. If you did this, you’d really make them count. This is the guiding principle, btw, in my book The Power of Less. You don’t need more — instead, be more discerning, and happy with less.
Know what you like and forget the rest. Warren Buffet, one of the world’s wealthiest men, has a nice but modest house and a surprisingly modest Cadillac (that he drives himself), and eats at his favorite (but pretty ordinary) restaurants … he can afford much more extravagance, but forgoes it because he knows the simple things he likes in life. He could have much, much more, but knows that he doesn’t need it. How many of us do that? Just enjoy the things we like, and not worry about what else we could be enjoying, or what everyone else is enjoying.
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There will be some who say, “Sure, it’s easy to be content when you’re rich and successful,” but I think this is missing the point. They are successful because of these lessons.
I learned that inspiration for contentment can be found in surprising places, including in Omaha, where everyone I met had a kind word for me, and a smile on their faces. I left with a smile myself.
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The World Has Barely Noticed This Huge Political Development in Gaza
Across the Middle East, tension is rising as violence spreads in Damascus, Beirut, and Cairo. Yet one area has remained surprisingly calm: the Israeli- Gaza border. Perhaps that's why many have overlooked a promising development: Hamas has apparently decided—at least for now—that it has more to lose than gain from violence.
Even the Israeli military has taken note. “Hamas during the past year has shown both the capacity and in some cases the motivation to prevent terror attacks against Israel and provide stability for the security situation around the Gaza Strip,” explained Lieutenant Colonel Peter Lerner, head of the foreign press branch of the Israeli military.
Hearing a senior Israeli military officer praise Hamas’ role in fighting terrorism is a shocking development. During the past two weeks, I interviewed over a dozen senior Hamas, Israeli military, and NGO officials to understand these surprising changes.
Hamas, the Islamic organization ruling Gaza since winning democratic elections in 2006, is labeled a terrorist organization by the United States and the European Union. Hamas and Israel have been fierce enemies for over 20 years. During the Second Intifada, Hamas launched suicide attacks on pizza parlors and buses. In the last five years, Israel has launched three massive military operations in Gaza, killing thousands of Palestinians, including many Hamas fighters.
Now, with the violence in the region tilted to Israel’s northeast in Syria, something has quietly changed on Israel’s western front. Hamas Foreign Minister Mahmoud Zahar told me that the group “is not interested in raising tensions right now.” These words are consistent with the fact that rocket fire from Gaza into Israel has been reduced by an astonishing 98 percent. Rockets that have been fired have generally been so by the group Islamic Jihad, not Hamas. Similarly, Israeli forces killed four Palestinians this year, according to the Israeli human rights organization Btselem—a major drop from the 350 killed in the previous two years.
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Israel has also eased restrictions on Gaza’s economy. The maritime limit for Gaza fishermen was doubled to six nautical miles. For the first time in years, construction material for private usage was allowed into Gaza earlier this spring.
So what explains this dramatic change between Israel and Hamas? Israeli security officials point to the military deterrence established with its previous large-scale operation launched in 2012, which killed hundreds of people and destroyed a massive amount of infrastructure. As Yaakov Amidror, the Israeli National Security Advisor until last month, argued, “They [Hamas] understand that there is a very high price for launching rockets into Israel or not stopping others from do it.”
The turmoil in the region has also had an impact. After President Mohamed Morsi’s ouster in Egypt this summer, Hamas lost a key ally in Egypt. This made life harder for ordinary citizens in Gaza, since the new military government frequently closes the border and has shut down many of the tunnels that allowed goods to move between them. When asked if the situation worsened in Gaza after Morsi left power, Isra Almodallal, a Hamas spokeswoman, replied, “Yes a lot. There is an increasing lack of electricity and fuel. This is a collective punishment on the people. ... We call on the Egyptian side to allow the fuel to enter Gaza so other sectors in Palestine, especially the health sector, will go on.” Given these circumstances, Hamas has no interest in launching additional rockets that will only bring additional hardship to the Palestinian people, especially when Hamas has lost a critical ally in Egypt for diplomatic cover. Hamas may have learned from Morsi’s downfall in Egypt about the dangers of overreaching.
A former Hamas senior advisor to the prime minister, Ahmed Yousef, offered an alternative reason for Hamas’ decision not to launch rockets. He explained that during the current peace negotiations between Palestinian President Mahmoud Abbas and Israeli Prime Minister Benjamin Netanyahu, if Hamas shoots rockets at Israel the “world will blame Hamas for sabotaging the negotiations.”
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Some critics claim that despite the fact that rocket fire from Gaza has declined dramatically, the sporadic fire by Islamic Jihad into southern Israel demonstrates that Hamas allows or even encourages this phenomenon. Nonetheless, General Amos Yaldin, former head of Israeli military intelligence, stressed the relative nature of violence reduction as he disputed this claim: “You can’t reduce to zero this phenomenon,” he said. “What is important is that Hamas is trying very hard to stop Islamic Jihad.” According to a prominent Gaza journalist who insisted on anonymity to speak candidly, some militants in Hamas’ military wing, the Qassam Brigade, have even quit the movement to join more extremist groups in protest of Hamas’ new stance.
Hamas is not the first Palestinian militant group to call for Israel’s destruction. While Fatah pressed in its 1964 charter for the elimination of Israel, it moderated its actions over time and eventually supported the two-state solution. Hamas may be following Fatah’s path of having realpolitik and not ideology guide its actions.
Aaron Magid is a graduate student at Harvard University specializing in Middle Eastern Studies. He has written articles on Middle Eastern politics for Al-Monitor, Lebanon’s Daily Star, and the Daily Beast.
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Peter Kaplan, 1954-2013
RIP NOVEMBER 30, 2013 To understand the modern internet, you need to understand the cranky wisdom of this journalism icon BY NATHAN HELLER Share
Peter Kaplan, the longtime New York Observer editor, died November 29. In this 2012 profile, Nathan Heller described Kaplan, who had just launched a glossy magazine for Fairchild Fashion Media, as one of the most influential figures in journalism. Though he reveled in being an old-school print guy, Kaplan's irreverent, obsessive take on the world is embdeed in the DNA of Gawker, the Awl, and many of the most influential websites that took up where the Observer left off.
ALMOST EVERY DAY for several decades, Peter Kaplan, the former editor of the New York Observer, has dressed in the same outfit before departing for work. There is, surely, a shade of Harold Ross in his round, tortoiseshell spectacles, a hint of the Depression-era newsman in his rolled-up sleeves, his tucked-in tie. But beyond those points of reference, Kaplan is just Kaplanesque. He wears pale blue oxford shirts each day because the color pleases him. He likes khaki trousers because tan is a great complement to blue. (“It happens at the beach,” he likes to say —“the ocean meets the shore.”) For years, Kaplan bought dress shoes made with steel supports, because he thought the extra weight helped tone his legs. But the shoes stopped being made a while ago, so now, instead, he wears Aldens (brown, because his mother told him black shoes look severe), except on weekends, when he dons a pair of Nikes (a suggestion from his girlfriend) and lets his blue shirt get somewhat untucked. It is not that Kaplan is naturally a stiff or stringent guy. (His office in New York looks like a paper factory after a hurricane.) It is just that he knows what he likes and thinks there’s no virtue in second- guessing what has worked for half a century and counting.
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At 58, Kaplan is the editorial director of Fairchild Fashion Media, a Condé Nast family that includes Women’s Wear Daily and Footwear News. He has an aging movie star’s smooth, youthful face and, like a star, the capacity to fill a room with outsized gawky charm. When he’s feeling gregarious, which he often is, he dons a barroom grin and says such things as There ya go! and Have a ball! (The latter is the subject of much speculation among Kaplan’s past associates, some of whom experience it as a kind of hex; “‘Have a ball!’ half the time meant ‘Go fuck yourself,’” former Observer staffer Choire Sicha explains.) His verbal style includes a lot of thoughtful pauses, during which he lingers on conjunctions like somebody leaning on a walkup buzzer (aaaaaaaaaaaaaand). And when there’s irony to be detected—there always is around New York—he has a way of registering it mostly in his right eyebrow, which lifts and swags abruptly like a kite in wind. Sometimes, though, extroversion fails him and a warier, more fretful Kaplan shows through. At those moments, the blue eyes go distant, the brow knits, and the mouth droops to an enigmatic grimace. It is the face of a guy seeing something ominous from a great distance, and it gives him an aspect of quiet gravity, of deep worry roiling beneath the neat gray hair.
Because Kaplan’s style is eccentric, those who’ve worked with him have spent a lot of time studying his favorite books, his eating habits, and his tics in search of insight. “Peter has a very unusual sense of time,” Adam Begley, the Observer’s former books editor, told me. “He’s always late— and then, sometimes, shockingly early.” Some staffers used to forge memos in Kaplan’s voice, carrying a mysterious inner life to the point of caricature. That caricature has recently gone public. A couple of former Observer stars, Jim Windolf and Peter Stevenson, two and a half years ago began tweeting as Cranky and Wise Kaplan, a pair of wild and wistful characters based on their boss’s outlandish interests. Enticed largely by this portrait, much of New York’s journalism world has come to regard Kaplan as a distant but endearing uncle—quirky, steeped in lore, and something of a daemon of the trade.
It is a truer assessment than many might realize. Although Kaplan is seen (or lampooned) today as a spokesman for the hoary charms of screwball
Forum for Multidisciplinary Thinking !63 Weekly Read Compilation December 8, 2013 comedy and ink-stained fingers, he has also, quietly, played a big role in marking the path of digital-age journalism. It’s hard to find a major publication right now, in print or online, that’s not in some way flavored by the old Observer: Subtract Kaplan from the media landscape of the past 20 years and you lose The Awl, much of Gawker, and a good bit of Politico, too. You lose many of the most distinctive reporter-stylists at magazines like New York, favorite bylines in the Sunday Times, and even members of the writing staff of “Girls.” It was Kaplan who hired Candace Bushnell, a struggling freelance contributor, and suggested that she write her way into the mounting erotics of money and power in ’90s New York by reporting them as a narrative he called “Sex and the City.” And it is Kaplan who attended to many voices long before they started tearing down the mainstream. Nikki Finke was a Kaplan writer. So was Ben Smith. It’s not just that his spunky sensibility has seeped into the DNA of Internet prose. (Sicha, a defining voice of Gawker and a co-founder of The Awl, told me that when he sits down to write, it’s still Kaplan’s taste and standards he is trying to meet.) What Kaplan offers is an eye to the long arc of journalistic craft—a sense of how today’s reporting, form, and style compare not only to the coverage of, say, the last election cycle, but to the greater arc of journalistic evolution since the late Jazz Age.
That style of thought has made him an attractive recruit. In 2010, Sidney Harman offered him Newsweek’s editorship (Kaplan turned it down, thinking the magazine required a bigger miracle than he could offer), and Arianna Huffington has previously tapped him for the top spot at The Huffington Post (“I couldn’t get past the fact that the page evaporated every day,” he says). In 1998, shortly after news broke that Tina Brown was leaving The New Yorker, S.I. Newhouse’s secretary rang Kaplan and asked for an appointment. The morning of the meeting, his temperature rose to 102 degrees and he stumbled into Newhouse’s office sick, unprepared, and overly excited by some original “Krazy Kat” drawings hung on the wall as objets d’art. “It was the worst interview of my life,” he says; today, he thinks the fever, which vanished afterward, was like Alvy Singer’s L.A. nausea: his subconscious’s way of swatting away a job he didn’t at that moment have the will or stamina to manage.
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Fourteen years later, though, Kaplan finally finds himself at the helm of a stylish New York magazine. M, which launches this month under the Fairchild umbrella, is Kaplan’s latest, proudest project: the fullest realization of his ambitions for bound print. M is nominally the reboot of a long-retired Fairchild men’s magazine called M: The Civilized Man, but the new version is a ground-up reinvention. M will appear quarterly and —unusually for a luxury-market print magazine—its editorial infrastructure is being cobbled together on the cheap: Kaplan produced the first issue by borrowing staff from other Fairchild properties, like Women’s Wear Daily, and bringing in a couple of trusted ringers from the old days, like Windolf, to help wrangle and edit stories.*
After nearly two decades of working mostly with newsprint, for a narrow audience, Kaplan is poised to make his mark on heavy paper. He’s concentrating on details to set it apart from the rest of the newsstand: three grades of paper (80-pound uncoated stock for the cover, 70-pound coated and uncoated inside—the same mix used for Henry Luce’s luscious 1930s Fortune), a selection of “real fonts” from the old days, and layouts he calls “masculine without being silly.”
“I thought there might be a place for a men’s magazine that had a different kind of voice—a much wittier, more sophisticated, grown-up voice, and that was much more a lateral conversation than trying to whack you over the head with Mila Kunis,” he explains. “I’ve got two sons who are in their early twenties, and they are culturally demanding. They have a tremendous sense of humor. They are digitally fluent and literate at the same time. They are impatient to the point of being dismissive of two-thirds of the culture that’s being foisted on them.” This new-style guy also tends to dress deliberately, with a knowing sense of fashion, and in that nexus, Kaplan saw his opportunity.
ON LABOR DAY, I met Kaplan at the corner of East 43rd Street and Lexington, behind Grand Central, to ride with him back up to Larchmont, New York, where he lives. Kaplan had been driving all morning—he had just dropped off his 26-year-old daughter at the airport—but he didn’t seem tired. It was cool out, with storm clouds riding toward the city on a
Forum for Multidisciplinary Thinking !65 Weekly Read Compilation December 8, 2013 strong breeze, and the streets were clear. I got into Kaplan’s compact Honda SUV and we took off northward on York.
Kaplan is a voluble talker, and his conversation tends to start with one subject and spread in overlapping branches. In the car that morning, Kaplan rhapsodizes about Dwight Macdonald (“a rigorous essayist who has a sense of humor and loves the English language”) and Evan Thomas’s new Eisenhower biography, Ike’s Bluff (Thomas wrote an essay about Eisenhower for the first issue of M), then weaves in Robert Caro’s latest volume about LBJ (“the greatest magazine profile ever written times a million”).
Also—and this is the last thing that he thinks I ought to know—the car is extremely low on fuel and may run out of gas at any moment.
“OK, we’re about to make the choice,” he says as we approach the last turnoff in Manhattan. “Left to gas, right to”—the eyebrows rise—“who knows what.”
We go right. As we idle at the stoplight, Kaplan takes up his Caro ruminations again, but drops them midsentence as a panhandler with stringy hair and baggy clothes approaches to ask for money.
“Oh, come on, lady, don’t make me do this!” Kaplan complains with an air of easy defeat. He carries a wallet, but most of his cash is stuffed haphazardly into his khakis, which means that in order to pay for anything, he must literally empty his pockets onto the nearest surface and root through the detritus. At the moment, he is sifting through a mass of crumpled paper, old receipts, and money he’s shoveled into his lap. The panhandler looks on. “God, I don’t have a single!” he exclaims. “All right, wait a minute! Wait a minute! Wait a minute!” Finally, he finds a dollar bill, and the window comes down. “There ya go. There ya go!”
“Thank you,” the panhandler says, and moves to the next car.
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“OK!” Kaplan shoots back. He starts rolling up the window and turns to me. “Was that a man or a woman, do you know? Do you have any idea? Do you have a guess?”
I say a woman.
“I’m not sure.” As the panhandler passes again, he commits—“Yeah, it’s a woman”—but follows her with his eyes until the light changes. “I think.”
In recent years, Kaplan’s life has steadied somewhat from the high-strung, high-wire labors of his early career. While he spent most of his twenties and thirties bouncing from job to job, today he has something like free pasture in his role at Fairchild. Where the late ’90s were a tumultuous period in his private life (in the space of a few years, he went through a divorce, with three kids, and started dating his current partner, Lisa Chase, then an editor at the Observer), he today enjoys a placid-seeming suburban existence with Chase, their eight-year-old son, and his older children.
On the FDR Drive, he has just begun talking once more about Caro’s book when a loud phone ringer goes off, and a caller ID—“Bobby”— flashes on the Honda’s dashboard screen.
“Uh-oh,” he says. He begins rummaging for his iPhone between the seats. “I don’t know who it is. Uh-oh. Hang on. Bobby?” He begins shouting. “Bobby! ... Bobby—you there? ... Bobby!”
There is silence for a long time; then, at last, a low, mellifluous voice booms through the car’s stereo system, in surround sound. “Hey,” it says. “How’s your kidney stone?”
“I think it’s not a kidney stone!” Kaplan shouts back. “Thank you. I called the doc—I think it’s not.”
“Ugh,” says the voice.
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“Listen, I’m going to try to come up to your house at around four! Will you be there?”
The voice says four is fine, and Kaplan signs off. He grins sheepishly.
“It’s my college roommate, Bobby Kennedy,” he says. “Whose bridge we’re about to get on—look, there ya go!” Before long, the RFK Bridge, rattling underneath us, has reminded him about the awesome nuance of Caro’s RFK portraiture, and he returns to the book, about everything Caro got right, as we hurl on toward the Bruckner Expressway.
KAPLAN GREW UP mostly in Northern New Jersey, far enough from the metropolis that New York represented something to be conquered but close enough that the city exerted a magnetic pull on his imaginative life. His parents, both New Yorkers, liked to steal into town for “romantic weekends”; sometimes, he and his two brothers were allowed to come along. Once, when Kaplan was four, his parents took the family to see Robert Preston in The Music Man at the Majestic Theatre. He developed a high fever on the ride into town, and when they arrived, he dragged his father into the men’s room, where he threw up through most of the overture. Later, they slipped back into the hall and watched the musical while sitting on the steps. The Majestic is a jewel box of a theater, and Kaplan, feeling purged and dreamy, absorbed the performance like a piece of cotton paper taking on a watermark.
Today, Kaplan’s cultural nostalgia is famous. It centers on the period, before the tumult of the ’60s, when the Broadway stage still marked the zenith of pop culture and the silver screen still shimmered in the public imagination. “Lots of references to Hollywood history, proper nouns, and a lot of them in a row—sometimes obscure ones,” Suzy Hansen, a former editor at the Observer, told me of Kaplan’s style both on and off the page.
“I seized on the thirties for a lot of psychological reasons, like I was desperate to understand my parents,” he told me at one point. “That was their moment.” His initial points of access to the period were also his first loves onscreen—the Fleischer brothers’ “Popeye” cartoons and The
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Wizard of Oz. Early on, he stumbled into the work of George S. Kaufman, through whom he found his way to Harold Ross and the Algonquin table. Ross, in turn, led him to Henry Luce—and on it went.
Larchmont itself was a show-business resort town, and as we pass through its broad streets, he takes a detour to the waterfront to try to explain why the Westchester shore has, for him, a small measure of romance.
“There!” he exclaims as some trees clear and we come to a small, crescent-shaped beach looking across the sound. He points toward the far Long Island shore. “I have one main dream in life. You see those three high-rises across? I want to dynamite them.” The towers are short, rectangular, and scarcely noticeable unless you’re scanning the horizon. A car behind us honks. “They are the one thing,” he explains, driving on, “that keeps you from being able to imagine that it is what it was.”
ON SEPTEMBER, 11 2001, Kaplan’s train from Larchmont stopped before it could approach the warren of underground track and switches leading to Grand Central. By the time he got to the Observer’s East Side offices, New York was in the throes of its greatest change in years. As Kaplan explained last year in an eloquent remembrance for New York magazine, the town’s sensibility in the late ’90s had been one of comedy and excess. He wrote, “Irony was the voice of the city—a voice easily assigned to a town without heroes—smartness without wisdom. Seinfeld’s epic whine was our ‘Leaves of Grass.’ Sincerity, purpose, emotion were déclassé. Incomes and real-estate prices climbed ceaselessly and so did exhibitionism, steeped in wealth, full of avarice without apology.” By September 12, that had changed.
As much as September 11 shook all New Yorkers, it may have shaken Kaplan personally, in part because his identity is tied so closely to a thriving image of the city. When other people saw the gritty Gotham of the ’80s, Kaplan saw the glowing center of the world. Where locals steer clear of the overcrowded, steamy Midtown streets, he walks them like a monument. In choosing between two New Yorks—the gleaming, romantic Xanadu of Broadway shows, sun-struck towers, and parkside
Forum for Multidisciplinary Thinking !69 Weekly Read Compilation December 8, 2013 walks or the grim metropolis of undersized apartments and trash— Kaplan openly favors the former. Driving in from New Jersey, he says, his father always hailed the appearance of the New York skyline with the same phrase: “There’s the Emerald City.”
Today, Kaplan sees this idealism not just as an affective mindset but as an editorial one, since, after all, the way that you imagine a place shapes the way that you identify its news. As a student of Clay Felker, he championed what the New York magazine editor liked to call “point of view”: the belief that writing from your particular experience of a subject was necessary not just for rich reporting and editorial honesty but because it opened up a space for bold intelligence.
On Kaplan’s watch, the Observer went full-color, gave more space to headlines and illustrations, and focused on a kind of quirky story no other paper in town could pull off. Alexandra Jacobs, now a New York Times style writer, lambasted Ugg boots (“the heinous shearling footwear—the winter equivalent of Birkenstocks—that women are wearing all over Manhattan”) and reported on the state of the then-new Condé Nast cafeteria (“The effect is slightly vaginal, accented by hanging chrome lamps which look like fallopian tubes or sea anemones”). Candace Bushnell explored “a Manhattan literary-romantic subspecies” she called “Bicycle Boys” (“Smart, funny, romantic, lean, quite attractive, they are the stuff that grown-up coed dreams are made of”). And Frank DiGiacomo wrote a moving elegy to John F. Kennedy Jr.—a profile that bears the clear trace of Kaplan’s fingerprints. (“He made the city his Forest of Arden, his Emerald City.”) Kaplan liked to describe the paper as a kind of foil to the comprehensive, earnest coverage of The New York Times, paying homage to Gotham’s elite even as it tickled the feet of the city’s titans.
Yet despite its reputation as the wittiest broadsheet in town, or possibly because of it, the Observer never had much of a mainstream following. For years, its circulation hung in the mid-five figures, a suspiciously small audience for a paper often hailed as the Sainte-Chapelle of New York publishing. “If the Observer is so great, why don’t more people read it?” the media critic Jack Shafer asked in Slate in 2006. “Perhaps because 1)
Forum for Multidisciplinary Thinking !70 Weekly Read Compilation December 8, 2013 they don’t know about it, and 2) it really isn’t that great. It takes nothing away from Peter Kaplan’s stunning performance as the Observer’s editor to point out that too many Page One stories start out brilliantly but peter out after the jump to the inside.” The paper acquired a reputation as a launching pad for young, promising writers but was never seen to be a career destination. “I think for a lot of people it’s up and out,” Michael M. Thomas, who wrote the paper’s “Midas Watch” column for 22 years, told me. “A lot of people, I think, outgrow the Observer.”
Still, was that, in some sense, the point? Kaplan appeared to love helping new voices take shape on the page. His main approach in cultivating young journalists was to take them seriously, both as young journalists— when kids came in to interview, he’d often ask them what sort of writer they wanted to grow up to be—and as young people trying to figure things out. Former staffers recall epic klatch sessions during which he’d inquire about their lives, ruminate about his own history, and, in matters as disparate as reporting and romance, offer advice. He was known to return phone calls unpredictably, but when he did, the conversations could run on for hours.
“In a way it looked, from the outside, like, ‘What does he do all day? He just talks to people all day?’ And yet that was his real strength,” says Jim Windolf, who decamped for Vanity Fair in 2000. “Each single person was the main person, as far as they knew, in their conversations with Kaplan.”
George Gurley, an Observer reporter who left in 2009, told me he still has trouble thinking of himself as anything but a Kaplan writer. “I have this idea that I’m just taking a sabbatical,” he says. “I’m just waiting for that call, and then I’ll come back.”
A LOT OF PEOPLE were confused when Kaplan, on the heels of his Observer run, took a job at Condé Nast Traveler, a magazine not widely known as a bastion of oppidan irreverence. They were just as baffled when, a year or so later, he moved to Fairchild and Women’s Wear Daily. To Kaplan, though, these ventures seemed a natural outgrowth of the milieu he loved: a universe of glossy magazines and little papers with big mandates. “It’s a business newspaper,” he explains, of Women’s Wear
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Daily. “John Fairchild, when he ran it, was this tremendously witty, towel- snapping elitist, and the paper, like the Observer, had talking headlines.”
It was also one of the first papers Kaplan ever read. “When I was growing up, my dad’s briefcase would snap open, and there were three or four things that I would always lunge for. One, weirdly, was Women’s Wear Daily,” he says. (Kaplan’s father, a West Point graduate, started out in the shirt business and ultimately led a women’s wear company.) “Another was The Newark News, which had great comics.” Gradually, he found his way to The New York Times, The Herald Tribune, and The Wall Street Journal. But he loved the magazines most of all. “He would bring home Esquire. The big old Esquire. Harold Hayes’s Esquire. The Norman Mailer–Robert Benton–George Lois–James Baldwin–Hemingway–Dwight Macdonald–David Levine Esquire. This big fucking trove would come in every month. And it had hugely witty covers that talked to you directly, and a voice. I didn’t understand half of what was going on, because it was very grown-up writing and impenetrable. But it was the closest thing I’d seen in a magazine to a comic book.”
In high school, Kaplan joined the newspaper. His older brother James, himself a fiction writer and lauded biographer, describes Kaplan as a gregarious and popular student, albeit one proudly out of step with the countercultural mainstream of that late ’60s era. It was around this time that Kaplan started taking on his oxford-khaki look, adopted in tribute to his family’s natty eye for clothing. “We have a history, going far back to our grandfather, of dressing British and thinking Yiddish,” James Kaplan says.
Kaplan left for Harvard in the fall of 1972 and quickly fell into the heady swing of the place. “I had largely inhabited what you could kind of call a David Levine universe—Lyndon Johnson, Richard Nixon, big heads, small bodies,” Kaplan says. “There were a lot of guys like that, just these huge, oversized figures.” He became a sort of protégé of Robert Coles, the psychiatry professor cum magazine writer cum social activist. And, in his spare time, he ran a film society, Herman J. Mankiewicz Pictures, with his classmate Henry Little Griggs III.
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“I thought that maybe he would do something in Hollywood, but he was first and foremost a writer,” Jill Abramson, a college friend of Kaplan’s who is now executive editor of The New York Times, told me. Kaplan introduced her to Griggs, whom she later married, and she and Kaplan also worked as Harvard stringers for Time. When Kaplan was unreachable, his assignments often went to her. “I benefitted from the fact that Peter was often hard to find,” Abramson says.
Harvard in those years was a hotbed of rising journalistic talent: The Harvard Crimson’s leadership included Michael Kinsley (who went on to become the longtime editor of this magazine and founder of Slate); by the time Kaplan’s class was in charge, the paper was being led by Nicholas Lemann (now dean of Columbia’s Graduate School of Journalism). Kurt Andersen, Spy’s co-founder and later the editor of New York magazine, ran the campus humor magazine.
“It was a lot like a big episode of ‘Little Rascals’: Everyone was running around causing trouble,” Kaplan says. “Part of it was the glamour of the Watergate era, but it wasn’t just that. I’ll tell you what it really was.” He crosses his hands behind his head and shuts his eyes to tune out the surroundings. We’re in his Fairchild office, a dim, hangar-like room off the Women’s Wear Daily cubicles in the company’s Third Avenue headquarters. “An incredible fucking explosion of belief—that not only would print change society and politics but it was worth it just because the making of it and the reading of it was galvanizing.”
Early in 1974, he came to his brother James with a proposition. “Peter called me one night and said, ‘What do you think the most fun thing we could do would be?’” James Kaplan recalls. The most fun thing they could do, Peter quickly told him, would be to get a magazine to send them to Hollywood to cover the Oscars. They wrote up a pitch. Only Lewis Lapham, then the editor of Harper’s, bit. Bearing an assignment letter and $500 as their carte blanche, Peter and James and one of Peter’s college friends flew to Los Angeles. Peter loved it. He interviewed John Huston and Jack Lemmon. He went to see George Cukor at his house, a visit interrupted by a phone call from Katharine Hepburn. By the time the young reporters headed home, they had pages and pages of notes—too
Forum for Multidisciplinary Thinking !73 Weekly Read Compilation December 8, 2013 many. They froze at the typewriter. “It was just like the ‘Spruce Goose,’ Howard Hughes’s plane,” Peter Kaplan says sadly today. “It was too big.”
KAPLAN RICOCHETED among various magazine jobs, largely unhappily, through his first several years out of school. In the course of quitting a post as a “baby editor” at Esquire in 1980, he pitched the magazine a profile. NBC had taken a chance on a young comedian named David Letterman, a tall kid launching a new morning show.
“I spent way too much time with Letterman,” Kaplan says. “I drove him nuts. I went to comedy clubs with him, I stayed in the car with him. He was private—he didn’t like it. His girlfriend liked me”—the Kaplan eyebrow lifts—“but he didn’t. I was a fucking irritant.”
By the time Kaplan sat down to write the profile, he was feeling overwhelmed and worried he would freeze—Harper’s all over again. So he looked to his Old Masters. Taking out Gay Talese’s Fame and Obscurity, he opened to the legendary write-around profile “Frank Sinatra has a cold” and studied its form as one might study a sonnet. He noted where Talese had live action, flashbacks, biographical exposition, and the way these pieces fit together. He took his Letterman notes and arranged them according to Talese’s schema, and then ran the whole thing through the typewriter—and again, and again, and then once more. “I could see what he was doing, finally, after like twenty drafts,” Kaplan says. Esquire bought the story and gave him a TV column to boot.
Kaplan loves to write, he told me, but never felt as if he had the skill to play at the highest level—as he’d need to if he hoped to support a growing family. After joining Jane Amsterdam to make a dummy of Manhattan,inc., the spunky ’80s business magazine, he spent a bit more than a year as a TV reporter for The New York Times, but left when his wife got pregnant. “I did not want to be a Times-man with a baby,” he says. “It was not a life I wanted to live.” He ended up back at Manhattan,inc. for a while, then at a men’s magazine venture that failed. Around that time, his third child was born, and Kaplan took an editing post at Condé Nast Traveler—an ironic endeavor in certain ways, since he hates traveling and did not own a passport. In 1993, Charlie Rose
Forum for Multidisciplinary Thinking !74 Weekly Read Compilation December 8, 2013 asked him to be an executive producer on his show—another gig that let him get to Larchmont at a decent hour—and it was from that perch that Arthur Carter, who owned the Observer, called him in 1994.
In taking on the salmon-colored weekly, Kaplan realized he could finally be master of both his editorial domain and his schedule. “I used to say to Kurt Andersen, when he was running New York magazine, ‘Ya know, you’re driving a town car, and I’m driving a two-seat M.G.,’” he says. But “it was close to the ground, and there were no shocks. The wind was always in your face. Who wouldn’t love that?”
KAPLAN LIVES ON a leafy street about a mile inland from the sound. His house is large and well-appointed, painted pale yellow trimmed with blue, and there’s a sun porch in the front with a long driveway cutting to a spacious lawn out back. It is a house he bought with his ex-wife and the home in which he raised his children. Inside, the décor is simple and elegant. Against one wall in a small, book-filled alcove near the kitchen sits a poster from JFK’s 1960 campaign, showing the candidate with his arm around a young Caroline; “It’s okay to dream,” the caption says. File boxes are piled on one side of the living room beside the couches, which are blue and khaki colored. A Rothko print hangs at the mantle. When we arrive, Kaplan’s loquacious eight-year-old, Davey, is reading a book at the kitchen counter. His mother, Lisa Chase, who’s now an editor at Elle, is on her way to shuck corn out back.
Kaplan takes me to a garage, at the rear of the garden, that he calls his “shrine.” “It’s my old Observer office, reconstructed,” he explains. The garage has been converted into a carpeted study with bookshelves on three walls. Near one, there’s another couch—khaki trimmed with blue piping.
When Kaplan left the Observer, after a 15-year run as editor, the move seemed at once abrupt and overdue. In 2006, Arthur Carter, who had then been funding the paper at a loss for nearly 20 years, had given Kaplan two months to find a buyer before shutting the operation down. When Jared Kushner, a 25-year-old real-estate scion, emerged as the winning bidder, Kaplan was relieved—and people then at the Observer
Forum for Multidisciplinary Thinking !75 Weekly Read Compilation December 8, 2013 say he stayed relieved even as the paper became harder to run. “Working with Jared was making Peter crazy,” one of his editors told me. Kushner wanted to turn it into a dynamic, streamlined business and kept cutting editorial budgets; Kaplan, who famously hated to fire anyone, scaled back incrementally. A former staffer told me he thought Kaplan finally left, in 2009, partly because he knew layoffs were imminent and didn’t have the heart to wield the ax.
But there were other considerations at play, too. “It was important for me to find a way to make first-rate journalism economically viable on the Internet, above and beyond aggregation,” Kaplan had told me back in New York. “I wanted the fucking Observer to work on the Internet, and they kept strip-mining it. And it wouldn’t. It wouldn’t.” Suddenly, he drew himself up and shouted to no one in particular. “I wanted sensibility journalism to be sold, and to matter!” he cried. “OK?”
The theme of M’s first issue, appropriately enough, is “ambition.” With styled photography and pieces from veteran Kaplan writers like Philip Weiss, culture doyennes like Lynn Hirschberg, and younger Observer alumni, the issue tries to understand how the expression of American ambition has changed over the past several decades. It’s a question Kaplan has been pondering a good deal recently, in part because he’s trying to figure out where the next generation of ambitious, genre- bending journalists whose work will both turn heads and last—the auteurs of the craft—are coming from. Five years ago, he thought it was just a matter of time before this brave new style made an appearance. Now he’s not sure. “Where is the thing?” he asks me in his garage office that afternoon. He’s frowning anxiously and staring at a far wall, where an enormous Philip Burke canvas of Roger Federer rests. “Why isn’t it coming up?” I realize in that moment that Kaplan isn’t straining toward the past as hard as he is thinking of the future—that the cultural nostalgia, Larchmont beaches, 70-pound stock, and Hepburn comedies aren’t so much a plea that the old world will come back but that the new one will, finally, come alive.
“When the Observer was cooking pretty well,” Kaplan told me at one point, “I always had the same feeling, which was that I was really lucky,
Forum for Multidisciplinary Thinking !76 Weekly Read Compilation December 8, 2013 because it must have been like what running a really good small jazz band in the thirties would have been like.” By then, his voice had quieted. “And I’m always waiting for the magazine where the editor is playing a song for me.”
*M’s inaugural issue will feature a spread about The New Republic; that story and this profile were conceived and reported independently.
Nathan Heller is a film and television critic for Vogue. This article appeared in the October 4, 2012 issue of the magazine. share this article on facebook or twitter print this article
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Forum for Multidisciplinary Thinking !77 Weekly Read Compilation December 8, 2013
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