The Frog and the Scorpion

One day a frog is sunning himself by a stream when a scorpion approaches him.  The scorpion wants to cross the stream but cannot swim so he asks the frog if he can climb on his back for a ride across.

“Do you think I am crazy?” The frog says. “If I let you on my back, you’ll certainly sting me and I’ll sink in the water and die.”

The scorpion replies, “Think about it, I can’t swim. If I sting you, then you’ll die and I’ll sink and die too.”

The frog considers this and decides that the scorpion’s argument makes sense.  He lets the scorpion crawl onto his back and proceeds to cross the stream.

About half way across the stream, the frog feels a sharp sting in his back.  As the frog goes numb and begins to sink, he screams “Why did you sting me?! Now I am going to drown and die and you are going to sink and die too.”

The scorpion says “Because I am a scorpion, it is my nature.”

When I’ve thought about the recent financial crisis, the trillions in lost wealth, the millions of lost jobs, the storied financial corporations like Lehman Brothers destroyed, and the incalculable human misery caused, at some point my mind inevitably turns to the fable of the frog and the scorpion.  As it has when I’ve thought about the economic trajectory of the last 30 years, growing inequality, stagnating wages, and record corporate profits.  I see the frog, scared and uncomprehending, sinking beneath the water.

But why does this particular fable come to mind?  Why don’t I see something else, something simpler, something like the business and financial elite being made up of a cadre of shortsighted fools?  Why don’t I see it like this piece does?

But the stupidity of having such an obviously unbalanced economy is the more important discussion we should be having right now. The corporations are every bit as vulnerable to the disappearance of the middle class as the middle class is itself.

offshoring of profits and the export of goods and services won’t sustain these corporations forever. At a certain point, native companies within the developing world will nudge our adventuring multinationals aside (China’s already building its own version of Wall Street).  And when that happens, Corporate America is going to turn around and be horrified by the devastation in its own backyard.

“Where did all our customers go?”

Well, you enormous fucking idiots, you fired all your customers. You’ve spent the last decade or so suppressing wage growth in the name of “creating shareholder value” and now even your shareholder base is disappearing.

You allowed wages to stagnate for a decade and made every decision you could in the service of nudging the quarterly profit higher, thinking less of the yearly profit and virtually nothing of the long-term viability of your business.

The author contrasts this stupidity, what he called “short-term greed, long-term nihilism” with Henry Ford:

One hundred years ago, Henry Ford gave his employees an unasked for wage increase and, when asked why, he replied “How else will they be able to buy my cars?”

Now Henry Ford was no sweetheart (when he wasn’t publicly browbeating his son, Edsel, he was busy giving handjobs to Hitler) but he also wasn’t an idiot.  He knew that good living wages meant more customers for his product, and they also made for a better workforce and a stronger company.

Surely it is stupidity not to see that the very foundation of an economy is interconnectedness, interdependence.  If the public can’t buy your product you’ll go out of business.  If Henry Ford saw it a century ago, our current business leaders could see it too…if they weren’t morons.  But is it really simply a lack of synapses that prevents today’s elite from following the wisdom of the past?  Are they stupid, or is it their nature not to see, or care about, the long term consequences of their actions?

I think it’s the latter.  For while it’s doubtful that many of the business and financial elite are exactly intelligent in the traditional sense of possessing a deeply curious, wide ranging intellect and a keen self awareness, what they clearly have is a highly specialized skill set.  They can use and manipulate key people, obscure regulations, and complex formulas to amass huge amounts of wealth and power.  A doddering, mouth breathing, inbred aristocracy they are not.

Fabrice “Fabulous Fab” Tourre, a French employee of Goldman Sachs is scheduled to go on trial this summer.  The SEC is accusing him of misleading investors on a disastrous complex derivative deal, allegations that Goldman Sachs paid $500 to settle.  At the time Tourre wrote his girlfriend about these deals, these complex derivatives that would play a role in ushering in the global financial crisis:

Only potential survivor, the fabulus Fab standing in the middle of all these complex, highly leveraged, exotic trades he created without necessarily understanding all of the implications of those monstrosities!!!

He may not have fully understand the implications of the complex financial instruments he was dealing with, but he did understand they were making him rich.  Just like traders at financial firms understood how to use accounting tricks to book large profits (and hence bonuses) on complex financial deals…some of which actually ended up going very poorly for the firms they worked for.  But they had a plan, it was called IBGYBG – I’ll be gone, you’ll be gone.  This was the plan that Hans Gruber had for for Nakatomi Plaza: “When they touch down, we’ll blow the roof, they’ll spend a month sifting through rubble, and by the time they figure out what went wrong, we’ll be sitting on a beach, earning twenty percent.”  And say what you will about Hans, but he wasn’t stupid.

And so I think of the scorpion.  He’s not stupid.  He’s cunning in his way, he talks the frog into letting him on his back so he can proceed to do what it is his fundamental nature to do: sting.  It’s how the nature of the scorpion is developed that is important.  And as the scorpion is a product of its genes, a creature that knows to sting above all else, our financial and business elites are incubated in a culture of radical individualism, boundless greed, and limitless self regard, and like the scorpion they do what’s in their nature.  And their nature is to acquire, to identify opportunities and exploit them, to find marks and take them down.  How much is enough?  As much as they deserve.  How much do they deserve?  Everything.  Or as Tony Montana put it: “The world, chico, and everything in it.”

Because, even if they haven’t cracked the spine of one of Rand’s books, they are steeped in an objectivist ideology that tells them that they are the producers, the makers.  They are atlases, gods among men, carrying the world on their broad shoulders.  Their successes are theirs and theirs alone, while their rare failures are nothing but the ugly marks left by the fetters of rules and regulations that are placed upon them by the unproductive, the jealous, the parasitic.  They are the market makers, the job creators, the grease that allows the machine of capitalism operate.  They are doing “God’s work”, or so Lloyd Blankfein thinks.  Or as Mozilo, former CEO of Countrywide Financial describes his company as “one of the greatest companies in the history of this country and probably made more difference to society, to the integrity of our society, than any company in the history of America.”   You can see how things like humility, restraint, and long term strategic thinking may not find an entry point here.

I wish that our situation was as simple as idiots being promoted beyond their means.  If that were so, maybe we’d be in a similar spot, who knows, but the solution would be clearer and we would not be looking at a problem with roots that point to a source so deep, ugly, and rotten.  It’s our society, our culture that is creating the scorpions.  As this fascianting aritcle discusses, culture may have a tremendous impact on fundamental aspects of cognition:

The growing body of cross-cultural research that the three researchers were compiling suggested that the mind’s capacity to mold itself to cultural and environmental settings was far greater than had been assumed. The most interesting thing about cultures may not be in the observable things they do—the rituals, eating preferences, codes of behavior, and the like—but in the way they mold our most fundamental conscious and unconscious thinking and perception.

So unlike the frog in the fable, we shouldn’t be surprised when we feel the sting, after incubating the scorpion and then lifting it onto our back.  We should question the circumstances that left us in the middle of the stream at the mercy of a stinging arachnid.

In his book Extreme Money, Satajit Das prints an Email that was being sent around the large financial institutions in 2010, reacting to the criticisms that had been heaped on Wall Street.  It has that curious admixture self-aggrandizement and self-pity you see with modern libertarians.  The Email threatens that the Masters of the Universe will take our jobs if they can’t get jobs on the Street: “What’s going to happen when we can’t find jobs on the Streeet anymore?  Guess what: We’re going to take yours.  We get up at 5 a.m. & work till 10 p.m. or later.”  After some sneering at cushy unionized teaching jobs there is the amusing line: “No more free rides on our backs.”  Which probably encapsulates the psychology at play as well as anything.  The Email ends:

…We aren’t dinosaurs.  We are smarter and more vicious than that, and we are going to survive.

If things don’t fundamentally change, that last bit very well may not be true.  But how much consolation can the frog take from seeing the scorpion down along with him?

  1. Interesting angle on the situation. You are right, they are not stupid, but they are supported, propped up – lazy. The banking and finance sector is the most regulated on the planet. They do not even have to be good at what they do to more than survive. What needs to be done is to break them up, shrink their influence and then let them swim themselves. Not carry them on our backs. Most will sink. But as nature dictates some will learn to swim, or at least cooperate with a trusting carrier. Thanks.

    • Thanks for the comment. I agree that the large banks need to be broken up, TBTF was a sick joke and has only gotten worse since the global financial meltdown. It’s nothing more than a license to extort on an epic scale. As far as regulation, Yves Smith at Naked Capitalism has had some interesting stuff on regulating banks like utilities, which I find persuasive.

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