Forbes: Trial, error and the elite
For years, we were told that Wall Street attracted the very best. That was why American investment banks were the envy of the world; that was why stratospheric salaries and bonuses were essential. Other financial centers, such as London, fought tooth and nail to attract the same elite. They were worth it, we were told: If you pay peanuts, you get monkeys.
That argument seems hollow now, but it was always a misunderstanding of the way financial markets work–indeed, the way the whole growth miracle of capitalism works. It’s not that financial markets themselves are a sham: There are indeed very smart investment bankers in the world, and some of them help to make us all richer by providing a bridge between those who could use money and those who have money. It’s just that this is not the whole story.
The fact of the matter is: The market system does not work because of the incredibly smart people in charge. (The Soviets had some pretty smart people.) The market system works because nobody is in charge.
Even when markets surround us, we prefer to forget this. It is easier to focus on personalities, so the financial press like to talk about the leadership of great CEOs. When things go wrong, we search for fools and frauds: a Dick Fuld or worse, a Bernie Madoff. We think that the elite betrayed us or that the elite wasn’t as smart as everyone thought. Politicians–temperamentally inclined to believe in the “great man” theory of everything–tend to agree…
Continued at Forbes.com