Saturday, December 6, 2008

Ivy League Puppies

"One wants to ask the Wall Street wizards who comprise the talent pool for the incoming administration, 'If you so smart, how come you ain't rich no more?' Manhattan's toniest private schools, harder to get into than Harvard, quietly are looking for full-tuition pupils now that the children of sacked Wall Street bankers are departing for public schools in cheaper suburbs. Harvard University president Drew Faust has warned of budget cuts to come due to 'unprecedented losses' to its US$39 billion endowment. ... [Robert] Rubin, a transition advisor to president-elect Barack Obama, was mentor to Treasury secretary designate Timothy Geithner. ... These facts came to mind while Reading David Brooks' November 21 New York Times panegyric to Obama's prospective cabinet, which gushes, 'Its members are twice as smart as the poor reporters who have to cover them, three times if you include the columnists.' Brooks added, 'as ... much as I want to resent these overeducated Achievatrons ... I find myself tremendously impressed by the Obama transition.' ... The cleverest people in the [US], the Ivy-pedigreed investment bankers, have fouled their own nests as well as their own net worth, and persuaded the taxpayers to bail them out. If these are the best and the brightest of 2008, America is in very deep trouble. ... Failed financiers run the Obama transition team. It used to be that the heads of great industrial companies got the top Cabinet posts. Now it is the one-trick wizards. ... Obama's bevy of talent comes from finance. American industrialists have become figures of ridicule, like the pathetic chief executive of General Motors, Rick Wagoner, begging for a government loan. ... A case in point is the reported implosion of the Harvard and Yale endowments. For years, these giant funds were held up as proof that superior intelligence was the ticket to excess returns. ... David Swenson, the legendary manager of the Yale Endowment, learned one trick: buy on dips in the equity market with all the borrowed money he could get. The alumni network on Wall Street made sure that the university endowments were in line for the hottest deals. ... For a quarter of a century, the inbred products of the Ivy League puppy mills have known nothing but a rising trend in asset prices. About the origin of this trend, they were incurious. ... Now that the stock market has collapsed, the private equity strategies cannot repay their debt, and their returns have evaporated. ... Over the long term, we know that the average investment cannot grow faster that the economy, for investments ultimately are valued according to their cash flows, and cash flows stem from economic growth. ... Whence came the enormous returns to the Ivy League? Some of them surely came from betting on the right horses, but most came from privileged access to leverage. ... Without leverage, the clever folk around Barack Obama are fleas without a dog. None of them invented anything, introduced an important new product, opened a new market, or did anything that reached into the lives of ordinary people. They wore expensive cufflinks, read balance sheets, exercised regularly, sat on philanthropic boards, and assumed that their flea's ride on the Reagan dog would last forever", my emphasis, Spengler, 24 November 2008 at http://www.atimes.com/.

"Last week the excellent David Brooks, in one of his columns in the New York Times, exulted over the quality of people President-elect Barack Obama was enlisting in his new cabinet and onto his staff. The chief evidence for these people being so impressive, it turns out, is they all went to what the world--'that ignorant ninny,' as Henry James called it--thinks superior schools, Harvard, Yale, Princeton, Stanford, the London School of Economics; like dead flies on flypaper, the names of schools Obama's new appointees attended dotted Brooks column. ... This administration will be, as Brooks writes, 'a valedictocracy.' The assumption here is that having all these good students--many of them possible 'toll-frees,' as high school students who get 800s on their SATs used to be known in admissions offices--running the country is obviously a good thing. ... Since my appreciation of David Brooks is considerable, and since I agree with him on so many things, why don't I agree with him here? ... The reason is that, after teaching at a university for 30 years, I have come to distrust the type I think of as 'the good student'--that is, the student who sails through school and is easily admitted into the top colleges and professional schools. The good student is the kid who works hard in high school, piles up lots of activities, and scores high on his SATs, and for his efforts gets into one of the 20 or so schools in the country that ring the gong of sucess. ... His perfect resume in hand, he runs only one risk--that of catching cold from the draft created by all the doors opening up for him wherever he goes, as he piles up scads of money, honors, and finally ends up being offered a job at a high level of government. He has, in a sense Spike Lee never intended, done the right thing. ... My sense of the good student is that, while in class, he really has only one pertinent question, which is, What does this guy, his professor at the moment, want? ... Harvard--and Yale, Princeton, Stanford, and the --others--has over the past three or four decades made this contentment easy to achieve. All these schools have done so by becoming, at least in their humanities and social sciences sides, more and more mired in the mediocre. ... In recent years I have come to think that some of the worst people in the United States have gone to Harvard or Yale Law Schools: Mr. and Mrs. Eliot Spitzer, Mr. and Mrs. William Clinton, and countless others. And why not, since these institutions serve as the grandest receptacles in the land for our good students: those clever, sometimes brilliant, but rarely deep young men and women who, joining furious drive to burning if ultimately empty ambition, will do anything to get ahead", Joseph Epstein (JE), 8 December 2008 at http://www.weeklystandard.com/Utilities/printer_preview.asp?idArticle=15857&R=13D311E601.

I read Brooks, thought of posting on it, but will just quote Spengler. I love this guy. He channels my thoughts. Or I his. I disagree about pursuading the taxpayers. Joe Schmoe wants to see Zegna-suited bankers led to the guillotine or the hanging tree. I make the same observation about private equitys' returns and leverage here, 19 November 2008: http://skepticaltexascpa.blogspot.com/2008/11/lbos-and-banks.html.

JE is a professor at Northwestern University. His description of an ambitious mediocrity fits our current chief justice to a "T", my 19 July 2008 post: http://skepticaltexascpa.blogspot.com/2008/07/john-roberts-supreme-fraud.html. I trashed our Supremes on 26 January 2008, here: http://skepticaltexascpa.blogspot.com/2008/01/supreme-injustice.html. What do these Law School geniuses know? See my 22 December 2007 post citing Raymond Woodcock, JD/MBA Columbia, http://skepticaltexascpa.blogspot.com/2007/12/us-injustice-system-at-work.html.

2 comments:

Anonymous said...

"Ivy League puppy mills" ---

That is turning conventional wisdom on its head...

Smart is good... but moral is better...

Blissex said...

«The good student is the kid who works hard in high school, piles up
lots of activities, and scores high on his SATs, and for his efforts
gets into one of the 20 or so schools in the country that ring the gong
of sucess. ... His perfect resume in hand, he runs only one risk--that
of catching cold from the draft created by all the doors opening up for
him wherever he goes, as he piles up scads of money, honors, and
finally ends up being offered a job at a high level of government.
»

Well, you have just described the English system, where instead of 20
there are 2-3 door-opener universities.

The USA have become (again) a class based society, similar to the
English one, where the elites reproduce themselves in the aggregate by
the means of elite universities.

Sure, a few especially slow children of the elites don't make it, and
some token members of the lower classes take their place, but by and
large the English system is now the USA system too.

Wasn't there some research showing that in the USA class is inherited
from parents more than height?