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Better Lucky Than Good

September 28, 2009

(another exciting article by everyone’s favourite Canta writer! This one is pretty random and I’m scared to reread it in case it really sucks. Published 28/09/09)

(Note: This article is my contribution to Michael Laws Awareness Week, which I have invented as a way to foster unity among non-Michael Laws New Zealanders by observing the kookiness of our most mascaraed male mayor. To fit the theme it may contain rambling and incoherence.)

In my last column I alluded to the oddball Ayn Rand and her cultish followers, some of whom make up ACT. Mocking ACT is very entertaining but a bit lazy, like Deborah mocking arts students, so this week I will discuss something different: the role of luck in society.

To people like Michael Laws the failure of a person to be rich is entirely their own fault. The white male CEOs raking in millions need to be paid that much because they are the best that the invisible hand can grope out. It’s a very appealing philosophy for those at the top, but it places far too little importance on the role of luck in deciding a person’s place in the economic race to “get ahead”. John Key’s rags-to-riches story sounds like a great endorsement for the hard-work-gets-rewards myth but the fact that it is such an exceptional story is telling. It’s obviously impossible for everybody to “get ahead” of everybody else. The “everything louder than everything else” theory merely justifies selfish “I’ve got mine” hating of the less fortunate. We need to remember that one of the most important roles of society and government is to balance out dumb luck.

Perhaps the most important element of luck that can be balanced out by society is health. Whether due to genetics, accidents or just the random factors that decide that one person will get cancer at 30 while another needs glasses, there is a huge variation in outcomes and costs that is out of anyone’s control. The fairest way for society to deal with this is to have everyone pay a share of the total bill, with the understanding that gambling on staying healthy is too risky to be worth saving a relatively small amount. Society as a whole benefits by spreading the risk of sickness around.

Risk in the context of investments is (or should be) taken on with full knowledge of the possibility of failure, and just like a casino lower odds give a higher payout. It is viewed as an individual risk that is not the responsibility of government or society. It is also, interestingly, usually portrayed as a matter of luck. An investment always has a “chance” of success and can never be a sure thing, yet entrepreneurs get all the credit for being great businessmen as if they knew what they admitted was unknowable initially. We recognize the importance of luck by helping out business people with contraptions like limited liability corporations which mean that society does end up bearing some of the risk. Welfare benefits also help to soften hard business failures. Recently the stupidity/evil of the finance industry has resulted in gigantic “unemployment benefits” being paid directly to companies that are “too big to fail”, treating corporations like orphaned children. Christchurch too has it’s very own high-rolling permanently rich dole bludger.

Dave Henderson, property developer, is a strange figure. He is a graduate of Zenith Applied Philosophy, a true cult which is like a greatest hits compilation album of Scientology, mysticism and extreme libertarianism (Henderson said in an interview “I believe taxation is theft”). He is also a true “entrepreneur”, having declared bankruptcy in 1996 after a bunch of his companies were liquidated only to return and run yet more companies into the ground. He created Sol square, which has become very popular amongst rich-looking people, and yet the bars in it are all in deep financial trouble. Last year he made an extremely suspicious-looking deal with Mayor Bob “Vote for me because you heard my name somewhere before” Parker to sell the council $17 million worth of property. The property is ‘vital’ to developing Christchurch city and couldn’t be allowed to fall into the hands of developers who might turn it into boring commercial buildings, yet the deal came with a clause to allow (developer) Henderson to buy back the property if he wanted it. Henderson has become a sort of ‘official’ developer for the council despite his dodgy history and hatred of government.

Henderson is relevant because he seems to have reached the promised land of high paid CEOs. No matter what the financial results of his investments are he is immune to the downside due to limited liability, mini-bailouts like the council property deal, and “business connections”. Similarly Telecom’s CEO Paul Reynolds was able to get a pay raise to over $5 million per year after his company’s profits dropped 40%, while Telecom technicians haven’t had a pay raise in 9 years. Evidently, luck is not a factor for these heroes. Meanwhile the people who seem to be most concerned with ‘dole bludgers’ stealing their tax dollars are the same right wing types who idolize these noble CEO beneficiaries. It’s not restricted to the super-rich either: the general public seems to be forever moaning about the fantastically luxurious prison system, but hardly ever gets outraged at the executives who have consistently worked to increase pay inequality and reduce employment benefits. It takes a really blatant example like Reynolds for people to even consider the problem. Where is The “Sensible” Sentencing Trust that will generate outrage over our corporate overlords?

Are leading lights like Henderson what people really want when they say we need more entrepreneurs? Would New Zealand really be better if everyone was talented enough to run a Henderson-style portfolio of 90-plus companies constantly in financial flux and legal trouble? He has reached the top of the stinking influence heap, but how many other people are buried in the nightsoil beneath his feet? All the small anonymous ‘losers’ are barely mentioned, while the guys at the top of the failed ventures walk out with their millions in savings with a phalanx of peasant defenders proclaiming them the epitome of citizensip/capitalism. I find that a lot more outrageous than putting an ‘h’ in Whanganui.

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