Something’s Happening to the Spirit of Capitalism

He seemed like an odd paragon to some of Weber’s readers. Even on the account he provided in his autobiography, Franklin was hardly the portrait of the penitent believer. His attitude toward organized religion was so blithe and ecumenical as to risk the impression he had no faith at all, an almost unimaginable status in colonial America. Yet, instead of undermining Weber’s thesis, the choice of Franklin highlighted his contention that commercial sentiments had been so thoroughly transformed by the Protestant ethic that, by the time the upstart printer began tugging at his bootstraps in the 1720s, the warrant of religion was no longer needed to maintain the “mighty cosmos of the modern economic order.” The spirit of capitalism, which had once been inflamed by religious conviction, retained its psychological urgency and practical discipline without the imprint of higher purpose, so much so that Weber claimed “[w]here doing one’s job cannot be directly linked to the highest spiritual and cultural values, the individual today usually makes no attempt to find any meaning in it.”

At least in respect to American capitalism, Weber’s choice of Franklin was notable for another reason: Franklin’s memoir served as a manual for young strivers keen on emulating the country’s foremost self-made man. Indeed, throughout the 19th century, The Autobiography of Benjamin Franklin was not only the original business book for the immigrants who settled the cities along the eastern shore and steadily pushed westward; Franklin himself became a commercial icon whose life provided a model of business behavior.

When greed became good

Having taught Franklin’s autobiography to business professionals for well over a decade, I can attest that students no longer regard Franklin as an exemplar for their own conduct but a quaint ambassador for an antique time and place. What model do they take? Who, today, embodies the spirit of capitalism? That is a question I have spent a lot of time thinking about recently, in part because I believe the spirit of capitalism may be changing, at least in the United States.

Until recently, I have been inclined to answer these questions with the name Gordon Gekko, the charismatic corporate raider from Oliver Stone’s 1987 movie Wall Street. Gekko long ago passed into the pantheon of modern movie characters, chiefly on the most remarkable moment in Wall Street, the “greed is good” speech.

Many people who can’t remember the film, or who never saw it in the first place, still know that speech, or at least the slogan it’s built around, and I tend to think that it captures the spirit of American capitalism, at least since the 1980s. Take what people typically mean by “greed is good.” They’re not paying attention to the social consequences of exceedingly selfish people—how they tend to be black holes in social situations, demanding undue attention from others and unwarranted respect for their every opinion. Instead, they are focused on the material benefits of selfish behavior. If a person spends her life making the most money she can, her efforts not only enhance the wealth of a nation; they are actually far more productive of the common good than the endeavors of those tender hearts who commit themselves to improving the world around them. The blessings of Mother Teresa, on this logic, pale by comparison to the miraculous works of Michael Milken.

While the moral convenience of such conviction is so obvious as to be slightly embarrassing, this spirit of contemporary capitalism has enjoyed a kind of intellectual respectability thanks to the unwitting assistance of three seminal arguments in modern economic theory. The first is Joseph Schumpeter’s notion of “Creative Destruction” as the essential force of economic advancement. “Economic progress, in capitalist society, means turmoil,” Schumpeter claimed, explaining his theory, an evolutionary process that “incessantly revolutionizes the economic structure from within, incessantly destroying the old one, incessantly creating a new one.”

Accordingly, Schumpeter’s hero, the agent of creative destruction, lays siege to the commercial status quo. A sworn enemy of bureaucracy and anything resembling red tape, he gleefully swings his wrecking ball, clearing the way for his own personal vision of what must be done while thumbing his nose at convention.

Schumpeter announced his theory in Capitalism, Socialism and Democracy, which he wrote and revised on either side of the US entry into World War II. The book served as a warning against creeping socialism as well as a call to arms for a particular type of renegade capitalist. What it didn’t do was provide a scientific underpinning for its claims, which resemble an ideological assessment of capitalism rather than a hard analysis of how the system might be improved.

But in the following decades, Schumpeter found support in two developments in financial economics that seemed to vindicate the fierce individualism of his hero. The first was the efficient-markets hypothesis, developed by Chicago Booth’s Eugene F. Fama in the late 1960s. The theory holds that, when all participants have the same information available to them, no single investor can consistently earn above-average returns on the market. By implication, the theory cast a negative light on regulatory efforts to intervene in market activities, regardless of the social aims intended, while also giving moral cover to commercial actors who could console themselves with the belief that, by pursuing their private interests, they were best supporting the public welfare. Thanks to the providential wisdom of the invisible hand, their greed, however blinkered, was actually good.

Not long after Fama’s insights began reshaping how people thought about financial markets, Harvard’s Michael Jensen and the late William Meckling attempted to reconceptualize the nature of the modern corporation. Eschewing the more traditional sociological approach that treated companies as small communities shaped by community obligations and a complex series of institutional customs, Jensen and Meckling contended that companies could best be understood as a collection of independent agents bound only by contractual obligations. These individuals were not guided by a vibrant suite of sympathies, sensibilities, and higher aims—community improvement, quality products, the pleasure and purpose of superior craftsmanship. They were corporate mercenaries with the same, singular motivation that propelled the entities they worked for: to make as much money as possible. Accordingly, if companies wanted to ensure their aims were best aligned with those of their agents, they should focus on one type of incentive only, the profit motive.

A flagging interest in finance

As I’ve already noted, for Max Weber, the idea that any single type of incentive might overwhelmingly shape one’s activity could only be the consequence of a “long, slow ‘process of education.’” Yes, the possibility of higher wages can go a long way toward skewing individual behavior—the difference between what one might do for $10 and what he might do for $1 million underscores this—but the mere promise of more and better baubles won’t ensure an unalloyed commitment to moneymaking. And yet, if money is essential not only to meeting material needs but to attaining power, status, opportunities, and self-respect, it doesn’t merely outweigh other interests; it effectively devours them.

As the spirit of renegade capitalism blossomed in the 1970s and ’80s from academic theories that redefined how we understood the very nature of a well-functioning economy, the expanding power of money served as both a carrot and a stick to such development. On the one hand, over the past 40 years, the growth of material rewards for commercial success has been positively eyepopping. (Forbes, for example, identified more than 2,200 billionaires in 2018, up from just 140 in 1987, the year Wall Street was released.) More importantly, though, in the same period of time, nonmaterial goods have increasingly been colored by money. Indeed, in the US, success in moneymaking often seems like a requirement for status, power, opportunity, and self-respect, making it less a single interest among others than the makings of a lifelong obsession.

No one can doubt that money is far more important today than it was 40 years ago, maybe more than it has ever been in American life. And as the customs and institutions of civil society have been renovated to reflect this fact, they have reinforced the essential lesson of contemporary capitalism: that making as much money as you can, in Weberian parlance, is its own calling, one whose wisdom has been certified by economic science.

And yet, things may be changing. The spirit of capitalism always passes along from one generation to the next, and therefore its immediate fate rests in the hands of those who are getting a firm grip on their bootstraps. Consider the evolving career choices of the young professionals who are currently pursuing their MBAs at elite institutions. According to US News & World Report, the percentage of graduates from the top 10 business schools accepting job offers from the financial sector dropped from 35.7 percent in 2012 to 26.4 percent in 2017—even though, during the same time period, companies raised their starting salaries faster than management consulting firms or tech companies, their rivals in recruiting.

Attempting to explain the flagging interest in finance, a career-services advisor at MIT Sloan School of Management told the Wall Street Journal that students were increasingly unwilling to trade off robust social lives for a few more dollars. Noting over the last decade a nearly “complete flip between finance and technology” in the career aspirations of admitted students, she voiced a conviction that I’ve heard repeatedly expressed by my own students: “You can have a lucrative career without those lifestyle costs.”

In the same article, the founder of a Los Angeles–based recruiting company echoed another belief that is familiar from my classes. Financial-sector companies, he told WSJ, “are increasingly seen as ruthless moneymaking machines.” Rather than making for a wholesale endorsement among MBAs, this impression has created a “serious image problem” for major investment banks, limiting their choice of hires.

This is just one data point, but it is not easily dismissed. Among the ranks of business professionals, the graduates of top business schools are a high-profile group whose behavior uniquely embodies the evolving spirit of American capitalism. The shift in their career decisions suggests a change in the way they interpret the moral necessities of their work and, thus, a break from the preceding generation. When it comes to the question that has long been the full measure of business ambition—Can you ever make enough money?—they increasingly answer in the affirmative. Moreover, not only do they seem unconvinced by the idea that every exercise in greed is also self-evidently good; they would rather work in an environment that evaluates their ultimate worth to others, and to the world around them, by some other measure than dollars and cents.

As polls over the last few years have repeatedly shown, among younger Americans, the siren’s song of capitalism is increasingly falling on deaf ears. If the system is to survive in any form—an eventuality that appears less likely than it did a decade ago, when the contrary seemed unthinkable—it will be because the system of capitalism rediscovers democratic endorsement. We are witnessing one reason for optimism in the sentiments of a new generation of strivers who are disdaining an unreflective faith in the virtue of selfish behavior. They no longer accept as axiomatic that doing well is doing good. They hold themselves to a different standard: the immediate evidence of their actions.

John Paul Rollert is adjunct assistant professor of behavioral science at Chicago Booth.