The Face of Capitalism Is Changing (Again)

He wasn’t alone in this thinking. In the autobiography of Benjamin Franklin, a work contemporaneous with Smith’s writings and self-consciously styled as something of a colonial companion to contemporary How to Succeed in Business books, Franklin audaciously includes letters from two acquaintances entreating him to publish his memoir.

“I know of no character living, nor many of them put together, who has so much in his power as thyself to promote a greater spirit of industry and early attention to business, frugality, and temperance with the American youth,” one tells him. The other declares that sharing the story of Franklin’s life could have no less effect than that of “improving the features of private character, and consequently of aiding all happiness, both public and private.”

These correspondents echoed Franklin’s self-estimation with respect to his singular significance for the new nation he helped create and seconded the virtues he believed were conducive to commercial success. And yet, importantly, Franklin went even further than Smith, not merely by avowing a “spirit of industry” that directly contradicted that of capitalism’s detractors but by illustrating it for his readers in his own business achievement.

The Industrialists

As the first face of capitalism, the avatar that Franklin presented in the pages of his autobiography could only prove useful so long as the daily labors and patient deliberations of shopkeepers, small farmers, and tradesmen embodied the system. However, once the locus of commerce shifted away from the hurly-burly of Franklin’s printing house and the intimate traffic of Smith’s small-town tradesmen to the smokestacks of Pittsburgh and textile mills of Manchester, capitalism needed a new face.

The new era was that of the Captain of Industry, according to the economist Thorstein Veblen. Looking back on the profound changes ushered in by the Industrial Revolution in his final book, Absentee Ownership and Business Enterprise in Recent Times, published in 1923, Veblen contended that the Captain of Industry had displaced Franklin’s proto-capitalist personage as “the dominant figure in civilised life.”

He “was a captain of workmanship at the same time that he was a businessman,” Veblen said, describing an extraordinary individual who appeared to be an industrial jack of all trades. “In the typical case, he was business manager of the venture as well as foreman of the works, and not infrequently he was the designer and master-builder of the equipment, of which he was also the responsible owner.”

Veblen understood that the division of labor helped drive the unfathomable complexities of modern commercial arrangements, and he granted that this swashbuckling, omnicompetent figure was not merely an anachronism by the start of the 20th century but always by and large a self-satisfying figment of the capitalist imagination. (Most people “who amassed fortunes out of the proceeds of industry during this early period [of capitalism],” he acknowledged in Absentee Ownership, were not “of this workmanlike or pioneering type, but rather came in for large gains by shrewd investment and conservative undertaking.”)

And yet, notwithstanding such disclaimers, the very idea of a Captain of Industry—an engineering genius who proved himself an adept businessman—was hardly preposterous in an age when titans such as Henry Ford got their start tinkering with the machines that would make them their fortunes. And besides, the face of capitalism has always been more a matter of the personification of the system in the popular mind than some composite image produced in conjunction with a bureau of business statistics.

While Henry Ford epitomized the face of capitalism at the dawn of the 20th century, it was the head of his chief competitor, General Motors’ Alfred Sloan, who better resembled the postwar exemplar of what the sociologist William H. Whyte famously termed the Organization Man. This face of capitalism was far less romantic than the Captain of Industry and far less homey and likable than the one found in Franklin and Smith. He—and if you looked closely now, she too—was a white-collar widget in the great gears of a corporate bureaucracy. Paragons of complacency and competence, they staffed the cells of giant companies—Dupont, General Electric, AT&T—and their very anonymity stood out for what it said about capitalism.

With the arrival of the Organization Man, for the first time, the face of capitalism seemed to embrace Adam Smith’s insight that the division of labor was the singular phenomenon that drove commercial development. The figure Benjamin Franklin embodied and the Captain of Industry both implied that capitalism was the story of single individuals, that of the small proprietor or the superman.

By contrast, the Organization Man was less uninspiring than entirely unremarkable. In the story his existence told of the system, capitalism was not a hero’s journey but a sociological saga, one in which complex hierarchies of men and women worked collectively toward a common goal. A company like General Motors succeeded not because of the extraordinary capabilities of an Alfred Sloan, but because the bureaucracy he sat atop functioned like a well-oiled machine of interchangeable human parts.

Sloan himself was so proud of the bureaucracy he created after he took over GM that he famously included the company’s organizational chart in his memoir. The gesture underscored the fact that, in Sloan’s view, for a company like GM to thrive, the face of capitalism had to be faceless. Nobody in the corporate hierarchy could be indispensable, including the man who sat atop it.

Wizards and Tech Stars

If the heyday of the Organization Man was the Eisenhower era, by the 1980s, the image of corporate America had transformed from a phalanx of promising young men in gray flannel suits to a foursome of paunchy execs hitting the links on a Friday afternoon while their sclerotic companies tottered under the weight of heavy pensions and complacent management.

“The new law of evolution in corporate America seems to be survival of the unfittest,” Gordon Gekko proclaims at a shareholder meeting for Teldar Paper, a fictional company in Oliver Stone’s 1987 movie Wall Street. Teldar Paper has “33 different vice presidents, each earning over $200,000 a year,” Gekko declares. He claims he spent two months “analyzing what all these guys do, and I still can’t figure it out!” The upshot for shareholders, he says, is nothing less than an outrage: “You are all being royally screwed over by these, these bureaucrats, with their steak lunches, their hunting and fishing trips, their corporate jets and golden parachutes.”

Gekko’s assessment is notable for what it says about the popular assumption of what was ailing the American economy in the early 1980s, and the speech famously ends with his irreligious remedy: “Greed is good.” As a corporate raider, Gekko was the perfect choice to represent the new face of capitalism, the Wizard of Wall Street, an individual whose activities involved neither the brick-and-mortar world-building of the Captain of Industry nor the sober esprit de corps of the Organization Man. In fact, to most, it wasn’t really clear at all what this person did, except make an eye-popping amount of money.

It is true, of course, that for those who barely understand the miracle of compound interest, the arts of the financier have always seemed obscure and slightly ominous. In the ’80s, however, spurred on by the rise of a new postwar generation that didn’t share the buttoned-down, steady-as-she-goes spirit that their fathers brought to corporate America, the significance and scope of these arts grew in ways that were shocking even to those who had long practiced them.

Relying on arcane terminology (swaps, LBOs, the yield), increasingly complex math, and the sword and shield of “efficiency gains,” the Wizard of Wall Street embraced a vision of capitalism that was atomistic, hyperanalytical, and, in its own strange way, exceedingly utopian. Buoyed by the belief that greed is indeed good, he could fire up his Bloomberg terminal and get rolling.

When I began teaching business ethics in 2005, the Wizard of Wall Street represented the face of capitalism for my students, albeit not the only one. For those students who were discomfited by the financial sector’s swaggering self-importance and gleeful indifference to any apparent claims of common responsibility, they could look to Silicon Valley for a second face of capitalism, one that seemed exceedingly smart and civic-minded, if also slightly dorky.

The Tech Star first emerged in the 1980s with the rise of companies such as Microsoft and Apple, but it was the waves of technology companies starting a decade later—first Amazon and Google, and then Facebook, Snapchat, and Uber—that presented an alternative to Gordon Gekko. The founders of these companies—and, more importantly, those who established the galaxy of small startups they gobbled up along the way—presented a face of capitalism that was characterized by the engineer’s attention to data and details and an ambition for world-building that seemed most at home in the pages of science fiction. It was also characterized by a striking nonchalance about the extraordinary purchasing power their success brought them. It wasn’t that they disdained money. Rather, money seemed incidental to the world-changing technology they were creating.

The face of tomorrow

As recently as a decade ago, I still saw the story of contemporary capitalism as a contest between two faces, those of the Tech Star and the Wizard of Wall Street. Even if the impression the latter made had changed since the financial crisis—the mischievous grin had wilted after a once-in-a-century comeuppance—both figures still had a hold on the minds of my students. They shaped how my MBAs thought about a world beyond Booth and the role they might play in it.

Things change. The financial sector no longer appears to be a cultural force that significantly shapes the way we think about capitalism. The Wizard of Wall Street remains, but seems increasingly irrelevant. The Tech Star still sparkles, but as the face of capitalism, seems as uncertain in the popular mind as the value of most Silicon Valley creations. Beyond a base lust for their many billions, no one in my classes takes an Elon Musk or a Mark Zuckerberg to be a model for much of anything.

What will the future hold? That’s up to my students. The way they conduct themselves and the choices they make as business professionals will determine the capitalism to come. We cannot know what face they will present; we can only hope it doesn’t cause us to cringe and look away.

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