At The Money: How Greed Became a Virtue

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0:41evolutionary spirit. Greed in all of its forms. Greed for life, for money, for love, knowledge, has marked the upward surge of mankind and greed. For the love of money is the root of all evil. Greed was long seen as a vice, as selfish, as a waste of our time. It undercuts both our happiness and our life satisfaction. Yet today, the pursuit of money seems to be everywhere. It's a driving factor in all of our lives. How did the love of money go from a vice to a virtue? I'm Barry Ritholtz, and on today's edition of At The Money, we're going to discuss how greed became good. To help us unpack all of this and what it means for you, let's bring in Paul Vigne of the Wall Street Journal.

1:33He's published numerous books on money and cryptocurrencies. His latest book is The All Mightier, How Money Became God, Greed Became Virtue, and Debt Became a Sin. It's out by the time you're hearing this. So Paul, when did greed become good and how did this happen?

1:54So I think people think that greed became good, that idea sort of came about in the 80s. And you have the Wall Street clip, Gordon Gekko, you know, greed, for lack of a better word, is good. And the 80s were the greed decade. And a lot of people will say, you know, you had the election of Reagan, the conservatives. It all changed in the 80s. And we've been living in that world. And I grew up in the 80s. You did too, Barry. I was a teenager in the 80s. And I had absorbed a lot of those beliefs and those ideas also. But what I've discovered is that you actually can trace that idea further back, much further back.

2:36I'm not talking about the robber barons in the Gilded Age in the 1890s where you can find it. I'm not talking about the Mississippi bubble in the 1700s where you can find it. you can trace that idea back specifically almost to the year, at least to the decade, to the 1420s. And there was a Florentine writer named Poggio Bracchiolini, and he wrote a dialogue. And the dialogue contains, among the many, many things in the dialogue, it contains this sentence. I'll just say the sentence. He says, avarice sometimes is beneficial. It is almost word for word what Gecko says in Wall Street. Gecko says greed, for lack of a better word, is good.

3:27Avarice sometimes is beneficial. That idea was incubated in Florence in the 1420s. Florence was a mercantile city. It was a republic, and there were a lot of merchants there. It was basically driven by commerce. And those merchants had this belief. They couldn't talk about it. They couldn't express it. They couldn't really show it because the church's stance was usury is evil. It should be outlawed. Greed is the root of all evil. You know, it was very, very dangerous to come out and say greed is good. So let me ask you about some other historical figures who might have become Forgotten, who philosophized on this topic.

4:14Who are the economic thinkers who rebranded greed from a deadly sin to a driver of social benefit? You mentioned Bracchiolini. Who else were key thinkers in this space? So it's interesting because the one dialogue that really states it the best is the one from Bracchiolini. So I spent a lot of time talking about that. But what's interesting is that he ran in this circle of influential thinkers and doers that included a banker that most people probably know the name of, at least, named Cosmo de' Medici, and a man who would become Pope, who would become Pope Nicholas V. He was a bishop and Cosimo was actually a supporter of this bishop.

5:03Nicholas V becomes pope. Cosimo becomes the most important banker in Europe and actually one of the most important politicians in Europe. And they take this idea and they run with it. Cosimo employs this in his bank, in his personal life. He makes a lot of money. He spends a lot of money. He shows people that you can be greedy. You can pursue wealth for yourself. You can become very, very rich and you can then become influential. He supports architects. He supports artists. He supports all kinds of public works projects. That becomes a very, you talk about culture, that becomes a very influential cultural example to people in Europe.

5:46So following the Medici family in Florence, which at the time was probably the wealthiest city-state in Europe, we eventually go forward to John Calvin in Protestantism, and Calvin holds that wealth is a sign of divine favor. This is the exact opposite of greed is a sin. This is, no, wealth proves that the gods are smiling on you. Yeah, and I'll go through a couple hundred years of history very quickly here. So these Florentines start saying greed is good and they show it as an example and it kind of takes off. It takes off in the Catholic Church, which starts employing it. The Catholic Church starts raising a ton of money and spending money at the same time.

6:30They really buy this. I call it in the book the ethos of beneficial greed. They start buying into it. And of course, it all becomes excess, right? Right. A Medici becomes Pope, Pope Leo X. And he is just he's horribly he's terribly corrupt. He's a really bad pope and he spends a lot of money. And he is actually the basically antagonist of Martin Luther. Like the whole Protestant Reformation is a rebellion against the excesses of Leo X and the Catholic Church. But what's interesting is that once the Protestant Reformation takes off, the idea that what they really are against is the excesses. They're not actually against the idea of money.

7:17And John Calvin comes along and John Calvin is very, very clear. And what he says is God controls everything. Every down to the last hair on your head is determined by God. And I don't have a lot of hairs on my head left, you know, so there's that. God controls everything. Everything that happens happens because God wants it to happen. If you have money, it is because God wanted you to have money. So whatever job you have, you should do it to the best of your ability and you should go out there and make as much money as you want because that is what God wants for you. He doesn't want you to spend it the way the Catholics do.

7:59And I'm Catholic, so if anyone's upset about Catholic bashing, I'm just being historical here. He doesn't want you to spend it the way those profligate Catholics do, but God wants you to have it and then wants you to put it to good uses, help the poor, help the indigent, do good things with it. But if you have it, God wants you to have it. That idea becomes, at that point, becomes deeply, deeply embedded in our culture. Let's fast forward to people like Richard Baxter and even Ayn Rand. How does the thought that greed is good progress over the next few hundred years? So over the next few hundred years, and again, I'm going to do this very fast if people want the whole thing, they can buy the book.

8:42Thank you very much in advance. Yes, I'm greedy too. I want to sell my book. So Calvin is influential. Another Protestant theologian named Richard Baxter takes it a step further, and he starts explaining how businesses operate and how the pursuit of wealth is employed as a tool of God's will. And then who takes that even a step further is Adam Smith, who's Smith's whole idea really is that the economic system we have, which had existed for a few hundred years by the time Smith came around, the economic system we have is a moral system. This is how it works. This is what's good about it. By all these people out there doing these jobs that they're supposed to be doing, the division of labor, this is all moving us towards a better relationship with God.

9:33That idea is, at the very least, it's moralistic in Smith's worldview, if not outright religious. He kind of secularizes it a little bit. So let's address that exactly, because I have to ask the question, what's the relationship between the rise of capitalism and the redefinition of greed or at least motivated self-interest as a virtue? Well, I actually think, and I state this quite clearly in the book, I think this change in attitude toward greed is actually what creates capitalism. There's a line in the book, I say, capitalism didn't create greed, greed created capitalism. So what you see in Florence in the 1400s, now I'm going backwards a little bit, but the start of it, that is the first time you see people employing capital consciously as a tool for themselves and for society.

10:30It used to be just about the nobility and the kings and the rich accruing wealth, and it was all for them. Now you see this idea that, wait a second, we can actually, anybody, commoners or nobility, can pursue wealth, and that can be a tool to help us in our own lives and to help society. That is the cornerstone of capitalism. Greed is good, Barry. That explains capitalism as it actually operates. That is not how the textbooks tell you it operates. I actually went through the textbooks and I looked and like the word greed doesn't appear in them at all. Well, it's motivated self-interest and it's homo economists and all that stuff.

11:10So but it's always kind of like sloughed off to the side. Right. I mean, you're making it a central focus. So it's about efficiency. It's about, you know, system. No, it's about greed. It's actually about people using greed. And you can see it winding its way through our culture. Adam Smith secularizes the idea and people seize upon it. And then you have this this new nation that had just formed in the Americas and they rejected the king. They rejected the church. They needed something to ground their new country on. And what they came up with, and James Madison, one of the founders, makes this most clear, property rights, money, wealth.

11:52That is what the nation is actually founded on. This idea that at that point becomes so deeply embedded in the culture of America that that is the cornerstone of our history. Let's dive deeper into that because the book delves into the transformation of money from a religious and communal tool to that exact secular object of faith. Are you saying that in large part the creation and economic success of the United States has been one of the key drivers of the belief that motivated self-interest, to use a less polarizing term than greed? Economic textbook term. Right? Is that what led us to a couple of quotes from your book?

12:45banks are churches of money. And the other quote that stood out, money isn't like a religion, money is a religion. So has money secularized greed or has money just kind of moved into religion's sphere and said, hey, we want part of this faith-based idea also? I think it's done both, really. It has – and this is really the argument of the book is that it has replaced religion as the incentive system around which a society revolves. In other words, I said earlier, 5 ,000 years ago, society revolved around the temple and it revolved around the idea of pleasing the gods. That belief system faded. You can't in the modern world have a belief – I know there are plenty of people out there that believe in religion, and I'm not trying to attack their belief systems.

13:43But you can't have a modern society built around that. At least the United States is a modern society that is not built around that. That can't be the foundation. It, in fact, is not the foundation. And the history of Europe shows this. Over time, the authority of kings, which came from the church, was whittled away and whittled away and through wars and civil wars and, you know, it all faded. Religion was replaced by this other belief system. And that other belief system is centered around money and the pursuit of wealth. Let's talk about that. That is what drives us today. Let's talk about that.

14:21We've been talking about the pursuit of money and assets and power and influence and all those things that go with it. What we haven't been talking about is debt. So let's talk a little bit about the ancient societal views of debt and how that has transformed in the modern world where debt is a useful tool, but it also comes with some ethical and moral baggage. Tell us about how debt has evolved over the past, I don't know, 5 ,000 years. Sure. I mean, part of, you know, so debt, money, credit, all these things are just, they are tools. They are ways to help distribute resources. And after money was invented, what you see is people realize you can use that as collateral for loans, for lack of a better word.

15:22They realize you can use that if you have a certain amount of money, which back then really wasn't, don't think of it as paper money. It was really more possessions. The money was just a notation on a clay tablet somewhere. But that you could use your wealth as collateral for loans. You could borrow against it. And then they realized something even more impressive was that you could collect interest on that and that if you had that loan going over time, the interest would collect interest on the interest. You could collect interest on the interest, compounded interest, which is, you know, all of modern finance is based on that idea.

16:03That was incredibly attractive in the ancient world. And you then have loans and you have networks of lenders. And because everyone understood that the money was coming out of the temple, that basically the money was something owed to the gods, Your debts were to the gods. So there was a very strong moral component to debt from the very beginning. If you're not paying your debt, you're basically thumbing your nose at the gods and the creditors could come in and basically do whatever they want. They can take your land. They can sell you into indentured servitude. They own you like not paying your debts was a really deep sin.

16:47And yet we would have these demands on a regular basis for a debt jubilee, erasing the ledger, rebooting the financial system. Whatever happened to the concept of, I think in some systems it was every 14 years, 11 years, some 50 years. Tell us about the history of the debt jubilee. And we kind of saw a debt jubilee in 08-09, didn't we? In a way. Yeah, in a way. So what happens is these creditors start amassing these giant loans. They are becoming extremely wealthy. But you see this from society, city-state to city-state. And look, this is something that happens today, right? People take on a loan.

17:33They have to pay interest on it. The interest is too high. It compounds. You start off with, oh, I borrowed a little bit of money. 15 years later, 20 years later, you're still paying it off and you're deeper, deeper in debt. what the people realized in the ancient world was that money, that loans had a way of growing beyond the ability of people to pay them, no matter what they were trying to do. This whole concept of compound interest, it just, it becomes a problem. And it becomes a societal problem at some point. A king who wants his subjects to work for him and be in his army, but he doesn't have them because they've all lost their farms, because they've all been sold into slavery because of their debts, well, that's a terrible society.

18:16So the kings developed this relief valve, which is basically a debt jubilee. Every once in a while, in the Mosaic Codes, it got codified and they put a timeframe on it. But earlier than that, you would just have kings whenever they felt things were kind of too bad, or they took over a new city and they wanted to start over. They would declare a debt jubilee. All the debts were wiped out. If you lost your farm because of debts, you got it back. If you were sold into slavery because of debts, you were released from slavery and put back on your farm. It was a way for the society to start over because what they realized was that debt had this just inescapable habit of overwhelming the entire society.

19:02So we've seen the rise of capitalism. And while globally, it's raised millions of people, arguably billions of people, out of poverty and raise standards of living worldwide. At the same time, we've never seen greater wealth inequality, greater income inequality, not just here in the United States, but around the world. How do we explain the virtues and vices of global capitalism? Why? How do we explain the virtues and vices of global capitalism, where on one hand, it's raising all these people out of poverty? Yet on the other hand, it seems to be creating this yawning chasm between it used to be the haves and the have nots.

19:50Now it's the haves and the haves a lot more. Yeah. So I think two things, and I'll try to get to them quickly. I think one, and it was a really important thing that I state in the book. I'm not writing this book as some kind of attack on money and capitalism and greed. I'm trying to explain a system, a system that we are all part of. This book is not just to say Bernie Madoff was bad. Ivan Boski was bad. Gordon Gekko's a villain. Those, you know, the robber baron, Cornelius Vanderbilt, they're bad. They're terrible. Money shouldn't exist. No, no, I'm not trying to do that. You know, I'm selling the book.

20:28I'm not giving it away. I could have given the book away. I'm not. I'm selling it. I'm part of the system too. I'm just trying to explain how the system works because part of this is, and I said this, money is actually a very effective tool. It's a good thing. Society flourishes after money is invented. Like you said, Barry, it has. capitalism has pulled a lot of people out of poverty, has made a lot of people's lives better. It stimulates people to go out there and do things and create things and build things. Those are all good things. This book is not anti-capitalist. What it does argue is that the problem is that we have mythologized money and we have come to worship it as a replacement for God and that God worship of money has created all the imbalances that we have in society today and that you see in society today and that people on both sides of the system recognize.

21:31I mean, you can hear that exact argument from people who are on the right and from people who are on the left. Everybody, I think, recognizes that there is a problem today. Most people, though, don't understand what the system is, so they don't understand how to combat it correctly. And that's why you get a lot of social programs that seem to go nowhere. That's why you get this seeming inescapable growth of inequality, because we don't understand the system. The other thing I'll say is another part of the problem, I think, is that when capitalism was created, especially, you know, certainly in the 1400s and even in 18th century, the conditions in which it was created were completely different from the conditions in which we live in today.

22:16Resource scarcity was a real issue back then. Certainly going back through time, it was even worse. You know, most societies were one great catastrophe away from being destroyed and wiped out forever. They were going to disappear. In the last hundred years, definitely in the last hundred years, technology has changed our means. We can grow enough food. We could build enough housing. We could provide enough education, health care, electricity. We have the means and the capability of providing the basics that every single person in the world needs to have just a decent life. Our economics was not built with that in mind.

22:56And I think our economics has not kept up with changes and doesn't recognize that. And I think that is another big problem. Our conditions have changed, but capitalism has not changed enough to meet those conditions. And I think that is causing a lot of the frictions that are going on in the world today. And my hope also in writing this book was to make that clear. So to wrap up, how did greed become a virtue? Well, motivated self-interest has allowed us to lift billions of people out of poverty. Capitalism has shifted the dominant thesis of just living in the world from one of scarcity to one of abundance.

23:41And we've managed to take what was once perceived as a vice and turn it into a virtue by building an entire economic system around rewarding success, rewarding the appropriate allocation of resources by companies, by governments, and by people. I'm Barry Ritholtz. You're listening to Bloomberg's At The Money.