The Advisors' Blog

– Brad Sonnenberg

Broc’s recent observation about how “lawyers have long ago given up…” is searing in its accuracy and something I’ve watched with pain over the years as an executive and lawyer. The profession itself has absolutely no insight into the phenomenon. To be balanced, however, I’d have to say that the cultural norms the profession rushed to embrace are no worse than those embraced by many other institutions in our society.

The accumulation of wealth issue is an interesting one, and here there’s an issue that’s troubling well beyond the empirical and logical infirmities of the claim that someone so rich (and, under this hypothesis, relatively unmotivated by the satisfaction of accomplishment and contribution) will somehow magically be energized by even more money he or she doesn’t need. That issue is whether such accumulations of wealth (which in financial services were widespread) were an actual contributor to the crisis in ways that went beyond the perverse incentives built into the structures that produced those payouts.

If you have in the bank more than you and your family will ever need under the most lavish of standards, does that incentivize reckless gambling (with corporate assets) to satisfy non-economic desires such as the desire to be big and command immense resources? Predating the current crisis, one thinks of the contrast between the empirical research on the consequences of acquisitions and the glee with which such transactions are pursued. In the context of the current crisis, it would seem that some of the key decisions must have been driven by a desire to be big and not lose ground (measured in size, not long-term profitability) to the competition.

I also wonder whether such accumulations create an outlook of superiority, entitlement, and invincibility that impairs objective assessment of risks, and disables the type of empathetic outlook that might otherwise have caused one to consider the possible consequences to those still dependent on our economic engines.

Keep in mind, I’m not calling for use of accumulated wealth as a marker for recklessness or bad character. I wonder, however, whether single-minded pursuit of such lavish packages by those with no rational need for them (especially where the collateral damage, such as loss of governmental or public goodwill, is foreseeably significant) should be a marker for potentially harmful proclivities. With the benefit of hindsight, the evidence in favor of that proposition is not inconsequential.