Our greatly lamented colleague Lary Ribstein was a movie buff. Some time ago he wrote an encyclopedic article on business in the movies, “Wall Street and Vine: Hollywood’s View of
Business.” At the time of his death, he and I were in discussions about publishing this article in the journal I edit, Managerial and Decison Economics. After his tragic death, I contacted his widow, Ann, and received permission to publish the article. It is now published in the June issue of MDE. (If your library does not subscribe to MDE, the article is still available on SSRN.) Anyone with any interest in the movies and their perception of business must read this article. Given the volume of Larry’s scholarship, it is amazing that he had time to see as many movies as he discusses in this article.
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Our greatly lamented colleague Lary Ribstein was a movie buff. Some time ago he wrote an encyclopedic article on business in the movies, “Wall Street and Vine: Hollywood’s View of
“Oscar” of the best antitrust law book? Non-antitrust book?
Best Antitrust Book: Oliver E. Williamson, Markets and Hierarchies: Analysis and Antitrust Implications (1975).
Best non-antitrust book: Louis Menand, The Metaphysical Club: A Story of Ideas in America (2001)
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Let’s do it like economists => assume that you could change 3 rules, principles, judgments, institutions in the current EU antitrust system. What would you do?
Answer: I would speak only to the United States system, where I would change the following three things:
A. The per se rule against tying arrangements (insofar as it still exists)
B. The strict recoupment requirement in predatory pricing cases when prices are clearly below average variable cost
C. The federal courts’ repeated refusal to see the competitive harm in reverse payment settlements in pharmaceutical infringement cases
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A piece of “counterfactual” analysis: what would you do if you weren’t in your current position?
I would be either a Dutch Reformed clergyman or a Professor of American History
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Eric Felten writing in yesterday’s WSJ, observes the hypocrisy of the poets who withdrew from competition for the T.S. Eliot Poetry Prize because it was funded by a financial firm. “Hedge funds are at the very pointy end of capitalism” sniffed one self-described “anti-capitalist in full-on form.” The anarchist vegan correctly observed that the funder’s business “does not sit with my personal politics and ethics.”
Felten notes that modern winners of a poetry prize do not “expect the florid lickspittlery once lavished on those who provided artists their livings.” He also calls out the hypocrisy of a poet who turned down a hedge funded prize but wasn’t too shy to acknowledge the support of
the ‘Arts for Everyone’ budget of the Arts Council of England’s Lottery Department. Which is to say, she’s happy to bank the cash culled from the easy marks who pay the stupidity tax, but not the earnings of a mainstream investment firm. * * * So let’s get this straight: If the investment bankers’ money is grudgingly handed over to the taxman it’s squeaky clean. But if it is given voluntarily, the lucre is filthy. What an odd and upside-down moral equation.
But Felten shouldn’t have focused all of his ire on poets. I have written about American filmmakers who similarly find a lot to dislike in the capitalists who support their work but have little problem with government.
Margin Call is the best film to come out of the recent financial crisis. This is no polemic masquerading as a “documentary” (Inside Job) or good vs. evil melodrama (Money Never Sleeps). It is serious film, with superb acting, script, direction and photography, which uses the financial crisis as the realistic backdrop for a timeless story.
And yet the film is fatally flawed. Its serious qualities make more transparent its defects, which it shares with most films about business—filmmakers’ sour view of capitalists, which colors their view of business and perennially hobbles their efforts to make credible films about the business world.
In a nutshell: Eric Dale (Stanley Tucci), a risk management employee of a large securities firm becomes one of many casualties of a downturn in the firm’s business. On the way out the door he hands subordinate Peter Sullivan (Zachary Quinto) a USB drive. Sullivan, a rocket scientist who chose a career in finance, learns from this information that the firm’s substantial mortgage-backed security portfolio was based on a flawed real estate pricing model, and now threatens the firm’s financial soundness. Moreover, since the rest of Wall Street used the same model, the whole financial world is vulnerable (obviously an oversimplification of the causes of the financial crisis, but this is movieland). The revelation works its way up the corporate hierarchy, including executive Sam Rogers (Kevin Spacey), all the way to the top, CEO John Tuld (Jeremy Irons). Tuld and Rogers must decide whether to solve the firm’s problem by dumping the portfolio on its unsuspecting customers.
Unlike so many films about business, this one makes the business credible. The audience understands the setup. Though a few of the firm’s employees, including Dale, had an inkling this could happen, nobody acted on this information. The firm’s dilemma is also clear: selling the securities could save the firm in the short term but destroy it in the longer term because the firm will lose its customers’ trust. Hence the tension between the coldblooded Tuld and the conscience-ridden Rogers. This realism contrasts starkly with the hokey business scenarios in films like Wall Street I and II, which derived their limited dramatic power more from foreboding atmospherics than inherent logic.
Margin Call also differs from other business films in the depth of its characters and absence of obvious villains. There is no looming “corporation” that somehow is able to motivate its employees to behave like evil automatons. Here the corporation dissolves into its all-too-human employees.
Having shed the defects of the typical business film, Margin Call had a chance at greatness. Lurking in the film is an existentialist core, the story of how a crisis brings people to question the worth of what they are doing. While they were surfing the financial wave the universe was in a perfect harmony, where hard work created deserved wealth and happiness all around. But when the wave crashes their world loses its meaning. Finance looks like a zero-sum game, a way to transfer wealth from starving dogs to fat cats, as Tuld says. Nothing is immune. Dale laments leaving his former career as an engineer where he built a bridge that saved time and money. But his former subordinate Will Emerson (Paul Bettany) points out that maybe the drivers wanted to take the long way around. Rogers says digging holes would be better than what he does. At least he loves his dying dog and clings to it as his anchor. But then the dog dies and ends up in the hole he has dug. Where is the value?
In a better world, the film’s characters might have confronted the void and, possibly, found something to hold on to. But instead the deeper message vanishes leaving the simplistic point that the problem lies in the financiers and their sandcastles built of money. The characters are moral monsters obsessed with how much they and others make. When they flank a cleaning lady on the elevator we see and hear through her eyes their nasty conversations.
The characters’ search for meaning might, in this better world, have started with their jobs. But their self-rationalizations are lame. Tuld says, “It’s not wrong,” but the only reason he can offer is that “it’s all just the same thing over and over; we can’t help ourselves,” –followed by a list of years of financial crashes in recent world history. Will Emerson says, “If you really wanna do this with your life, you have to believe you’re necessary.” But the only necessity he finds is that “people wanna live like this in their cars and big . . . houses they can’t even pay for.” The film judges the characters for us — the cleaning lady, Rogers left with nothing but his dead dog, his childless woman subordinate, Sarah Robinson (Demi Moore) who threw her life away for an empty career, Tuld’s death’s-head face.
This is what happens to so many films about business. In my study of films about business and my law review articles How Movies Created the Financial Crisis and Imagining Wall Street I see a common theme: The artists who make films resent and distrust the capitalists who provide their money under the condition that the artists satisfy merciless markets that have no time for art. Of course the market’s judgment has to be shown to be irrational. So capitalism is often presented as a zero-sum game, where results depend on chance. Crashes happen, and people suffer. It has nothing to do with anything real.
In most business films (e.g., Oliver Stone’s Wall Street), this diminutive narrative of business shrinks the whole film: the characters are cardboard, the drama forced, the technical features marshaled to shore up the weaknesses. But since Margin Call is a serious film, its failure to fulfill its promise is more obvious. This film forces us to consider why filmmakers are so unable to reckon with the lives that so many Americans lead within large firms.
Perhaps the most prominent American filmmaker who could create a plausible narrative of big business was Billy Wilder. His films, such as The Apartment and Double Indemnity, had characters who found personal meaning even if some of their co-workers had not. But, then, Wilder was not subject to the anti-capitalist disease of modern filmmakers. He had not led his entire life in Hollywood or in movie theaters. His early years in Nazi Germany made him appreciate that free enterprise was not the worst thing in the world.
There was another story to be told in Margin Call, if only the filmmakers had been receptive to it. Finance is not basically a zero-sum game. It brings the resources together that create the worthwhile dreams that people do have. Where did the money come from to build Eric Dale’s bridge? The financiers who assembled the cash to build the construction and design firms were as responsible for the bridge as the engineers who worked for those firms. Financial engineering doesn’t create just instruments only rocket scientists can understand, but also the institutions that encourage investors to hand over their money.
If finance, even so envisioned, is worthless, then we can more readily believe that the rest of the world is, too. But we are also receptive to an existentialist construction of a reason to live. In the end, Rogers might have found that reason in constructing a financial solution to the financial dilemma instead of caving in to Tuld’s demand for a short-term solution that sacrificed both the firm’s customers and its own reputation. Or Rogers might have rejected this solution and taken the cash, just as Fred McMurray succumbed to murder in Double Indemnity. But at least we would have seen that finance gave him the same kind of choices that people have in other walks of life.
In the end the film can claim at least one important accomplishment. It shows that a realistic portrayal of business can be dramatic. Business does not have to be a generic prop. But it also shows that filmmakers’ anti-finance bias has real artistic costs. Filmmakers’ impoverished narrative of business can dilute the drama inherent in what so many people do with their lives.
Note: This review was written for the Atlas Society’s Business Rights Center and was first published on their website. My thanks to the Atlas Society for encouraging me to think and write about this film.
Today’s WSJ covers Hollywood’s treatment of business. And so, of course, they went to the Source (link added):
Hollywood has been famously left-leaning for decades, even as it teemed with shrewd business operators. Larry Ribstein, a professor of law at the University of Illinois who wrote a paper called “Wall Street and Vine” about the historically negative portrayal of business in film, concludes that the ongoing antipathy to corporate execs in films has nothing to do with politics. Rather, many creative types—notably screenwriters and directors—are expressing their own perennial resentment of bottom-line focused studio heads, who often seek to dilute a film’s message for mass-market appeal.
Orson Welles, director of the 1941 classic “Citizen Kane,” about a ruthless media mogul based on William Randolph Hearst, detested interference and famously refused to allow studio executives to visit the set. “He was feeling that artist resentment,” says Mr. Ribstein.
The Journal article has interesting background on the current “Margin Call,” which it describes as unusually fair to business, and suggests it’s because the director’s (J.C. Chandor) father, worked for Merrill Lynch:
A low-budget movie with a high-powered cast, its Wall Street characters are flawed, cynical—but, for once, actually human. * * *.
Mr. Chandor says he wanted to draw a more balanced portrait of the financiers who were being demonized in the media for causing the global economic collapse. The caricatures of executives being denounced by politicians at the time bore little resemblance to Mr. Chandor’s dad, he says.
I wonder how sympathetic the film comes out. I remember another director whose father worked in the securities industry — Oliver Stone. (My article about Wall Street discusses, among other things, all the father-son threads in the movie).
Here’s the setup: Finland has nuclear waste which can be dangerous to humans for 100,000 years. So they’ve decided to bury in a way that it will be safe for 100,000 years.
As the film details in thoughtful depth, this involves a couple of problems, the least of which is how to keep nuclear waste harmless for 100,000 years. The simple answer is to bury it very deep in bedrock, then seal the whole miles long and deep structure with concrete.
Where it gets complicated is: what if somebody finds the stuff. Seems unlikely, but as the film emphasizes, anything can happen in 100,000 years. How can you warn them off when you don’t know what kinds of creatures they will be in 100,000 years, much less what language they’ll speak? This is what one of the talking heads in the film calls the ultimate decision under uncertainty: what do you do when you don’t know what you don’t know?
The Finnish government decided in its infinite wisdom to solve the problem of how to guide future civilizations for 100,000 years by requiring that instructions be given now, in Finnish — a language that the vast majority of even modern humans don’t understand. I suppose the intuition is that the super-Millennium will bring us the Age of Finland.
The film’s subtext is that, if this is the best we can do, maybe we shouldn’t mess with nuclear power at all. And don’t forget the film was made and released before the earthquake. The film doesn’t tell us what we should do instead.
Here’s another take on the problem: the effects of anything we do now are unknowable over much shorter periods than 100,000 years. Trying to micromanage the future is folly.
What you need is an institution that can utilize the knowledge that is dispersed through many people over time and space. This institution is the market, which aggregates and communicates knowledge through prices. See Hayek.
Trusting markets may not be perfect. But the film’s real lesson is that this is likely to work out better than trusting the Finnish (or any other) government to come up with the ultimate solution now.
I’ll be discussing Inside Job with Steve Davidoff and Roberta Romano, at the invitation of the Yale Law & Business Society. I managed to get through the movie last night without throwing any sharp objects at the screen. I’m hoping to repeat that performance on Wednesday.
Watch this space for commentary on the film and the Yale discussion later this week.
I didn’t watch the Oscars last night, following my usual habit. But I note that “Inside Job” was supposedly the best documentary. The filmmaker, Charles Ferguson, said in accepting
“Forgive me, I must start by pointing out that three years after our horrific financial crisis caused by massive fraud, not a single financial executive has gone to jail, and that’s wrong,” Mr. Ferguson said, as the Hollywood crowd erupted in applause.
The award and the crowd’s reaction are consistent with my theory about Hollywood’s negative view of capitalists. I’ve discussed this frequently on this blog and Ideoblog, as well as in my articles Wall Street and Vine, Imagining Wall Street and, most relevantly, How Movies Caused the Financial Crisis.
For a non-Hollywood view of why at least one of the financial executives in the film is not in jail, see my post from last week.
I originally wrote about “The Social Network” before having seen it, led by a Gordon Crovitz WSJ story quoting a Larry Lessig TNR review into thinking that Zuckerberg was the villain, and concluding that this was just another movie, like so many others I’ve discussed, in which
Hollywood’s view of business is shaped by the resentment of the artists who make films of the capitalists who make money from their art. So, Zuckerberg is the capitalist who succeeded by sheer luck or theft or just crawling over the backs of the people who had the ideas.
I have now seen The Social Network and see I was wrong. Zuckerberg is not the bad guy, it’s the twins. Who could like these snooty caricatures of old Harvard privilege? We get all the commentary we need from Larry Summers, who derisively throws them out of his office when they come to complain about getting ripped off, and from Zuckerberg, who likens them to the chair designer who wants credit for the concept of the chair, and says they’re suing because for the first time things didn’t work out for them the way they were supposed to. The film backs up Zuckerberg’s assessment by adding a whole scene in which they act like spoiled brats for losing a boat race.
Zuckerberg may have in some sense stolen the twins’ idea, but the film makes clear that it’s better that he did. And this fits with my artist-centered analysis of business films: While artists need protection for their ideas, they also need these ideas to be protected from others’ less worthy proprietary claims.
To be sure, the film is complex. Zuckerberg is in some sense Sarnoff in screenwriter Aaron Sorkin’s earlier play, The Farnsworth Invention, using the law and brute force to steal Philo Farnsworth’s idea for the television. I noted in discussing the play, as in my initial post on the movie, that this was the usual film-artist-complaining-about-moneybags-ripping-off-their-ideas plot. And Sorkin evidently has a reputation about being particularly prickly and proprietary about his ideas.
Add filmmakers’ sympathy with the socially responsible businessman I discuss in my article linked above: Zuckerberg doesn’t want ads messing up the purity of his product, just as Farnsworth was portrayed in The Farnsworth Invention as wanting to preserve television for the public while Sarnoff commercializes it. Interestingly, in The Social Network, Sorkin plays an ad man whom Zuckerberg obviously disdains. (But it’s clear even in the film that Zuckerberg isn’t interested in society, but in how to build a billion-dollar business.)
But what really matters is that both Sarnoff and Zuckerberg were sympathetic characters. In the film, the twins aren’t sympathetic at all, and Zuckerberg is left as the only possible protagonist. The near-autistic Zuckerberg character does come across as an unlikely hero in a Hollywood movie. But then there’s a precedent for this sort of movie hero.
This may not be what Sorkin intended. He’s obviously more interested in getting a good story with snappy dialog. The film concocts a fake story about Zuckerberg inventing Facebook to get a girl, or get in a club. It ends with his continued fruitless pursuit of the girl, refreshing his screen to see if she’s noticed. The lawyer at the mediation gives what’s supposed to be the final pronouncement on his character — that he’s not actually an asshole. (Who cares? And why should we care what a lawyer thinks?) The film doesn’t seem to get that he could really have been pursuing the obvious goal of creating a successful business. Worst of all, the film has the usual movie take on heartless capitalists, including the way they helped ripped off Zuckerberg’s original business partner.
And I wish, as in my Farnsworth post, that the real story about business had come out. How critical it was to get funding, the key role of angel and venture capital, and even the boring role in the Facebook story of LLCs. Also, the roadblocks that the law throws up, including the twins’ continuing opportunistic litigation and Facebook’s having to find ways around regulatory costs of going public.
But you can’t really expect that in a film, which needs to tell a story the audience likes and make some money. The heartening thing about the film is that the real story of the importance of creativity to business and the social wealth business creates does come through. The film, including its title, is basically about the product Zuckerberg created, and its success. It also turns out to be about entrepreneurs as rebels fighting the established order. Just as wealth and privilege couldn’t protect the twins, so established firms aren’t safe from a scruffy and socially awkward Jewish kid in a sweatshirt. As long as this idea holds sway in our society we can’t be in such bad shape despite the best efforts of politicians and filmmakers.
I’d like to think that it was this story about the romance of the entrepreneur that made the movie so popular and that maybe Hollywood will get the hint.
Here are the best films I saw in 2010, in reverse chronological order:
Hearts of Darkness, The Chaser, Fear and Loathing in Las Vegas, Mother, The Life and Death of Colonel Blimp, The White Ribbon, The Lives of Others, Sin Nombre, Suicide Kings, A Prophet, The Damned United, Barfly, The Wrestler, In the Loop, Revanche, A Serious Man, Felon, Appaloosa.
Also: Mad Men, Boardwalk Empire.
Things to be grateful for, movie division: Joel and Ethan Coen, Terry Gilliam, Mickey Rourke, South Korea, The Archers, Christopher Walken, Michael Sheen, Deborah Kerr, Netflix (and maybe to come, Redbox).
A few movies I saw that didn’t make this list: Toy Story 3, The Blind Side, Crazy Heart, Inglourious Basterds, Up in the Air, The Hurt Locker, Public Enemies, District 9.
See you next year, with some comments on the AALS.