Tom Perkins Shows We Need to Stop Listening to Rich People

Commentary about business and finance.
Jan. 28 2014 8:45 AM

Stop Listening to Rich People

Just because you’re a successful businessman doesn’t mean your policy ideas make any sense.

Tom Perkins
Let Tom Perkins be a lesson to us all.

Photo by Steve Jennings/Getty Images for TechCrunch

“Kristallnacht was unthinkable in 1930,” observed a remarkable Jan. 24 letter to the editor published in the Wall Street Journal; “is its descendent ‘progressive’ radicalism unthinkable now?” The sensible answer, of course, is yes. It is totally unthinkable. And yet the letter writer, Tom Perkins of the important venture capital firm Kleiner Perkins Caufield & Byers, thinks we should take the possibility very seriously. He wrote to draw attention to “parallels of fascist Nazi Germany to its war on its ‘one percent,’ namely its Jews, to the progressive war on the American one percent, namely the ‘rich.’ ”

The sheer level of derangement on display here is remarkable, and has prompted a fair amount of armchair psychoanalysis of the American super-elite’s odd loathing of the moderate technocratic liberalism of the Barack Obama years. A Monday non-apology in which Perkins regretted the Holocaust analogy but nonetheless insisted that "any time the majority starts to demonize a minority, no matter what it is, it’s wrong and dangerous" hardly makes things better.

But the larger issue here is simply that the letter is extraordinarily stupid. Its author, successful as he was in business, was still perfectly capable of writing an extremely stupid letter to the editor. The political and historical analysis contained in the letter is stupid. But beyond that, the idea of publishing it was stupid. Anyone with the slightest sense of public opinion would recognize that the analogy is offensive and counterproductive. There is simply no viewpoint on economics or American politics from which writing this letter was anything other than stupid. And yet Tom Perkins, a very successful businessman and co-founder of one of the most important VC firms in the world, went and wrote it anyway.

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Concurrently with the publication of the Perkins letter, a fair swathe of the world’s elite was gathered in Davos, Switzerland, for a conference based on the presumption that a Tom Perkins would never write a stupid letter. The presumption of the annual World Economic Forum meeting is that leading policymakers and scholars ought to mingle with very, very, very rich businessmen (and, yes, it’s overwhelmingly men) to talk about the leading issues of the day. The idea, in other words, is that CEOs and major investors have unique and important insights on pressing public policy issues. After all, they’re so rich! How could they not be smart?

Well, ask Tom Perkins. Or ask Michael Jordan how he could be so good at playing basketball and yet so bad at owning and managing the Charlotte Bobcats.

Outside the business world, we tend to take it for granted that just because you’re good at one thing doesn’t automatically make you a mastermind at other things. Nobody expects Taylor Swift to make important contributions to a panel on sustainable growth in Africa or rethinking global food security. But the Davos panels on such topics always include a rich executive from the business world. Because who better to solve the world’s problems than the people who benefit from the status quo?

Of course, if there were just one somewhat obnoxious conference like Davos, it wouldn’t be a big deal. But the Davos mentality—the assumption that managing a for-profit enterprise gives you special insight into social ills—is all around us, from the Aspen Ideas Festival on down. It has also infested more formalized policymaking settings. Rich businesspeople wield disproportionate interest in the political system simply through their ability to make campaign contributions and hire lobbyists. But over and beyond that, they are regularly invited to enter policymaking circles.

In the early months of his administration, President Obama held a summit with bank CEOs to discuss the state of the financial system. He did a big roundtable with tech CEOs in December. Back in 2011, he made a big deal out of creating a council on jobs and competitiveness headed by General Electric CEO Jeffrey Immelt and largely composed of other business titans. And yet a staple of Republican criticism of Obama during his first term was that he didn’t do enough of this kind of thing and his administration lacked firsthand business experience. Finance whiz kid Mitt Romney was supposed to turn things around with his business savvy.

But the notion of a link between economic management and firm management is bizarre. Probably the biggest “job creator” of my lifetime has been former Federal Reserve Chairman Alan Greenspan. In the mid-1990s the unemployment rate got down to around what most economists thought was the lowest level compatible with stable inflation. Greenspan made a gut call that the consensus was wrong, kept interest rates low, and employment boomed for the next several years. In the coming year, we desperately need Janet Yellen to do something similar: to ignore falling unemployment and keep monetary stimulus going until inflation actually becomes a problem. Yet it’s just obvious that the kind of judgment and analytic skill necessary to make these calls has nothing to do with the kind of judgment necessary to run a multibrand conglomerate, a nationwide retail chain, an innovative consumer electronics company, or any other kind of business.

It’s not impossible to be multitalented. Bill Gates was a great innovator and businessman and also has pretty smart ideas about global public health. But the fact of the matter is that he’s an important figure in global public health because he’s both extremely rich and extremely generous, not because he’s the No. 1 most insightful thinker on the subject. To say that some billionaires are insightful on subjects outside their core area of expertise is just to say that billionaires are people too—and for every Gates, you have a dozen business leaders who can’t tell the difference between policy insight and knee-jerk prejudice. They’re up there on the panels, in the meetings with policymakers, spouting off on CNBC, being quoted in newspapers, and writing the occasional op-ed. All because of the unwarranted presumption that being rich and successful makes you insightful.

Every once in a while a Perkins comes along and says something so egregiously dumb as to be mocked by everyone. But it’s not the egregious idiots who do the damage; it’s the excessive deference paid to the unremarkable mediocrities. But the next time the elite get together to discuss the affairs of state, keep Tom Perkins and his ridiculous analogy in mind.

Matthew Yglesias is the executive editor of Vox and author of The Rent Is Too Damn High.