Capitalism's Fundamental Flaw
But there is another less obvious bug in capitalism that I don’t believe regulation can quite handle. It is the fundamental flaw that our celebrated system rewards speculators much more than creators. A relatively junior hedge-fund manager or a bond trader on Wall Street makes a great deal more money in his career than Charles Kao, who invented the basic physics making optical communication a reality. Dr. Kao, now 73, won the Nobel Prize this year, but his net worth would not compare favorably with that of George Soros.
Yet, who added the real value? Soros or Kao?
In 2009, 30 million people sit unemployed in America. Yet, the speculators have managed to lift the stock market up, and the media pretends that we’re having a recovery.
We’re not having any recovery. We need the innovators, the entrepreneurs, the creators, the scientists, the technologists—those who build value, those who create jobs—to lead us out of this nightmare. Not a bunch of speculators who make money regardless of whether value gets created or destroyed. In fact, many of them are incentivized to destroy value by spreading fake rumors about companies and stocks, and they do so often. Some get caught, most don’t.
And our talented youth gets seduced by this profession of speculation known for its easy and abundantly flowing financial rewards, avoiding those that require much greater intellectual capacity. Most importantly, very early in their lives, our talented youth come to realize that fields that may earn them a Nobel Prize—cancer research or multi-core computing—may not make them rich. But moving money from here to there will.
And thus, we lose Berkeley Ph.Ds in nuclear physics to hedge funds and MIT computer scientists capable of delivering computing to 6 billion people to derivative manipulation on Wall Street.
And I find it darkly ironic how many Ayn Rand fans praise the speculators these days…
