Privatizing Success, Socializing Failure: FAIL

I decided to turn the “Twitter quote of the day” series into real posts, rather than simple “retweets.” There is so much great stuff on twitter, but some links stand out. Someone posts a short bit from something they’ve read or thought. I retweet a lot to share the best of what I find, and pass on stuff not just on twitter but also through my network of email correspondents and other sources. Sometimes there are great finds that don’t lend themselves well to 140 characters. So with today’s piece.

@monstro: “privatize success (by chalking it up to individuals) & socialize failure (by blaming it on large systemic problems).”

This quote is from a great critique of the economic discussion at Davos by Daniel Gross on Slate.

More from the same piece:

For centuries, historians have debated whether history is propelled by Great Men (and Women), human forces of nature who bend events and systems to their will, or by vast impersonal forces (communism, capitalism, globalization) that render even the most powerful of us a mere reed basket floating in a massive river. There’s no session on the subject at the World Economic Forum in Davos. But at least with regard to finance and business, the consensus seems to be clear: Success is the work of Great Men and Great Women, while failure can be pinned on the system….

At a CNBC event yesterday, groups of 10 to 12 people sat at tables and mooted three questions: Which policy assumption failed? Which regulatory failure proved to be the largest systemic shock? And which market failure proved most damaging? The answers were obvious: poor regulation of the shadow banking system, mispricing of risk, the failure of models. But there was very little talk about the people who helped design and justify the systems, the mispricing, and the models. At one point, someone in the crowd stood up and said: “It’s intriguing nobody is to blame. In other industries, there are consequences if you make toxic products that hurt people. Policy makers need to make it clear that there are serious consequences for that type of behavior.” Big applause! And yet aside from the odd mention of Alan Greenspan and an oblique reference to Robert Rubin, the former treasury secretary who became a senior executive at Citigroup, there was little talk of individual players who had responsibility.

Alas, how true. While we don’t need a witch hunt, Daniel Gross has put his finger on something important.

  • Did we finally pin the Great Depression on anyone? Hoover? We have villains for sure, but when the economic system in a democracy fails it is the people who suffer and it is also the people who bear responsibility to reform the market system so that it is less likely to fail in the same way again, and to ensure the economic failures can be managed by the people involved. (People shouldn’t go hungry and homeless.)

    A few years back Time magazine named the Person of the Year “YOU” — we ALL bear responsibility for how the economy works or fails to work.


  • I think part of what’s going on is that we see very few systems that are actually geared to promoting success.

    Instead, successful actors largely tend to game the system to prevent competition, and subsequent successful actors have to route around the gamed system in some way in order to succeed. This of course perpetuates the cultural myth that you’re talking about here.

  • Daniel,

    I agree that there is collective responsibility. But at the same time, there are individual decisions that matter.

    This is particularly relevant given some of the crazy stuff we’re hearing about the tin ear at some of the companies receiving bailout money.

    Many of the people who got us here are still in place.

  • “Success has many fathers, but failure is an orphan.” – unknown

    People tend to remember success while forgetting failure and to attribute success to their own actions, even though, as Taleb has suggested, most “success” is just random. Thus it is pretty easy to see why failures are pinned to some “outside event” that is independent of the observer. This distancing of failure tends to change the language from “I made a mistake” to “mistakes were made”, as if the mistakes were some external factor.

    Daniel Howard – we don’t all bear responsibility for the economy. People who are in the best position to push it in the directions they like and gain most from this bear much more responsibility than the general population.

    At the extreme, it is pretty clear that some people were basically looting the economy and their companies, especially in the financial sector.

  • Last week’s Economist had a great special feature on the finance system and the failures, a must-read.

    That newspaper described how the seeds for this crisis were in a way sewn in the Asian currency and economic crisis in the late 90’s. The idea was that as those countries recovered, they resolved to hold more dollars, leading the US to have a credit boom, and all the mess that unravelled.

    Financial crises will be a continuing feature of our global economy. Indeed, I agree 100%, consequences for failure for the ‘great minds’ and the players in the financial sector need to be more pronounced. Today, they are not, as the bonus fiasco on Wall Street makes abundantly clear.

    If we learn one thing in this crisis, it is that we must do a better job coordinating at a global level the financial system. In addition, it is imperative that long-term comp models change in the financial system.

  • This is great food for thought, but I think this topic, as is apparent, quickly degenerates into a “us” vs “them” debate, which is largely pointless. How come the victims are always “us” regular folk, and the perpetrators are always “them” people in power who somehow fell down from the skies and have nothing to do with “us”?

    You know why success is often attributed to individuals and failures to systems? because most people who successd at something do so by going against the grain, by not listening to common wisdom and mass opinion. Most failures of large scale are impossible without mass support.

    Lets take some examples. In the technology business, I guess most would consider Microsoft, Apple, and Linux to be success stories. Is there any doubt that they can be attributed to individuals going against popular wisdom? Hell, Apple stock plumetted when Steve Jobs didn’t show up at an expo and there was talk of succession.

    It is also true however, that mass movements cannot succeed with out grass roots support. Linux coudn’t have succeeded without mass support, and as mass support grows it arguably becomes more successful. But if “us” common folk are to take the pat on the back for successes, we also need to accept our failures. Hitler didnt run a evil militaristic regime single handedly with an all powerful super computer to do his dirty work. He did so with a lot of “us” supporting him, no matter how unpopular that thought might be now. There were obviously more of “us” willing to support and ignore than oppose, and the rest is history.

    Everyone was very brave and vociferous about how bad George W. Bush was as soon as his last day in office neared. It was suddenly ok for “us” to shout from the rooftops as to what a big mistake the attack on Iraq was. Strange, I remember a lot of “us” voting the man back for a second term. How come that failure is suddenly only the responsibility of an individual?

    A year ago the economy was booming. Irrelevant, unessential jobs were being handed out like sample cheese at a super market, and people were buying million dollar hoses in Dubai (where I live), as they were in the rest of the world, with a 10% down payment on a measley $30,000 per year salary. How many of “us” in our right minds really thought this was logical? Most of us partook in the gluttony anyway. I didn’t see any individuals being given credit for that golden age of economics. No, all that greatness was because of all of “us”, the people, the masses. And now that things have crashed because of our misadventures into unrealistic consumerism, we need to be looking for individual scapegoats?

    Needless to say I think this is the highest quality horse manure on the market. All of “us” are willing to include ourselves in the successes when we contributed nothing to them but just went along because we didn’t know any better. When the same blind, and frankly stupid, cattle behaviour results in failure it’s suddenly all “their” fault.

    The fact remains that most successes of this world are the result of individual brilliance, even if it is individuals that create a system for the masses to act in. Successes are possible without the thumbs up from the masses. In practical experience though, almost no failures can work without mass support. We might like to fall back on our mental archetypes and think there is an evil mastermind or a mad scientist hidden in every dark alley waiting to flick a switch or pull a plug and bring destruction on the world. But that is a dramatic conceit in fiction and “history” that we have come to take too seriously.

    If you’re looking for villains. Look around you. “We” are everywhere.


  • “You know why success is often attributed to individuals and failures to systems? because most people who successd at something do so by going against the grain, by not listening to common wisdom and mass opinion.”

    …and are lucky. Going against the grain isn’t enough. You also have to have made the right decisions at the right time, and almost as importantly, not be beaten to the punch by someone else.

    For example, Microsoft succeeded due to very hard work, keen insight, and some really major bits of luck. Had those breaks gone another way, some other company would have arisen the way Microsoft did and made someone not named Bill Gates very rich. Ditto for Apple and Steve Jobs.

    This takes nothing away from the hard work and brilliance of those men and their companies, by the way. I am not saying that anyone can become a huge success through luck alone. It’s still a critical component.

    Anyway, my original point was going to be that the whole “success is individual, failure is systemic” is as ludicrous and damaging as the reverse proposition, and I wish everyone would get over it, already.

  • Vahe Katros

    The blame game according to Robert Samuelson, in his book, “The Great Inflation” goes back to the the policies and outcomes of the massive up and down inflation cycle between 78-82. The changes that occurred including currency globalization, export deficits, and financial innovations to deal with the crushing impact on banks of double digit inflation. Between 1960-78 inflation went from 1% to 14%. For those of you who may have missed those years due to youth and it’s corresponding distractions, check it out. The connections are massive.

  • Anonymous

    If upon entering a train station, you find out that although most tickets go for $8 to $15 dollars, there is a $1 dollar ticket that goes straight to your destination. You take it. It doesn’t matter how logical it is or isn’t. It doesn’t make you selfish. You trust the logistics of the train station itself to take your money and get you where you need to go. So it goes with people navigating the course of their lives when they buy a mortgage. They trust the system. Maybe naively, maybe unwisely, but don’t blame the customer.
    The policy makers who made the most egregious and selfish decisions in this process are counting on us sheep saying there is no one to blame. And according to this comment board, we are saying it.

  • Agile Cyborg

    I understand the perfunctory qualification of avoiding the witch-hunt effect but I am clueless as to how one goes about ‘hunting’ down blackguard Wallstreeters without the serious steppage (faux word- so sue me) on of polished shoes.

    Frankly, I am not so sure these guys AREN’T a bunch of witches that could stand some crucifying.

    These emotionless manipulators prance about in their gilded castles totally cloistered from the hammering reach of the reforming processes of humility and shit-ownership.

    Meanwhile they’ve become experts at retraining the scrutiny of the scoundrel-hunters onto meaningless tripe which NEVER results in quantifiable change to a system that could, perhaps, be far less greedy and broken and, therefore, far more fruitful and responsible.

    The utter contempt of people who stand to make ignoble fortunes on the backs of a malleable, simple society is an ancient plague.

    I support a witch-hunt in 2009. We now possess the common sense and intelligence to avoid destroying the innocent.

  • Monty Zukowski

    Dean Baker of has a blog specifically about misrepresentation of basic economic theory in the press. One of his biggest complaints is that economists and journalists are not held accountable for failures. Indeed, the group mentality of “who could have known?” makes it safe and lucrative to go along with others’ views even if they don’t make sense according to basic economic theory.

    Dean Baker’s blog is at

  • More on this much-adapted idea from Quoteland:

    “Victory has a hundred fathers and defeat is an orphan (La victoria trova cento padri, a nessuno vuole riconoscere l’insuccesso) (1942)~popularized by JFK but originated with Italian diplomat and son-in-law of Mussolini, Count Galeazzo Ciano (1903-1944), The Ciano Diaries, 1939-1943, Vol. 2.”

    “Tacitus, «Agricola», 27:
    It is the singularly unfair peculiarity of war that THE CREDIT OF SUCCESS IS CLAIMED BY ALL, WHILE A DISASTER IS ATTRIBUTED TO ONE ALONE.”

  • @Eric Meyer
    I agree with you to a degree. Luck is an important aspect of individual achievement, but the shortcoming of language is that ‘luck’ is not a very well defined term. Successful people are certainly lucky, but I just don’t believe in the ‘luck’ as completely random providence theory. Do you not find that some people just seem to have more lucky breaks while others always miss them? Just being able to spot, recognise and utilize opportunity is a skill and a talent that could very well be the major component of what we like to call ‘luck’. Is there a lot of random chance in our lives? Of course there is, I don’t see why we should expect our existence to be any more specific and absolute than that of all the other sub-atomic and galactic scale things floating through the universe.

    On your main point I agree completely, assigning the responsibility of succes and failure exclusively to either individuals or systems is juvenile. It is time and thought better spent coming up with real solutions.

    I’m sorry, this whole “don’t blame the customer”/”the customer is always right” malarky is the reason for too many of the problems of modern urban life, and I’m not just talking about the economic crisis. If a premise such as this isn’t producing good results you don’t try to blame some one for it, you change the premise. That would be logical.

    While I see your point about the one dollar train ticket, comparing the decision to buy that one dollar train ticket to the lifetime commitment of a mortgage or the dangerous choice of taking on more bad debt with your third or fourth credit card, is trivialising the entire concept of individual responsibility.

    Let’s not forget that you and me are individuals too. Are individuals in power responsible for their choices and decisions about the larger system? Yes, but only as much as we individuals are responsible for the choices and decisions we make about our own little system. If the individual customer is supposed to be exempt from the consequences of being naive and unwise, why not the individual in power?

    The issue is not one of blame but one of uniformity. If we purport to want an egalitarian world, we can’t selectively grab our equality only when it comes to rights but not when it comes to responsibility. The worst part is that unless we come to this realisation any “correction” of the current economic crisis is just going to be some flimsy top-down band-aid, so that we can all go back to behaving irresponsibly in peace. How long does anyone expect that to last?


  • At least in the U.S. what we dealt with that allowed consumer to make so many poor decisions was deregulation. Industries which, historically, couldn’t lend to risky customers was now compelled to do so en masse. That deregulation is clearly linked to a small group of individuals who were smart enough to understand their decisions.

    What about people who lost their 401(k)s and mutual funds to this disaster? They put their faith directly in the hands of individuals whose specific job it was to protect them from poor decision-making. What about those investment firms? If they chose to ignore companies making bad investments they would have been labelled as not maximizing their clients money.

    People make decisions at the top; the system calculates an outcome over time. Within that calculation are internal pressures shifting the outcome. Sounds like programming a system to me, and when you have bad programmers, you fire them. Anyone reading this have experience firing a whole engineering department? You should probably run for Congress.

  • Robert Young

    Once again: in 1971 I wrote my senior thesis on the effect of “post industrial” monetized economy, with Uruguay’s then recent experience in doing so and the results. Said results were not pretty. IOW, this was predictable, and was predicted by some. Those more famous than I: Krugman, Reich, Stiglitz.

    If one follows the economic’s press, Krugman most recently and loudest, those economists not being paid by the financial services industry have been pointing out since early in Bush-II’s reign that the bottom had to fall out.

    The reason is quite simple: median income has fallen over that period of time. Yet consumption, as always pointed to by those on the right, continued to grow. Ergo, all must be well. But, of course, it wasn’t and isn’t. What those with brains figured out was simple enough: folks were burning the un-earned rise in equity in housing on consumption. Now that those funds are no longer available, and they find themselves with negative equity (compounding the problem), folks stop consuming.

    The assertion that folks are choosing to save is bogus. They’re not saving; they simply have no funds to spend.

    This all relates to the Subject thus: it is the capitalist’s game to privatize profit and socialize cost. They’ve been doing it since the founding of the Republic. Railroads? Paid for by the public purse. The Internet? Paid for by the public purse.

  • Consumer


    Lets just remember that all of those folks, charities, etc… that put their trust in Bernie Madoff, are all guilty for his failure too.

  • “Corporation, n. An ingenious device for obtaining individual profit without individual responsibility.”
    – Ambrose Bierce

    “A corporation is a legal entity separate from the persons that form it.”
    – wikipedia

    I think the above definitions highlight an important and erroneous assumption and misunderstanding we all carry – that corporations are separate from individuals. I agree with Samir that we can’t think to simply blame EITHER individuals OR the (corporate) system – “We are the system.”

    But maybe we tend to blame corporations, and the individuals who control them, because we use them to grant individuals precisely that peculiar right that they otherwise don’t enjoy – i.e., limited responsibility/liability/blame. Basically, we tell individuals in a corporation we won’t hold them personally responsible for any damages – legal, financial, moral, etc. – done by the corporation. How is that just? I think our reaction to blame them probably stems from this underlying intrinsic injustice – blamelessness – at the root of our corporate system.

    Still, we are that system. We establish limited liability corporations because *we* want to collectively (corporeally) undertake risky profitable endeavors without having to take responsibility for their failures. *We* want to just partially invest into them so *we* delegate *our* responsibility for the decisions and judgements of the corporation to leading individuals in the corporation itself. Additionally, *we* also use debt – credit cards, mortgages, etc. – to buy things we can’t really afford.

    On the latter point, when we incur debt on ourselves – individually or collectively – we are indulging in the present at the cost of the future. A huge problem, IMO, is that we’ve made a habit of this in all areas of our society – individually, commercially, legally, gubernatorially. This is 100% antithetical one of Tim’s principles of working on something that matters – to take the long view – and he pointed it out already.

    I guess what I’m trying to do is to show that BOTH the success AND the failure of our most recent economic escapades are BOTH private AND social:

    Some of us privately succeeded in getting mortgages for which we should not have qualified, while some of the rest of us privately succeeded in profiting from selling those mortgages. Some of us privately succeeded at buying things which we could not afford on credit cards, while some others of us privately succeeded at profiting from selling that credit. We socially lived beyond our means, and we socially developed artificial economic “growth” based on debt.

    Then the looming, inevitable future came – some of us privately failed to make the payments, which meant some of us privately failed to keep our artificial sales figures. We socially failed to manage all those risky artificial sales, which meant we socially failed to maintain our collective finances.

    Now we’re BOTH socially AND privately failing to see that we all got ourselves into this mess – BOTH privately AND socially – by sacrificing BOTH our private AND our social prosperity of the future for the largesse of today.

    Ignoring the failure won’t help. Blaming the failure on only one aspect won’t help. Only holistically changing BOTH our private AND our social actions will help. So let’s live within our means and work on stuff that matters. Be part of BOTH the private AND the social solution.