By Chet Yarbrough
Written by: Sheelah Kolhatkar
Narrated by: Kaleo Griffith
In “Black Edge” Sheelah Kolhatkar masterfully recounts the dark side of capitalism. The American stock market is a tremendous source of energy (private money) for entrepreneurial capitalism. At the same time, a poorly regulated stock market pollutes the capitalist ideal.
Capitalism is an economic and political system for trade and industry that allows individuals rather than a collective determine one’s future. The capitalist ideal’s upside is that people have more freedom. The downside is unrestricted human nature becomes brutish and unfair. Some form of governance is needed to provide rule-of-law. Without rule-of-law, society devolves into an anarchy of individual interests. There is no “invisible hand” that guides an economy to equal opportunity; i.e. there is only human nature and its penchant for good and evil.
Kolhatkar explains the meaning of black edge information. She shows how the American stock market becomes a breeding ground for greed. In the stock market, black edge information is personal notice to private investors of events that affect stock prices. The information is proprietary and unknown to the public. The private investor chooses to buy or sell stock before the public knows of an event that will affect stock prices. Steven A. Cohen develops an organization, SAC Capital, that revolves around gathering proprietary information before it is known by the public. Cohen becomes one of the richest men in the world by using that information.
In one sense, this seems a “no harm, no foul” entrepreneurial benefit in capitalist society. Cohen pays big money for traders that can provide him inside information. People are employed and well compensated for their effort.
However, Kolhatkar infers there is harm, and it is foul. It breeds an organizational philosophy of abuse. Cohen creates a “dog eat dog” organization that hires and fires people based on revenue made or lost on investment. Individual traders are compelled to violate the law by soliciting black edge information that is not available to the public. The only criteria for success is money; not family, not friendship, and not society.
One may argue, so what? Cohen becomes a rich man and is known as a benefactor to charities based on his accumulated wealth. Some of the traders that worked for Cohen became multimillionaires. Similar arguments can be made for the Koch brothers. Where is the harm? Where is the foul?
The harm is somewhat inchoate but care for others is missing in Kolhatkar’s story. Lives were ruined by Cohen; i.e. some of his closest associates are abandoned, traders operating as information gophers break the law, and Cohen’s personal life falls apart. He is divorced by his first wife. Cohen focuses on making money because it offers power and prestige. The gap between rich and poor widens because of Cohen’s philosophy of life. In the end, Cohen is found not guilty of insider trading but he leaves a trail of human destruction.
The story of Steven Cohen is the story of a Trump presidency in the United States. America loses its way when capitalism is only seen through the prism of wealth. The “Get out of my way” philosophy of Cohen and Trump are cut from the same cloth. The difference is–one is more financially successful than the other.
Capitalism is not the problem in America. It is the failure of the S.E.C., the FBI, Presidents, and congressional legislators to do their job. The purpose of the American government is to protect the public through rule-of-law. Every day, we see a President denying immigrants the chance of becoming a part of an American Dream that made and makes America great. We see an Education Secretary intent on dismantling our public education system. We see a congressional and departmental effort to dismantle health care and welfare. We see Americans being discriminated against because of their sex, race, and religion.
Human nature is not self-regulating. Unregulated human nature is brutish. The checks and balances of the American government are founded on that truth. When the American government fails to exercise its mandate for the health, education, and welfare of the nation, it diminishes capitalism. It diminishes a way of life cherished by most Americans. People like Steven Cohen and Donald Trump are guilty of being human and un-ruled.