William D. Cohan is a columnist for Bloomberg View and Vanity Fair and author of the new book, “The Price of Silence: The Duke Lacrosse Scandal, the Power of the Elite, and the Corruption of Our Great Universities.” He previously authored, “The Last Tycoons: The Secret History of Lazard Frères & Co.” and “House of Cards: A Tale of Hubris and Wretched Excess on Wall Street.”
Cohan characterizes the state of the American university system and talks about the elitist bad-boy attitude that plagues many campuses across the nation. So many people who fit the stereotype he describes end up on Wall Street.
(2:05) Reminder: Little Rock property tour coming up
(6:04) YouTube video on landlord-tenant laws in Arkansas
(15:53) Introducing William D. Cohan
(16:17) The connection between the Duke lacrosse scandal and Wall Street
(18:02) Similarities between the American university system and corporate financial institutions
(21:19) Discussion of college tuition prices
(23:29) The elitist bad boy attitude that plagues university campuses
(26:15) William D. Cohan’s books about Wall Street
(28:34) The 24/7 availability of modern media
(29:45) Closing comments
William D. Cohan is the New York Times bestselling author of three non-fiction narratives about Wall Street: Money and Power: How Goldman Sachs Came to Rule the World; House of Cards: A Tale of Hubris and Wretched Excess on Wall Street; and The Last Tycoons: The Secret History of Lazard Freres & Co., which won the 2007 FT/Goldman Sachs Business Book of the Year Award. He is a contributing editor at Vanity Fair and writes a weekly column for Bloomberg View.
Mr. Cohan also writes for the Financial Times, Bloomberg Business Week, The Atlantic, Art News, the Irish Times, the Washington Post and the New York Times Magazine. He appears regularly on MSNBC, Bloomberg TV, CNN, Current TV, and the BBC. He has also been a guest on the Charlie Rose Show and the News Hour.
Over the course of 17 years Mr. Cohan was a senior Wall Street Mergers & Acquisitions investment banker at Lazard Freres & Co., Merrill Lynch and JPMorgan Chase. He is a graduate of Duke University, Columbia University School of Journalism, and the Columbia Graduate School of Business.
ANNOUNCER: Welcome to Creating Wealth with Jason Hartman! During this program Jason is going to tell you some really exciting things that you probably haven’t thought of before, and a new slant on investing: fresh new approaches to America’s best investment that will enable you to create more wealth and happiness than you ever thought possible. Jason is a genuine, self-made multi-millionaire who not only talks the talk, but walks the walk. He’s been a successful investor for 20 years and currently owns properties in 11 states and 17 cities. This program will help you follow in Jason’s footsteps on the road to financial freedom. You really can do it! And now, here’s your host, Jason Hartman, with the complete solution for real estate investors.
JASON HARTMAN: Welcome to the Creating Wealth Show. This is your host, Jason Hartman, this is episode #394, thank you so much for joining me today. Really always appreciate having you listen to the show. And a lot of you are listening lately. As you know, we’ve got listeners in 164 countries, which is awesome, and I notice there’s been a lot more downloads lately of the show, so we appreciate your support, and we appreciate you staying tuned to the show, and recommending it to your friends. And your enemies. Even they need it. Today we’re gonna talk with William D. Cohan on The Price of Silence & The Last Tycoons. I think this’ll be a pretty interesting interview for you. And the next episode, #395, we’re gonna talk all about some great real estate investing techniques. Really specific—as you’ve noticed, of course, from listening to maybe the last few shows, or the last 393 shows—as you’ve noticed, sometimes we talk about some more esoteric economic concepts, and things like that, and sometimes we talk about really specific tactical things. And also strategic things. On how you can be a better investor, and specific techniques you can use in your investing career. We like to keep a balance, and so both of those things. And we will continue to do so as we’ve got more and more great stuff coming up for you.
Reminder: Little Rock property tour coming up
So we’ll get to our guest in a minute, but I just want to mention, be sure to go to www.jasonhartman.com and register for our Little Rock property tour; it’s coming up quick. We’re less than two months away from that. And do you know that Kiplinger Magazine rated Little Rock as the #1 place to live in the United States? I know! That would probably surprise a lot of people. It’s sort of an under the radar city. You don’t hear much about it. And many times, these are the best markets in which to invest. Because the institutional investors aren’t running wild in there; they haven’t run the prices through the roof. A lot of good benefits for stability in these markets. Kiplinger, #1 place to live in the United States. The 4th strongest economy in the US. One of the 10 strongest markets in the US, according to Forbes Magazine. The 2nd cleanest city in the US. I wonder what #1 is. I’m almost thinking that could be Irvine, where I used to live. It’s funny, because Irvine frequently wins all the awards for like the safest city. You know, the FBI does these ratings on the safest cities to live in America, based on different sizes and so forth, and I always like to joke and say, yes, Irvine is the safest city. So you’ll never die there. The only problem is, it’s so boring that you may never actually live in the first place. I can make fun of it because I lived there for many years. Also, Little Rock, low taxes, and low unemployment.
Before we get to our guest, I want to play the audio from a video I recently found on YouTube. And this is kind of controversial, okay? So I’ve kind of hesitated on whether or not I should play this video. Because, frankly, I couldn’t believe it myself, when I first saw this video. And the soundtrack will do justice to it for you. It’s on YouTube. You can find this, and we’ll get it posted on our YouTube channel as well, at Jason Hartman Media YouTube channel. So we’ll have it posted there as well, so you can see it. It’s pretty shocking. And why it’s pretty shocking, is because it shows how massively landlord friendly Arkansas is, in terms of a state, to be a landlord. Whereas New York and California, they would be the complete opposite. Chicago would be the opposite. At least in the city of Chicago. Some of the outlying suburbs aren’t that bad, in terms of landlord friendliness. I think Arkansas—I can’t believe it—I might actually say it’s gone a little bit too far. This is a rather amazing soundtrack you’re about to hear here.
That reminds me, too, of the quote for the day. Here’s a great quote for the day, as you’re thinking of this. Because even though the law is so massively in your favor as an investor in this market, it doesn’t mean you have to actually use every aspect of the law to be in your favor. But we do like landlord friendly markets. We like markets where we know the governmental, and the legal climate, is going to be friendly to our cause. If we have a deadbeat tenant, of course as a landlord, we want to be able to get them out of their quickly and re-rent the property to a tenant who is going to fulfill their contractual obligations. That’s just fair. That’s how civilized society works. People have got to live up to their contracts, or we have anarchy. There’s two sides of the spectrum. Now here, the pendulum swings massively in favor of the landlord. So here’s the quote for the day. It made me think of it when I was watching this video that you’re about to hear.
A gentleman is someone who has the advantage, but doesn’t take it. A gentleman is someone who has the advantage, but doesn’t take it. And that’s the whole concept of graciousness, right? And being gracious, and being a good, ethical person, regardless of what the law may allow you to do. So at least you know, going in, when you are a prudent investor, in a place like Little Rock, Arkansas, you’ve got the advantage going in, and you’ve got the law on your side. So, you’re a lot less likely to suffer from the ills of having a difficult tenant experience. So let’s listen to this video and I’ll come back on and talk to you some more about it.
YouTube video on landlord-tenant laws in Arkansas
FEMALE VOICE (KIM BARNES): The police came to our house on Tuesday. I never received an eviction notice. We came in, and I explained the situation; they offered him 90 days in jail, because of failure to vacate. It’s unconstitutional.
ANNOUNCER: It’s a hard life for renters in Arkansas. It’s the only state in America with no implied warrant of habitability. Or in other words, landlords are not required to make repairs or maintain their properties. Perhaps more radical, it’s the only state where you can be prosecuted, fined, and jailed, for not paying rent on time. Every year, more than 2000 people are charged under Arkansas’ failure to vacate law. Justin Duke is a legal aid attorney. He specializes in representing tenants in failure to vacate cases.
JUSTIN DUKE: Failure to vacate was passed at the beginning of the last century at the request of landlords as an easy, cheap method to dispossess tenants of their property, with really minimal effort on the landlord’s part, because the state has taken over that role for them.
ANNOUNCER: If a tenant is even a day late on rent, the landlord can begin the eviction process. Tenants are given only 10 days to vacate the property. A conviction can carry a fine up to $100 for each day the tenant remains in the property, and up to 90 days in jail.
JUSTIN DUKE: It’s just black and white. Is your rent due? Yes or no. Did you pay the rent? If the answer is no, and you haven’t gotten out in 10 days, then you can be convicted under the statute of a crime.
ANNOUNCER: This makes things difficult for a third of Arkansas’ residents who are renters, and have legitimate concerns about the properties they’re occupying. Tenants are required to pay rent even if their landlords aren’t maintaining their properties. Arkansas is the second poorest state in America, and 18% of the population that live below the poverty line are now being swept up into the criminal justice system. Kim Barnes was evicted for being late on rent.
KIM BARNES: They actually fingerprinted me, and took a mug shot, like I was a criminal. I said, all of this just because of failure to vacate?
ANNOUNCER: Barnes claims she had paid the rent on time, but the landlord refused to take her payment.
KIM BARNES: With me in my situation, I’m gonna make sure my kids have a roof over their head. Their rent is gonna be the first thing I pay out. I had proof that I had the money order. She just wanted us out.
ANNOUNCER: Under Arkansas’ criminal eviction statute, Barnes was given 10 days to move. Despite claiming she moved before the time period ended, her landlord pressed charges for failure to vacate.
KIM BARNES: I had already moved. Once I already got my eviction notice, and she wouldn’t work with us, we just said, okay, we’ll move! And then I had to go to court today, he asked me, how do I plead to failure to vacate? And I said, not guilty. Because, I mean, I’m not guilty. Because I was out of this woman’s place, in reasonable time like she asked me to be. After she still wouldn’t accept my payment. I have to go back in April, hope that by then I have all my paperwork showing, what dates I did exactly move out.
ANNOUNCER: Challenging a criminal eviction is tricky.
JUSTIN DUKE: If a tenant, like Barnes, wants to plead not guilty, and take their case to trial, they first have to pay the full amount of rent that the landlord claims they owe, into the court. So there’s a real incentive there for the tenant to just leave, to get out of the premises, and especially considering that they’re now facing a crime. Most of the time it’s just a matter of the tenant getting out. And you might say, well, what’s wrong with that? If they owe money maybe they should get out. The problem is, the way the system is set up, it allows landlords to abuse the system. The tenant very rarely gets a chance to give their side of the story. Maybe they’re withholding the rent because the landlord promised to make repairs. You never get to raise those claims at courts, because this isn’t a civil matter; you don’t get to raise counterclaims in a criminal lawsuit. Well, let’s just assume that it’s just a straight up non-payment of rent case. Even then, you gotta question the wisdom of deciding in this particular case that the state wants to pick up the tab.
ANNOUNCER: The state of Arkansas bears the cost of deploying members of law enforcement to serve evictions, and providing prosecutors for court proceedings. The only cost to landlords is a small processing fee. That is good news for landlords and their representative. Jason Boldman is a real estate attorney and a landlord with more than 60 properties.
JASON BOLDMAN: The criminal method is not as radical as it may seem. I’ve been handling hundreds of evictions over the years. I’ve never once seen a tenant ever serve a day in jail due to the criminal eviction statute. I would say 90% of all evictions in Arkansas use the criminal method. It’s fairly simple, and easy, and inexpensive. If the tenant is staying in your property, and not paying the rent, essentially, the tenant’s allowed to steal from you. It’s a crime akin to a parking ticket. You park at the meter, you don’t put any money into that meter, well, then you can be ticketed.
LYNN FOSTER: I don’t live in my car. Maybe the people who are comparing it to a parking ticket do live in their cars. But this is somebody’s home that‘s being taken away from them. And their conduct is being criminalized. Tenants are sometimes jailed under this statute.
ANNOUNCER: Currently, the data on the number of tenants jailed in cases related to Arkansas’ criminal eviction statute is not available to the public. In fact, much of the information available about the reality of landlord-tenant relations in Arkansas has not come from the state, but from legal researchers like Lynn Foster.
LYNN FOSTER: With the landlord-tenant situation, you have kind of the poorest segment of our society being penalized for this behavior, which in every other state is not criminal behavior. I think that’s one reason why nothing much has been done, and not much attention has been focused on it.
ANNOUNCER: In 2011, Foster joined a state assembled commission of 10 advocates, industry groups, lawyers, and judges, to recommend modifications to Arkansas’ landlord-tenant law. Their report, released in the winter of 2012, recommended repealing failure to vacate.
LYNN FOSTER: What the commission recommended, unanimously, was that a better civil eviction statute be put into place. Then the failure to vacate statute should be repealed by the legislature.
ANNOUNCER: The commission’s recommendations were approved by representatives of all parties. Most importantly, tenants’ rights advocates in both major associations representing landlords and realtors, but implementing the recommendations have proved daunting.
MALE VOICE: My initial thought, when I received the commission’s recommendations, was that we might be able to turn that into legislation, and try to get something passed during the session that we were currently in. it became clear to us pretty quickly that the realtors and the landlords were very vehemently against this issue, and would lobby hard against it. I don’t think I expected that kind of opposition to happen so quickly and so strongly. It seemed like the recommendations were the result of consensus.
ANNOUNCER: The Arkansas Realtor’s Association proved to have an influential lobby. They circulated a letter around the legislature in opposition to the commission’s recommendations. After that, few lawmakers would consider the proposed changes. In a letter to their membership, the Association celebrated that they had stopped the bill. It mentioned that they had fought legislation intended to fundamentally change landlord-tenant practices in Arkansas, and that the municipal eviction process would have been eliminated in warranty and habitability imposed. In other words, evictions in Arkansas could no longer be criminalized, and landlords would be required, under the law, like the rest of the United States, to maintain their properties. After repeated requests for an interview or statement, the Arkansas Realtors Association refused to comment.
LYNN FOSTER: There is at least one very, very powerful lobby that works on behalf of folks who are landlords. And tenants do not have any correspondingly powerful lobby. On the other hand, of course, if you’re counting votes, there are more tenants in Arkansas than there are landlords. About a third of all Arkansans are tenants. So, the numbers would be on the tenants’ side. The money may be on the landlord side.
ANNOUNCER: Lawmakers in Arkansas meet only for a few months every two years to pass legislation. The failure to vacate law won’t be debated again until 2015.
MALE VOICE: It’s embarrassing for Arkansas to be an outlier in this way. To use law enforcement to enforce a private contract is pretty unheard of. We don’t have debtor prisons in the United States anymore.
MALE VOICE: It is not a violation of international rights. Rather, it is simply a tool that allows people to cost effectively remove a tenant who is failing to pay the rent, and admitting before a judge that they have refused to pay the rent, and remained in the property.
MALE VOICE: When we’re allocating resources, are we really wanting to supplement their profits? Are we really wanting to supplement the landlords when we can use these resources for so many things that are so much better? The tenants, they’re intimidated by the process, they don’t have lawyers most of the time, and they’re facing not only the prospect of owing a lot of money, but even the possibility of jail time.
KIM BARNES: Things come up. Kids get sick. Parents get sick. You get sick. And stop trying to bring cops in. It’s really not they’re—their concern is the streets.
Introducing William D. Cohan
JASON HARTMAN: It’s my pleasure to welcome William D. Cohan to the show. He is a columnist for Bloomberg View and Vanity Fair; he’s also author of the new book, The Price of Silence: The Duke Lacrosse Scandal, the Power of the Elite, and the Corruption of Our Great Universities, as well as a few other books we’re going to talk about. Especially one entitled The Last Tycoons: The Secret History of Wall Street, that I think you’ll find very interesting. And we’re gonna dive right into it. William, welcome. How are you?
WILLIAM D. COHAN: I’m great, thank you for having me.
The connection between the Duke lacrosse scandal and Wall Street
JASON HARTMAN: Let’s talk about your most recent book first, if we can. There’s an interesting connection between the Duke lacrosse scandal and Wall Street that surprised me. Tell us more.
WILLIAM D. COHAN: First of all, it’s probably not a surprise that finance and accounting and economics are very popular courses of study among Duke undergraduates, and that many Duke graduates go to work on Wall Street. In fact, I one wrote an article for the Duke Alumni Magazine about how any number of heads of Wall Street firms were Duke graduates, like Alan Schwartz at Bear Stearns, and John Mack at Morgan Stanley, when the financial crisis hit in 2008. So, it’s no surprise that Duke sends a lot of graduates to Wall Street. But what I discovered as part of writing this book about the lacrosse scandal, is that part of the compact with young students when they come to Duke to play lacrosse, is the idea that if you play lacrosse at Duke, we will help you get jobs on Wall Street. And there’s always been an interesting link, generally, between lacrosse players and Wall Street. I don’t know whether it’s because they’re team players, or they’re athletes, or they’re smart, or whatever it is, but there does seem to have been historically a link, not only at Duke, but generally among lacrosse players, who go to Wall Street. But at Duke it was pretty much understood that if you played lacrosse and you wanted to go to Wall Street, they would help you get a job on Wall Street. And in fact, two of the three players that were ultimately indicted and then exonerated for wrongdoing, two of the three of them work on Wall Street now. And I would not be surprised to discover that a majority of the people on that 2006 team are now working on Wall Street.
Similarities between the American university system and corporate financial institutions
JASON HARTMAN: You had mentioned to me before we started, that Duke spent a lot—I mean, really was rather mind blowing—a lot of money on this situation to fix it, to make it go away, if you will. Talk about that, if you would, and then just generally, how would you characterize the state of the American university system nowadays?
WILLIAM D. COHAN: So, maybe I’ll take the second part of that first. My three previous books were about Wall Street, and I spent 17 years working on Wall Street as an [unintelligible] banker. So, people have said to me, why did you write a book about the Duke lacrosse scandal? Why didn’t you just write another book about Wall Street? And the answer is, because this is an amazing story about what happened. And I was curious about what had happened, and so, I wanted to investigate it sort of free of all the incredible passion that existed around this topic. What I found though, is there really isn’t that big a gulf between what happens in our big financial institutions that I’ve written about, and where I worked, and places like Duke. Duke, and these elite colleges and universities, are incredibly powerful institutions on a global basis.
There’s not that much difference, frankly, between Goldman Sachs, the subject of my third book, and Duke! I mean, they’re both very powerful institutions, they both have a lot of myths that have been created about them, they both have their strange customs and mores, they both have a lot of capital to play with. Duke’s endowment is approaching $9 billion. At Goldman they have $72 billion in equity capital. So there’s, frankly, more similarities than there are differences. They’re both very secretive organizations, even though Goldman is a public company; it’s really hard, frankly, to really know very much about them, despite their disclosure to the SEC. And of course, Duke is not public at all, doesn’t have to disclose much of anything, and really doesn’t.
When we think of Duke, we think of incredible academics, and we think of the basketball team. So there really isn’t that much difference. And in fact, major universities in this country are really no different than big corporations. They’re very powerful, they’re very secretive, they’ve got a lot of money, and they care a lot about their brand. So, the state, unfortunately now, is that they are run like businesses, which maybe they need to be run like that. But when you find sort of a gold mine like college division one athletics, if you play at the top level like Duke does in basketball and lacrosse, and even now this past year in football, there’s a lot of money. We all know, the NCAA basketball tournament generates billions of dollars for the NCAA, and hundreds of millions of that trickles down to the universities, and that’s not a pool of money that these organizations are willing to ignore. It’s a differentiating strategy for Duke and Stanford to be both strong academically, and athletically. That is what distinguishes these two schools from many of the others, and they take that very seriously.
JASON HARTMAN: It’s very interesting that you alluded to that they’re run like private businesses. And, where I really object, is number one, very few if any private businesses have their prior employees donating money. Their alumni, if you will. Although you could argue that this is true in maybe the housing market, or anywhere you’ve got government insured loans. But when you look at the university system, it is just absurd to me the price of an education nowadays. In my opinion, that’s largely the government’s fault. Because they insured student loans, and they created this huge pool of money chasing a limited supply of services, and these universities did what any business would do; they hired branding consultants, they made great gyms, and things that would attract students—
WILLIAM D. COHAN: Facilities that are extraordinary—
JASON HARTMAN: Facilities, and they make this whole mystique about them. I think it’s just corrupted the whole system. We’ve gotta get the government money out of here. And the tuition prices need to drop to market levels.
Discussion of college tuition prices
WILLIAM D. COHAN: I’ve thought about this a lot. And I’m trying to think, whether there really is a market for college tuition. The fact that it costs $52,000, or $55,000—is that the market forces working? Or is that the result of sort of cartel pricing? The fact of the matter is, that Harvard could fill the seats in its undergraduate school how many times over? Five, ten times over? People willing to pay $52, $55—if they opened it for purely a market bid, it would go well about $55,000. It would probably got very quickly to more than $100,000. If all you had to do to qualify to go to Harvard was to be able to pay the tuition, and people could bid in the marketplace for it, I assure you, don’t you think that the prices would be much higher than they are now? So, believe me, as a parent of two kids in college, it’s very painful to make those tuition payments, because of course, those are after tax dollars, and it’s an awful lot of money, and it’s an awful lot of one’s net worth. So I don’t like the fact that tuition payments are so high, but on the other hand, one has to step back and say, at least at some colleges and universities, people would be willing to pay to get that branding a lot more than they’re charging now.
JASON HARTMAN: I agree, but I’m not sure that I understood. Because when you said cartel pricing, I thought you were going to mention monopolistic, or anti-trust practices. And I agree with you that some people would pay more. Wealthy families with dumb kids would pay a lot just to send their kid there just so they could get that somehow—
WILLIAM D. COHAN: And foreign, wealthy foreigners.
JASON HARTMAN: Foreigners for sure.
WILLIAM D. COHAN: But I do agree that there is an element of cartel pricing, because they seem to all raise their prices in lock step. They never explain themselves. You just get a note saying, oh, by the way, the board of trustees has announced that we’re increasing tuition 5% next year. If you don’t like it, you can do exactly zero about it.
JASON HARTMAN: Yeah. It’s amazing to me, with all the modern technologies, that the cost has not dropped dramatically. I mean, I know college kids who are taking online courses. What does that cost the college? It’s completely scalable. It’s amazing. You know, when you can go get this same education at the Kahn Academy for free! You just can’t get the degree.
WILLIAM D. COHAN: But of course it’s about branding. It’s about resume building. And the Kahn Academy doesn’t have the same cache as Duke or Harvard.
JASON HARTMAN: I agree.
WILLIAM D. COHAN: And people are willing to pay for that because they think it makes a difference in the job market.
JASON HARTMAN: And it does.
WILLIAM D. COHAN: We’ll see whether it does or not. It might still, but it could be changing.
The elitist bad boy attitude that plagues university campuses
JASON HARTMAN: Yeah, I hope that changes. You talk about the elitist bad boy attitude that plagues many of these campuses. What’s going on there?
WILLIAM D. COHAN: Clearly an epidemic, and it’s not only at Duke. Every day we see more stories in the paper—for the last two weeks we’ve been sort of inundated with sexual assault stories on campus, whether it’s the result of President Obama’s task force that he pulled together in January, but every day we see more examples of bad behavior on these college campuses. And in the back of my book I list 10 or 15 different examples, whether it’s at Vanderbilt, or Harvard, or Yale, or Princeton, or Wellesley, or Amherst, or the Naval Academy, or American University, where there have been instances of sexual assault that lead everybody extremely dissatisfied with the outcome. And, so this seems to be a rampant behavior, and as I explain it in my Duke book, clearly with the lacrosse players, who were put on the pedestal at Duke, they make up 1% of the undergraduate population that were responsible for something like 25% of one kind of bad behavior, or 50% of another kind of bad behavior. They got reported, and the coaches didn’t do anything, the administrators didn’t do anything. And so, when this incident came along, they probably thought, well, you know we can do whatever we want with impunity. And so, if we want to have a party all day, where there’s underage drinking, then we’ll do it. If we want to hire strippers to come and perform for us for two hours, and pay them $400 each, we’ll do it.
What they didn’t bargain on, of course, is what happened after that. But unfortunately, I think with the drinking age being 21, forces the administrators at colleges and universities to turn the other cheek, and to pretend that this isn’t happening, or they do take steps to try to deal with the underage drinking, which is of course an epidemic. What happens is, the drinking of course takes place anyway. More than 40% of students now say they binge drink. So what’s happening is, they drink a lot in a short period of time to get really drunk, and then so-called hook up culture that we live in apparently can take place, and other bad things happen. So, we need to get our minds around the fact that the drinking age of 21 doesn’t work for anybody at the moment. And people need to take, as I talked about with Jon Stewart the other night on the Daily Show, people need to take personal responsibility for their behavior. We saw with Jameis Winston, the Heisman Trophy winner from Florida State University in that New York Times expose, it looked like the police completely botched the investigation because it was Jameis Winston. And the other day we hear that he’s now shoplifting crab legs or something. I mean, what is going on? Why isn’t somebody like that in control of his behavior? Don’t want to read about it on the front page of the New York Times, don’t do it!
JASON HARTMAN: It’s really mind-boggling, it sure is. There’s a whole nother class of people who many would say view themself as immune to the system, and not having to follow the rules. And your book, A House of Cards: A Tale of Hubris and Wretched Excess on Wall Street—let’s talk about that, and the Last Tycoons, and some of the Wall Street stuff.
William D. Cohan’s books about Wall Street
WILLIAM D. COHAN: There are three books I’ve written about Wall Street. The Last Tycoons’ about Lazard, House of Cards is about the collapse of Bear Stearns, and Money and Power about Goldman Sachs. These are books—really, first of all, I think they’re great stories. That’s number one. I mean, they’re great narratives about the people who work there, and the history of these firms, and in the case of Bear Stearns, how it all collapsed in March of 2008. But it’s of course tales of hubris, and people who make a lot of money, who think that they are immune, from the rules that the rest of us have to live under. You know, they’re not necessarily bad people. Some of their behavior is repugnant. But they just get this sense that they’re supermensches, you know, in the Nietzschean phrase, you know, that they’re somehow better than the rest of us, they don’t have to follow the same rules. And that leads to behavior, whether it’s quasi-illegal behavior that we sometimes saw at Goldman and Lazard, and at Bear Stearns, that just led them to blow up the firm. And so, getting back to what I talked with Jon Stewart about, on this lack of personal responsibility—taking responsibility for your actions. Making a good example for your children. I mean, we just seem to have, in many instances, maybe east of the Hudson, or something, maybe west of the Hudson people have more wholesome behavior. But, I don’t understand why, you know, virtual epidemic of bad behavior. And not just in finance, and not just on college campuses, but in sports—look at the whole disgusting episode with the owner of the Los Angeles Clippers. The fact that this still goes on in this day and age really blows my mind. I mean, it’s a full employment act for me, because I’ll be able to continue to write about this kind of crazy behavior. But I really don’t understand why people behave this way when they know better. It’s incredible. Look at the rash of insider trading! I mean, you know, [unintelligible], the US attorney in the 7th district of New York, has an 80 and 0 record. He is undefeated, in prosecuting insider trading cases since he took over that office. How can you, in 2014, engage anything remotely that looks like insider trading is beyond me.
JASON HARTMAN: Well, I would agree with you. I wonder, though, how much of it is just a symptom of, in some ways, us having a better media today. And I’m not saying that the media per se is better. Of course, we’re both members of the media, to one extent or the other. But, you know, with the internet and the blogosphere, and podcasting, and so forth, you know, a lot more of this stuff kind of leaks, than it used to, with social media, etcetera. The stories grow, and I think a lot of them were just unknown before, or unreported.
The 24/7 availability of modern media
WILLIAM D. COHAN: We live in the famous 24/7 media cycle, and Sarah Palin refers to it as the lamestream media; no question. In the Duke lacrosse case, the whole thing was incredibly inflamed by the media, and the cable news channels that just like took to this like a duck to water, and couldn’t get enough of it. I mean, it was literally the combination of Flight 370 and [unintelligible] all wrapped into one for a period of time there, for about a year. And there’s no question, it used to be that there were three networks, and you’d have the nightly news was a half hour. You had to be very selective about the stories that you put on. Now, between Fox and MSNBC, and CNBC, I mean, you know, it could be all day and night! Bloomberg, all day all night! Any time anything happens, it’s gonna find its way on, and they’re gonna run with it! Look at CNN with the plane, I mean, with the jet. Even though there’s literally nothing to report, they’re continuing to report!
JASON HARTMAN: Mhmm. There have been some really funny parodies of this CNN reporting about Flight 370. You know, just, we have nothing to say, but here we are again.
WILLIAM D. COHAN: That’s what happened with the Duke lacrosse case. There always seem to be one or two stories that are in the sweet spot for these guys, and they just go after it on a continuous basis. It can have a detrimental effect on the situation. Not that they care about that. But I mean, it can really be detrimental.
JASON HARTMAN: Anything else you’d like to share, you’d like people to know, your hopes or predictions for the future on any of this, whatever you’d like to kind of wrap up with.
WILLIAM D. COHAN: One of my themes lately is that despite all the complaining that goes on from Wall Street executives, I think in many ways we’re about to enter into a golden age of Wall Street again, because there’s very little competition. Their cost of goods sold, i.e. their cost of money, is close to zero. The economy is improving, and when the economy improves, and there’s very little competition, then firms like Goldman Sachs are just gonna do incredibly well. That doesn’t mean I would invest in Goldman Sachs, but if you’re a Goldman Sachs employee, you’re lucky enough to get a job there, you’ll probably make a lot of money in the next five years.
JASON HARTMAN: The problem with the whole game of investing in someone else’s company, or someone else’s deal, is that insiders, they get all the money before it trickles down to shareholders, you know? Maybe the shareholders get to fight over the crumbs, the executives and the employees. I mean, Goldman Sachs bonuses are of course astronomically insane.
WILLIAM D. COHAN: Great if you work there.
JASON HARTMAN: Yeah, it sure is. It’s great in general if you’re an insider in almost anything, but Goldman Sachs—it would be especially true. So, I want to ask you to give out websites. You can give out vanityfair.com, bloombergview.com, any others?
WILLIAM D. COHAN: My website, www.williamcohan.com, has all the articles I’ve written, my books, and links to all sorts of interesting things. That’s one place you can go. There’s a Facebook page related to the book The Price of Silence, my book about the Duke lacrosse case, if people are interested in more information.
JASON HARTMAN: Well, William Cohan, thank you for sharing this with us today, and keep up the good work. Start working on another book soon!
WILLIAM D. COHAN: I’m gonna take a little break after this one, but soon enough, I hope, yes.
JASON HARTMAN: All right. Great. Well, we’ll look forward to seeing it, and hearing more from you. Thank you.
WILLIAM D. COHAN: Thank you for having me.
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Transcribed by David
The Jason Hartman Team