The Hollywoodization of Wall Street
A HOLLYWOOD veteran once told me the story of a group of Wall Street bankers who were dispatched to the film capital during the Great Depression to see if the industry was worth investing in. They had no sooner arrived at the office of an MGM executive when Sid Grauman, the colorful impresario best known for Grauman's Chinese Theater, burst in and gleefully dumped on the desk bags of money that he had collected from some financial scheme. The bankers were more scandalized than impressed. Stodgy Wall Street and glitzy Hollywood, they concluded, were just not compatible.
How times have changed. The recent reports of Wall Street's own excesses - private planes, lavish parties, gold-plated bathroom fixtures, and customized limousines - all sound like pure Hollywood. And that might not be coincidental. Though America's captains of finance have been pilloried for their greed and though the financial collapse has been attributed to avarice, the collapse may actually have had less to do with greed per se than with a certain mindset that seems to have been adopted by Wall Street from Hollywood. In short, you can blame the Hollywoodization of Wall Street for our economic woes.
As that Hollywood veteran suggested, it wasn't so long ago that Wall Street was the very embodiment of conservatism. After the Depression, bankers, who during the spendthrift 1920s had competed with Hollywood, had learned to be quiet, cautious, and frugal. They disdained vulgar displays of wealth. They lived in solid communities, and their uniform of choice was a Brooks Brothers suit, rep tie, and wing-tip shoes. It was an aesthetic that came naturally to these mostly Ivy League-educated Brahmins, but it was an aesthetic that also had its business function. It provided reassurance that these men were not gamblers. They were, as Paul Krugman recently wrote, boring. Hence one's money was safe with them.
If Wall Street occupied one end of the postwar American cultural spectrum, Hollywood occupied the other. Hollywood, as a community, was a mythological place - a kind of faraway magical kingdom. It was where stars shone brightly, where wealth abounded, where glamour was the rule, where everything was larger than life, and where nothing exceeded like excess. Boring it wasn't. It provided temptation precisely because its values seemed so alien from the typical American small-town virtues that, ironically, Hollywood movies often touted. It was as if the twain - Hollywood's exoticism and our quotidian reality - could never meet.
But something happened over the last 25 years of general prosperity, media saturation, and increasing mobility. Hollywood stealthily became a paradigm for American success and not just an extreme example of it. Americans began to aspire to be like Hollywood, and ordinary people came to dress like stars, talk like stars, act like stars, in some cases even live like stars. Gossip magazines and movies themselves were primers on how to close the gap between them and us. We began to measure success by the standards of Hollywood - by how much you could flaunt your wealth, by how much publicity you could attract, by how much power you could exude - because those were the standards we saw daily.
Wall Street was no more impervious to this process than Main Street. It dawned on the bankers that as America increasingly celebrated excess rather than sobriety and publicity rather than dignity, they were being left out of the status sweepstakes and all its psychological benefits. What good was wealth or power if no one really knew about it? Indeed, financial stardom was every bit as intoxicating as movie stardom. Witness Donald Trump. Even in business terms, flamboyance was now a better lure than prudence. As the swindler Bernie Madoff so amply demonstrated, the best way to convince potential investors that you were legitimate was by showing off your wealth. In Hollywood, extravagance had always been the modus operandi. Now it was becoming the modus operandi of Wall Street too.
But Hollywood's effect on Wall Street was not just a matter of personal style or even of conspicuous consumption. The deeper effect, the one that contributed profoundly to our economic mess, was a matter of consciousness - the consciousness on which the movies depended and which the whole country seems to have appropriated. In movies, perception is reality. The whole job of the movies, after all, is creating illusions that seem real and that have the same impact as reality. The trick is in making the illusions credible enough to captivate the audience.
Something similar happened to our financial system as its keepers were living large. Wall Street's chieftains discovered that if Hollywood was the paradigm and if perception had become reality, then it wasn't really the creation of wealth that mattered. It was the illusion of the creation of wealth - an idea that was encouraged by the film industry's own Ronald Reagan, who seemed to think that swashbuckling was a financial boon. Within the permissiveness of Reagan's deregulation, what one had to do was fabricate a system that looked as if it was generating wealth on the assumption, unfortunately all too accurate, that no one would really bother to examine whether one had generated wealth or not - perception as reality.
That's how, in a country of dreamers where everyone seemed bedazzled by illusions, American finance became a giant special effect. Ponzi schemes like Madoff's, and the invention of derivatives, credit default swaps, and other complicated financial instruments that even economic experts acknowledge they do not understand, were Wall Street's answer to Hollywood - vast illusions of wealth that were maintained through smoke and mirrors. Just as Hollywood got caught up in the blockbuster mentality, Wall Street was besotted by its own cascades of money and for the same reason as Hollywood: It was exciting. There was only one problem. The cascades weren't real.
When we go to the movies, we eventually leave the theater, usually to find ourselves disenchanted by the reality outside. That was something Wall Street hadn't reckoned on. Its bosses seemed to think their movie would never end. Now we have all left the financial theater, and we are all disenchanted. The responsibility is the bankers' who traded Brooks Brothers for Armani and earnings-to-price ratios for pie-in-the-sky. But the lesson is Hollywood's - that in America we pay the price for not being able to distinguish airy dreams from earthbound reality, glamour from common sense.
Neal Gabler is the author most recently of "Walt Disney: The Triumph of the American Imagination."