Chapter 13 The Glories of Change, September 15, 2008
The events on Wall Street, the collapse of Lehman Brothers and the selling-off of Merrill
Lynch are magnificent and inspiring events.
What we see here are examples of sweeping and fundamental change taking place, a huge
upheaval that affects the whole of society, and toward the better, since what we have
going on here is a massive reallocation of resources away from failing uses toward more
productive uses.
Hundreds and hundreds of billions of dollars are on the move, sweeping all before them.
And yet, take note, it is not war accomplishing this, it is not violence, it is not the result
of a Planning Committee. No election is necessary. No terrorist act took place. There was no
government edict. The agent of change here is the composite of all the world's exchanges
that relentlessly shove resources this way and that way so that they will find their
most economically valued uses in society. No one person is in charge. Layers upon layers
are the essential mechanism that makes the process move forward.
All these decisions and choices and guesses come to be aggregated in a single number called
the price.
And that price can then be used in that simple calculation that indicates success or failure.
Every instant of time, all around the world, that calculation is made.
and it results in shifts and movement and progress.
But as wonderful as these daily shifts and movements are, what really inspires are the
massive acts of creative destruction, such as when old-line firms like Lehman and Merrill
melt before our eyes, their good assets transferred to more competent hands and their bad liabilities
banished from the face of the earth.
This is the kind of shock and awe we should all celebrate.
It is contrary to the wish of all principal players and it accords with the will of society
as a whole and the dictate of the market that waste not last and last.
No matter how large, how entrenched, how exalted the institution, it is always vulnerable to
being blown away by market forces.
No more, no less so than the lemonade stand down the street.
Dramatic shifts are essential for progress.
But adapting to changing conditions and becoming an agent of that change, staying with the
curve and jumping out in front of it, this is the real challenge.
Enacting change, any kind of change, but especially big and fundamental change, sometimes seems
impossible in this world.
We all desire it and know it is necessary.
Seeking the reality of rebirth has an appeal.
But finding the mechanism to make it happen is hugely difficult.
Try to change an institution from the inside and you will meet resistance around every
corner.
Bureaucracies are nearly impossible to change.
Even firms and private enterprise are reluctant to adapt and have to be pushed and nudged
by the accounting ledger or no movement happens.
Churches and other charitable organizations can wither and die without periodic and fundamental
Change and Upheaval.
Many institutions grow up around the principle of stability first.
The organizational structure tends in the direction of the protective mode, with everyone
burrowing in and resisting doing something different today and tomorrow from what he
or she did yesterday and the day before.
Inertia is the default.
How to break away from this problem is a great challenge.
The theory of democracy was that we would have a voting mechanism to enact and force
change, but the problem is that the votes and personnel shifts bring aivid change in
the look and feel of government, but do not get below the surface.
Wars and revolutions yield change, but at too great a cost.
The change wrought by markets goes to the very core of the issue.
It makes and breaks whole institutions, sometimes overnight, and it does so in a beneficial
All of the plans of big shots, all of the desires of our governing masters, all of the wishes and dreams of people who imagine themselves to be larger and more important than the rest of us, melt like snow on a sunny day.
In this sense, the market is the great leveler, the force in the universe that humbles all
people and reminds them that they are no more important than anyone else, and that their
wishes must ultimately be shelved when faced with the overwhelming desire on the part of
market traders that some other reality emerge.
For this reason, everyone should celebrate the end of Lehman and Merrill.
Over night, while we slept, the seemingly mighty were humbled, the first made last and
the last made first. The greatest became the least, all without a shot being fired.