The game has changed

Remember when your grandma asked you what you wanted to be when you grow up.  Doctor,  nurse, policeman, teacher, fireman were probably high on the list.  After watching enough “Perry Mason”, you might have added lawyer. When it was time to go to college, your smart classmates talked up premed and pre law, and so did your parents (“My son the doctor.”). For the math whizzes, engineering and science programs were big. J-schools had adherents in my day too. If you were shooting for a business degree, most grads had their eye on working for a Fortune 100 company or starting their own business, building something that would last while you made a decent living along the way. That was then.

Circa 2007, going to med school is passe. Who wants the billing and malpractice insurance headaches? Science and engineering give way to dreaming up the next software/internet scheme. The best and the brightest in business, meanwhile, have become (let’s be crass) brokers — investment bankers, traders, private equity players, or hedge fund investors. You make your (tons of) money out of fees, promotes, and complicated structures using other people’s money and lots of debt, cashing in as soon as possible on the next trade. The more transactions, the higher the volumes, the more everyone makes; while the frenzy of deals ratchets up prices and whips up more transactions and higher fees. In the past decade, even lumpy commercial real estate wall streetized and traded like crazy thanks to various securitized structures. Entrepreneurial developers who hadn’t turned into REITs, transformed themselves into advisors and managers to get in on the action. You buy real estate with little down, sit on it for a short time, and flip into riches… repeatedly.  And all the other intermediaries get their sliver of the pie too — appraisers, lawyers, accountants, title companies, even (gasp) rating agencies pile into the pool. Nothing much is created, leaving something for posterity isn’t part of the equation. Extracting money through trades is the name of the game. It’s genius.