New Yorker’s Hot Air on Poverty

Gladwell over-inflates the story of one Goldman banker

Things we really don’t like: Articles that pose a question with an obvious answer and then, pretending the answer is not obvious, spend thousands of words arriving at the conclusion we already knew. The New Yorker did this in a recent Annals of Business piece, and then compounded the problem by dangerously confusing economic reality and fantasy.

The article, titled “The Uses of Adversity,” examines that rags-to-riches story of which Americans are so fond, and asks us this question in its subhead: “Can underprivileged outsiders have an advantage?”

Well, yes. Of course. It makes complete sense that children who grow up in financially straitened circumstances sometimes develop greater savvy and skill than their wealthy counterparts. Longtime New Yorker staff writer and big thinker Malcolm Gladwell agrees.

What Gladwell does not do, however, is answer the much more interesting, and complicated, follow-up question, without which his piece is pretty much meaningless: So what?

Gladwell’s meditation on self-made men focuses on the up-from-poverty story of successful financial executive Sidney Weinberg. We get a sense of Weinberg in the first paragraph:

Sidney Weinberg was born in 1891, one of eleven children of Pincus Weinberg, a struggling Polish-born liquor wholesaler and bootlegger in Brooklyn. Sidney was short, a ‘Kewpie doll,’ as the New Yorker writer E. J. Kahn, Jr., described him, ‘in constant danger of being swallowed whole by executive-size chairs.’ He pronounced his name ‘Wine-boig.’ He left school at fifteen. He had scars on his back from knife fights in his preteen days, when he sold evening newspapers at the Hamilton Avenue terminus of the Manhattan-Brooklyn ferry.

And then an encapsulation of his quick rise:

At sixteen, he made a visit to Wall Street, keeping an eye out for a ‘nice-looking, tall building,’ as he later recalled. He picked 43 Exchange Place, where he started at the top floor and worked his way down, asking at every office, ‘Want a boy?’ By the end of the day, he had reached the third-floor offices of a small brokerage house. There were no openings. He returned to the brokerage house the next morning. He lied that he was told to come back, and bluffed himself into a job assisting the janitor, for three dollars a week. The small brokerage house was Goldman Sachs.

From that point, Charles Ellis tells us in a new book, ‘The Partnership: The Making of Goldman Sachs,’ Weinberg’s rise was inexorable. Early on, he was asked to carry a flagpole on the trolley uptown to the Sachs family’s town house. The door was opened by Paul Sachs, the grandson of the firm’s founder, and Sachs took a shine to him. Weinberg was soon promoted to the mailroom, which he promptly reorganized. Sachs sent him to Browne’s Business College, in Brooklyn, to learn penmanship. By 1925, the firm had bought him a seat on the New York Stock Exchange. By 1927, he had made partner. By 1930, he was a senior partner, and for the next thirty-nine years—until his death, in 1969—Weinberg was Goldman Sachs, turning it from a floundering, mid-tier partnership into the premier investment bank in the world.

Now seems an odd time to laud Goldman Sachs, even the Goldman Sachs of an earlier age, and that off-key note signals a larger problem to come: Gladwell is so charmed by Weinberg—who is rather charming—that he overestimates the importance of his story. Weinberg, the outsider who hoisted himself up by his bootstraps, becomes in Gladwell’s narrative a model to imitate rather than what he is: a talented, and lucky—we don’t buy that Weinberg’s rise was ever “inexorable”—exception.

Gladwell’s mistake is not that he focuses intensely on one remarkable example of success. If all he aimed to do was tell a good story, then our larger criticisms wouldn’t be justified. The problem is that he pretends it is possible to generalize from that one example (and some dyslexic entrepreneurs, but we’ll leave that aside). He even offers a prescription for our financial ills—more rags to riches!—without ever really looking at the realities of our social structure.

The fact is, the rags-to-riches story is just that, a story—albeit an important and powerful one. Gladwell starts out by acknowledging that he is writing about stories—narratives both national and personal that demonstrate some combination of who we are and who we want to be, and, sometimes, who we want other people to think that we are—but he then slips back and forth between the fantasies about and reality of class in America, until the two start to appear indistinguishable.

The rags-to-riches story—that staple of American biography—has over the years been given two very different interpretations. The nineteenth-century version stressed the value of compensating for disadvantage. If you wanted to end up on top, the thinking went, it was better to start at the bottom, because it was there that you learned the discipline and motivation essential for success. ‘New York merchants preferred to hire country boys, on the theory that they worked harder, and were more resolute, obedient, and cheerful than native New Yorkers,’ Irvin G. Wyllie wrote in his 1954 study ‘The Self-Made Man in America.’ Andrew Carnegie, whose personal history was the defining self-made-man narrative of the nineteenth century, insisted that there was an advantage to being ‘cradled, nursed and reared in the stimulating school of poverty.’ According to Carnegie, ‘It is not from the sons of the millionaire or the noble that the world receives its teachers, its martyrs, its inventors, its statesmen, its poets, or even its men of affairs. It is from the cottage of the poor that all these spring.’

Today, that interpretation has been reversed. Success is seen as a matter of capitalizing on socioeconomic advantage, not compensating for disadvantage. The mechanisms of social mobility—scholarships, affirmative action, housing vouchers, Head Start—all involve attempts to convert the poor from chronic outsiders to insiders, to rescue them from what is assumed to be a hopeless state. Nowadays, we don’t learn from poverty, we escape from poverty…

Gladwell doesn’t acknowledge that Carnegie’s self-mythologizing has little to do with inner city families who can’t pay their rent, and he doesn’t say how these two spheres relate to each other.

The unacknowledged tension between fantasy and reality heightens as the article goes on:

The man who created what we know as Goldman Sachs was a poor, uneducated member of a despised minority—and his story is so remarkable that perhaps only Andrew Carnegie could make sense of it.

His story is remarkable. And in fact has to be. A crucial point, which doesn’t enter Gladwell’s analysis, is that Weinberg’s success—his ability to both understand and selectively disregard the rules governing the behavior of the social and financial elite—is only possible as an anomaly. Loud opinions and personal idiosyncrasies may have helped rather than hindered him in the stuffy circle of elite bankers that he joins. But where one Weinberg is a charmer, many Weinbergs are a problem. So, structural impediments to his rise aside, how could Weinberg possibly be a model for broader social change?

Gladwell attempts to draw broad conclusions—both descriptive and, as we noted, prescriptive—from a series of anecdotes. Rather than placing Weinberg in cultural context, which would have offered some critical perspective, Gladwell focuses on Weinberg himself and only strays into America at large when it suits Weinberg’s, and by extension Gladwell’s, narrative. (An approach that is the intellectual kin of the Great Man theory we recently criticized.)

To offer a counterweight to Weinberg’s story, here is some information from Stephan Thernstrom’s 1973 book, The Other Bostonians: Poverty and Progress in the American Metropolis 1880-1970:

Youths born into working-class homes in Boston had rather good prospects of moving upward into middle-class jobs in the course of their own careers.

Good. But:

No more than 1 in 10 succeeded in becoming professionals or substantial businessmen—movement all the way to the top of the occupational ladder was far less likely for them than for sons from upper-middle-class families—but about a third of them ended up as clerks, salesmen, or small proprietors.

This kind of moderate rise doesn’t have the drama of Weinberg’s, but it says far more about the way the system works. And if Gladwell wants his story to be anything more than an interesting anecdote—which he clearly does—then he needs to address the system as a whole.

The fact is, enough class mobility exists in this country for the rags-to-riches myth to have staying power, but inertia is as real—or more real—a force. If you don’t believe us, listen to The Economist:

A growing body of evidence suggests that the meritocratic ideal is in trouble in America. Income inequality is growing to levels not seen since the Gilded Age, around the 1880s. But social mobility is not increasing at anything like the same pace: would-be Horatio Algers are finding it no easier to climb from rags to riches, while the children of the privileged have a greater chance of staying at the top of the social heap. The United States risks calcifying into a European-style class-based society…

America is increasingly looking like imperial Britain, with dynastic ties proliferating, social circles interlocking, mechanisms of social exclusion strengthening and a gap widening between the people who make the decisions and shape the culture and the vast majority of ordinary working stiffs.

And the Economic Policy Institute shows working-class incomes falling while the wealthy get more so.

American folklore often emphasizes the rags-to-riches Horatio Alger stories, which suggest that anyone with the gumption and smarts to prevail can lift themselves up by their bootstraps and traverse the income scale in a generation. Reality, however, shows much less mobility.

In fact, the Economic Mobility Project, spearheaded by The Pew Charitable Trusts, raises an interesting point in its report “Economic Mobility: Is the American Dream Alive and Well?”:

The belief in America as a land of opportunity may also explain why rising inequality in the United States has yielded so little in terms of responsiveness from policy makers: if the American Dream is alive and well, then there is little need for government intervention to smooth the rough edges of capitalism. Diligence and skill, the argument goes, will yield a fair distribution of rewards.

By this logic the American Dream, in addition to being a motivational force, can be a very dangerous one, dulling our abilities to see the limits of the meritocratic ideal.

These ideas are more than an interesting addition to Gladwell’s story. They are essential to it.

All this effort seems to be in service of the following point:

We have become convinced that the surest path to success for our children involves providing them with a carefully optimized educational experience: the ‘best’ schools, the most highly educated teachers, the smallest classrooms, the shiniest facilities, the greatest variety of colors in the art-room paint box. But one need only look at countries where schoolchildren outperform their American counterparts—despite larger classes, shabbier schools, and smaller budgets—to wonder if our wholesale embrace of the advantages of advantages isn’t as simplistic as Carnegie’s wholesale embrace of the advantages of disadvantages.

What is Gladwell saying? Should we move to impoverished countries? Further underfund our schools? Or just romanticize poverty?

A society of decreasing mobility, as suggested by the observers we quoted above, renders even more ridiculous Gladwell’s call for Americans to return to what he sees as an earlier attitude toward poverty and success: namely that poverty—that great instructor—is in some ways good because it can breed traits that may lead to success.

Our confusion only grows at the end of the piece, when Gladwell counterposes the failure of a Wall Street good old boy to the success of Weinberg. After the departure of a senior partner at Goldman Sachs, Gladwell writes:

The Sachs brothers—Walter and Arthur—were desperate for a replacement, and they settled, finally, on a young man named Waddill Catchings, a close friend of Arthur Sachs from Harvard. He had worked at Sullivan & Cromwell, Wall Street’s great patrician law firm. He had industrial experience, having reorganized several companies, and ‘on top of all that,’ Ellis tells us, ‘Catchings was one of the most talented, charming, handsome, well-educated, and upwardly mobile people in Wall Street.’

That Catchings was a poor decision maker became clear in the 1929 crash, when he lost Goldman a lot in both money and reputation, and it spurs the article’s closing observations:

Privilege did not prepare Catchings for crisis. The Sachs brothers then replaced Catchings with a man who was not from privilege at all, and perhaps now we can appreciate the wisdom of that decision. Wall Street needs a few less Waddill Catchingses and a few more Sidney Weinbergs.

Now, wait a minute. First of all, Gladwell told us early on that Weinberg’s strength was not financial acumen but interpersonal intuition:

Weinberg was not a financial wizard. His gifts were social.

So Catchings’s bad judgment doesn’t serve as a true counterexample, at all.

And the piece ends with a prescription— “Wall Street needs a few less Waddill Catchingses and a few more Sidney Weinbergs”—but, and here is the point we feel strongest about: Gladwell hasn’t earned the right to give it. The idea that Wall Street’s problems somehow stem from character issues—that Weinberg would not have sold defective CDOs, or something—is entirely bogus and, in any case, journalistically out of nowhere.

We need better from The New Yorker both as a cultural critic and certainly as a reporter on the financial crisis.

Elinore Longobardi is a Fellow and staff writer of The Audit, the business-press section of Columbia Journalism Review.