(2020-05-24) Guinn A New Gilded Age

Rusty Guinn: A New Gilded Age. ...more important half of Twain’s point. The elegant idea of the Gilded Age is not that it was about prosperity. It is that it was about the narrative of prosperity.

That narrative of prosperity was built from the same stuff as any top-down narrative: an underlying political goal, a small-t truth, a big-t truth, a big lie and an abstraction through which the lie might gain purchase.

political goal underlying American policy narratives from the 1870s through the early 1900s was nearly self-explanatory. After a brutal Civil War, we wanted – we needed – Americans to believe that the post-bellum period in America, a time defined by reconstruction, rapid immigration, reconciliation, resource exploitation, the emancipation of millions of slaves and the historically unique proposition of rapid rail expansion to a geographically far-flung land, could be America’s Golden Age.

The small-t truth was that these forces really did cause the country and its economy to grow remarkably quickly.

The Big-T Truth was that this expansion laid the groundwork for America to become the clear global hegemon of the 20th and 21st centuries.

The big lie was that this prosperity was equally accessible to all.

The abstractions? Well, those would be Twain’s gilding, wouldn’t they?

The excesses empowered by centers of political and social power were not just excesses. They were attempts to apply a layer of gilding to the baser materials underneath – the still vast and unresolved social and economic problems faced by an emerging United States with devastating inequality of both opportunity and circumstance.

Perhaps this all sounds familiar. Perhaps this sounds like the Long Now.

That’s because it is.

The Long Now IS a New Gilded Age

instead of land speculation and the pretenses of an aristocratic minority, our gilding largely boils down to the current level of the S&P 500 Index.

we will find no better example than in the least golden yet most gilded retreat

Tuxedo Park.

More than a hundred years before Tuxedo was a gleam in anyone’s eye, in 1760, an 18-year old French stocking weaver and immigrant to New York named Pierre began milling tobacco into snuff

So fabulously wealthy was his great-grandson Pierre Lorillard IV that in 1877 he was able to commission the construction of the most spectacular residence in a community of spectacular residences – Newport, Rhode Island.

which he called The Breakers.

when Pierre sold The Breakers to Cornelius Vanderbilt II in 1885, it was a bold statement. And when Pierre packed up and hopped off a train rolling through the Ramapo Mountains of lower New York state with his architect and partner on a rainy day only weeks later to chart out a new kind of elite community, it was an even bolder statement.

Lorillard intended for Tuxedo to be both a social club and residential community; in short, Pierre built a country club

membership to the Tuxedo Club was both limited and exclusive. More specifically, it was initially limited to 200 men, and exclusively offered to those who had accumulated great sums of wealth in the right way, which is to say by inheriting it.

Newport had, unfortunately, developed a nasty reputation for permitting those who had built wealth through acts of ingenuity or even labor, heaven forfend, to participate in the loftiest social circles

Bankers, financiers, and others who dealt with money only in its more intangible and dignified aspects, however, were acceptable.

membership in the club was a de facto requirement for the purchase of property. By 1888, after growing demand that led to some relaxation of limits on membership, about 350 men belonged to the club. Roughly 30 of them had homes there

First and foremost, there were the Astors, who held vast quantities of real estate in the city and were seen as the gatekeepers of its social scene

Tuxedo also welcomed the Schermerhorns, who were an old New Amsterdam Dutch family

Other Tuxedo members were part of the old Dutch roots on the island, too. The Kips, for example

there was also the matter of the literal stone fortifications and 24-hour armed security that greeted anyone approaching by road. If you didn’t fancy that, you might instead try the 8-foot barbed wire fence that greeted anyone traversing the 25-mile border of Tuxedo Park

How fabulous and remarkable must the stories of what happened behind those walls have been to the ‘villagers’ who lived beyond them – and yes, the residents of Tuxedo referred to them as the villagers

And yet there was an unavoidable problem with pretending at an Old-World aristocracy: there was no hiding how very young anything built in America was.

Lorillard’s vision when leaving the gaudy excesses of Newport, a vision shared by the primary architect Bruce Price, was that Tuxedo must be an old place. A place for old families, old Anglican religion, old social values and old money

Fortunately, the nature of many of these techniques to produce exactly those illusions was recorded for posterity by Bruce Price’s daughter. Her name was Emily Price. You, however, probably know her better by her married name: Emily Post.

builders were literally instructed to pick stones for the front gatehouse and homes that had more lichen on them.

Yet Tuxedo Park as an abstraction of American prosperity still lacked a final, indispensable bit of gilding – a narrative of class. It needed a propagated set of rules and values so arcane that they could only be understood by those who had already been made familiar with the game

So it was that the final, and probably most important, gilding of Tuxedo Park was its ritualized informality. It was the practiced leisure of those sophisticated enough to know that nothing was quite so boorish as trying too hard, unless perhaps it was working too hard. (Sprezzatura?)

tuxedo was originally a relaxation of common dinner jacket attire for gentlemen.

The stories of intrigue from the late 19th and early 20th centuries in the Park are uproariously petty. For example, Emily Post herself wrote often about her frustration at being forbidden access to the performance stage at the club at Tuxedo. Apparently her banjo playing (yes, this was a fashionable skill for young debutantes at the time) and acting shone a bit too brightly in a world where her father’s necessary architectural prowess proved a rare exception to early admittance standards.

Snobbery at Tuxedo came in such concentrated and virulent doses that it produced a stifling air of complacency and stilted formality

If you had asked individuals instead of members of the crowd watching the crowd, however, you would have gotten a very different description. From even the very early days, you would have been told about how obviously artificial the place was. How positively anyone could see it. Its various gildings – with perhaps the exception of some really remarkable architecture, some of which is attributable to Price himself – were widely deplored within and outside the walls

Irritation with the artificiality of the many forms of Tuxedo’s gilding hit very close to home for Emily Post herself. Her earliest of many conflicts with her husband were related to the absurdity of the place’s pretenses. Edwin Post considered himself a legitimate outdoorsman, traveler and gentleman (and as it turned out, he considered himself quite a catch for all sorts of women, too). The alpine costumery of its groundskeepers, the stocking of game and fish, the ostentatious faux-country estate mentality – its mise-en-scene, as Laura Claridge put it in her Emily Post biography – was immediately absurd to him.

The lake, for example, was originally the home to beautiful, enormous and sporting species of bass. Bass being the apex predator (among the fish, anyway) in most such environs, the dilettante gamekeepers introduced a species of European carp to be a food source to fatten up the bass. Instead, the carp crowded out the usual food sources for the bass and killed them off within a couple years.

So if everyone – even America’s leading voice on the rules of etiquette – realized that the narrative of Tuxedo Park was utter nonsense, what happened?

Absolutely nothing.

For a while, anyway.

When we recognize artificiality, we usually expect that the continuous pounding of reality will expose it. We want to believe that markets – social, financial and political alike – are voting machines in the short run, but weighing machines in the long run

But when the narrative is promoted from the top-down and built on a foundation of abstractions and models, it can sustain all sorts of contradictory facts. Indeed, that is the whole point of summoning the abstraction in the first place – to make it nearly impossible to find facts that exist on a dimension that could falsify the abstraction or lie.

Can you think of any investor you know who has not said to themselves and others, “It seems like fundamentals have really stopped mattering all that much” at some point in the last 12 years? How about, “Surely central bank intervention like this isn’t going to be sustainable forever?”

Yet it is not enough for all of us to know that equity markets are now a political utility. It is not enough for us all to know that they are too important as a measuring stick of prosperity, as a layer of gilding, for central banks and other centers of modern political power to allow to fail. It is not enough for us all to know how those incentives inherently create long-term social, political and economic value destruction. It is not enough to know that they empower the persistence of zombie companies. It is not enough to know that they create incentives to direct capital toward short-term share price appreciation over the development of productive tangible and intangible assets.

Likewise, the narrative gilding of Tuxedo Park didn’t wear away because enough people knew of its artificiality on so many dimensions. It didn’t fade because enough people put two and two together on the excessive formality, the pretense at effortlessness, the Tyrolean costumes or the stone castles named “Woodland.”

It faded because enough people decided to act on their individual knowledge. They packed up and left.

John Jacob Astor was the first meaningful departure.

The only thing that breaks a top-down narrative is action.

That isn’t to say that knowing doesn’t matter. Knowing matters to you.

Here’s an idea: Stop waiting and leave. (Exit, Voice, and Loyalty)

Who will be the John Jacob Astors of markets? Who will be the CIO or Board Chair at a major public pension plan who will take the career risk that goes along with talking about the need for funding problems to be resolved with fiscal policy

Who will forge the hard path that will make it possible for write-ins and third parties and underserved demographics to have a real voice in our collective governance?

Whoever among us works to puts an end to this New Gilded Age, who unlocks the power of real capitalism and real democracy to create multi-generational prosperity, will have performed an act of both clear eyes and full hearts.