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About the Author
Mike Lapham is the project director, a cofounder, and a member of UFE’s Responsible Wealth project, a network of over 700 business leaders and wealthy individuals.
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The Self-Made MythAnd the Truth about How Government Helps Individuals and Businesses Succeed
By Brian Miller Mike Lapham
Berrett-Koehler Publishers, Inc.Copyright © 2012 United for a Fair Economy
All right reserved.
Chapter OneThe Self-Made Myth
Origins of the Self-Made Myth
The myth of the self-made man lies deep in our country's collective psyche. As a new nation breaking free of its colonial ruler, America's identity was built in large part on the contrast of our frontier nation—with farmers carving a living out of the raw wilderness and merchants peddling their wares on our city streets—with that of Europe, whose economic pecking order was still largely defined by one's pedigree and aristocratic lineage. Though this contrast was at times exaggerated, it nonetheless helped shape our identity as a new nation.
Many of our nation's Founders viewed the concentrated and hereditary wealth of Europe's aristocracies as incompatible with the democracy they were trying to create in the United States. To ensure that our nation charted a different course, Thomas Jefferson and others championed the distribution of federally acquired land to small-scale yeoman farmers who would work the land themselves. This system of broadly distributed wealth was viewed as more consistent with the values of the emerging democracy.
Others echoed this aversion to concentrated wealth. In 1765 John Adams said, "Property monopolized or in possession of a few is a curse to mankind." As one writer recently noted, "Adams knew that too much power in the hands of a wealthy powerful few would be detrimental to mankind, and in America today, the curse to mankind is the few monopolizing the resources of the majority."
It was in this new, more equal nation that aristocratic lineage and pedigree were no longer the measure of one's worth. Instead a man's rise and fall was, in principle at least, due to his own merit, character, and hard work. With the trappings of bloodlines and aristocracy swept aside, the stage was set for the emergence of the "self-made" man in America.
During our nation's early history, a new type of self-help literature emerged, celebrating the personal qualities one must develop to better oneself and achieve prosperity. Benjamin Franklin's famous Poor Richard's Almanac was filled with such advice for poor Americans looking to get ahead.
By the nineteenth century, scores of writers, religious pulpits, schools, and penny presses built on Franklin's legacy, churning out the gospel of individual success. One of these "preachers" was Horatio Alger, the Harvard-educated novelist and former minister who churned out more than 100 such pieces, from short stories to novels such as Ragged Dick. His stories told a formulaic narrative of the poor boy who rose from rags to riches as a result of hard work and individual character. Young boys and men across the nation read these books, and those of others, for guidance and advice on how they too could become rich and successful.
In addition to the moralistic novels of Alger and others, there were real-life stories, told in news articles around the country, of millionaires who seized their piece of success through steady application to business. In some cases, though certainly not all, they rose up from working-class roots to do so. Together these various success stories worked to fuel the self-made myth.
There were skeptics, however, who questioned the self-made myth. The humorist Mark Twain reveled in turning the Alger story on its head3 with "The Story of the Bad Little Boy Who Did Not Come to Grief" in 1865, "The Story of the Good Little Boy Who Did Not Prosper" in 1870, and "Poor Little Stephen Girard" in 1879, among others. In classic Twain fashion, these stories poked fun at the improbable rags-to-riches narrative and its moralizing of success. Despite following all the advice of Alger and his ilk, the "good boys" in Twain's stories were chased away by the business owner or, worse, blown to smithereens. The "bad boy" ended up wealthy and successful.
Beyond the moralizing ridiculed by Twain, this individual success myth overlooked a number of key social and environmental factors. The emergence of a clear geography of opportunity showed that there was something about the place where one lived that contributed to one's success. No matter what personal qualities someone had, if you lived in Appalachia or the South, your chances of ascending the ladder to great wealth were slim. Those who achieved great wealth were almost invariably from the bustling industrial cities of the Northeast. By one estimate, three out of four millionaires in the nineteenth century were from New England, New York, or Pennsylvania.
Another unique external factor was the opportunity that existed at that time, thanks to expanding frontiers and seemingly unlimited natural resources. The United States was conquering and expropriating land from native people and distributing it to railroads, White homesteaders, and land barons. Most of the major Gilded Age fortunes were tied to cornering a market and exploiting natural resources such as minerals, oil, and timber. Even P. T. Barnum, the celebrated purveyor of individual success aphorisms, had to admit in Art of Money Getting that "in the United States, where we have more land than people, it is not at all difficult for persons in good health to make money."
He might have added that it also helped to be male, to be free rather than a slave, and to be White. While free Blacks had some rights in the North, they had little opportunity to achieve the rags-to-riches dream because of both informal and legal discrimination. Even after the Civil War, Blacks, Asians, and others were largely excluded from governmental programs like the Homestead Act that distributed an astounding 10 percent of all US lands—270 million acres—to 1.6 million primarily White homesteaders.
Then there was the luck of timing. Those born in the first half of the nineteenth century who survived the Civil War caught the wave of resource exploitation and industrial expansion. This was the time of railroads and the dawn of Wall Street. Of the 75 richest people in all human history, 14 were Americans born between 1831 and 1840, including John D. Rockefeller, Jay Gould, J. P. Morgan, Frederick Weyerhaeuser, and Andrew Carnegie. Historian Irvin Wyllie notes that from a statistical point of view, being born in 1835 was "the most propitious birth year for a poor boy who hoped to rise into the business elite." Carnegie hit this lottery perfectly. He was born in 1835, held a desk job during the Civil War, and reached business maturity after the fighting ceased.
Finally, it's also clear that the majority of nineteenth-century millionaires were not in fact born poor but came from middleclass or wealthy households. With so many reasons to doubt the validity of the self-made myth, it's no surprise that political scientist Francis Leiber declared in 1882, "Self made men, indeed! Why don't you tell me of the self-laid egg?"
By the turn of the century, the rags-to-riches story began to lose its influence. "Soothsayers could not conceal the fact that the frontier had closed, that the nation's basic resources had long since been appropriated, and that small enterprisers had been put on the defensive by big business[;] ... competition for top positions became more severe, [and] employers raised standards of qualifications by requiring degrees ..." Education, once regarded as optional and even detrimental to financial success, became a prerequisite for top positions in the newly organized, large-scale enterprises. Access to advanced education, however, often mirrored preexisting class differences and thus eroded the avenues for poor Americans to advance.
By the 1920s the post–World War I prosperity briefly reinvigorated the self-help credo. The modified formula for success now included professional training and an understanding of modern psychology in addition to character and hard work. But the Depression put a dent in this success ideology. Wyllie writes, "As virtuous men took their places in the breadlines, silence fell over many of the sages who had vouched for the doctrine of wealth through virtue."
By the middle of the twentieth century, scholars like C. Wright Mills were explaining the societal roots of success and poverty. This social science approach to understanding mobility, success, and opportunity found growing support. Nonetheless the myth of the self-made man has great potency to this day. In explaining wealth and success, the practice of elevating individual character while ignoring social and environmental factors is an enduring national tendency.
Modern Myth and the Titans of Industry
As industries have become organized on a larger scale, as technology has evolved and the world has become more interconnected, the role of the individual business leader has become increasingly intertwined with that of the larger society around us. Nonetheless the self-made myth persists and in some ways has even grown in influence, holding sway over our political and cultural debates.
With the tax debate intensifying in recent years, it has become infused at every turn with the self-made myth. Conservative talk-radio shows regularly use phrases like "punishing success" when referring to rolling back the Bush tax cuts for top income-earners. The assertion here is that it is their success and their success alone. Within the "punishing success" frame, there is no acknowledgment that others, whether co-workers, society, or taxpayers (who paid for the roads and the schools and the courts that businesses rely on), had anything to do with that success.
Similarly, the rhetoric of the self-made man is evident in the debates over the extravagant and sometimes controversial CEO pay. When the then-CEO of Scott Paper, "Chainsaw" Al Dunlap, who was later disgraced after he engineered a massive accounting scandal at Sunbeam-Oster, was asked on PBS News Hour to justify his $100 million pay package, he declared, "I created six and a half billion [dollars] of value ... I received less than 2 percent of the value I created."
Similarly, Dennis Kozlowski, the indicted former CEO of Tyco International, was asked to justify his $170 million pay package in 1999, which was second on the annual Businessweek executive compensation list. He responded, "I created about $37 billion in shareholder value." There was no mention of the share of wealth created by the company's other 180,000 employees.
The operative word in each of these stories is I. Not one of these modern-day CEO heroes mentioned the share of wealth created by the thousands of employees at his company. To acknowledge the other people and the complex factors contributing to the CEOs' wealth might loosen their claim to bloated compensation packages.
To understand the ideological turn the self-made myth has taken in recent decades, it's helpful to look at the recent popularity of the writings of novelist Ayn Rand among conservative ideologues. While economists like Milton Friedman drove the rightward shift on the academic side, Rand's novels, most notably Atlas Shrugged, provided the narratives, complete with heroes and villains, that are essential to cultural myth-making.
It's hard to overestimate the significance of Rand's writing in guiding far-right thinking in the United States. Congressman Paul Ryan stated in an ad, "Ayn Rand more than anyone else did a fantastic job of explaining the morality of capitalism, the morality of individualism, and this to me is what matters most."
Stephen Moore wrote in the Wall Street Journal, "Some years ago when I worked at the libertarian Cato Institute, we used to label any new hire who had not yet read Atlas Shrugged a 'virgin.' Being conversant in Ayn Rand's classic novel about the economic carnage caused by big government run amok was practically a job requirement."
In an on-air rant, Rush Limbaugh echoes Rand—whom he calls a "brilliant writer and novelist"—arguing, "When you vote for politicians who take from your back pocket to give to others, you think it's compassionate, you think it's caring? It's not. It's depriving the recipient of his own quest for self-interest." The quest to serve one's own self-interest above all else is a central tenet of Rand's philosophy.
The popularity of Rand has seeped into the Tea Party movement as well. The Christian Science Monitor writes, "At tea party meetings in September, Rand's name competed in popularity with Jefferson. Some demonstrations even started wiTha reading from Atlas Shrugged, which was coupled with the declaration that this book should be treated as 'America's Second Declaration of Independence.'"
Like the propagandists of the nineteenth century, there are those who are doing all they can to spread the Rand worldview, including the banker John Allison, former chair of BB&T Company. According to a recent Bloomberg article, "Allison, working through the BB&T Charitable Foundation, gives schools grants of as much as $2 million if they agree to create a course on capitalism and make Rand's masterwork, Atlas Shrugged, required reading." Despite the objections of professors and others who are concerned about the power of wealthy donors to dictate course curriculum, at least 60 schools, including several major universities, have accepted the grants and are now teaching Rand's work.
The cumulative effect of this recent interest, along with Allison's bankrolling, can be seen in the sales figures for Atlas Shrugged. Though the book has sold 7 million copies since it was first published in 1957, an astounding 500,000 of those copies were sold in 2009 alone. That was twice the previous annual sales record set in 2008.
So who is Ayn Rand, and what did she stand for? Whereas Horatio Alger embodied the self-made man myth of the nineteenth century, perhaps Ayn Rand best captures that myth taken to its extreme in the twentieth and twenty-first centuries. While both authors lifted up the accomplishments of the individual with a blind eye to the contributions of society, they differed in significant ways, most notably in their views of altruism and religion (Rand abhorred both). Unlike Alger, Rand argues that any exertion of effort to serve others, whether God or the community at large, is a violation of the moral obligation to seek one's own self-interest above all else.
Despite the controversial nature of Rand's writings on morality, her view of entrepreneurs and industrialists has grown in popularity and captures the self-made man story taken to its extreme. In Atlas Shrugged the industrialists and the business leaders, fed up with what they view as government intervention and meddling in their affairs, ironically go on "strike," retreating to a secret hideaway. In the subsequent years, the nation descends into chaos and riots as the economy, absent the leadership of these great men, grinds to a halt. Eventually, after the world has learned the folly of its ways, the industrialists return from their secret hideaway.
The essential message of Atlas Shrugged is that our nation owes a debt of gratitude to the heroic entrepreneurs, business leaders, and industrialists whose ingenuity, brilliance, leadership, risk-taking, and hard work are the wellsprings from which all prosperity flows. Without them our nation would fall apart. Government gets in the way or, worse, saps private-sector productivity through public policies to protect and benefit the undeserving.
Recent statements from the likes of House Republican Conference Chairman Jeb Hensarling (R-TX) echo Rand's worldview: "Americans know full well that you can't help the job seeker by punishing the job creator." Embodied in that statement is the glorification of business leaders as "job creators" as well as the subservient relationship the rest of America has to them. It captures the essence of the world described by Rand, a world that consists of two basic groups: industrious job creators and everyone else.
Excerpted from The Self-Made Myth by Brian Miller Mike Lapham Copyright © 2012 by United for a Fair Economy. Excerpted by permission of Berrett-Koehler Publishers, Inc.. All rights reserved. No part of this excerpt may be reproduced or reprinted without permission in writing from the publisher.
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Table of ContentsForeword by Bill Gates, Sr.
Foreword by Chuck Collins
Introduction: Public Policy and the Success Narrative
Chapter 1–The Self-Made Myth
Origins of the Self-Made Myth
Modern Myth and the Titans of Industry
Fueling an Anti-Government Narrative
Chapter 2–Busting the Myth
Making the Invisible Visible
Donald Trump: FHA Housing, Imminent Domain, and Bank Bailouts
H. Ross Perot, Sr.: Medicare, Medicaid, and the Right Connections
Box: Social Mobility and the Rags to Riches Story
Koch Brothers: Money, Power, and Public Subsidies
Summary: Cleaning the Slate
Chapter 3–The Built-Together Reality of Individual Success
Roots of the Built-Together Reality
The Role of Individual Effort and Leadership
Unequal Opportunities and Historical Timing
Society’s Contributions to Individual Success
Chapter 4–Stories of Success and the Common Good
About the Profiles
Jerry Fiddler: “Public support for education helped get me where I am.”
Glynn Lloyd: Food safety inspections help me and my customers
Reality Check: Highways and Transportation
Thelma Kidd: Taxes are just the price of doing business
Warren Buffett: “This Society Disproportionately Values What I Do Well”
Martin Rothenberg: “My Success was Paid For by Others”
Box: Higher Education and Individual Success
Kim Jordan: The idea of a self-made person is ridiculous.
Anirvan Chatterjee: Leaving the ladder down behind him
Reality Check: Building the Internet
Peter Barnes: Wealth Comes Out of the Commons
Amy Domini: Regulation Makes My Industry Possible
Reality Check: Government Regulation in Finance
Nikhil Arora: “It Takes a Village to Raise a Business”
Ben Cohen: “Holding the Business in Trust for the Community.”
Gun Denhart: “There’s No Way I’ve Done This By Myself.”
Reality Check: Technical Innovation, Research, and Development
Abigail Disney: Wealth and the Next Generation
Jim Sherblom: What Will Our Economy Offer for the Next Generation?
Chapter 5–Policy Implications and the Public Investment Imperative
Shifting Perspectives and the Built-Together Reality
A Note on the Role of Government
Tax Policies for the Built-Together Reality
Investing in America and Paying it Forward
Ensuring the Framework of the Economy is Fair
Conclusion: A Call to Action
Using Your Voice
Responsible Wealth in Action
About the Authors
About Responsible Wealth
About United for a Fair Economy