That Used to Be Us: How America Fell Behind in the World It Invented and How We Can Come Back

by Thomas L. Friedman

  The third shift in values is a weakening of our sense of shared national purpose, which propelled us in—and was reinforced by—the struggle against fascism in World War II and against communism in the Cold War. As we have emphasized, although the Cold War had its dangers and excesses, and although no one should wish for its return, it did bring one benefit, whose importance becomes all the clearer in hindsight: It fostered a feeling of American solidarity, a shared sense of the national interest, as well as a seriousness about governance, which could rally the country to do important and constructive things at home and abroad.

  Every one of us has a friend who looked great in high school, maybe even quarterbacked the football team, but over the years put on more and more weight, so that at the high school reunion, when he walked through the door at the hotel, everyone smiled politely while muttering under his or her breath, “Wow, he really let himself go.” That was America after the end of the Cold War: lots more gadgets, and much bigger houses, but so much of it bought with liar loans, bailouts, stimulus, cheap credit, and more tax cuts with money borrowed from China and from the next generation. We really did let ourselves go …

  “Don’t pretend we didn’t see this coming for a long, long time, the writer Kurt Andersen observed of this era in a Time magazine article (March 26, 2009), which he later turned into a book called Reset: How This Crisis Can Restore Our Values and Renew America.

  In the early 1980s, around the time Ronald Reagan became President and Wall Street’s great modern bull market began, we started gambling (and winning!) and thinking magically. From 1980 to 2007, the median price of a new American home quadrupled. The Dow Jones industrial average climbed from 803 in the summer of 1982 to 14,165 in the fall of 2007. From the beginning of the ’80s through 2007, the share of disposable income that each household spent servicing its mortgage and consumer debt increased 35%. Back in 1982, the average household saved 11% of its disposable income. By 2007 that number was less than 1%. The same zeitgeist made gambling ubiquitous: until the late ’80s, only Nevada and New Jersey had casinos, but now 12 states do, and 48 have some form of legalized betting. It’s as if we decided that Mardi Gras and Christmas are so much fun, we ought to make them a year-round way of life.

  This is not the place to undertake a comprehensive review of all the norms that have underpinned American society. Nor do we believe that the core values responsible for American greatness over the decades have disappeared. To the contrary, we are confident that they can be revived. They do, however, need reviving.

  Jerry Maguire

  The first shift, from deferred to instant gratification, from a long-term to a short-term perspective, has been described by Dov Seidman, the CEO of LRN, whose book How explores how values issues play out in the business world. In Seidman’s view, two competing kinds of values animate business, government, leadership, individual behavior, and relationships. He calls them “situational values” and “sustainable values.”

  Relationships propelled by situational values, he says, involve calculations about what is available in the here and now. “They are all about exploiting short-term opportunities rather than consistently living the principles that create long-term success. They are all about what we can and cannot do in any given situation.”

  Sustainable values, by contrast, are “all about what we should and should not do in all situations.” As such, they literally sustain relationships over the long term. Sustainable values, according to Seidman, are the “values that connect us deeply as humans, such as transparency, integrity, honesty, truth, shared responsibility, and hope.” They are therefore “all about how—not how much … Situational values push us toward the strategy of becoming ‘too big to fail.’ Sustainable values inspire us to pursue the strategy of becoming ‘too sustainable to fail,’” by building enduring relationships. As the collapse of major Wall Street banks such as Bear Stearns and Lehman Brothers has demonstrated, Seidman explains, “What makes an institution sustainable is not the scale and size it reaches but how it does its business—how it relates to its employees, shareholders, customers, suppliers, the environment, society, and future generations.”

  Just how far Wall Street drifted into situational values came out in some of the congressional hearings about the causes of the 2008 subprime crisis. On April 27, 2010, Senator Carl Levin (a Democrat from Michigan) questioned the Goldman Sachs CFO David Viniar about e-mails in which Goldman bankers described bonds they were selling to their customers as “crap.”

  Sen. Levin: And when you heard that your employees in these e-mails, in looking at these deals, said God what a shitty deal, God what a piece of crap, did you feel anything?

  Viniar: I think that’s very unfortunate to have on e-mail.

  Sen. Levin: Are you … ?

  (Laughter)

  Viniar: And very unfortunate.

  Sen. Levin: On e-mail? How about feeling that way?

  Viniar: I think it’s very unfortunate for anyone to have said that in any form.

  Even with Senator Levin’s prodding, Viniar seemed not to realize that the problem was what was said, and the rank cynicism behind it, not the fact that it was put in an e-mail that became public. Goldman had fallen into such situational behaviors—just sell any piece of junk, just get the deal done—that it was ready to injure its own customers. That is about as far from sustainable behavior as one can imagine for an investment bank, and even when it was exposed, the firm’s chief financial officer didn’t get it.

  In his book, Seidman highlights the 1996 movie Jerry Maguire, one of the main themes of which is the conflict between situational and sustainable values. The title character is a big-time, self-centered sports agent who has a sudden moral awakening one night and writes a new “mission statement” for his firm. It proposes that he and the other agents in the firm restructure their business and reduce the number of their clients while better serving the clients they keep. In essence, his message is: Let’s be in it for the long haul and for the right reasons in the right way—let’s behave less situationally and more sustainably.

  Maguire, played by Tom Cruise, stuffs a copy of the new statement in the mailbox of everyone in his firm. The next morning, when he walks into the office, he receives a standing ovation from fellow agents, bookkeepers, and secretaries. His boss, Bob Sugar, played by Jay Mohr, who is grinning broadly, joining in the applause, and giving Maguire a thumbs-up, is asked by another senior colleague, “How long do you give him?” Sugar answers out of the side of his mouth, “Hmmm, a week.” Sure enough, within a week Maguire is fired by Sugar, and his former co-workers move in quickly to strip him of all his clients. His career is devoured by the very situational values he was decrying.

  Seidman notes that the film revolves around a series of personal relationships in which the characters wrestle with the choice between the philosophy of “Just do it!” (just do whatever the situation allows) and the philosophy of “Just do it right” (think and act sustainably).

  For instance, after being booted from his firm, Maguire thinks he has been able to hold on to one big client, a college star, to represent—the prospective number-one National Football League draft choice Frank Cushman, played by Jerry O’Connell. When Maguire goes down South to visit Cush and his father, Matt, played by Beau Bridges, at their small-town home, they make an ostentatious handshake deal and the father says that a written contract confirming that Jerry represents his son isn’t necessary. “My word is stronger than oak,” Matt tells Jerry. A few weeks later, though, at the NFL draft, Sugar swoops in and steals Cush away from Maguire, simply because in that situation he was able to engineer a better deal, or so he claimed. And anyway, Cush and Maguire had no contract, only a handshake. Maguire confronts Matt and tells him how disappointed he is.

  “I’m still sort of moved by your ‘My word is stronger than oak’ thing,” Maguire seethes.

  At that point, Maguire is left with one employee ready to work for him, the sweetly sincere secretary Dorothy Boyd, p
layed by Renée Zellweger, who is swept off her feet by Jerry’s sustainable-values pitch, and one athlete ready to stick with Maguire, the demandingly sincere football player Rod Tidwell, played by Cuba Gooding Jr. Tidwell, for all his focus on money, is also bound to Maguire by something intangible, something, well, sustainable. Tidwell and Boyd represent the opposite of Cush and Sugar—loyalty in the face of hardship. There is no more sustainable value than that. This contrasts with opportunism in the face of hardship. There is nothing more situational than that.

  Jerry Maguire became one of the top-grossing films of all time because, Seidman argues, “it struck a chord in people tired of cutting corners. We were in the ‘Just Do It’ decade. The world was accelerating rapidly and ‘Just Do It,’ the advertising slogan of the sports shoe manufacturer Nike, captured the self-centered zeitgeist of the decade.” It was the decade when Nike’s most famous representative, Michael Jordan, turned professional basketball from a contest of cooperative, closely integrated five-man teams into a stage for individual athletic virtuosity. The spirit of the age also infected business. Managers, Seidman said, under pressure “to answer the short-term demands of an increasingly insistent capital market, looked for shortcuts and easy solutions, managing for the here and now in ways that often neglected long-term goals.”

  In the decade after the release of the film, the drift from sustainable to situational values helped to trigger America’s worst economic crisis since the Great Depression. From Wall Street to Main Street, far too many Americans abandoned the save-and-invest mentality of their Depression-era parents for what became the prevailing ethos of the day, which bankers call IBG/YBG: Get whatever you can now and either “I’ll be gone” before the bill comes due or “you’ll be gone” before you really have to pay the piper.

  This was at the heart of the subprime-mortgage mess. The mortgage broker who first sold a family a subprime mortgage and then passed it off to a bigger financial institution, such as Fannie Mae or Citibank, knew that he would be “gone” if and when the family buying the mortgage defaulted. No problem—his firm would no longer own the mortgage: Fannie Mae or some investment bank in Iceland would own it. So there was no risk for him personally in signing up high-risk home buyers who were sometimes actually encouraged to lie about their incomes—or lack of them. The broker told the family assuming the mortgage that the same was true for them: If they couldn’t meet the monthly payments when they started kicking in, no problem. Just walk away from the property—“you’ll be gone”—or sell it for a profit because, as we all “knew” at the time, housing prices would keep going up forever. They would never go down.

  The rating agencies, whose fees and incomes depended on how many of these subprime mortgage bonds they got to rate, had an incentive to give them high ratings so they would sell more easily, leading more investment houses and banks to want to use their rating services. And if those bonds blew up, well, said the raters, IBG—“I’ll be gone.” The investment banks had a great incentive to bundle more and more mortgages into bonds and sell them all around the world because the commissions were huge and, as long as they didn’t hold too many on their own balance sheets, if they blew up, who cared? IBG—“I’ll be gone.” IBG and YBG, the essence of situational thinking, became the order of the day, while sustainable thinking—“I will behave as if I will always be here to be held accountable”—went out the window. No one summed up this attitude better than former Citigroup CEO Charles Prince, who told the Financial Times (July 9, 2007) just weeks before the credit markets entered their subprime death spiral, “As long as the music is playing, you’ve got to get up and dance.” And when that situational music was playing, far too many Americans, from Wall Street to Main Street, got up and danced.

  What started in the 1980s with home entertainment systems for nothing down and nothing to pay for thirty days reached its ultimate conclusion in the Terrible Twos: the American dream—a house and yard—for nothing down and nothing to pay for two years. When in our history was the American dream ever so cheap? Never, and as things turned out, it was not so cheap this time, either. It all turned out to be an expensive illusion.

  Seidman argues that this was all possible because we created, first in our own minds and then in our actions, two different worlds in which we operated. He illustrates the point with a reference to the scene in The Godfather in which Sal Tessio, having plotted the assassination of Michael Corleone, the head of the Corleone crime family, is discovered and sent off to be killed himself. Before his execution, Tessio asks Tom Hagen, the family’s trusted adviser, to tell Michael that he had not been planning a personal act of vengeance. “Tell Mike it was only business. I always liked him.”

  We did the same thing, according to Seidman. “We created a separate sphere where we could behave situationally. The business world became that sphere. All those subprime mortgages—they were ‘only business.’ The idea was that there was an amoral space where as long as you were not breaking the law, your only responsibility was to ‘shareholder value and pursuit of profit.’”

  The damage inflicted by the rise of situational over sustainable values has affected public life as well. The short-term, me-first, never-mind-the-future attitude that did so much harm to the country’s financial system also obstructs the necessary responses to America’s major national challenges. Reinvesting in our formula for greatness—in education, infrastructure, and research and development to assure continuing economic growth and a rising standard of living—making broadly shared short-term sacrifices to reduce the federal budget deficit so that future generations are not burdened with huge debts, and cutting back carbon emissions today to mitigate climate change in the years ahead, all qualify as sustainable policies. The baby boom generation, in thrall to the situational approach to the world, has failed to undertake them.

  Delaware governor Jack Markell spelled out the negative consequences of the shift from the Greatest Generation’s sustainable outlook to the boomers’ emphasis on the short term: “People acted as though they forgot that we owed at least as much to the next generation as to the current one. Lots of politicians argued that cutting taxes was the right thing to do because it gives people money back that actually belongs to them. What they weren’t saying, but should have, is that absent spending cuts that nobody wants to make, what we’re really doing is borrowing from our kids to give to the current generation. Not very responsible. Instead of investing for the long term, we focused too much on what will impact the next poll and the next election. Businesses have similar problems when they focus too much on the next quarter. They fail to make the investments they need for long-term prosperity and eventually they die. Government follows this pattern to the peril of all of us.”

  We now have day-thinking politicians trying to regulate day-trading bankers, all covered by people Tweeting, blogging, or commenting on cable TV moments later. When the two powerful forces of technology and markets converge in a way that encourages or even forces everyone to think situationally, it is hard to expect that the society and political system will produce sustainable thinking and outcomes. Everything gets shortened—from the time you are prepared to hold a stock, to the time it takes to form an opinion or fire off a comment, to the time you devote to studying any subject, to the length of time you should take amassing a savings before you buy your own home. When there is no time to think sustainably, it is not surprising that we see so many people acting situationally.

  The Decline of Authority

  At a Tea Party rally in Colorado in October 2010, the Financial Times reported (October 25, 2010), one of the speakers had this to say: “I am not an expert in anything. But look where the so-called ‘experts’ have got us. They are a bunch of liars, crooks, and thieves.” A national poll taken that month found that faced with a congressional contest between someone with experience in the job and a candidate without it, people preferred a novice by 48 to 23 percent. Perhaps this can be chalked up to business—or politics—as usual in the United
States. Politicians as a group have seldom enjoyed high popularity in America, 2010 was a year when many voters were angry, and there is a national tradition, especially when times are hard, of wanting to “throw the rascals out” of office—all of them.

  These days, however, experience and expertise in other areas don’t command much respect, either. In the fall of 2010, Tom met Professor Nicholas Comerford, a soil scientist at the University of Florida and the 2010 president of the Soil Science Society of America, who told him this story: “I have ten acres of land and decided to plant some blueberries this year. There is a Florida cattleman I know, from an old family from the South, who is now in his eighties. His kids won’t let him raise cattle anymore so he went into blueberries instead. I went to pick up some blueberry plants from him to plant on my own land and we got to talking about things. The subject of climate change came up, and he said to me, ‘I don’t believe any of that climate change stuff.’ And I said, ‘Well, we probably disagree on that, but if you like I could tell you what my views are and why I believe in it.’ And he said, ‘No, I’m happy with my opinions.’ Great guy, salt of the earth, but just not interested.”

  Skepticism of expert opinion is always appropriate: It is in fact at the heart of the scientific method. Indeed, a measure of skepticism about all opinions, especially one’s own, is healthy. But in the ever more complicated world we are living in, the professional judgments of experts are, in the end, indispensable. The details of technical and scientific fields lie beyond the easy comprehension of almost all nonspecialists. Such details are like foreign languages, and the rest of us have to rely on experts to translate for us. Otherwise, like travelers in a country whose language we don’t know, we will get hopelessly lost. This is especially true at a time when we have to make drastic cuts in our national, state, and local budgets. We should not simply reduce these budgets across the board. We should do so with a strategy informed by expertise on the world in which we are living and the requirements for thriving in it.