Ira M. Millstein

The Curse of “Short-termism” in America, Part II

VTR Date: November 12, 2011

Corporate attorney Ira Millstein discusses American business and corporate governance.


GUEST: Ira M. Millstein
AIR DATE: November 12, 2011
VTR: 09/21/11

I’m Richard Heffner, your host on The Open Mind.

This is the second of a series on the curse of short-termism in America. Once again my guest is Ira Millstein – my Columbia classmate and hugely successful corporate lawyer friend who looms large in America’s high-flying legal circles as the Dean of Corporate Governance.

Now Ira was quoted recently as finding his views radicalized by the teaching he does at Columbia and Yale where until the recent economic crisis most every student planned on entering the financial sector. But now he figures maybe only 30%.

What he has heard in virtually every class since the crisis began, he says, is “How could this happen and no one gets blamed?” They ask where were the Boards, auditors, rating agencies and regulators? Where was everybody else who was in the game? Why, they ask, is no one penalized?

Well, last time I asked my highly placed guest what in the world he tells them? And now let’s go on from there. Indeed, Ira, in talking about what you tell them … we got to the point where you said in response to my question about – you mean we should be saying, “I’m made as hell and I won’t take this any longer?”

MILLSTEIN: Good summary.

HEFFNER: You said “Yes”.

MILLSTEIN: Yes, indeed.

HEFFNER: Well why haven’t we gotten up on our hind legs and said just that? I, I, I read a piece – if you don’t mind my, my quoting … a very informal piece that you wrote about nostalgia. You said nostalgia is good. And it is good. And you looked back to when we were kids. You looked back to what our families suffered in the great Depression.

And you talked about the reaction of that time. “My nostalgia tells me that what happened in 2007 and 2008 was not a lot different from what happened at the beginning of the great Depression. The difference to me is that nostalgia reminds me that the country was angry enough to elect Roosevelt and bring about dramatic changes in government regulation of the elite. Whereas today, there is no such reaction and I wonder why there is such a collective memory lapse.” What’s your answer to your own question?

MILLSTEIN: I, I … I still wonder why, Dick. I … it’s very hard for me to, to figure out what, what the apathy is about. I think in my going around talking to people I sense a feeling of helplessness on, on the part of people.

In the ‘30s people looked to the government for solutions. The private sector had failed miserably in the late ‘20s and early ‘30s and it was obvious that they had failed miserably – fraud, deceit, stock market corruption – one thing after another. Everybody knew that the private sector had done very badly. The Pecora Commission had absolutely torn it apart and shown exactly what happened. So the country knew that the private sector was a flop. And yet had confidence that there was a government that might pull them out of it.

I don’t see today any confidence that we have a government or that people recognize that there’s a government who might pull them out of it. Quite the contrary. You have the Tea Party saying get rid of the government. Did they forget that in 1930 the government solved this problem over and over and over again. You know, Roosevelt never really stopped the Depression as such but he had people hopeful and working and thinking about different – he tried everything under the sun to get it going.

I mean recently I was out at Hoover Dam and I said to myself they did that in the ‘30s. Can you imagine people working for $4 a day and building Hoover Dam – changing the history of four states including Old California and providing water as far south as Mexico? We did that. The United States government can do that. And only the United States government can do that. I have great confidence in our government. It’s what pulled us out of all sorts of things.

Today the mantra is the government is miserable. Everybody is terrible. The Republican Party – well, bless them – miserable, get rid of them, level government, get rid of spending, don’t do these things, don’t build and restructure America, don’t do any of those things.
So people are looking and saying who do you turn to? Who’s going to get us out of here? Private sector failed. We know that. And nobody’s looking at the financial sector as heroes any more, I don’t believe. I think they’re looking at them as people who made a lot of money and continue to make a lot of money … not as much as they did before … and maybe in the coming years not as much … maybe never as much as they did before. Because the regulations are starting to bite.

That’s that’s not bad. I’m not worried about them. Nobody is selling their houses Amagansett. It’s fine. And they should. Fine. Let them do whatever they’re going to do. But we shouldn’t be the tail on that dog. We should be thinking about what do we need to do to get this country back on track again.

And we’re not looking to the government. We don’t trust it. I do. But I’m the only one apparently (laugh) who says we need the government to get us out of this. I’m willing to spend money. I’m willing to go more deficit. I’m willing to see restructuring. I want to see all of that. It’s the only thing that’s going to get us out of here. But if you talk to the bulk of America, somehow or other, they’ve been blinded and beaten into believing the government’s bad.

HEFFNER: Blinded and beaten. I think you’re quite correct. And the suggestion has been made that since the Roosevelt revolution it turned out that it wasn’t that much of a revolution in terms of long-term.


HEFFNER: You know, I wrote a little book A Documentary History of the United States in 1952 and I accepted what we had been taught … there was a permanent revolution.


HEFFNER: And in revising it the other year with my grandson, I apologized …


HEFFNER: … for having believing … for having believed it and written that and having believed it. No permanent revolution …

MILLSTEIN: No, it wasn’t.

HEFFNER: … because the New Deal hadn’t taken place.

MILLSTEIN: Well, not only has the New Deal not taken place. But don’t forget … the beginning there was no conspiracy. But there was an anti-Roosevelt who was a Socialist at best and probably a Communist bloc that really felt this man was ruining America and changing it from a capitalist country to a socialist country and that that was a bad thing.

And they created think tanks. And there were all sorts of opposition. And it was well paid for. You know, there have been books written about it. This is not my imagination. It’s true. It happened. And it just happened that there was this bloc building up that said government’s no good … – we have to prevent this socialism from grabbing America and blah, blah, blah.

And you know what? Gradually, Dick, that took hold. It took hold in Chicago School … it ultimately took hold in the Chicago School of Economics – that the market would solve everything. The market would self-correct. We didn’t need regulation. We didn’t need anything. We didn’t need antitrust. We didn’t need any of those things because the market would self-correct.

I remember arguing with Bill Baxter, the head of the Antitrust Division at the time, who said, “You can predict the market like it’s a law of physics – it will always self-correct.” And I burst out laughing and he go angry at me, but that’s beside … the point is that up until this crisis we were in the grips of an economic theory that said the market will always cure everything and you don’t need regulation and the government isn’t necessary.

And somehow or other that became the collective mantra. Everyone believed that. It’s only now that you have good economists beginning to turn around and say wait, wait, wait … that doesn’t work, it didn’t work.

Look what happened when we just let the market uber alles. We had this collapse of 2007. No regulation. No government looking at anything. Nobody looking to see what was being done. Just letting go.

HEFFNER: But are you saying that’s not now? The prevailing sentiment.

MILLSTEIN: What I’m saying … No … I am … I don’t know what the prevailing sentiment is. I know that there is now a state of confusion in the economics world of the great thinkers and the people can hopefully lead us out of this by finding another way than just letting the market run rampant. The market … sure … we need a market.

But we also need regulation. And we need controls over that market. And for 40 or 50 years we gradually destroyed those controls. Glass-Steagall was absolutely the end. When they reformed it … reformed it (laugh) … when they changed it … that was the end of any form of regulation. Banking could get together with investment banking and you had colossal firms. Fine. That’s capitalism at work.

But who changed that law. It was intense lobbying by the financial sector that did it. And incidentally it was probably gone by the time they did it – there had been so many loopholes. But the point is that we were in the grips of this market theory, we deregulated it … led to 2007, now the really good economists and there are lots of them, Stigletz and others, are really thinking through the problem and saying “Wait, that didn’t work. And, yeah, some of us were all in that direction, but that doesn’t work. So we’ve got to rebalance this thing and begin to think about bringing the government back into regulation ,,, into some kind of control over the market because somewhere in there there’s a balance between markets which should work and government which sets the boundaries within which the markets work.”

And good thinking is going into that. And I think we’re going … and that’s why nostalgia is so good. In thinking about today I went back and read Christopher Stone and Daniel Bell – these are all in the ‘70s and ‘80s – and they were talking about a pragmatic approach to government … a pragmatic approach to economics – mainly there are no ideologies that are the magic bullet. There’s no ideology that wins it all. Totally regulation – no good. Total market – no good. Somewhere in between, as Kennedy said we have to find pragmatic solutions to very complex problems.

HEFFNER: Ira, what’s more pragmatic than measuring your bank account at the end of the year? So think of all these people who we know did not suffer the way the middle class did in the last few years.


HEFFNER: And each year, pragmatically, they add it all up and they’re doing better and better not worse and worse but better and better. So pragmatism at what level? For whom?

MILLSTEIN: But those people – they don’t run the world.

HEFFNER: They don’t?

MILLSTEIN: They did up to now. That’s what I’m saying. You have to have a new resetting of goals. They ran the world up to now because we were convinced that that theory was right. That total freedom in the market was the way to go. Total ups of compensation was the way to go. We know now that’s not the way to go. And we know that they are a small segment.

HEFFNER: Ira, come on. We know. You and I know sitting here. But are you telling me that with all of the efforts successful that have been made to limit the impact upon the fundamental change that you thought would do some good … the Dodd-Frank reform, so called . . .

MILLSTEIN: Do I think those are going to change the game … no. I’ve said before and I’m saying that what will change the game is if enough of us


MILLSTEIN: … are angry enough to say we don’t want ideologies. We want practical solutions. Enough of us have to get there. I mean this is a world … I think somebody called it a rollicking sea of checks and balances. That’s the world I want to live in. Where ideologies drown in that sea. That’s what I want to live in … and I think, I … and academia is heading in that direction.

I know that because I’m starting projects at Columbia and working up there. I know pragmatically people are thinking about okay, we, we know … we can’t buy these ideologies any more. They don’t work as such. But we can think about them and find a pragmatic balance if we can.

And I think people are working at solving problems. I think academia, at least in my opinion, those parts of academia at our old alma mater are working in that direction. They’re looking for pragmatic solutions. And I think the problem I see … I think academia is going in that direction.

I don’t see our Congress going in that direction. The question is how to we get from the thought leaders who are encased in the ivy halls back to where it counts – namely who’s working in Washington.
HEFFNER: Do you see the world of finance moving in that direction?

MILLSTEIN: No. I see the world of finance protecting itself as one would expect. They will lobby heavily against any changes which impinge on them. That’s what they do for a living.

HEFFNER: My understanding – and you can bear it out or contradict it … is that they’ve been quite successful … even in the last year.

MILLSTEIN: Even in the last year. But again, Dick, why is that true? Where are the rest of us. Yes they’re lobbying. Yes they’re spending millions dollars. But where is a countervailing force? Where is somebody saying this is terrible? I mean yes, The New York Times writes an editorial every now and then which a few people read but who else is trying to say, “Wait a minute – where is everybody? Where are you people? You’re never heard.

HEFFNER: OK. What’s the answer? Come on. You’re the smart man here. That’s why you’re sitting there and I’m asking the questions.

MILLSTEIN: I, I … damned if I know. I really feel we need a Roosevelt. I think we need a leader. I had once thought that the President was going to be that leader but he hasn’t, he somehow or other he hasn’t connected. He hasn’t been able to convince people that this is a radical change that’s needed … that we really have to stop thinking the way we did and start thinking …

Now he’s going for the Buffet tax. He should have done it 3 years ago. I mean … finally Warren Buffet gave him a peg to hang his hat on. I’m not being critical of him – he’s a politician, he wants to get re-elected. I didn’t think that was who he was. I was hopeful that he would be better than that. But he’s like all the rest of us. He wants his next job.

The problem, the problem is where are we generating enough excitement and anger about where we are to countervail the money that’s being poured into Washington to lobby against it.

HEFFNER: Okay. The question must be what has to happen? One would have thought that it would have been what’s happening in the unemployment situation that would have riled us up. But it’s not.

MILLSTEIN: Dick, I know … I wish, I wish I could tell you that I know that if we did the following four things that life would change. I can’t. I like to do . . .

HEFFNER: Do you think that it’s because maybe we haven’t really suffered enough …that there’s enough still left of the safety net, so called.

MILLSTEIN: It’s possible. And I, I have the feeling that if this recession continues for any length of time maybe, maybe, maybe everybody will wake up and say we have to change something. It may be that the safety net has done it but I can’t believe that’s true. I mean middle America is hurting. Badly. I know that and you know that. It isn’t just yes, the rich are doing fine and the poor are poorer than they ever were. But there’s the rest of us here in the middle that’s really hurting.

HEFFNER: So it must …

MILLSTEIN: Why are all the stores closed? Why aren’t people going out to eat at night? Why are the theaters not altogether full? Things are … why is every store in Larchmont closed? Why in Mamaroneck are things not great? Why when you walk down the main street in Rye in the areas where I live – supposedly wealthy areas – store after store is closed. The little people are not able to stay in business.

HEFFNER: So the assumption must be then that when it all comes down and down and down and further down and it really hurts …we’ll have an explosion.

MILLSTEIN: That would be horrible but it’s a possibility because I don’t see anything happening that leads me to believe that tomorrow … the soon tomorrow is going to be a lot better than it is now. I keep my fingers crossed that it doesn’t get any worse. But I’m not confident and my son who is very busy in Washington – he thinks it’s going to get worse. Lots of people think it’s going to get worse.

I pray that that doesn’t happen. But if it does and if it gets worse or if it continues for a very long period of time, it may be that people will turn again and have confidence in the government and put people in Washington who don’t respond just to lobbying but respond to what I want and you want and most of the people in America want.

It’s incredible that 70% of America would like to see the taxes on the rich go up and it won’t happen. Why? I mean how, how is that possible? There are at least 70% of America that believe the rich ought to be taxed including me. I mean I believe in it. And I will be taxed higher. And I think it’s the right thing to do. I’m no Warren Buffet but I’d like to pay more than I pay. I really would.

Everybody believes that. It won’t happen. It won’t happen because the lobby is so strong. Now sooner or later than dam has got to bust. I believe that.

HEFFNER: You think it can bust and as you put it … in the face of Supreme Court decisions that . . .

MILLSTEIN: They don’t control America. I mean, come on. Now …

HEFFNER: But the lobbyists and the contributors do, you’re saying.

MILLSTEIN: I … I understand that there is an unlimited amount of money that goes into it … but again, again some people on the other side are beginning to demand that management disclose where they’re putting this financial money on lobbies. That’s good. And that’s causing big companies to think. And there have been companies who are lobbied against because they put money into things that the people who buy from them are not excited about. That’s the way to build a little backlash against that kind of lobbying. Get it out in the open. Get it transparent. Make them disclose who they’re giving money to and often the people who buy from them are going to find out they’re giving money to people who are not necessarily in their interest.

HEFFNER: You know I would be remiss if – we have maybe 10 minutes left or so …if I didn’t go back to the beginning of our first program in this series together and pick up questions that you raised – not intentionally …you were talking about human behavior …


HEFFNER: … talking about well that’s the way we’re like … talking about grabbing the most you can. Doesn’t that mean an end … that recognition mean a call for an end to the notion of the invisible hand to the marketplace idea itself. Not of modification – which might work for awhile. But if you’re saying the nature of human nature is to grab the most you can for yourself …

MILLSTEIN: Well, I don’t believe that completely. I think people do act irrationally and very often will do things that are right not just because they want to make more money. I do believe that there’s an essential goodness in people and I do believe that most people know right from wrong.

Which leads me to tell you about where one of our classes wound up. And they wound up by saying management and Boards ought not to be punished for what happened and so on because nobody’s at fault. But did they think about the consequences of what they were doing. Now think about that. If you could be somehow or other pilloried, not financially but pointed out transparently by your peer group or whatever that you did something without even thinking about the consequences of what you were doing …did the people who wrapped up these mortgages think about the consequences of what . . . So my class went to work trying to think of what they could build into the system that would somehow or other make transparent people who didn’t think about the consequences of what they were doing and where the consequences really turned out to be material risks that shouldn’t have been taken.

And I know … I cottoned to that a lot and I assigned them all a job of saying okay tell me how you do it. And some of them came up with very innovative suggestions as to how you could hold people a little more responsible for not thinking about the consequences of what they’re doing.

Now we don’t, I don’t believe that we only respond to the profit motivation. I think a lot of us think about the consequences of what we’re doing and maybe refrain a little bit from doing that. But this gets into moral philosophy and how I teach people. I don’t know how to do that. All I can do is class by class try to get them to think about it and try to get them . . . It works. I can’t teach the world but a few people go out.

HEFFNER: You say it works. You mean get some thinking along these lines.

MILLSTEIN: No. I have gotten years later letters back from people who were in the class saying you know I’m really glad I took that course. It makes me think every time I do something.

HEFFNER: Ira, what we’re going to do is have our audience marching off to Columbia to get into your . . .

MILLSTEIN: I would like that very much but I’m not a rabbi. I don’t know how to teach people to do the right thing.

HEFFNER: Hey. But I remember – that’s interesting. I’m not a rabbi. But I remember the first program we did all those years ago. You said the Hebrew prophets or at least a Hebrew prophet …


HEFFNER: … had pointed the way to a better, a more moral approach to the market.

MILLSTEIN: Yes. And it’s true. They have. And so did Chris Stone and so did Daniel Bell and so did lots of other people. There’s a, there’s a wealth of learning and information out there about people … how to behave better and think about the consequences of what you’re doing. And teaching that at the major universities, the colleges we love, is important. I think that this is something that has to be – we’re not going to change the world tomorrow, Dick.

But it seems to me that the major universities should be thinking about starting this. The major graduate schools should be thinking of making these kinds of questions – namely consequential action – part of the curriculum.

HEFFNER: But how do explain then the academy award winning film …what was the name …the short film which showed at length the involvement of many of our academic friends?

MILLSTEIN: I think it embarrassed the hell out of them. And I think it’s caused a change in academia. I really do. I think that film was marvelous because it really displayed the fact that so many of our academics …not all of them …but many of them may have had internal conflicts. Maybe they weren’t bought and paid for but if they were on many Boards and so on their thinking may have been somehow or other influenced by that.

And yet it’s hard for me and you to turn to our academic friends and say don’t make a living – stay off Boards – don’t do anything – make $100,000 a year and let it go at that – take a nice academic and live in your . . . It’s hard for us to do that. So, again, I think, I think these great professors have to think about the consequences of what they’ve done. Did they like being on television and were in that movie and having it exposed that they were all on Boards – I don’t think so. So they didn’t think about the consequences of what they were doing. And I think we need to create a generation of people who, who think better. I hope, I do hope we can start this educational process. I don’t see it happening but I do hope we would start our great universities taking more interest in teaching morality and teaching consequences and teaching something other than making a buck.

HEFFNER: And you seem to feel that full disclosure is a key to all of this.

MILLSTEIN: Transparency. Sunlight. You remember. Sunlight cures all evils. It does. If you have to disclose what you did. How often on this program people said would you do that in front of your mother? And so this is the concept. Or would you do that in Macy’s window? I think transparency and disclosure of who we are paying off and what you’re backing and what you’re doing and what are the consequences of what you, did is the best thing of all and maybe to get people turned around a little bit.

HEFFNER: Now this is prophecy on your part?

MILLSTEIN: No. It’s a prayer. It’s not prophecy. I don’t know, Dick, and we’ve said this three times now. I don’t know how exactly to turn it around. All I know is that we need to turn it around and it’s not going to be with Dodd-Frank or some regulation. It’s going to be changing the way people think and getting them angry enough to know that they have to change the way they think.

HEFFNER: And that seems to me to be a perfect way to end the program. Thanks for joining me again today.

MILLSTEIN: It was a pleasure.

HEFFNER: And thanks too to you in the audience. I hope you join us again next time. Meanwhile as another old friend used to say good night and good luck. And do visit The Open Mind website at to reprise this program online right now or to draw upon our archive of 1500 or so other Open Minds and related programs. That’s