Makers and Takers: How Wall Street Destroyed Main Street

by Rana Foroohar

Is Wall Street bad for Main Street America?

In looking at the forces that brought our current administration to power one thing is clear: much of the population believes that our economic system is rigged to enrich the privileged elites at the expense of hard-working Americans. This is a belief held equally on both sides of political spectrum, and it seems only to be gaining momentum.

A key reason, says Financial Times columnist Rana Foroohar, is the fact that Wall Street is no longer supporting Main Street businesses that create the jobs for the middle and working class. She draws on in-depth reporting and interviews at the highest rungs of business and government to show how the "financialization of America"--the phenomenon by which finance and its way of thinking have come to dominate every corner of business--is threatening the American Dream.

Now updated with new material explaining how our corrupted financial sys-tem propelled Donald Trump to power, Makers and Takers explores the confluence of forces that has led American businesses to favor balance-sheet engineering over the actual kind, greed over growth, and short-term profits over putting people to work. From the cozy relationship between Wall Street and Washington, to a tax code designed to benefit wealthy individuals and corporations, to forty years of bad policy decisions, she shows why so many Americans have lost trust in the sys-tem, and why it matters urgently to us all.

Through colorful stories of both "Takers," those stifling job creation while lining their own pockets, and "Makers," businesses serving the real economy, Foroohar shows how we can reverse these trends for a better path forward.

Genres: Economics, Business, Nonfiction, Finance, Politics, History, Audiobook

400 pages, Paperback

First published May 17, 2016

About the author

Rana Foroohar is the author of Don’t Be Evil, which won a Porchlight Business Book Award, and Makers and Takers. Currently the global business columnist and associate editor for the Financial Times and the global economic analyst for CNN, she has served as the assistant managing editor and economic columnist at Time and an economic and foreign affairs editor and foreign correspondent at Newsweek. She is a life member of the Council on Foreign Relations and sits on the board of the Open Markets Institute.

Reviews

[BlackOxford · Rating 4 out of 5]

The Ideology of Corporate Finance

Around the turn of the 20th century the economic power of the world shifted from capitalists who made things to capitalists who made money. The source of the change was the mid-19th century discovery of limited liability and its rapid dissemination into the corporate legal systems of Europe and North America.

Limited liability, the obligation of corporate shareholders only for their investment in a company and not for further debts of the company, is the foundation of financial power. Ultimately it is what allowed the great robber barons - Frick, Carnegie, Rockefeller - to control enormous corporate resources with very little of their own money.

This sort of control demands some sort of ideology in order to justify itself to those who are essentially its victims. Marx of course wouldn't do. But neither would the theories of liberal economics that presume intense competition among numerous more or less equal adversaries. During the first twenty years or so of the 20th century, just such an ideology began to be formulated. The American economist, Irving Fischer, is its Karl Marx. This is the ideology is Corporate Finance

The point of the new ideology was to provide a socially acceptable rationale for the power exercised by financial interests: commercial banks, merchant banks, insurance companies, but mostly corporate executives of non-financial companies who could personally benefit more from making money than from making things, even if the companies they ran were run into the ground.

The ideology of Corporate Finance got an enormous boost in its credibility after WW II when it became 'mathematicised' as a pseudo-scientific exposition which neatly disguised its purpose. By the 1970's Corporate Finance had escaped from its academic hot house and began infecting all business with its message that economic well-being depended on the "efficiency of capital". And this of course depended entirely on the financial expertise which was only available to those intimately knowledgeable in the ideology.

Makers and Takers is a documentary of the latest triumphs of Corporate Finance. It is depressing reading. Corporate Finance has coopted the entire world, even the Chinese Communist Peoples Republic subscribes to its insane principles under the tutelage of Goldman Sachs and Morgan Stanley [See: https://www.goodreads.com/review/show...].

It has become such a powerful mode of thinking that we no longer notice that it is just that, a way of thinking [See: https://www.goodreads.com/review/show...]. But it is a way of thinking which is explicitly and irrationally meant to benefit just that segment of society against which the electorate has recently rebelled in the USA and Britain. Perhaps there is hope after all.

[Andrew Tollemache · Rating 2 out of 5]

I was really looking forward to reading a good analysis of the perils of financialization, how it came to pass and what can be done about it. Unfortunately, "Makers and Takers" is not that book. Rana Foroohar, who is a long time financial journalist, has written a book that is filled with both factual errors (no, mutual funds were not invented in the 1970s nor did our debacle in Vietnam stem largely from Robert McNamara's background in system and data analysis) and shoddy, shoddy thinking.
Her biggest mistakes are in her reasoning and argument development. Now "financialization" is a fuzzy concept that lends itself to numerous interpretations, Rana just includes just about everything from the "Innovators Dilemma" to general corporate mismanagement. Much can be said in criticism about the drive to literally focus on nothing but the stock price. It often leads to company managements making all types of poor decisions, but many choices that look clear cut and obvious now, were not so clear 20, 20 years ago.
Everyone hates "Too Big Too Fail" in banking, but no one really knows what to do about it. The Modern State has always had a preference for increasing centralization and consolidation in the capital markets so that it can mobilize capital and borrow for its own purposes. Both for warfare and welfare, the Modern State needs to borrow gobs of money. This is an old debate in the US dating back to the 1st and 2nd Bank of the United States. The Civil War ended that debate and for the next 50 years up to the founding of the Federal Reserve saw govts here and abroad move to consolidate and centralize their banking. Frankly as modern states go, the United States has less of a concentrated banking sector than most. She counters that argument by trying to lump in every financial asset people own into tabulating how big the financial sector in the US is, she adds in all real estate, money market and stock holdings. By adding the sum of what everyone owns into what counts as "financialization" she has made the concept meaningless.

[Charles Haywood · Rating 2 out of 5]

Imprisoned inside this book is a good book screaming to get out. Buried alive, like the Man in the Iron Mask, this Hidden Book offers worthwhile insights into, and criticism of, the crony capitalism that has choked the free market out of our finance system. But the Hidden Book has disappeared from view under the crushing weight of authorial ignorance and an idol of, or rather an entire marble temple erected to, Elizabeth Warren. So each time the author of “Makers and Takers,” Rana Foroohar, yet again prostrates herself yet again before her idol, I think I can hear a tinny shriek from the dungeon, as the Hidden Book realizes that its message will never, ever, fly free.

Oh, I had high hopes for this book. Like Diogenes, I have been looking for an honest book on this topic, holding my lamp high, without much luck. Finance is one area I know a lot about, and I am fully aware of the heinous corruption that characterizes the industry. I am also aware that politicians of both parties are cravenly beholden to the interests of the masters of finance, and that nearly all journalists lack the raw intelligence to understand finance or its corruption. Foroohar correctly identifies this latter point, but she incorrectly believes she does not suffer from that lack of intelligence herself. To be fair, she grasps somewhat more than the average journalist, but here, given the critical importance of the topic, that’s no better than being the world’s tallest midget. And so, I still haven’t found a book that approaches the corruptions of finance with both insight and understanding.

More than anything else, what characterizes this book is innumerable well-crafted statements that sound good—but that when you think about them, make no sense. Underneath the dross, the interminable references to the author’s own importance (shown mostly by her constant use of the first person and continually talking about how famous people let her interview them), and the flogging to death of bad metaphors (if I have to hear again about “financial methods of mass destruction,” especially those that also “pour gasoline on a crisis,” I’m going to join the Hidden Book in screaming), there are good points to be made, but I doubt very much if most readers will come away with anything of value.

Ignorance abounds. Foroohar seems unaware that there is any distinction between “small business” and “start-up” business; she uses the terms interchangeably. She says that “accountants, consultants and lawyers” get “between 30 and 80 percent of their income . . . not in cash but in incentive stock options and stock shares,” which would surprise all the accountants, consultant, and lawyers I know. She uses the term “bank” interchangeably for commercial banks and investment banks (and merchant banks), even though she seems dimly aware of the differences. In a book on flowers, imprecision about banks might not matter, but in a book on banks, it muddies a lot of analysis. She refers to “trickle-down” economics as if it were a technical term, rather than a content-free propaganda term. She confuses the incentive effects of stock and stock options (she would do well to read Steven Clifford’s “The C.E.O. Pay Machine”). Her complete list of “large and successful companies” that “in the past few years” have been targets of shareholder activists is “Dell, Yahoo [sic], Dow, JCPenney, GM, DuPont, Sears, and Hewlett-Packard.” To most people, “successful” doesn’t spring to mind, given that list. Foroohar seems to think “making” money is the same thing as revenue. She thinks Kodak’s decline was because it was forced to engage in short-term thinking. She says, out loud, that “the key goal of finance is to move liabilities (like labor costs and factories) off the balance sheet.” That’s not the key goal; making money is. And labor costs are not liabilities; they are expenses, and do not appear on the balance sheet. Plus, anyone who can move factories or other fixed assets off the balance sheet is pretty clever, though why a company would want to do that is opaque to me. The author finds it impossible to understand why “retained profits can’t be written off,” whatever that means. And so on, in amateurish style, throughout.

Leaving sheer ignorance aside, I think many of the book’s conceptual problems stem from Foroohar’s complete lack of understanding about small business. She’s a columnist for London’s “Financial Times,” and her stock-in-trade seems to be interviewing, and generally hobnobbing with, the elites of the journalism and finance world. I doubt if she is personally acquainted with a single person who owns and runs a small business, such as one with 250 employees. Foroohar talks all the time about “real business”—but has no idea what that is. Thus, she fails to make the key point that the zero-interest loans offered to big business, around which much of her analysis revolves, are not only not offered at all to small business, who must pay 5% or more, but that the owners of small businesses also have to personally guarantee any loan, so that they are personally ruined if things don’t go right. She fails to grasp how government regulation, as well as its filthy cousin, frivolous lawsuits, are a crushing burden to small business—and, even more importantly, how big business spends huge money to encourage more regulation, in order to harm small business. (In fact, commercial banks are among the worst offenders in this area.) Yes, she pays lip service to the need to loan to small businesses—but she doesn’t seem to understand how that actually works, and that it’s larger factors that dictate whether small business wants to accept loans, or would rather fold its tents and go home. It’s not as simple as “big banks prefer not to lend to small businesses.” Similarly, she nods to the overall desirability of encouraging entrepreneurs, yet seems to have no idea what exactly they are or how to please them.

Anyway, “Makers and Takers” is organized in ten chapters, in each of which Foroohar in turn trains her (squirt gun) fire on a different area of the finance industry. Threaded through every chapter, though, are a few key points, varied somewhat from time to time, embodied within Foroohar’s all-purpose epithet, “financialization.” One is factual, summarized as “finance represents about 7 percent of our economy but takes around 25 percent of all corporate profits, while creating only 4 percent of all jobs.” In other words: finance is a “taker.” Another is normative: that finance is “meant” to serve “real business,” but instead is now a parasite upon and a hindrance to real business (i.e., “makers”—though the author never defines that term, and most definitely is not channeling Ayn Rand). The third is basically political: this parasitism of finance is the main cause of the miserable performance of the economy under Obama, not the heavy hand of government or Americans’ lack of confidence in the future. For Foorohar, the administrative state and Democrats are never to blame for anything, and with a few exceptions where they were misled by others, they are always heroes. In every case, if it is not shadowy figures of finance who are to blame for an economic problem, it is Republicans, either collectively or in the form of evil Reagan.

My difficulty, though, in reviewing this book is that despite its gross flaws I agree with its most basic point, that finance as currently constituted is a blight upon the land. It is true that “The power of these large, oligopolistic interests is remaking our unique brand of American capitalism into a crony capitalism more suited to a third-world autocracy than a supposedly free-market democracy.” Yes, finance wastes the talents of our best and brightest. Yes, “We have a rentier economy in which a small group of vested interests take the cream off the top, to the detriment of overall growth.” Yes, Wall Street’s treatment of jobholders as disposable is corrosive and pernicious, and has spread across the land. No doubt giant corporations take all the benefits of being in the United States and then dodge the taxman by stashing assets abroad, and, more broadly, they generate intellectual property using this country’s resources and use it to benefit foreigners (as Richard Baldwin documents in The Great Convergence). Yes, the lobbying power, visible and invisible, of finance means the gutting of laws and regulations, and the “revolving door” effect exacerbates this problem. But Foroohar’s fleshing out and execution of her attack on finance are so incompetent that the book harms rather than advances an appreciation of the problems.

My own interest in the corruption of finance springs from my movement away from pseudo-free market conservatism to something more approaching Teddy Roosevelt. In fact, I am conceiving a new-found appreciation for TR, especially in the days of fresh malefaction by the corporatist giants of technology. He was certainly on to something in his desire to crush the corrupt alliance of big business and politics, which even in his day had knock-on effects on society at large. I have many friends who work in finance, and friends whose academic work revolves around finance. I am not sure what most of them would say about my own attacks on the finance industry or the tech giants; many would fall back on the eternal verities of efficient markets and the need for liquidity. But that some of something is good does not make more better. Human nature is to take any system and distort it for personal gain, and we are far, far down that path with the modern finance industry.

“Makers and Takers” begins with the history of finance, in a chapter titled “The Fall of Finance.” I picture Lucifer hurtling from Heaven, but the actual text is much more boring, and the reader is not reminded of Milton. Foroohar narrates the Great Depression, Glass-Steagall, Regulation Q (which limited the maximum interest rates commercial banks could offer) and the rise of financial derivatives. We then skip the 1970s, except with a reference to problems outside the US. Jimmy Carter is only mentioned for ending Regulation Q; 1970s inflation is only mentioned in passing and weirdly ascribed to “all the complex [financial] deal making at the global level.” Stagflation is mentioned not at all. Then evil Reagan came, creating domestic inflation (yes, this book really says that, on p. 52), and evil Reagan pushed deregulation and less saving, strengthening the finance industry, whose raison d'être is creating debt to trap people in its web. (Foroohar seems to think that debt is like smallpox—always bad; and debt of all types, even the simplest, is “financialization.”)

Nothing happened under George H.W. Bush, who is totally absent from this lengthy history. Then Clinton, misled by evil advisors, mostly Republicans, deregulated more, causing financial crises all over the world, from Asia to Brazil, which crises apparently had no other cause. After that, banks cooperated to enable bad behavior such as Enron. Then came the 2008 financial crisis, also caused by the banks, the aftereffects of which the doughty Obama was unable to solve, despite the sound advice of awesome Elizabeth Warren, because of his unwilling and unknowing “cognitive capture” by Republican finance types. (Nowhere does Foroohar acknowledge that most of the masters of finance are, in fact, aggressive partisans of the Democratic Party, from George Soros to Tom Steyer.) And here we are today.

“Simplistic” is too nice a word for this canned history, which for all practical purposes ignores the real core of the structural problem, the largely hidden intertwining among the elites in government and finance, and their combined willingness to harm larger society for their personal benefit. In fact, we are never told what exactly Foroohar’s objection is to finance. Too much debt? Too much opacity? There is much talk about the “real economy”—but that is never defined. There is much talk about “financialization,” which seems, at different points, to mean the issuance of debt, securitization, or inadequate government regulation (although, other than Glass-Steagall and the CPFB, the author offers almost no specifics as to what government regulation is desirable, except, of course, anything Elizabeth Warren may propose at any point in the future). But none of this is ever tied together in any coherent way.

The next chapter continues a historical frame by narrating “The Fall of Business,” by which Foroohar means that business used to be public spirited and now it’s not. The original sin was when courts recognized that stockholders, rather than some ill-defined broader stakeholder group, were the people for whose primary benefit a corporation must be managed. From this flowed the evils of Taylorism, short-term thinking, bean counting, Robert McNamara, the Ford Pinto, and GM ignition switches. All these evils were merely facets of Foroohar’s bugbear, financialization, and were the result of big business no longer wanting to make great products, but instead (gasp!), wanting to make money. How, exactly, this relates to finance is not shown, other than that money is involved.

Slogging on, the reader next learns that business schools teach mostly finance, not “business.” Leaving aside that, like leadership or ethics, but more so, it’s impossible to teach “business,” and that Foroohar doesn’t herself know anything at all about, or apparently have a single iota of experience in, running a business, it’s not clear what her complaint is here. At actual business schools, most of the time even entrepreneurship is taught by professional academics, which is idiocy. After all, especially at business schools, those who do, do; those who can’t, teach. (I always wanted to shoot myself, listening to professional academics teaching “strategy” like they had any idea what they were talking about, and that was before I ran my own business.) To the extent business schools add any value at all, demanding that business schools teach more “business,” rather than teaching building blocks (including finance) is an ignorant and irrelevant way to approach the problem that finance has corrupted our power structures. MBA students study finance for the same reason Willie Sutton robbed banks—because that’s where the money is. And they “study” mostly to make contacts. Yes, MBA students don’t add much to society, as shown by their rarity in Silicon Valley or the productive segments of working businesses. But MBA programs are a second order issue to the real problem—that most finance as an industry is itself of little social value, and big social cost.

More confused than ever, and not sure what the point of the book is so far, even though we’re nearly halfway through, the reader learns that “shareholder activism,” as practiced by men such as Carl Icahn, is bad, very bad—mostly because the pressure brought to bear on corporate managers by such people causes managers to act in ways that fail to benefit both the other stockholders and a broader group of stakeholders, especially by encouraging stock repurchases, a particular focus of the author’s ire. Such pressure allegedly prevents companies from reinvesting for the long-term and engaging in “moonshot” projects. There is an element of truth to this, but it is also true that companies that hoard cash almost always spend it in ways that destroy value and accomplish little, and giving it back to the shareholders makes much more sense (though as Foroohar discusses later, tax strategies often prevent doing this directly—hence borrowing for stock repurchases). Next Jack Welch gets (justifiably) hammered, both for being grossly overrated in general and for turning GE from a company that makes things into one that focused on getting money from financial chicanery, directly and indirectly. Fair enough—but the existence of GE Capital is really a different problem than the existence of Goldman Sachs, and Foroohar doesn’t seem to understand that offering debt for consumer purchases is not the same thing as what Goldman does.

Other chapters meander on, criticizing speculation in the commodities markets (why this is relevant I’m not sure, other than apparently it drives up commodity costs), in which Goldman Sachs is the chief villain (which I’m sure is true). I think the point is that speculation is not real and can therefore not create value, and that the emphasis on it chokes resources from “real business.” In another chapter, we are told that private equity firms own and rent too many houses, bought out of foreclosure after 2008. Why this is bad is not explained, other than the new owners are not susceptible to pressure from left-wing “community organizers” and the local regulators they have captured, and supposedly the income streams from rents have been securitized into instruments that are assumed to be inherently toxic, again for unexplained reasons. Apparently encouraging empty, rotting homes is better. I wholeheartedly agree that the private equity industry should be hobbled, including by taxing carried interest as ordinary income. But all the focus in this book with respect to private equity firms is on irrelevant matters through an ignorant lens.

Then we are treated to a long screed on “The End of Retirement.” The main complaint here seems to be that defined benefit pension plans have disappeared and 401(k) plans are too discretionary, and too often invested in funds that charge fees for returns lower than that of index funds. Like a blind squirrel who still manages to find nuts, Foroohar is again correct that managed mutual funds can never beat index funds, overall—but she doesn’t seem to realize that’s strong evidence for the truth of the efficient capital markets hypothesis, which she rejects out of hand (without, apparently, even remotely understanding it). Also, Detroit went bankrupt, not because it had decades of stupid, corrupt, Democratic governance resulting in crumbling infrastructure, huge defined-benefit pensions to government employees, and a vanishing tax base, but because tricksy finance types forced them to sign a bad financing deal in 2006. No doubt the finance types were tricksy—I, for example, know from writing underwriting agreements just how “heads I win, tails you lose” all finance agreements are. But that doesn’t mean Detroit didn’t cause its own problems.

And, predictably, the solutions Foroohar offers are trite. A Hippocratic Oath for those in finance. More federal government regulation of every area, from consumer debt to commodities, though of what type and to what precise end is not specified—apparently government regulation is like chocolate, automatically good and delicious. More federal taxes, which might make sense as a method to break the masters of finance, but here just seem beneficial because they would fund increased government, an independent good. Foroohar also demands an increase in top marginal tax rates, out of “basic fairness”—that is, increased taxes on “makers,” which seems to undercut the entire point of her book, that makers, presumably what she means by “real business,” should be encouraged and rewarded. Other proposed solutions aren’t awful, but aren’t really that helpful—bringing back Glass-Steagall, increasing bank capital requirements, and similar technical changes. These are balanced by gross stupidity—such as calls to “build a new growth model,” “using a new moonshot goal for economic growth.” Sounds good. What is it? “A national green stimulus program.” Yay! Problem solved!

[Review finishes as first comment.]

[Susan · Rating 5 out of 5]

What "Dark Money" was to political realities in 2016 - "Makers and Takers" is to the economic reality of the USA in 2016. Foroohar traces the 2008 crises, causes, loopholes remaining, tax advantages to corporations, examples of corporate "welfare," and assorted other Wall Street advantages and power over Congress and US economy as a whole.
Bankers and financialization of our economy is the driving force behind sluggish recovery, stagnant wages and growing income inequality that will not and cannot be remedied only by raising the minimum wage. The everyday trading back and forth of debt in various forms between one bank, one company, one hedge fund and others etc generates substantial income for bankers, and stockholders but does nothing for investment for the future of said companies themselves or America as a whole. This is NOT the way our economy used to work. It is the way it has worked since Wall Street slowly and methodically lobbied its way into a regulation elimination here and a loophole opened there until now Apple ( with all the cash is does have) is better off BORROWING money ( interest which is then tax deductible) to pay its stockholders rather than investing said borrowed money in new products or technology advances. The Apple Watch did not advance our lives the way the Mac, iPhone, or iPad did. When corporate funds are spent buying and selling debt between companies and doing whatever necessary to raise share prices to appease stockholders and NOT into new investment then you are going to have inequality in income and lack of advances America was once known for.
I am sure Elizabeth Warren understands each and every word of this book and applauds it for its easy read for those not schooled in high finance. In actuality problem is quite simple - rich have the money and are trading it back and forth with each other for fees while not caring what happens to economy as a whole. Market speculation and casino betting on stocks is at the heart of our economy.
It has been said - the stock market is only legalized gambling and this book explains exactly how that analogy is not that far off in truth.

[Andrew · Rating 4 out of 5]

Makers and Takers: The Rise of Finance and the Fall of American Business, by Rana Foroohar, is an interesting look at the changing landscape of American Business and macroconomic finance. The book examines the post-2008 economic crisis economy in the United States, and examines what the author terms as the "financialization" of the American economy. This means the movement toward financial products and rentier behaviour by corporate and government entities. Corporations appear to be seeking monetary gain by dealing in increasingly complex financial vehicles and systems, becoming "bank-like." This means they utilize shareholder buybacks and distribute cash out of their coffers to increase corporate shareholder value. This may increase their temporary value on the market, but it does little to increase their actual economic strength or encourage corporate growth.

Indeed, Foroohar looks at a number of prominent examples; from General Electric and their recent closing of their once powerful banking department, to the entry into the futures market of large financial firms like Goldman Sachs, who are driving up the price of raw materials like aluminum, corporations are increasingly looking to short-term financial instruments to boost immediate profit, with little thought or oversight into longer term strategic thinking. Foroohar terms these firms "takers" as they do not contribute to economic growth, but instead encourage inflationary tactics that produce financial bubbles - artificial increases in a goods value above what its real value is. Forhoohar decries the current situation, and instead wished to see companies move toward becoming "makers" - entities that invest in R&D, economic growth, and labour and wage increases for employees - all situations that would lead to strong economic performance at the corporate level. However, the power of shareholder activism in the US - an abnormality in global business trends - leads companies to shy away from a more powerful economic performance, and encourages financial schemes to raise the value of a companies market index.

Makers and Takers was an interesting book in a similar field as many post-recession business books. It is heavily critical of US shareholder activism and the control stock prices have on the minds of US business managers and politicians. Examined through a number of various categories, this financialization of economic growth has led to worrying asset bubbles, poor innovation from US companies, and slow stagnation of US market-growth compared to global competitors. One needs look no further than Apple, the electronics conglomerate, which is more focused on financial payouts to stockholders than R&D, to see a decline of innovation market level. As a cosumer, it is clear that Apple products are currently underperforming, and the decline in corporate R&D investment in the company is quite observable. Foroohar looks at many other examples, suffice to say, that this is a comprehensive analysis of the damage of putting finance first at the corporate level. It was an interestng read, and easily reccomendable to anyone looking for a good post-recession read on business economics.

[Diego · Rating 5 out of 5]

There are 2 types of CEOs, the short term greedy vs long term innovator. It must take balls to not please your shareholders in the short term. Financialization is a company culture and political disease. It destroys a productive company or manufacturer. And the American MBA education is breeding this greedy thought process.

Two ways that people will think about financial engineering, either it's good business because you are growing the stock price, making money, and pleasing Wall Street, or, it's destroying the company by taking heavy risk and will fail horribly at some point due to lack of R&D investing and cost cuts. Both are true.

Now I know what to keep in mind during my MBA. Would be optimal to get it outside the US.

This book was a sweeping review about the effects of financialization on companies, politics and society. It has drastically slowed US economic growth and may bring an end to capitalism. I especially enjoy how Rana calls out offenders by name.

I consider this a must read. Helps one understand the future of finance and the potential demise of the US economy.

[Lada · Rating 4 out of 5]

Holy crap! This book really scared me. At times it seemed contradictory, e.g. privately financed firms do better because they are not beholden to increasing short-term shareholder value, but firms not going public is bad because then we don't know what they're up to. I think this is because stats and opinions were thrown about in a simplified way to make particular points. In any case, if you want something to freak you out, try this book. It will do so very methodically.

[Terry · Rating 1 out of 5]

A disappointingly superficial look at an important topic. Full of overstatements ("Apple puts more effort into financial engineering than their core business"). Short on any new insights or suggested remedies. Don't waste your time.

[Joel · Rating 1 out of 5]

Rich in footnotes, but devoid of logic. Takes non-sequitur to a whole other level, but hey, it's backed up with stats. As a reporter, Foroohar is great at collecting stories, but is clueless about what's actually going on. And when the details get too complicated, like any good journalist she falls back on evocative adjectives to get you enraged, but not actually understand the roots of the problem, never mind the appropriate solutions.

Some examples:

Page 2, paragraph, paragraph starting with "Which gets us to..." She throws in terms like "buy off", "fattening dividends", "goose the company's lagging share price", "tactic", "paper wealth", "maneuver", "cash hoard". And that's just one short paragraph. All these are designed to get the reader incensed at what amounts to essentially a share buyback. I get it, the author doesn't like the idea of share buy backs, but rather than analyze the pros and cons of various forms of returning capital - actually educate her readers, her goal is simply to demonize capitalism. The author is actually against returning capital at all; she would rather the company invests in R&D. But she doesn't get that freeing up the capital allows the investors to shift the money into other investments that will yield a higher return. If the company had more productive things to invest the money in, it would. The author proposes that they don't return the capital and instead waste it on their own R&D rather than let the capital seek out the most productive use. Fancy terms like "financialization" aside - the author doesn't understand the basics of how finance works.

Page 9, section titled "The Lifeblood of Finance". First she talks of a decrease in lending. The stat she throws in (hey, it's got a footnote, so it must be credible!) is that "ordinary" bank deposits grew from 50 to 70 percent of GDP, compared to trading which grew fivefold as a share of GDP. There is so much wrong with this that I don't even know where to begin. Deposits don't make us a share of GDP. GDP represents consumption and investment spending (mostly). Deposits don't factor into it. It would make more sense to speak of "ordinary" deposits as a share of all deposits. She doesn't explain what she means by "ordinary", but I suppose she's again trying to incite the "ordinary" reader against the banking industry. Again with the emotionally charged language devoid of any actual meaning. And I don't see how this statistic says anything about the decrease in lending she starts the paragraph discussing. To top it all off, the very next paragraph starts by saying "With the rise of... securities and trading... Came a rise in debt of all kinds." Huh? Didn't she just say lending was DOWN? She does this throughout the book. She starts by pointing to some aspect of finance you're supposed to be angry about, and then throws in a random statistic just to confuse you so that you don't have time to think about the illogic of what she's saying.

Another example, page 20: she's talking about how finance need to be more strongly regulated. Then she says "It won't happen anytime soon. Even now, finance continues to grow as a percentage of our economy. Leverage ratios are barely down from... 2007... Assets in the informal lending sector, which includes shadow banking, grew globally by $13 trillion..." What is she talking about? How does she go from arguing that there's not enough regulation to finance growing as a percentage of the economy to leverage ratios to shadow banking. I get that all these things are thrown at the reader in quick succession is a designed attempt to arose anger, but there is no logical sequence to her argument. How does one thing follow from another other than just saying "Bad banking! Bad finance!"? It's unbelievable that this author has been reporting on finance for decades, but doesn't understand the first thing about it!

The book is full of conflated logic like this: page 19 implying (using the classic correlation equals causation fallacy) that the rise of 401(k)s in the '70s led to subsequent slowing in growth. Or right before that, about how "financialization" is destructive because it encourages cost cutting outsourcing, which is bad because, wait for it, Rana Plaza, Bangladesh, and cost cutting technology, which is also bad because of (if you though she couldn't outdo herself) flash trading and computer-generated algorithms used in complex securities. Last I checked, spending less money rather than more was good business, not bad banking. Oh, and why is using computers to value derivatives bad? Because it resulted in repeated market crashes, wiping out trillions of dollars of wealth. Simply not true. But it sure roils your blood. Here's another one, page 22: "70 percent of mergers... end in disappointment." What does disappointment mean? I don't know, you have to follow footnote 72. But it sure makes you angry at those greedy bankers! Mergers equals bad.

Those are just some examples, but the book keeps going with this kind of logic. The author had been covering finance for decades, but none of that seemed to teach her the first thing about finance. All she knows how to do it throw snippets and anecdotes at you, and sound smart by quoting statistics (all extensively footnoted), but not follow any coherent logic. This book will make you stupider for reading it.

[Khan · Rating 4 out of 5]

I have been circling this book for quite sometime, I knew exactly where it was in my library without searching for it. I am not sure why it took me so long to finally pick this one up but I am glad I did. Theres some potent points regarding the increasing role wall street has in our everyday lives. The financialization of large swaths of the economy, the incentives CEO's, investors have which are not aligned with the continued success of the company itself and a look at the education system itself in terms of what these students are being taught. If you have ever made it through one of my reviews, you'll know that I am not fond of MBA's, business, or finance majors. Ironically this book isn't either, I am not sure if books that hate on MBA's find me or I find them because I was not expecting that topic to be a part of this book. I also do think this book is better than its rating, I think it at least deserves over 4 stars. Theres some parts that are a bit wonky in terms of solutions and some arguments made against "quant" types but I still believe it deserves more than its current rating. Some of the points she makes has aged extremely well in terms of housing market, asset inflation and the political ramifications of what this means. This book came out pre Trump victory so the author has not experienced the tectonic shake of global political consensus but hints at it. For someone who is intertwined with the business press, she does have a good sense of how politically these changes will impact main street. Which is something journalists of the mainstream kind had no idea about leading up to the 2016 election.

The authors central premise is we're moving away from an economy which focuses on being on the cutting edge of innovation, building products which have a tangible value and a culture which focuses on being on the forefront. Instead she states wall street makes up only 4% of employment but captures over 25% of the profits from corporate America. Companies today have embraced financial stock market goals as their only bar for success. However to get approval from wall street/ investors this means, cut costs at all expenses, layoff workers, slash R&D spending, replace workers with less skilled workers (I'll get to scary examples later) and damage company culture. If you do this wall street will reward you by pushing up the value of your stock. However there is a short term gain for this, in the 2-3 years in which you make these moves, companies falter because they reduced the quality of their products, damaged the relationship with the customer base and made no effort to spend money on innovating, enhancing or making bets on possible industry shifts on products that could change the landscape of an industry aka long shot bets every company should make. Not to mention the CEO's are rewarded with stock options in the million to hundreds of millions. CEO's can effectively game the system, increase share holder value in the short term but destroy the company in the long term. In doing this, they capitalize on their stock options and then leave the company in ruin. The risk is on the workers who work at the company and do not make nearly as much. You would think this impacts the share holders sentiments when in fact this is what the share holders want which is also head scratching. We have been told that a companies major purpose is to bring value to the share holders, right? This was disputed in court between investors for FORD who sued the company when Henry Ford wanted to invest money in the community, pay workers better wages etc. The investors who sued were two individuals who would go on to start DODGE Ram, I would presume this played a factor in why Henry Ford did not want to give all the winnings to them but paying workers higher wages and spending more money in the community is a way to actually build trust between workers and stake holders. However the DODGE brothers won the suit and ever since then companies answer to shareholders. However a better question to ask is "Do shareholders want whats best for the long term goals of the company or the short term goals of the company". You would think the answer is the former but in reality it is the ladder. Let's go a layer deeper.

When stock buy backs were deregulated in the 1980's allowing for companies to boost their shares by buying back their stocks and essentially paying themselves gargantuan sums. This opened the door for market manipulation, and short term thinking over long term thinking. It put wall street at the fore front and everything else at the backend. Since stock buy backs were initiated, there has been a precipitous fall in R&D spending in which companies invest in innovating or making bets on the future of their respective landscape. R&D spending has increasingly been avoided to only spend for stock buy backs. So the CEO can cut costs, hollow out the company and then take the profits of the initial years and buy back the stock. Enriching share holders at the expense of the companies long term future. Lets give some example to make this more robust in your eyes.

Well start with Boeing, Boeing in the 2010's hired finance people not product people to run the company. James McNerney was the CEO under Boeing at this time, a former Mckinsey consultant/ GE executive which are two red flags already and he had an MBA. Bingo the trifecta and holy grail of "This will not end well". He cut costs, displaced engineers who were highly skilled with less skilled engineers, outsourced work. It was reported that Boeing paid programmers $9 an hour for their flight control systems. In this time period, he created share holder value but also multiple plane crashes and a few where all of the people died on board. I can hear you now "Maukan, this is one example and you're cherry picking". Okay lets do another one this time with General Electric which was famous for increasing share holder value, GE displaced its entire engineering sectors, sold off parts of their company and created an enormous finance division. This division would go onto lose several hundred billion in the crash of 2008. Requiring a bailout of 139 billion from the tax payer. GE squandered its intellectual advantage in terms of its engineering services by investing in slashing R&D, outsourcing and catering to what wall street wanted. Take General Motors, a company that cut costs, outsourced and created a hierarchy with finance people at the top had to do a recall on a set of cars because of a faulty switch which cost the company hundreds of millions and actually killed people. Ford had cars that caught on fire when the gas tank was raptured and the finance team decided that the cost to recall was more than the fines, this was in 70's. These idiots thought the fine and human lives did not justify a full recall not to mention what hurt the brand of a once great American car company.

Lets do another one. The holy grail... Apple. Apple is one of the foremost examples. A company worth 2.60 trillion at the time of this this writing. Apple has catered to shareholders and activist investors by spending Billions on stock buy backs while lowering R&D spending. In fact this is one of the things the book was spot on about, Apple recently made an announcement that it was turning into a bank. Though commendable that they're giving customers 4.5% interest on returns and forcing banks to compete. I have no doubt this will make money for the company. However, Apple is a technology company which created innovative products. Other than the laptops they have made which I will give credit to are awesome, they really have not pushed the envelope. We keep talking about them producing electric cars for years, that would be worthwhile but Apple has not made the leaps in bounds in technology it did in the early 2000's. Ironically when Apple released the ipod which was the start of its meteoric rise, its share price fell. This brings me to another major point.

Amazon's share price in the early 2000's was under $10. A wall street was punishing it for creating its services called AWS or Amazon Web Services. The quote is something like this "Wall street wishes Amazon would focus on the store". Recently AWS brought in over 69 billion through a moonshot bet through R&D spending. Amazon is actually famous for ignoring stock market pressures and they were killed for this early on but those little bets they made, with the marketplace, advertising, prime, AWS, ALEXA and many more over time created a company over a trillion in value. This is the point business types have no fucking clue when it comes to innovation, they're good at powerpoint, excel and using formulas they don't even understand. Mechanistically just plugging things in without any depth in understanding of what these numbers could mean under certain contexts. In fact this is what happens with virtually every crash which brings me to the next point... Education.

Many of these business types are labeled as mathematically inclined but I would argue the opposite. Plugging numbers into a spreadsheet and evaluating them doesn't make you a quant. This is what I disagree with the author. Many of these types learn these economic theories in the classroom that have no relation to reality. This is partly responsible for the economic crashes, misunderstanding of multiplicative processes, non linear movements and genuinely having zero idea with what they're plugging in and out. Calling these people quants is laughable but also the quants have no idea what they're doing. There are countless stories of the rising star quant making money until one day they lose everything. This has happen so many times. I almost get tired of reading about it. The MBA/business/Finance major only understand share holder value, they do not understand anything else like building a great product and delivering consistency to their customer base. Look at the train derailment issue in Ohio. This was completely avoidable, instead the company wanted to cut costs at the detriment of the public and the people form Ohio now deal with it. Another example was a company near me that decided to dump chemicals into the cities water supply in order to cut costs. This is what these people are taught in these majors, cutting costs, theories that are not applicable and being good at power point. They're not innovators. They're not the ones who're going to push society forward but I can tell you they're the ones that will be very well paid. In nice 10k suits, giving talks about "Success" and "Making it" and all of these bullshit principles the business press and Ted Talk circuit eat up. They're the wizards, the gurus, the masters of the universe until they blow up a company and then they bounce around to another CEO job. Rarely has a managerial position failed so definitively and yet maintains its status. Its a bizzaro world where having a degree from a fancy school and then leaving a trail of failure can somehow make you fantastically rich and also oblivious to your own failings.

The author talks about the "Best and the brightest" going to wall street. Who're the best and the brightest? The ones that do well on tests? That get into elite schools? From those elite schools enjoy perks of being selected in job interviews, investment pitches etc? 70% of Ivy league students belong to the top 1%. That is all you need to know, advantages being displaced to the next generation who metrics for success other than they went to a top school is all there is for them to be catapulted to another opportunity they will burn to the ground. Intellectual curiosity does not appear in the classrooms, people who tinker and take risks from their tinkering historically have been shown to create the most consequential innovations not someone from Harvard Business School.

The author nails just how devastating 0% interest rates are to lower and middle class citizens. It raised assets, forcing potential homeowners to be forever renters. Bernanke for all his Princeton education was told that 0% interest rates were allowing companies to borrow debt and then use that debt to buy back shares at a lower value than actually using their cash on hand to inflate share prices to pay themselves. Bernanke would engage in debates where he threw out economic gibberish in order to make the other person feel like they don't know what they're talking about. The complexity wall street has created to murky their business dealings allows them to move in ways where they can engage in what would be deemed fraud in a democracy in which corporations could not donate to politician's tipping the scale towards them. This technical jargon has allowed them to obscure outright market manipulation, rampant fraud and being back stopped by the tax payer. The degrees they have seemed to only make them better able to bullshit what they do. Go look at talks Steve Jobs gives or even Elon Musk. They don't obscure with technical language ever because they don't need to appear smarter than they're. They don't need to sell you on their need for them, what they built does it for them. Regardless of what you think about both of these men or their companies actions. Tesla's are pretty cool when you look at them without being attached to Elon, same thing goes for ipods. They don't need to sell you on themselves, their products do that for them. Finance, MBA's, business types. That is the only think they can do to justify their bloated salaries

An enjoyable read, 4 stars. I think the politically this will continue to create a strong taste for populism. Watch for fake politician's on either side try to incorporate rhetoric about the working class against the elite while they go to a 2k per plate fundraiser and assure the elite their advantages are here to stay.

[D.L. Morrese · Rating 4 out of 5]

It is quite obvious that there is something fundamentally wrong with our economic system, a system in which the CEO of a corporation is paid several hundred times the wage of its average worker. A system in which the wages of workers have remained flat despite decades of productivity growth. A system in which well over half the wealth of the nation is held by 1% its people. A system in which (as the author tells us) "the top twenty-five hedge fund managers in America make more than all of the country's kindergarten teachers combined."

But unjust wealth distribution is not the only problem. Our financial system as it exists today may actually be detrimental to our economy.

In this book, Rana Foroohar (a business writer for Time Magazine and a CNN economic analyst) argues that Wall Street financiers have warped the system to their benefit. They have successfully pushed the idea that making money, rather than making goods, creating jobs, or providing services, is the primary job of any business. They see money as the ultimate gauge for measuring the value of all things, and they treat it almost like a commodity to be traded and manipulated as if it has some intrinsic value.

It doesn't, of course. Money is simply a tool, a means to facilitate the trade of goods and services. It is, at best, a representation of the value produced by makers who build, grow, and create things that have real value. When banks loan money to makers, they provide a legitimate service. Loans can help business get started. They can help makers make.

But our financial system has mutated beyond simple banking. It has become a system that allows money manipulators to become takers. These takers provide nothing of real value to our economy themselves, but they can skim a great amount of wealth from those who do. Worse, they exert pressure on businesses to maximize short-term monetary gains over long-term growth and innovation. If an expenditure (such as R&D or worker benefits) is unlikely to increase quarterly profits, it's less likely to be made. Money spent on growing a business is money that can't be given to investors.

This isn't a comforting picture. It seems fairly obvious to me that a system that gambles on debt, places quarterly profits above long-term benefits, that skims wealth from those who create it and then hordes that wealth rather than recirculating it back into the real economy, is destined to fail. It has before, most recently in 2008. The government bailed out the financiers then, but the government is heavily in debt now as well, a fact that can also be attributed to the influence of the financiers. Wall Street controls a great deal of wealth, which is used to further the interests of financiers in the halls of government and in the offices of businesses. It promotes policies and practices that allow it to squeeze wealth from the economy like water from a sponge. This can continue only as long as the wealth being created by makers exceeds the wealth being squeezed out by takers. As long as this is true, economic growth can still happen, although much slower than it might be otherwise. When the takers squeeze out as much as goes in, the economy will stagnate. It may collapse.

At the end of this book, Foroohar suggests some strategies to prevent takers from squeezing dry our economy. These include simplifying our economic policies, better regulation of financial services, and a few philosophical changes about what businesses and banking are actually for. I wish I could say that I thought these might happen, but I fear that they won't. The influence of the financial system is too great. Countering that would take more courage from our politicians and greater interest from voters than they have demonstrated in the recent past.

[Herzog · Rating 5 out of 5]

I always enjoy Rana Foroohar's columns. I find them concise and insightful. This book is in that same tradition. She sets the Paul Ryan analysis of "makers and takers" on its head, identifying the financialization industry as the true takers and those enterprises contributing to society's progress as the makers. Along the way, she even-handedly addresses issues critical to our capitalist system - the financialization of our businesses, the failures of American business education, the problems with maximizing shareholder value and stock buybacks, the financialization of American business, absurdly complex financial instruments of mass destruction, the flaws of private equity, finance's misappropriation of our retirement nest eggs, a failed tax system and the revolving door between Washington and Wall Street. Whew, that's quite an agenda.

She takes on all this with no political screed. She objectively points out issues that surely need to be addressed, but, given how our system is constituted, I'm less optimistic than she that we'll actually see reforms.

[Shirley · Rating 5 out of 5]

Good read, an excellent primer on the effects of financialization on the general economy. A must read if you wish to understand the important issues leading up to the 2016 US election, and choices and reforms that need to be made afterwards.

[Harith Menon · Rating 4 out of 5]

Unlike most other books criticising the financial industry, this one actually analysed (A) the incentives of people working in financial institutions and (B) the reasons behind the rise of finance from the 1950s to the modern day. As such, a lot of the arguments made later in the book were well-contextualised within the broader historical trend of growing finance. I especially enjoyed the chapters on commodities trading and the failures of post-2008 financial regulations.

One criticism I have of the book is its occasional lack of structure - for example, the chapter on retirement did not rigorously stick to analysing the failures of the "3 legs" of the American retirement system; instead, it sort of jumps between attacks on the failure of the 401K system and reduced accessibility to defined-benefit pension systems.

All in all, quite comprehensive and enjoyable; would recommend and would read again.

Note: I didn't read the chapter on how the American tax code is rigged, just because I felt the last chapter on deregulation looked more interesting.

[John · Rating 5 out of 5]

This is one of the three best books of the year for me. Rana Foroohar traces the change that has overcome both main street and wall street in the past 30 years. A full 20 per cent of the text is references, so it is definitely not just another political diatribe.

It is difficult to summarize a book of this complexity, but let me use Apple computer and how it has changed from the technical powerhouse it was under Steve Jobs to the poster child of current CEOs , Tim Cook. Jobs' vision was to make the good tech and money would follow. Cook follows a different recipe: use the money to make more money and downgrade research and development. In 2013, he borrowed 17 billion dollars while having $145 billion in banks around the world. Why? Because he needed money to bolster Apple stock by buying it back and increasing dividends at the same time. He didn't want to pay taxes on the money stored off shore and interest for a blue chip is cheap. In 1982 Reagan and friends created legislation that allowed this "buy back of stock" by corporations. Before that time, it was considered cheating the fair value of the stock.

Second reason why Cook did what he did concerns Bill Clinton's signing legislation to exclude excessive CEO compensation if it is based on performance. CEOs get huge bonus packages that are based on the performance of the stock, not products. So, the short term view of "performance" plays the tune. Not Good for a strong long term economy.

There is not enough space in this review for too many examples, but one begs for the light of day. After the stock market crash of 1929, in 1933 the Glass-Stegall bill regulating banks was created for good reason. It was just 37 pages long and prohibited prohibited banks from engaging in both commercial and investment activities. There was a long period of stability and no "bubbles". Fast forward to the 1980's and 90's, where the financial sector (4% of US jobs and 25% of corporate profit) worked their way with Congress. In 2008, the too big to fail banks securitized home loans and sold them to unsuspecting US and European retirement funds. The banks are only required to leverage at the rate of 5%. Go try to buy a home with 5% down and see how far you get. Then public moneys were expended to make it all good.

In 2008, to avoid another banking crisis, Dodd-Frank was passed. After the financial sector got through with the best Congressmen that money can buy, it ended up at 2,319 pages. Good luck with enforcing that. But, here comes the next go round under Donald Trump and he is appointing the same Wall street types that caused 2008. It's hard to watch.

Because of the tax code, debt is favored over equity. Short term over long term also prevails. Corporate America spends less on R&D, workers, factories as a percentage of profit than private companies in the current climate. It isn't a matter of going after the one percent at all, it is about the country investing in sustainable energy, infrastructure and our young people's education. The government funded the research that invented touch screens, GPS, voice activation and the internet. The day of socializaion of risk and privitization of profits for the financial sector needs to end. Read Rana Foroohar's book and you can draw your own conclusions.

[Rick Wilson · Rating 3 out of 5]

There is a concept in statistics called “overfitting a model” where instead of having mostly good split on your data, you try to account for every single outlier and data point that you have. Rana Foroohar overfits financilization to just about every political and business problem in the past 50 years. Apparently the crash of 2008 is Henry Ford’s fault. Or perhaps we could blame Fra Luca Pacioli and Leonardo da Vinci for inventing double entry bookkeeping. Or perhaps the ancient Egyptians for the creation of government bureaucracy.

That’s perhaps a bit unfair, overall this book is very good diagnosis of several key problems in the entrepreneurial and business world. Rana bemoans the fact that after you reach a certain size it becomes more cost effective to engage in financial chicanery then it is to actually create new products. Companies pour money stock buybacks instead of research and development.

I thought most of this book was a well organized set of examples where valuing accounting/finance over tangible products proved to be detrimental.

But a core problem with this book is that the author uses a that select set of examples to try to draw a broader macroeconomic picture. I found myself unconvinced by the transition to larger arguments. Sure, a blind focus on numbers or finance is not a good plan for any business. But pointing to it as the sole cause of business failures and larger problems felt overly reductionist. Businesses and economic failures are massively complex events with lots of inputs. Rana wants to have a strong impact with her book, but ultimately I thought it overreached.

Read it for a good understanding of what financiliztion is about, it knocks that part out of the park. But don’t rely on it for a macro look at what’s wrong with American business.

[Scott Lee · Rating 5 out of 5]

I'm not an expert on any of the things that Foroohar covers. I've taken basic (i.e. High School/A.P. level) economics, taught a semester or two at that level, and try to follow what I can of what's happening at the intersection of business and politics--especially banking and politics. I've found Foroohar's columns in Time well-balanced and well-argued and was excited to see she'd written a book.

I don't know enough to challenge this book or to really read it critically. Okay, not true--I'm an English teacher, I know enough of rhetoric and logic to read aspects of the book critically. In the sense of putting together a well-researched argument that is clear and cogent she's done a fantastic job.

In the end, this feels true--or at least a true as we can get in our skeptical age--the best effort of an intelligent, passionate person to present the truth and its implications as she sees it. I don't know enough to know if she's right, but I feel driven to investigate further and really learn this subject, because she convinced me of one thing for absolute certain--this is something we'd all do better to know more about and sooner rather than later, because things won't get fixed as is.

[Fernando Rodriguez-Villa · Rating 3 out of 5]

We're overdue for a thoughtful, comprehensive and well-documented examination into the ways in which the modern financial sector has undermined and hampered actual business and economic progress. This book is almost that. It has a methodical structure and highlights crucial (and crippling) flaws in our attitudes towards corporate governance, market regulation, asset management and more. Nevertheless, Faroohar arrives at some of her conclusions prematurely. A reader with an academic or professional background in finance, I think, would need to hear her use a combination of more nuance and more evidence in order to be convinced. There is not enough back-and-forth; and consequently, the binary distinctions and pejorative labels come across as facile and simplistic. I agree with her core grievance: that we have a "real" economy that serves that needs of the financial system, rather than a financial system that serves the needs of the real economy. However, the case will need to be made more fulsomely elsewhere to alter our mindset.

[Ben · Rating 4 out of 5]

Objective, politics-free & well-researched look into the scary place the U.S. economy has become.

The author walks through the causes & origins, they why, the how, and finally her recommended fixes as to how to reverse course from a first-world economy that once was a bastion and in many ways has gotten worse and slowed to a crawl, tech innovation aside.

For economic/finance novices she does well in walking through easy-to-understand examples of the core topics.

I've been in both industries -- that is, finance (the "takers") and as an entrepreneur (the "makers") -- and feel that while I'm no expert, having experience in both maybe makes me uniquely qualified to say that she gets most things (pretty much everything) right, she understands her topic well, and that this is a great read even if you have no interest in finance & the economy. It's important to understand the world we live in. Recommended.

[Soph Nova · Rating 3 out of 5]

I feel like I've been in an extended conversation with someone on the conservative end of Elizabeth Warren's policy team for too long after reading this. There's certainly some good explainer information on various and sundry elements of the finance industry here, as well as a couple of good proposed solutions - but the whole time, I wanted to yell through the book at Foroohar "don't you see where this expansion of profit-seeking and greed comes from? It's inherent in the system!!". Unfortunately, she says multiple times that she doesn't believe that, and it shows in the solutions proposed - a shotgun blast of technocratic tweaks to make things better, only some of which actually get at the heart of the problem. Worth reading if you want to understand the liberals to keep an eye on as the 2020 election proceeds apace, or if you are curious what the general tone of the New Consensus ideology looks like - but don't get led astray.

[Michael Russell · Rating 5 out of 5]

This is likely the most important & informative book I’ve read this year.

It think the title may intimidate some readers as it suggests financial wonkiness- but please don’t let it deter you.

It’s extremely readable, and the use of anecdotes to illustrate points gives it a Macolm Gladwellian tone.

I genuinely could not put this book down… I was hoping for train delays and rainy days in, just so I could get through more if it.

I’ll re-read this and gift this many, many times. Everyone should read this book.

[Mark Desrosiers · Rating 4 out of 5]

A frightening and illuminating analysis of the apocalypse that occurs when a wafer-thin stratum of humans finds out that making money is easier than making things. This sort of thing is not widely reported for a variety of reasons (e.g. our media is owned by the very financial interests this book investigates), so establishment journalist Faroohar often comes across as extremely radical -- which I suppose she is.

[Dr. Tobias Christian Fischer · Rating 3 out of 5]

Good fun title but I dislike the American focus. It would be great to have a global perspective on the topic and say more than:

the richer get rich, the poorer get poorer.

[Hannah Schumacher · Rating 5 out of 5]

When anyone in the financial sector offer to “educate” investors on how to navigate Wall Street, they are putting the onus on the individual for being responsible for avoiding the pitfalls that could tank their retirement savings, when in reality the financial sector relies on this “cult of expertise” and jargon to further complicate and obscure what they’re doing to avoid regulation or taxation. So YES I do believe it’s important to understand what’s happening but primarily to do so in order to escape the “cognitive capture” that Wall Street has on our understanding of who companies should serve and how large of the slice of pie they deserve.

Is this the book to educate someone on that? Idk it’s published in 2016 so while it does examine the 2008 crisis, it is unable to comment on the Trump era or how Covid 19 affected the economy. For what the book actually is, it does a good job broadly discussing how we got here, the many different tendrils of this monster within the economic ecosystem, how our current financialization actually hurts us and how we might construct new legislation to fix it. The author interviewed Elizabeth Warren and many others, and sources pretty much everything. I have a background in the financial sector and I learned a lot and gained nuance on what I already knew.

[Anthony Tang · Rating 2 out of 5]

Didn’t finish, kinda bland IMO. Interesting concepts though, the overarching idea was that the U.S. financial system is bad for business because it focuses more on short-term trends than on long-term innovation.

[Charles · Rating 5 out of 5]

This book will scare the reader as it explains many things about the performance of the American economy, specifically the nature of the recovery since the financial collapse of 2008. Unemployment is down, tightening the pool of available workers, yet with the exception of the top few percent wages are stagnant. Furthermore, most of the people are not rebuilding the wealth that they lost in 2008 and 2009, saving rates remain low and few are building up their financial cushion.
The problem that Foroohar so convincingly states is the pervasive power of the finance industry. It is no longer acting as an engine of serving customers as they acquire debt that will aid them as well as the overall American economy. Rather, the finance industry is now operating to serve no one but themselves, charging enormous fees and feeling no need to operate in the best interests of their clients.
The finance industry is bleeding all others, both large and small, in order to further expand their own coffers. Even the largest companies sometimes cower at the power of a financial company that is engaged in a monopolistic practice. This is demonstrated with great force starting on page 185, where a situation where Coca-Cola was unable to acquire the aluminum needed to make cans. It turns out that Goldman Sachs cornered the supply of aluminum and was not only charging high prices for the aluminum but was also adding on exorbitant fees for the delivery. Yet, when it became clear that Goldman Sachs had fleeced Coca-Cola, the Coke executives declined to pursue any counter action for fear of retaliation. This is monopolistic extortion rather than high finance. Coke is currently ranked at 58 on the Fortune 500 list of companies, so they are capable of exerting great power.
Fortunately, this example also demonstrates a possible solution to what is clearly a path to another financial collapse. Companies like Coke would be easily recruited allies in the move to regulate the financial industry, for they would know that it could happen again.
This is one of the most revealing books about what is wrong with the modern business world, it should be required reading in college programs in business and finance. It also turns the arguments about “makers and takers” made by Republican candidates for high office on its head, showing that the takers are the wealthy while the makers are the regular workers.

[Aravind Bharadwaj · Rating 1 out of 5]

A one-sided, ill-informed narrative that force fits data to suit the author's views, often bordering blatant misrepresentation. Some representative points that I found to be skewed are:
- The treasury earned an 8.5% return on the TARP program, which the author conveniently omits.
- Financial services is not one big blob of service providers that need to be "slaves to businesses". Financial services include real services such as banking and lending, but also services such as financing, which inherently create an enabling, not servicing, relationship with businesses.
- With respect to the Detroit bankruptcy, securities products were just a tool that the city used incorrectly to blow themselves up. If anyone should be blamed for it, it should be the city officials who willingly signed up for contracts that they did not fully comprehend.
- Sure, there is some blame to be rightly placed on the banks for catalyzing the recession of 2008, but the author completely ignores the faults of the masses who borrowed beyond what they could afford, the real reason for the collapse.
- Guaranteed retirement benefits don't work because of the inherent uncertainty in yield. However, the author rallies not only for managed pensions, but also for guaranteed income in retirement, insulated from market realities.

[Joseph Brigante · Rating 5 out of 5]

Wow. I was not aware of much of what was in this book. I must say it has changed my perspective on a number of things when it comes to finance, and corporate America. The history that this book goes into is particularly illuminating.

This book is probably not for everyone, but if you are even a little interested by the title, or the topic matter I can easily recommend,

[Jackson · Rating 5 out of 5]

Intensely aggravating and informative. Most of us do not have much say in how our pensions are invested, but after reading this I am supposing it is some legislator's favorite lobbyist. We really do need some transparent, accountable change to the system. People who just shuffle money around look like shell-gamers for a reason.

[Sourav · Rating 5 out of 5]

Interesting read especially for MBA grad, more specifically those who are interested in finance. It provides great insights on 'financialisation' of corporates in US and how it all happened. The author puts forward really strong point against Corporate Finance - creating value or wealth for shareholders doesn't bode well. In fact, the percent share of R&D spent among fortune 500 has declined over the years. Further, the author argues strongly against the tax-free debt provision and supply of cheap credit, how both these factors favour big companies who may not even need that money. The book starts with the famous example of Apple. There are certain ideas that you may not agree with, so read it to disagree.