Michael C. Hill - Cannibal Capitalism: How Big Business and The Feds Are Ruining America

Table of Contents

Copyright 2012 by Michael Hill. All rights reserved.

Published by John Wiley & Sons, Inc., Hoboken, New Jersey.

Published simultaneously in Canada.

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Library of Congress Cataloging-in-Publication Data:

Hill, Michael, 1971

Cannibal capitalism : how big business and the feds are ruining America / Michael Hill.

p. cm.

Includes bibliographical references and index.

ISBN 978-1-118-17531-6 (hardback); ISBN 978-1-118-19775-2 (ebk); ISBN 978-1-118-19776-9 (ebk); ISBN 978-1-118-19777-6 (ebk)

1. Income distributionUnited States. 2. IndustriesUnited States. 3. CapitalismUnited States. 4. Right and left (Political science) 5. United StatesEconomic conditions21st century. I. Title.

HC110.I5H55 2011

330.973dc23

2011039742

Introduction

There I was, sitting in bankruptcy court. It was all gone. It was over. Why? Why me? What did I do wrong? How was I going to take care of my family? My wife was six months pregnant with our second child, a little sister for our two-year-old daughter. Why did I put their futures at risk? How didnt I see it coming? I was all in. Everything I had was on the line, but it was all tied up in the safe haven of real estate. Everyone said the real estate market only slows, not stops. It was considered more stable than gold. In fact, land is the only property called real, and yet there I was. The whole thing had collapsed. They called it a subprime crisis, but the whole economy was in crisis.

By 2008, the whole thing had failed. Dog eat dog world is just a figure of speech, until you are the one being cannibalized. It was as if the whole country had turned on itself economically; instead of growing through the pain, the pain caused a cannibalization of engines of growth in the economy. Small businesses like mine that produce tangible goods and services and employ regular people were sacrificed, while paper traders who amass vast wealth through the exchange of abstractions derived from the real economy were propped up as too big to fail. It was a panica panic initiated by the greatest fear of the super-richthe fear that they might become a little less rich. For those a little lower on the totem pole, the fear was based on the near reality of losing everything.

Just a year earlier, I had won a Custom Builder of the Year award for the Greater Washington Metropolitan region, and my company was valued by an investment bank at $47 million. My homes were featured in magazines, and I was rubbing shoulders with celebrities. We were engaged with a venture capital fund to take the business nationwide and ultimately go public with a stock offering. I thought Id realized my dream, but it all blew up in my face. Sales froze and I was stuck holding over $10 million worth of real estate that was underwater, as they say.

I had to retrace my steps. I had to understand the market forces that drove my success, or the illusion of it, as well as its collapsenot just for me, but for everyone caught up in this economy. The old distinctions we once safely made between Wall Street and Main Street have proved to be fallacious. Our money may come from the banks, but the value of that money comes from the real economy of Main Street. When a business fails, they may say, You win some, you lose some, but what is a game for some is life and livelihood for so many more. The forces that drive wealth creation and destruction, the flow of capital up and down the socioeconomic ladder, and even the trading of financial instruments that no one understands, govern our lives in ways not easily perceived.

I pored over census data, market trends, economic theories and reports, and book after book of analysis of the economy. In the course of my studies, I turned myself into a sort of blue-collar economist, not academically trained in theory, but well practiced in real-world economics and the art of business. I am a career entrepreneur. I have skills in a variety of highly technical areas and very broad work experience. Ive held jobs ranging from janitorial services to research assistant in a solid-state physics lab, but my life has been business. To understand my predicament, you have to understand my background.

My father is a rocket scientist, as turgid as that may sound. This is significant only insofar as the end of his career shaped my view of work, money, and career. He had long dreamed of working for NASA, and that dream came true. He worked on the space shuttle before the time of its first launch. It meant everything to himperhaps too much. He gave himself fully to the space program, and in the end, it cost him his family. Now, there are many details that I wont describe here, but in short, when he faced the life-changing choice between career and family, he chose career.

Ironically, a short while after my parents divorced, the space program suffered wide-ranging budget cuts, and he was laid off. He played by the rules and got a good education and a good job, but ultimately, his dream was empty. The illusion shattered. If being a rocket scientistthe well-worn clich for any intellectual challengeis a guarantee of nothing, then what is? I became determined to chart a distinct course. I would not live my life that way.

Think about itmy fathers education and diligence led to a dead end, while college dropouts like Microsofts Bill Gates and Oracles Larry Ellison number among the richest men in the world. To me, its strong evidence that something is very wrong with what we are all generally taught. Go to school, get good grades, pick a career, get a degree, put your money in a bank, work hard for job security, buy a house, and retire to a warm place. Its standard fare, but it doesnt really work, at least not anymore. Feeding people that garbage may maintain the status quo, but it doesnt meet the ambitions of overachievers, and it hasnt led the national economy to a brighter future.