Rana Foroohar

Ep. 038 - How Wall Street Destroyed Main Street with Rana Foroohar

As you’ll recall, we did our fair share of explaining why Wall Street matters, on the episode featuring Bill Cohan.

Today we’re doing a 180 with financial journalist and author Rana Foroohar. Rana’s book, Maker and Takers: How Wall Street Destroyed Main Street, doesn’t exactly paint our economic system in the best light.

The book, just released in paperback, explores how the misguided financial practices and philosophies that nearly toppled the global financial system have infiltrated many US businesses.

Rana shows how the “financialization of America,” the trend by which finance and its way of thinking have come to reign supreme, is perpetuating Wall Street’s reign over Main Street, widening the gap between rich and poor, and threatening the future of the American Dream.

And since it’s not everyday that we have a Financial Times columnist in the studio, we also talked a good bit about the global economy, including Germany, Brexit, and China.

Rana is a great storyteller, and it’s through stories of both “Takers,” those stifling job creation while lining their own pockets, and “Makers,” businesses serving the real economy, that she shows how we can reverse these trends for a better path forward.

“Better Off” is sponsored by Betterment.

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#280 Stocks Market Highs, American Business Lows

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Despite stock market indexes reaching all-time highs, American businesses are falling to new lows. The reason is that the golden age of US innovation and capitalism has given way to what our guest Rana Foroohar calls "financialization.” Rana is the Time business and economics columnist and author of "Makers and Takers: The Rise of Finance and the Fall of American Business." The book divides the American business world into "Makers," those companies that serve the real economy by providing capital and investing in long-term growth and "Takers," those who use financial engineering to juice short-term profits and as a result, enrich their shareholders and themselves.

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How did we go from the simple explanation of banking that Jimmy Stewart provided in "It's A Wonderful Life" ("The money's not here [in the bank]. Your money is in Joe's house that's right next to yours. And in the Kennedy house and Mrs. Macklin's house and a hundred others") to a world where only about 15 percent of all the money in our system actually ends up in the real economy?  Rana notes that the 40-year process has culminated in the financial sector holding "a disproportionate amount of power in sheer economic terms. It represents about 7 percent of our economy but takes around 25 percent of our economy of all corporate profits, while creating only 4 percent of all jobs."

And if you have an MBA or are thinking of getting one, you might be interested in knowing that "an increasing number of business educators at top schools are concerned that MBA programs are churning out number crunchers without a conscience." Before you get too depressed, listen to the whole interview, because Rana notes "Despite all our problems, America is still the prettiest house on the ugly block that is the global economy." There are also some interesting policy shifts that could occur that would remedy the trend.

Callers/Listener E-Mails:

If you are interested in starting your own business, check out my conversation with Barbara, who is trying to decide whether or not to start a private practice. We discuss the Social Security Windfall Elimination for Scott, the use of fixed annuity for Deanna and robo advisors for Andrew.

Thanks to everyone who participated this week, especially Mark, the Best Producer/Music Curator in the World. Here's how to contact us:

  • Call 855-411-JILL and we'll schedule time to get you on the show LIVE