Donald Luskin Read online

  Contents

  Introduction

  The Books That Changed Our World

  Beyond Political Labels

  Objectivism 101

  Who Is Ayn Rand?

  Living the Life of an Ayn Rand Hero

  Why It Matters Today

  Chapter 1: The Individualist

  Yes, It All Began in a Garage

  Stevie Appleseed

  Poisoned Apple

  The Granite Quarry

  Back on Top

  To Infinity and Beyond

  Chapter 2: The Mad Collectivist

  The Abysmal Pseudo-Scientist

  The Economist Who Couldn’t Shoot Straight

  The Little Man Lives Large

  Adding Consult to Injury

  The Krugman Truth Squad

  Ordeal by Slander

  The Errors of His Ways

  Putting Krugman in the Correctional Facility—for Life

  Cut Down to Size

  Chapter 3: The Leader

  Discovering Rand

  The Man with a Purpose

  In Defense of Capitalism

  Chapter 4: The Parasite

  The Birth of Countrywide

  The Loeb Years

  Unholy Alliance with Fannie

  Slide into Subprime

  To Beg or to Bribe?

  Carnival Barker of Loans

  Exceptions Are the Rule

  By Force or by Fraud

  The Rats Flee the Ship

  Washington, We Have a Problem

  SEC v. Angelo Mozilo

  Chapter 5: The Persecuted Titan

  Storming the Gates

  A Hero from the Start

  Origins of Empire

  Act I: DOS Kapital

  Act II: As Far as Your Mind Will Take You

  Gates through the Looking Glass

  Gates Puts His Mind on Strike

  Chapter 6: The Central Planner

  A Czar Is Born

  Frank’s “Noble Experiment” in Housing

  Government-Sponsored Booby Prize

  The Money Pit

  “I Need Wider Powers”

  Chapter 7: The Capitalist Champion

  The Bad Boy of Silicon Valley

  From the Gridiron to Silicon Valley

  Planting the Seed of Cypress

  Profits versus Political Correctness

  The Conscience of the Nation

  Silicon Always Tells the Truth

  Money Is Not Evil

  A Hero on Strike

  The Laboratory Vineyard

  A Normal Man

  Chapter 8: The Sellout

  Ayn Rand’s Adopted Son

  Beyond The Collective

  Ayn Rand’s Man in Washington

  The Making of a Maestro

  The Maestro Untethered

  From Bust to Bubble

  The Maestro’s Final Bow

  Chapter 9: The Economist of Liberty

  A Young Mind in Training

  A Detour to the New Deal

  A Historic Economic History

  From Academia to Main Street

  Helping People Learn (Because Governments Don’t)

  The Prophet of Profit

  Afterword

  Notes

  Acknowledgments

  About the Authors

  Index

  Copyright © 2011 by Donald L. Luskin and Andrew Greta. 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:

  Luskin, Donald L.

  I am John Galt : today’s heroic innovators building the world and the villainous parasites destroying it / Donald L. Luskin and Andrew Greta.

  p. cm.

  Includes index.

  ISBN 978-1-118-01378-6 (hardback); 978-1-118-10096-7 (ebk.); 978-1-118-10097-4 (ebk.); 978-1-118-10098-1 (ebk.)

  1. Entrepreneurship—Biography. 2. Creative ability in business. 3. Self-esteem.

  I. Greta, Andrew. II. Title.

  HC29.L87 2011

  338'.040922—dc22

  2011010991

  To Christine, Roark, and Roark

  —Don

  To my wife Emily, and daughter Lucy

  —Andrew

  Introduction

  Who is John Galt? Ayn Rand asked that question over and over as a catchphrase in Atlas Shrugged, one of the best-selling and most inspiring novels of all time. The question was a cry of despair in a desperate time not unlike our own—the equivalent of “What’s the use?” More precisely, it meant “Where are the great men and women who could inspire us?” That’s a question many are asking today. The world portrayed in Atlas Shrugged is racked by a pervasive economic and social crisis—its eerie similarity to our own real world today is one of the reasons it is selling more copies than ever, 50 years after it was first published.

  Your personal answer to Rand’s question could be “I am John Galt.” Yes, you, the person reading these words now in an increasingly quaint hard copy, or on your handheld digital reading device. You can be one of the epic heroes of Rand’s books—like John Galt himself, her greatest hero—the ones who fight despair, overcome relentless opposition, and lift the world out of desperation.

  We think that’s the real secret explaining why Rand’s fiction—Atlas Shrugged (1957), but also The Fountainhead (1943), We the Living (1936), and Anthem (1938)—are so timeless. Simply stated: they are inspiring. Rand set out to portray ideal men and women, and she did. The heroes and heroines of her novels are individualists, innovators, and iconoclasts. They are achievers—in business, in the arts, and in love. Their ordeals are the ones that all potentially great people face. What’s special about them is that in the course of Rand’s novels, they disco
ver and put to work core philosophies—life strategies, really—that lead ultimately to triumph.

  You can do it, too. Our proof is the heroes we portray in this book. They faced all the same challenges you do. And yet they made themselves great by following the same life strategies that Rand’s heroes did—some of them quite self-consciously, others without having ever even heard of Rand as far as we know. This book shows you what their life strategies—their philosophies—are, and how they map with great precision to the philosophies of Rand’s heroes.

  Yes, the world portrayed in Rand’s books was the world of the industrial era—when leading-edge technologies were railroads and steel mills. Today’s Randian heroes run software companies, not railroads. They manufacture semiconductors, not steel. But the principles of success are the same. The philosophy is the same, and Rand laid it all out more than 50 years ago.

  Unfortunately, Rand’s villains are alive and well in today’s world, too. We portray them here as proof that collectivism, self-abnegation, envy, power lust, and, most tellingly, the corrupt alliance of business and government are all strategies for personal ruin. And they spill over into horrific consequences for the world. As you’ll see, the economic paroxysm that rocked the world late in the first decade of the 2000s was caused specifically by individuals operating perfectly in the mode of Rand’s parasitic villains.

  So as another timeless book puts it, our real world and Rand’s fictional world are both the best of times and the worst of times. Our heroes have created personal wealth never before seen in history by creating technological marvels that were thought, just a few years ago, to be impossibilities found only in science fiction. Our villains very nearly succeeded in bringing the world economy to its knees. Such is the power of one’s personal philosophy. Such is the power of your choice.

  Whom do you choose to be like? Do you want to be like Bill Gates? Gates is reviled as a monopolist and a plutocrat akin to Rand’s hero Henry Rearden, the steel tycoon. His own government came within inches of branding him a criminal and breaking up his company. If you agree he’s a hero, you need to read this book to learn what he did to became one. If you think he’s a villain, you urgently need to read this book—we’ll show you that his greatness is to be celebrated, not feared. Do you want to be like Steve Jobs? He dropped out of school to follow his professional passion like Rand’s hero Howard Roark. Even after he became rich and famous, over and over again Jobs risked his fortune on new and untried technologies—just because he thought they were so damn cool. Now his company is one of the most valuable on the planet. Yet he’s widely regarded as a pirate who steals the ideas of others, and an autocratic son of a bitch entirely incapable of working with people. If you agree that he’s a hero, maybe one of the reasons is that you’re reading this on an iPad—one of Jobs’s many magical innovations that have transformed our culture. If you think he’s a villain, go out and get an iPad—it might change your mind.

  Maybe you’d like to be Paul Krugman. He’s a media darling and widely known academic much like Rand’s villain Ellsworth Toohey. He’s also a rabid partisan who, in the vivid words of one critic, pulls his so-called facts from “a database somewhere in his lower intestine.”1 He has discredited himself among serious thinkers and brought dishonor to the once-great newspaper on whose opinion pages his politicized deceptions appear. He’s also a socialist who is willing to destroy as many lives as necessary to deliver the United States into collectivism. If you’ve experienced a visceral revulsion when reading a Krugman column or seeing him on the Sunday morning talk shows, we’ll help you understand your intuition that he is a villain. If he’s a hero in your mind, then you shouldn’t be afraid to read what we have to say about him—but we might change your mind.

  Does all this strike you as a strange conception of “heroes” and “villains”? Maybe when you think of a hero, you think of someone like “Sully”—Chesley Sullenberger, the US Airways pilot who saved 155 passengers by successfully landing a disabled plan in the Hudson River. Sully isn’t a titan of business. He’s not rich. Yet we emphatically believe he is a hero, and we suspect Ayn Rand would, too. Why? Because Sully’s performance in those fateful few minutes in January 2009 was a tour de force of sheer ability, the bravura performance of a highly skilled and courageous man motivated by a single purpose, doing battle with chaos—and winning. What Sully has in common with Bill Gates, Steve Jobs, and the other heroes we talk about in this book is competence, courage, and purpose. That’s what makes a hero.

  Maybe when you think of a villain (and let’s leave out overt monsters like, say, Adolf Hitler) you think of a corrupt politician like Richard Nixon or a crook like Bernard Madoff. Who could disagree with that? Ayn Rand certainly demonstrated that evil could exist at the highest levels of government and in business as well. We’ll meet real-world villains of both types in this book. But Rand’s novels focused primarily on that special brand of evil that is carried out under the high-minded slogans of altruism. The real-world villains you’ll meet in this book all have one thing in common: No matter how rabid their lust for power, no matter how voracious their appetite for unearned wealth, and no matter how many lives they have to destroy in the process, their villainy is all carried out in the name of selfless service to others.

  Real-life Randian heroes and villains are among us. If you so choose, you can live your life such that you can truly say, “I am John Galt.” This book shows you how.

  The Books That Changed Our World

  To Ayn Rand fans, her books, characters, and philosophy need no introduction. If you are new to Rand, let us introduce her.

  Ayn Rand is one of the best-selling novelists of all time. Atlas Shrugged has sold over 7 million copies since its 1957 publication, with a record 500,000 copies in 2009 alone. Of the Modern Library Reader’s List of 100 Best Novels, Rand’s titles hold four of the top eight positions, with Atlas Shrugged at #1 and The Fountainhead at #2.2 In a survey by the Library of Congress and the Book of the Month Club, respondents ranked Atlas Shrugged second only to the Bible when asked what book had made the biggest impact on their lives.3

  The New York Times has called Atlas Shrugged “one of the most influential business books ever written.” The Chicago Tribune called it “the boldest affirmation of the gospel of free enterprise ever attempted in fiction.”4 Its ongoing popularity is an astonishing achievement for a literary franchise that has produced no new content since Rand’s death in 1982, and for a book that was derided as too long, too intellectual, and too politically conservative.

  References to Rand’s work continually crop up in popular culture ranging from Mad Men to Mad magazine. There’s even a video game saturated with Rand references, including cigarettes branded with gold dollar signs and the ever-present question, “Who is Atlas?”

  But Rand has something deeper to offer. Her books are sought out for their enduring practical and philosophical content by readers eager to learn how to live a more successful life. Rand’s work has inspired lives and helped create the society, politics, economics, law, and culture we live in today.

  Former Federal Reserve chair Alan Greenspan and the eminent economist Milton Friedman (both of whom we’ll examine in detail in this book), as well as Supreme Court Justice Clarence Thomas and House Budget Committee chair Paul Ryan all count themselves among Rand’s devotees. It’s far more than just conservative political figures, though. Whole Foods Market founder John Mackey, former BB&T chief executive John Allison (whom we’ll also examine), Dallas Mavericks owner Mark Cuban, baseball’s “Iron Man” Cal Ripken, actor Vince Vaughn, magician Penn Jillette, actress Angelina Jolie, and even Hillary Clinton have all said publicly that Rand has been an inspiration.

  Beyond Political Labels

  Do you have to be a political conservative to be a real-life Ayn Rand hero? Hardly! Rand used the word conservative as an insult. But then again, she did the same thing with the word liberal. When it came to politics, she was maddeningly hard to pin down—and very resi
stant to being labeled.

  That said, she is probably associated more with so-called conservative ideas than with so-called liberal ones. And with Atlas Shrugged selling better than ever, the political right has been quick to claim that it’s because of politics. The right’s story is that the Great Recession that rocked the globe in 2008 and 2009 was caused entirely by government meddling in the economy, and that Ayn Rand’s masterwork amounts to a prediction of that, made more than a half century ago.

  This is a misreading of Rand, and the political left should be the first to say so. In fact, Rand has always offered as much to liberals as she has to conservatives.

  For starters, it’s much too simple to say that Atlas Shrugged is a parable of the destructive effects of government intervention, a black-and-white world in which businesspeople are heroes and public servants are villains. In fact, the primary villain in Atlas Shrugged is a businessman, railroad executive James Taggart. There are villainous politicians, to be sure, but for the most part they are portrayed as passive bumblers. The government’s most destructive acts are carried out at the behest of Taggart and his cronies, not for ideological motives.

  Yes, many of the heroes of Atlas Shrugged are businessmen. But that is only to say that the key dynamic animating the story’s action is the conflict between good businessmen and bad businessmen.

  Even the heroic businessmen in Atlas Shrugged are portrayed as flawed and conflicted individuals. They are not examples of “an ideal man,” the projection of which was for Rand the “motive and the purpose of my writing.”5 That honor belongs to John Galt, a humble inventor. (Liberals take note: In Atlas Shrugged Galt invents a motor that requires no energy—what would now be called green technology.)

  The same distinction shows up with a vengeance in The Fountainhead, Rand’s first major novel. The ideal man is Howard Roark, an art-for-art’s-sake architect. Ultrarich newspaper tycoon Gail Wynand is portrayed in heroic terms, prefiguring some of the industrial giants who will later populate Atlas Shrugged. But Wynand is a tragic hero who makes the error of pursuing wealth for the sake of power over other people—as in fact many highly achieved businesspeople do. In the closing scenes of the book Wynand commits suicide, declaring his entire life to have been a failure.