The price of greed
In the movie “Wall Street,” Michael Douglas who was playing Gordon Gecko uttered a line during a stockholder’s meeting that became not only the lynchpin for the movie but also the primary rule of entrepreneurship back then when he said “Greed is Good.” Since that movie was released, greed has become the guiding principle for most business transactions done in this country. The theory surrounding a deal used to be “What’s good for the most people.” Today it’s “what’s good for me.”
A feature article in Time magazine this week exemplifies that concept. For those of you unaware of this, the Permian Basin in west Texas is enjoying yet another oil boom and because of new oil exploration techniques, it’s the largest one yet and the profits are soaring. Gas stations, retail shops and fast-food restaurants advertise perks like $15 per-hour pay and 401 (k) benefits as they compete to lure workers. Bare bones motels are charging hundreds of dollars to rent a room for a night. Local restaurants, patronized by women clutching designer handbags are charging $18 for a salad.
While previous oil booms have ended in busts that devastated the region, local officials say this time is different. In the past, high oil prices fueled short-lived enthusiasm that dwindled when the price of crude dropped. But recently, drillers have flocked to the Permian despite low oil prices, in part because fracking and other technological advances have made extraction so cheap. Drillers are striking crude in areas inaccessible just a few years ago.
A report from the Federal Reserve Bank of Dallas estimates that new Permian oil wells break even around $50 a barrel, far less than the $80 that Saudi Arabia spends on average to extract the same quantity of crude. So with the profit margin being much higher than before, everybody’s hoping to strike it rich.
And it’s not just oil exploration that has hit the jackpot once again. Jerry Jones, a former classmate of mine at the University of Arkansas and the current owner of the Dallas Cowboys, just paid 250 MILLION dollars for a new yacht that is larger than a football field measured from the back of both end zones.
In other words, its 120 yards long. And that’s 100 million dollars more than he paid for the Cowboys when he bought them in 1989. His net worth is close to 7 BILLION dollars, so buying a yacht that expensive is just another day at the office for him.
Even in McCook, Nebraska, we see the effects of greed. When I moved here in 1995, lunch cost four to six dollars. Today, it’s 10 to 20 dollars. I had three pieces of fish the other day, accompanied by coleslaw and a large coke and my bill was over sixteen dollars. There are a couple of places in town that serve fish for lunch and their prices are comparable.
I did some math the other day using my police officer salary in Tulsa Oklahoma in 1967 and the things it allowed me to buy with my closing salary at McCook Community College three years ago and my retirement income since. My salary as a Tulsa police officer was $440 a month before taxes. My take-home salary from the college my last year of teaching was $3500 a month. I discovered that I could buy about the same kind and amount of things when I retired as when I was first hired. In other words, my standard of living did not increase very much at all even though my salary did.
We’re in the middle of the same thing happening again. The rich want to get richer and that’s often at the expense of the poor. Some of you will remember when the Hunt brothers tried to corner the world’s silver market a few years ago and when asked how much money would satisfy them, one of the brothers replied that they wanted ALL the money.
A lot of people have the same idea today.