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Writings & Speeches

Informal Remarks

by Eugene (Gene) Rotberg
University of Pennsylvania Law School
September 22, 2006

When I was asked to talk to law students here at Penn, I was ambivalent. It was suggested I should talk about my experiences, how Penn Law School informed my life and offer some words of wisdom.  I was ambivalent for three reasons. First, my personal remarks would be self-serving and immodest, despite disclaimers to the contrary. Second, I was concerned that I would slip into platitudes designed to advise you in your future endeavors as if I had certainty about the way the world is put together and what would be “best” for you. Third, I was concerned about suspect memory – that I would remember, then connect certain experiences and events with outcome measures as if they were cause and effect. I too found that self-aggrandizing and immodest.

Nonetheless, I figured that I could try to be pleasant and likeable and not someone who bores his audience with talk of the “good old days.” I felt I could do this because I was brought up in my adult life by three women psychologists, two daughters and one wife, who hopefully had knocked out or at least had diminished the “center of the universe” mentality so prevalent in men of my age and profession.

So let me begin with some personal background/reminiscences which I am reasonably confident (though assuredly not subject to psychoanalytic probity) account for what I ended up doing and thinking. My father was a lawyer. He had no corporate clients and represented virtually exclusively rather poor people in claims for Workman’s Compensation or he sought damages for the results of automobile accidents and similar kind of stuff. I heard often about discrimination against the poor, blacks, Jews, Catholics, and a quota system for admission to college, particularly in this university, a natural place for college- aspirant young Philadelphian boys.

I went to Central High School. Central was then an all-boys academic high school. It made me aware how smart other people were. It was a school where children who were thought to be “college material” would go. It was also a school where child prodigies—the genius types—would also attend in considerable number, and so your classmates were the likes of Noam Chomsky. That made one very modest, if like me, all you had in your favor was you were “college material.” Virtually everybody else at the school, it seemed to me, were prodigies. They had maybe 50 IQ points on me.

I was brought up to believe that wealth and power were concentrated in a few, that politicians were for the most part corrupt, and that to be on the side of the disadvantaged, the minorities, the poor and forgotten – that was the honorable side to be on.

I went to Temple University as an undergraduate. My major fields of interest were philosophy, literature and history.  The greatest influence were those professors who taught me the difference between things and language, between induction and deduction,  between questions answerable and unanswerable, between facts and value judgments, between that which was provable, that which was proven, that which was measurable and those questions which were meaningless. It wasn’t until I finished law school that I began to understand the importance of social and public policy both in deciding cases and in legislation. But my law class here, as I remember, had no African Americans, Hispanics or Asians. Only one woman was enrolled and she was verbally harassed by more than one faculty member. Years later, the environment changed. Now the diversity by gender, race, ethnicity causes me to realize how much my classmates and I missed by being confined to a world of white men.

My first job was at the Securities and Exchange Commission (SEC), a natural home for me – a place hostile to Wall Street and those who had wealth – a regulatory agency whose role was to protect, if not the poor, certainly the public, from greed, avarice, and non-competitiveness of elite bankers and brokers. I have a story to tell that perhaps will give you a sense of the relationship between the staff of the Securities and Exchange Commission and Wall Street. I was sent with a colleague, Fred Moss, to visit the investment banking firm then called Morgan Stanley. No one from the SEC had visited Morgan Stanley in 20 years. Some of you may know it was at Congressional Hearings in 1933 that a small dog jumped on the lap of the then President of Morgan Stanley, J.P. Morgan, the leader of America’s most prestigious investment banking firm, much to his embarrassment. In any event, Fred and I went up to New York for our meeting. We approached the double doors on the floor of the meeting, and were met by two men dressed in livery—bright red tunics, white cross harnesses and britches. The doors opened, and we entered a room larger than the one we are now in. We stood there. Diagonally, on the far left sat a man behind a desk and in each of the four corners of the room sat four other men. There was a huge painting of J. P. Morgan in the far corner. No one said anything. Finally, from the far corner behind the desk came a voice, “Who are you?” I said my name is Gene Rotberg and this is Fred Moss. We are from the Securities and Exchange Commission. As you know, we have an appointment. The voice again asked who are you. I repeated what I had just said. Again the voice from the corner said, “Let me tell you what I mean. My name is Perry Hall, Managing Partner, Morgan Stanley, Princeton. In the far corner is Hudson Lemkau, Managing Partner, Underwriting, Morgan Stanley, Princeton. In the left corner is John Whitney, Managing Partner, Morgan Stanley, Princeton. To the far right, John Young, Managing Partner, Morgan Stanley, Williams, and he was captain of the football team. (He pointed to someone who looked to me about 80 years old!) Now who are you?” I was terrified. But finally, Fred Moss, my colleague, said “The name is Moss, Brooklyn College Law School. Before that it was Moskowitz, and before that it was Morgan, but in 1933 we changed it from Morgan to Moskowitz.”

In 1968, Richard Nixon in an open letter to Wall Street wrote that one of his first acts if he became President would be to get rid of those hostile Kennedy-type lawyers at the SEC who were giving Wall Street such a bad name through public hearings and attacks in the courts. I believed for good reason that he was talking about my colleagues and me. He was elected in November 1968. In December 1968 I was interviewed by Robert McNamara who had just become President of the World Bank.  The interview was a bit unique and I use it to conclude this autobiographical background before I get into the substance of what informed my life over the next 30 years.

I did not know the purpose of the interview. I was in my mid-thirties. McNamara started by asking me why I became a lawyer. I told him my father was a lawyer. He then asked how much I knew about business and accounting. I told him the truth – virtually nothing. Did I study economics – very little I said. What had I studied as an undergraduate – mostly literature and history I told him. What did I know about international monetary affairs – I said nothing. He asked me how I felt about investment bankers. I said I was trying to put them in jail. He asked what I thought of commercial bankers.  I told McNamara I didn’t know what they did. Tellers behind a window? Bosses who wore white pants in the summer and drank martinis sailing around the Long Island Sound in their summer?  He then asked me a final question: what did I think of poverty in poor countries. I said it seemed worth spending one’s life on. He then offered me the position of Vice President and Treasurer of the World Bank. I was shocked. I told him I didn’t know the difference between a debit and credit. Not a problem he said. I took the job and spent 20 years doing it. For me, it was like Robin Hood on a grand scale – the perfect job for me. Get money from the rich and lend it to the poor. All I had to do was design financial techniques and products which would be attractive to diverse holders of wealth around the world. And then my colleagues would lend the money to poor countries to address problems of malnutrition, infant mortality, no water, no electricity, no jobs, no hope, throughout the third world.

We all consciously or unconsciously have a map of the world – how we think things are and why things develop the way they do. I might say, parenthetically here, that those who say they can divorce themselves as jurists from their own psychological, experiential and ethical base (and their map of how they think the world should be) should be treated with respect…and suspicion.

For me, not surprisingly, because of what I said earlier and my time at the World Bank—I believed then and still believe that a driving force which informs what happens in the world—is lack of access to a decent life, lack of hope, a feeling of absence of power—poverty.

I came to believe that for those with little hope, the reactions range from a sort of catatonia, to a violence born of frustration and anger which accelerates as expectations and education just begin to impinge on lives. We—in this room—know that coups, assassinations, violence, sickness, depression, lethargy, anarchy and clashes of civilizations are enhanced by the widening gap between rich and poor and by poverty.  But, it has been said that the war on poverty is too amorphous a concept, too diffuse, too abstract to be successful—unlike, say, the war on terrorism. I believe it is the same war.

I certainly do not mean to suggest that major geo-political problems can be resolved or substantially changed simply by addressing problems of poverty. But it doesn’t take any great brilliance to recognize that those who don’t have access because of poverty or have little influence, even in their own countries, are more vulnerable – and are easily attracted to those committed to violence..                             

The second driving force is the uncertainty, the vulnerability of all of us in a globalized world. We simply do not have a model that explains and predicts contagion - how events occur that have a far closer resemblance to a pinball machine or chaos theory than to Aristotelean logic. Iraq is an obvious example. And it’s not just politics. Russia can’t meet a debt service payment, therefore Japanese banks in response, reduce their lines of credit to Korea prompting a huge withdrawal of short term funds from Korea, collapsing its economy, and by contagion, that of Thailand, and when in response, U.S. Government bonds, held as collateral on sovereign debt are sold, interest rates rise in the U.S. hurting the U.S. stock market. Unpredictable events, unpredictable outcomes. Uninsurable. We do not know how a specific intervention can offset or aggravate the effects of a series of apparently unlinked events. Besides, there are coups, wars, technological changes, assassinations, earthquakes and factors we cannot identify. We do not have the capacity—even in retrospect—to identify with certainty the impact of a particular set of interventions by government or the private sector—there are too many variables.

Quite apart from the ambiguities inherent in evaluating what is the “best” economic outcome in a judicial controversy, the uncertainty of even predicting any given outcome will add to the complexity of applying economic or behaviorial standards in the judicial process.

The third concept that has informed my life is the realization that the U.S. is not the center of the universe. In the past, powerful countries like the U.S. controlled colonies, or sources and prices of labor, or raw materials, or technology. The West fixed prices, protected its industries, sent in troops. The United States does not control any longer the raw materials, the energy, the commodities, the minerals.

There was a time when power was concentrated in a few -- Great Britain in the 19th Century; the United States after the Second World War. The United States then had leverage. It achieved much of that leverage because of the Cold War and the fear that another power -- the Soviet Union -- would, one way or another, swallow up all of Western Europe, while a third, China, it was argued, was likely to control Asia. That provided the United States the leverage to effect economic and political policy outside its own borders. Now there is no Soviet military threat. China has become mercantilist way beyond expectation. There is no value to anyone invading Belgium yet again. There are no longer monopolies on intellectual or technological prowess.  One hundred countries now compete for markets with highly sophisticated products and some with wages only a minute fraction of those in industrialized countries. Countries small and large can exploit low wages, implement tremendous productivity gains by using modern technology, subsidize, delay gratification, compete, form alliances, over-produce, under-produce, form cartels and distribute gains to but a few. Without the Cold War countries are not easily influenced by the old paradigms of power. China, given its nuclear expertise and its huge investments from the Western world, cannot easily be pressed to have a more flexible attitude on trade imbalances.

The reality is that the seat which you will occupy will not be the center of the universe, whether it be in the United States or, indeed, anywhere else. Power is fragmented. There are many players, independent ones, some rich, some poor, each with enough power to cause havoc, but not enough to insist on a particular course of action.

Freud, Galileo and Darwin told us, at different times and in different ways, that we are not the center of the universe; that we do not have control; that we do not fully understand our motivations; that we are not all that special. They did not have an easy time of it -- for each society wants to believe that it can exercise control over its own destiny and over others. I suspect their findings apply not just to science or personal behavior, but to the way power and leverage can be exercised by nation states. Yours, I suspect, will be the first generation which will have to achieve results with neither military nor economic predominance -- no matter where you sit. If conflict of laws between states and between states and the federal system were always overlaid with political considerations, consider now the implications of controversies between nation states or groups of nation states (EU) with highly divergent legal, social and political systems. Whose “law” of conflicts of laws governs in a globalized world.

Much of what I said up to now relates to risk, the fourth concept I would like to share with you. Let me just quickly set out some suggestions or guidelines that have helped me cope with the financial, legal and political environment in which we live:

• Know what can go wrong before you act if you are a policy maker or practitioner.
• Ask “what if.” Quantify “what if.” Do adverse scenario analyses before you embark on an intervention.
• Always measure opportunities lost.

Let me interrupt this outline of “risks” to test your own sense of gain, loss and risk. Assume the following: Let’s say you buy a share of stock at $10 a share. It rapidly goes to $20. At that moment, before you have sold it, have you made a profit? Are you wealthier? Let’s see a show of hands…Now, let’s assume you buy the same share at $10 and shortly after it declines in price to $5. Have you had a loss before you sell it? A diminishment of wealth? Let’s see a show of hands…Now a final hypothetical: Let’s assume you don’t buy a share of stock after considering it at $10. The stock quickly thereafter goes to $20, but you, of course, don’t own it. Have you lost any money? ( Discussion of the different economic, accounting, behaviorial and linguistic implications of responses of the students).

 Now let me get back to talking about “risk” and behavior.

• Don’t take credit for a favorable outcome unless you can really show how and why your intervention specifically caused the result. And certainly admit to failure and vulnerability.
• Understand that material compensation does not correlate with ability to predict the future.
• Resist peer pressure.
• Be careful you don’t seek short term rewards by delaying to the future painful decisions. Don’t create a situation where someone else has to pick up the pieces.

And, finally, some words about yourselves. I am not going to suggest whether public or private service will be more satisfying. It is unanswerable. But, you might want to ask yourself before you take a job or set out on a career path or continue to do what you have been doing some very difficult personal questions. Who are you?

• How important is it for you to be recognized publicly by strangers, in the news papers, on TV, or is it enough only to be recognized by your peers for your work? Or only by your mother and father and siblings.
• Do you care at all whether or not you’re recognized for your work? Let the good work speak for itself –like the Russian mathematician who has solved the mathematical proof of Poincare’s hypothesis - but has resisted public ceremonies and medals for his accomplishment. He says the solution speaks for itself. It is enough for him.
• How important is wealth to you? Enough to get by? More than you could ever possibly need?  Is wealth life’s report card for you?
• Do you want to be able to travel – a little, a lot? Why?
• How important is it for you to have a partner in your life, children?
• Do you want to work with others? Or alone? Are you comfortable with consensus and compromise or do you prefer to win unambiguously. 
• Do you want to be remembered, immortal? Or is it irrelevant to you.

I will conclude with some thoughts about immortality because though it might not be uppermost in your minds now, it may become so. Immortality is usually reserved only for writers, artists and composers and a few others – if they are written about. After all, there is no Helen of Troy without Homer. Over the millennia, some even have written about their future place in history. Ovid, some 2000 years ago, ended his “Metamorphoses” with these words: “I shall have mention on men’s lips, and if the prophecies of bards have any truth, through all the ages shall I live in fame.” His last Latin word was “vivam”—I shall live. At the opening night performance of Rigoletto, Verdi predicted that by the next morning La Donne e Mobile would be on everyone’s lips throughout Italy and would remain so. Others were not so sure of their place. James Joyce wrote in his notebook “Today, the 16th of June, 1924, 20 years after. Will anybody remember this date?” The date that he was referring to was June 16, 1904, the day of Bloom’s travels through Dublin. Joyce, unhappily, doubted that anyone would remember his Ulysses.

Or will it be sufficient if what you have done will have a positive effect on the lives of a few or many who probably will never know your name?

Robert Herrick, the English poet, wrote:

     “She by the river sat, and sitting there,
     She wept, and made it deeper by a tear.”
You can make a difference.

© 2012-2024 Gene Rotberg