“Breaking Bad” and West Coast Culture

I’m not quite sure how “Breaking Bad” escaped my attention, but I discovered it only a month ago (it’s in its third season).

Without question, it’s a dark show –it is about a high school chemistry teacher who is diagnosed with cancer and decides to start cooking crystal meth.

But the writing is pitch perfect.  I couldn’t imagine a better skewering of West Coast hustler culture.

The show is based in Albuquerque, New Mexico, a city I’ve never been to and know nothing about, but in my view the locale solidly captures the feel of major West Coast cities circa- 2011.

Here are the dominant macro themes I take from Breaking Bad:

1.     Decline in the legitimacy of wealth.

Unlike “Mad Men”, “Breaking Bad” never allows outside events to penetrate the story lines— the show focuses exclusively on what’s going on in Albuquerque.

With a light touch, however, “Breaking Bad” is always commenting on the broader societal context.   For example, in Season 1, there is an episode where we learn that, in addition to being a high school history teacher, the main character, Walter White, also works the register at a car wash.  In this episode, Walter’s boss tells him that the car wash is short-staffed and he asks Walter (not for the first time, it is suggested) to help wash cars for a bit.  Walter finds himself washing the car of a student who had been disrespectful in class that very day.   The car is of the $50k variety, and we are left wondering — where did this money come from?  The viewers mind wanders to various aspects of white collar crime that this student’s parents might be involved with.

2.     Rise of the dumb criminal

The show suggests that Walter was a promising research scientist in his early life.  He, nonetheless, becomes a high-volume crystal meth producer and distributor, and arguably not a very smart or careful one (he steals the necessary equipment from the high school where he works).

The show is full of crime that is particularly stupid and ill considered in its execution.   The statement here is:  dumb crime is much more problematic, societally, than smart crime.  Smart crime is just a simple benefit-versus-cost calculation; people coldly pursuing their self-interest.  Dumb crime speaks of desperation.  And widespread dumb crime suggests widespread desperation.

Smart crime is, in some ways, predictable.  Dumb crime is random and therefore scarier.  In Las Vegas, for example, I can put myself into the mind of a smart criminal and predict how/when/why he might act.  This allows me to protect myself to some extent.  But what does one do when crime is dumb and therefore a bit random?

See the Bellagio motorcycle thief for example….


The alleged thief, whose father is a judge, contacted gamblers on the site twoplustwo.com with solicitations to by Bellagio $25k chips.

3.     Randomness

The utterly dominant impact of chance on one’s life course is explored throughout Breaking Bad.

4.     Utter effectiveness of violence

As Walter White’s Albuquerque comes apart at the seams, violence becomes the key determinant of power.

5.     Ineffective law enforcement

In Breaking Bad, law enforcement is reasonably good-natured, but they suffer the public sector problem — they’re underpaid and therefore lacking in talent, and they have mixed objectives.

6.     Demoralization of service sector employment

One of Walter’s meth salesman was recruited from the ranks of costume-wearing, traffic-directing, living billboards.

7.     Labyrinthian health care system

Walter, an obviously smart guy, can never figure out how to navigate the health care system, and he is stunned at every turn by the cost.

8.     Ineffective public education system

“Breaking Bad” comments minimally on this, as it is well-trodden territory.

9.     The power of addiction

Various harmful addictions provide some level of continuity to Walter’s surroundings.  No one in the show who develops an addition ever kicks it.  The only avenue Walter can find for covering his medical expenses is catering to others’ crystal meth addictions.

10. Difficulty of criminal life

Walter’s life as a drug dealer is one of continuous struggle.  The suggestion is that Walter moved into selling drugs (or hustling, more broadly) because of desperation, but, in so doing, he had a lot of company.  The hustling world in this show is extremely competitive — more like Sudhir Venkatesh’s Gang Leader for a Day than Dr. Dre’s “Kush”.

11. Decline in attention span

No one has the patience to explore the problems they face in depth.  In class, Walter’s students furtively monitor their cell phones and pay absolutely no attention at all to his lectures.  There is a memorable scene where Walter’s wife is actively monitoring an ebay.com auction during sex. …

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The Fall of Airline Pilots And Rise of Hedge Fund Managers

There is a great scene in the Steven Spielberg movie Catch Me if You Can where Leonardo DiCaprio playing the young Frank Abiginale has his “Aha” moment. Frank’s parents have just gotten divorced and he has run away from home seeking a life on his own in NYC. He is down on his luck and is feeling sorry for himself when he sees an Eastern Airline pilot get out of a cab accompanied by several beautiful stewardesses.

Frank is stopped dead in his tracks at the sight of this pilot. The pilot and his bevy of women swoosh past Frank and head to the classy hotel where they are staying. There the pilot is given a big welcome by the manager before heading up to his room. On his way up, he signs autographs for wide eyed youngsters and advises them to stay in school.  After watching all this, Frank decides that he too must become an airline pilot.

Catch Me If You Can is set in the early 1960s which is the only reason why anything in this scene makes sense. It is absurd nowadays to imagine an eight year old asking a commercial airline pilot for his autograph. Nor could one imagine the stewardesses accompanying that pilot being young attractive women and not dumpy and grumpy middle aged ones. Being an airline pilot was once a very prestigious, high paying job with loads of glamour. Now it is quite the opposite.

In his testimony before Congress in 2009, Captain Sully, the hero of the Hudson River landing, brought to light the tough working conditions faced by many modern commercial airline pilots. Over the past eight years the pay scale for most pilots has dropped by 30 to 40 percent on average. The starting pay for a pilot at a major is somewhere around $30,000 annually and it takes several years of seniority before you even begin to crack six figures and that is assuming that your airline does not go bankrupt.  It is even worse for regional airlines where pilots are sometimes making only $14,000 to $24000  a year.

There are all sorts of reasons cited as to why pilots have been squeezed – deregulation, rising fuel prices, the cyclical nature of the industry. An important reason perhaps the most important one is supply. The requirements for becoming an airline pilot have lessened over the years. It used to require well over a thousand flight hours. Now new regional hires only need 300-500 hours. Before military experience was a given. Now less than 50% of all pilots have it. Somewhere along the line, airlines decided that having super experienced pilots was not as important as having a super plentiful pool of less experienced pilots who were willing to take a cut in wages. With supply up and demand volatile, the fortunes of the airline pilot profession went south.

While the salaries of airline pilots have tanked over the years, the salaries of hedge fund managers have skyrocketed. If there was a ever a profession that was on the cutting edge of pay and prestige the last ten years – the hedge fund PM was it. Hedge fund PMs made millions and sometimes tens of millions, hundreds of millions and in a few cases billions of dollars a year for a time. They have gone from being completely anonymous guys laboring behind Bloomberg terminals to business celebrities.

The real question though is how will this industry look 20 years from now?  Lots of people are entering this industry or trying to at least. Everyone including the hedgefunds themselves get how grossly over compensated they are. That said they deliver returns. Even after this whole crisis you have not seen the collapse of 2 and 20, the industry standard performance fees. Many hedgefund managers are still raking in hundreds of million of dollars a year in salaries.

Now, I have no way to know whether this will continue or not. However, I can say that in order for it not to contiue, the barrier to entry to becoming a hedgefund manager will have to be lowered. That is the gate keepers of money will have to decide that they would rather go with the less experienced fund managers with no track record who is going to charge a significantly lower fee structure then the experienced fund manager charging a bundle. However, it is hard to imagine that happening given the potential reputational risk in getting a judgement call like that wrong. It is also hard to imagine people still getting 2 and 20 for generating easy alpha.

However, the battle develops, I can tell you one thing. The second the 8 year old on the street know what a hedge fund manager does and wants to be one is the second you should begin shorting the long term financial and prestige prospects of hedge fund managers. …

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