The Go-Go Years – John Brooks, 1973 ★★★½

Capitalism Takes A Trip

At the dawn of the 1970s, terms like “conglomerates” and “hedge funds” fell outside the typical business vernacular. Corporate raiders were a frightening novelty. Could Wall Street have been so innocent not all that long ago?

John Brooks, a financial-news reporter for The New Yorker, had fun explaining how much of the wider cultural craziness of the 1960s wound up trickling into the world of big business, stocks, and bonds. The Go-Go Years details a ten-year span where once-staid brokers began growing out their hair, wearing patterned ties to work, and endangering capitalism at its core by chasing trends and ignoring fundamentals:

The term “go-go” came to designate a method of operating in the stock market – a method that was, to be sure, free, fast, and lively, and certainly in some cases attended by joy, merriment, and hubbub. The method was characterized by rapid in-and-out trading of huge blocks of stock, with an eye to large profits taken very quickly…

If Brooks comes across a bit judgmental here, that’s par for the course. A buttoned-down liberal with an open bias for regulation, he recoils at the high jinks he describes and pines for the days of New Deal oversight, rather than Nixonian laissez faire he sees on parade.

One wonders how Brooks gutted his way through the Reagan era.

For all the vitality and youth on display in The Go-Go Years, economic growth itself proved a rarity. Trading volume was incredibly high, rising by 1969 to average two and a half times what it was at its peak in 1960. But money went out as fast as it came in. 

The trading floor, circa 1964. "In the nineteen sixties Wall Street still had a stimulating tendency, as it had had for a century and more, to project humanity (and specifically American humanity) on a wide screen, larger than life," Brooks writes.
Image from https://stacker.com/business-economy/stock-market-history-year-you-were-born

That famous metric of economic health, the Dow Jones Industrial Average, briefly crept over 1,000 for the first time in its history for a few minutes in February 1966, only to fall back to 631 by May 1970.

As always with Brooks, the numbers are secondary to the personalities on display. Nothing exposes a person quite like power, except maybe money, and The Go-Go Years is awash with both.

The book opens by focusing on H. Ross Perot, famous decades later as a third-party presidential candidate, here a mega-success story who transformed his computer processing business into a windfall thanks to lucrative government contracts. A plain-spoken Texan, gratingly so at times, Perot was someone who, despite his vast wealth, preferred to fly commercial and offer his wisdom with whomever sat next to him.

Perot was so rich that on April 22, 1970, he managed to lose $450 million when the market crashed, “quite possible more in actual purchasing power than any man had ever lost in a single day since the Industrial Revolution brought large private accumulations of money into being,” Brooks writes.

But Perot’s sense of proportion was such that he shook it off and went back to making more money, a talent which proved strangely elusive to many other so-called high rollers featured in this book.

H. Ross Perot, founder of Electronic Data Systems Corp., shows off the technology that made him rich. "Barely five and a half feet tall...he was inclined to talk at length and with enthusiasm about things like patriotism and the Boy Scouts of America," Brooks writes.
Image from https://www.bloomberg.com/news/articles/2019-07-09/h-ross-perot-billionaire-who-sought-presidency-dies-at-89

Eddie Gilbert enjoyed spending his family wealth on fast living and unsound investment schemes that inevitably went bust. After a late-night meeting with his shaken investors, Gilbert explained he needed to meet someone for a loan, then skedaddled for Brazil, a popular hangout for financial fugitives.

“His father’s indulgence, then and later, was his financial strength and his moral weakness,” Brooks writes.

Gerald Tsai was for a time Wall Street’s Golden Boy, able to stock-pick so well he led the Fidelity Fund from staid propriety to lucrative darling of the Go-Go set, quite an accomplishment at the time for an industry not known for openness to Asians.

Tsai explained: “I felt that being a foreigner I didn’t have a competitive disadvantage there, when I might somewhere else. If you buy GM at 40 and it goes to 50, whether you are an Oriental, a Korean, or a Buddhist doesn’t make any difference.”

But nothing lasted very long in the Go-Go Years, not even Tsai’s hot streak. It was a topsy-turvy time.

May 8, 1970: Four days after students were shot protesting the Vietnam War at Kent State University, a student-led protest on Wall Street was broken up by construction workers brandishing flags and clubs. Brooks notes the stockbrokers, no fans themselves of an unprofitable war, mostly looked on in horror as the workers attacked.
Image from https://www.archives.nyc/blog/2020/5/8/the-hard-hat-riots

Brooks often references the more famous collapse of 1929, covered extensively in his earlier work, Once In Golconda. Often the comparison is less favorable to the more recent period, however less devastating he admits it was to the financial community or the nation at large: “One might, in comparing 1929 with 1969-70, even find a certain appositeness in Karl Marx’s famous observation that history repeats itself the first time as tragedy, the second time as farce,” Brooks writes.

As much as I enjoy reading Brooks’s account of the foibles of investors and wheeler-dealers, and the way he makes it so relatable and enjoyable to penny-stock novices like me, his smug tone can get wearying. Clearly he longs for a tighter grip by government agencies to rein in how private capital is spent. Even a Wall Street rally in the wake of President John Kennedy’s assassination offends him for its unseemly display of greed.

At one point he quotes an unnamed Securities and Exchange Commission official describing his job as that of an “arbiter.” “An arbiter, rather than a conscience?” Brooks asks.

I don’t think you have to be libertarian to answer that with an emphatic yes. But Brooks makes his biases into good copy. At least they give him a distinct point of view.

About hedge funds, which began to attract notice and capital in the 1960s: “Market rigging became a federal crime in 1934, but the banding together of rich investors did not. Like the pools of ill repute a generation earlier, the hedge funds of the sixties were the rich man’s stock-market blood sport.”

While the New York Stock Exchange occupies most of Brooks's attention in Go-Go Years, he does spend a chapter on its next-door neighbor, the wild-and-wooly American Stock Exchange. Its absorption by the NYSE, discussed in the book, finally became reality in 2008. Today, only this façade survives.
Image from https://www.flickr.com/photos/wallyg/11165149076

Another phenomenon of the 1960s, the buying up of huge corporations by other corporations in different industries to amass power safe from monopoly busters, earns even deeper scorn. These “conglomerates” – Brooks explains the derivation of the word from rocky masses buried underground – are worse than immoral. They are unworkable:

The conglomerate need neither toil nor spin – only keep buying companies and writing up earnings. It was magic, until the pyramid became top-heavy and fell.

That may have looked more true back then. But the practice of conglomeration since 1973 has only, well, conglomerated.

The Go-Go Years scores best when it focuses on the human side of the market. A likeable computer-leasing tycoon, Saul Steinberg, gobbles up larger businesses to buttress his capital, using the fact their money is more tied up than his, until he is outfoxed by Chemical Bank.

“I always knew there was an Establishment – I just used to think I was part of it,” he muses after.

Brooks also examines a crisis of spirit he sees in Manhattan’s Financial District, reflected in everything from the despairing scrawls of money men outside Wall Street’s landmark Trinity Church to stories of open drug use on the sidewalks. Put away any Mad Men fancies you might have of swinging forty-somethings grooving away their long lunch hours with Mancini and cocktails; it was a gloomy time:

One gets off the subway at Broadway and Wall and begins to feel depressed. Men’s faces seem pinched and preoccupied. Pretty women seem flesh without magic. In winter a savage wind curls around the corners of those canyons; in summer the air lies heavy, dank, and sunless.

Brooks even explores racism, sexism, and the Bartleby-like bleakness of back offices, where sales literally grind to a halt because the backbreaking chore of producing paperwork for all the trading going on proves too much to handle, causing millions lost in the form of “fails.”

Stock certificates, once a joyful symbol of a piece of the American dream, had become a nightmare of paperwork as trading volumes rose in the 1960s. Computerization was an inevitable necessity, Brooks writes, but a sad loss of character, too.
Image from https://www.ebay.com

“Wall Street had become a mindless glutton methodically eating itself to paralysis and death,” Brooks writes.

The Go-Go Years began with Perot; it ends with him, too. This time he is cast as a white-knight savior of an investment firm run into the ground by the haughty, out-of-touch du Pont family. Unfortunately, the business was critical to Wall Street’s preservation, and Perot got pressed into service more as a patriot than a businessman.

In this chapter, the clash between old values and new money is particularly profound, and comical, too. Perot shakes his head at getting into bed with the crazy du Ponts, but is persuaded the national ruination their fall would cause would hurt everyone more in the end.

In Out Of The Past, Robert Mitchum tells Jane Greer the trick in gambling is not trying to win, but losing more slowly. The same holds true for Brooks’s Wall Street here. The Go-Go Years offers a grim but gripping picture of a national economy in slow free-fall, its worst offenders doubling as victims too jaded to care.

Yes, the period Brooks captures proved less momentous in hindsight; a Second Great Depression was not so close as he seemed to think. Still Go-Go Years is richly engaging, humorous account with a kind of accessibility rare in financial writing that is both edifying and a pleasure.