I Am John Galt (28 page)

On September 14, Lehman Brothers collapsed and Merrill Lynch was sold in panic to Bank of America. On September 18, Treasury Secretary Henry Paulson and Federal Reserve Chairman Ben Bernanke met with Barney Frank and other legislators to propose a $700 billion emergency bailout fund to buy toxic assets from financial institutions. Bernanke told them, “If we don't do this, we may not have an economy on Monday.”
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On September 25, Washington Mutual was seized by the FDIC and its banking assets were sold to JPMorgan Chase for $1.9 billion. Washington Mutual was the biggest bank failure ever in all U.S. history, scuttled by $77 billion in subprime mortgages and billions more in other toxic home loans.
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Over the next few weeks the stock market would lose over one-third of its value.

After Paulsen and Bernanke's $700 billion Troubled Asset Relief Program (TARP) was approved by Congress, Paulson decided not to buy toxic assets at all as had originally been pitched.
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Instead, he'd buy equity stakes directly in U.S. banks to make the government a direct owner in private enterprise—a move amounting to a partial socialist-style nationalization.

At the climax of
Atlas Shrugged
when the economy is crashing—economically and physically—Wesley Mouch and the other bureaucrats whose policies had caused it all huddled together in abject fear, thinking only John Galt could save them now. “ ‘He . . . has . . . to . . . save . . . us,' said Mouch slowly, as if straining the last of his mind into blankness and delivering an ultimatum to reality. ‘He has to . . . save the system.' ”

At the climax of the banking crisis of 2008, it was all in Henry Paulson's hands. Barney Frank personally called the Treasury secretary and didn't exactly beg him to save the system—just one little part of it: a TARP cash infusion for the Boston-based OneUnited Bank.

On November 25, 2008, following Frank's intervention, the Treasury Department awarded $12,063,000 in bailout funds to OneUnited, which is located in Frank's district.
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“I Need Wider Powers”

Did Barney Frank admit that his policies to expand home ownership had nearly destroyed the housing market, the mortgage market, the banking system, and the whole world economy? No—and here is the most chilling parallel between the real Barney Frank and the fictional Wesley Mouch.

As the economy is collapsing in
Atlas Shrugged
, a fellow bureaucrat—an especially cynical one—advises Mouch, “Whatever you do, don't apologize. . . . Make them feel guilty.” Mouch takes the advice, just as Barney Frank did. “I'm not apologizing! . . . I'm not to blame. I need wider powers.”

How did Frank make them feel guilty? Frank's biographer sums up Frank's position this way: “Lenders' ability to package mortgage loans into securities (lend money and sell the loans to passive investors) took away from lenders the incentive to be more careful in making loans.”
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How did Frank prove he's not to blame? In an interview with Aaron Task in July 2009, Frank denied all responsibility by saying, “I wasn't in a position to do anything . . . even when it did come up as an issue, I was critical of giving loans to people who couldn't afford them. I wanted to help them out with housing, but with rental housing.”
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Did he really call for broader powers, even when it was his powers that nearly destroyed the world economy? In a speech to young Democrats in June 2010, he said, “You can reach out to your fellow young people and make it clear to them, that when [sic] they may not be satisfied with everything we've done—we're not satisfied with everything we've done. The way to cure that is to give us more authority.”
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Yes, he really said that. It's almost as though he was
trying
to walk in Wesley Mouch's footsteps. Don't let anyone tell you that life doesn't imitate art.

Did Frank get those wider powers that Wesley Mouch wanted? Yes, at least in a way. In July 2010, President Obama signed into law the Dodd-Frank Wall Street Reform and Consumer Protection Act. It is a massively complex law of 848 pages that creates sweeping new regulatory powers for the federal government over every aspect of the American financial industry, from banking and credit cards to derivatives and monetary policy.

Frank's name is on the bill, which assures that he will go down in history as a noble regulatory reformer, rather than what he actually was: an ignoble regulatory deformer, who used the power of government to destroy rather than to protect.

But maybe the American people aren't as easily gulled as Frank has always expected. Bill or no bill, Frank personally no longer has the power he once enjoyed. In 2010 the Democrats lost majority control of the House of Representatives, which means that Frank is no longer chairman of the Financial Services Committee.

So the real-life Mr. Mouch wants wider powers? The voters have said, “You've done quite enough already, Mr. Mouch.”

Chapter 7

The Capitalist Champion

T. J. Rodgers as Francisco d'Anconia, the modern Renaissance man and agent provocateur for capitalism

Francisco could do anything he undertook, he could do it better than anyone else, and he did it without effort. There was no boasting in his manner and consciousness, no thought of comparison. His attitude was not: “I can do it better than you,” but simply: “I can do it.” What he meant by doing was doing superlatively.

—Atlas Shrugged

“Is this the headquarters of a major chip maker in Silicon Valley or the Football Hall of Fame in Canton, Ohio?” we wondered to ourselves as we stood amid a shrine of Green Bay Packers memorabilia in the second-floor Lombardi Conference room on Champion Court in San Jose, California. In front of us, a 15-foot expanse of wall paid tribute to Packers greats through the ages, every inch covered with autographed 8 × 10 framed photos arranged neatly in alphabetical order with an engineer's precision. Behind us, a plaque commemorating Bart Starr's 35–10 victory over the Kansas City Chiefs in Super Bowl I hung next to an engraved homage to the famed 1967 NFL Championship “Ice Bowl” game played against the Dallas Cowboys on rock-hard Lambeau Field during an arctic blast that had stadium thermometers registering 15 below zero. Toward the far window, a Packers lava lamp stood at one end of a vast conference table like a kitschy Buddha overlooking his reverent temple of green and gold.

Suddenly out of nowhere appeared a sandy-haired, compactly athletic figure dressed in a navy blue Dartmouth College jogging suit over a bright yellow T-shirt. He could have been the head coach coming in fresh off the practice field to do a pregame interview with ESPN. “Hi, I'm T. J. Rodgers,” he announced. “Let's go to my office.”
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Dr. Thurman John Rodgers
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—known universally as T.J.—commands a small but fertile plot of Silicon Valley's vast technology landscape. The company he founded in 1982, Cypress Semiconductor, generates $268 million in cash flow on $850 million in revenues with 3,600 employees worldwide. While its $3.4 billion market cap seems small beside next-door giants like $115 billion Intel, Cypress is world leader in universal serial bus (USB) controllers and maintains a position at the vanguard of technological innovation with the world's only programmable analog and digital embedded design platform, having sold nearly a billion units.

As if on cue, a muffled bark from the reception area prompted a quick explanation from T.J. “It's my dog,” he said matter-of-factly. “His name is Dollar. He's a Jack Russell.” Why the name? We free-associated to the fact that Ayn Rand wore a golden dollar sign pin on her lapel for decades, and that a golden dollar sign hung high above Galt's Gulch, the hideaway portrayed in
Atlas Shrugged
as the safe haven for the country's greatest industrialists, on strike against collectivism. That dollar sign in Galt's Gulch was a gift of Francisco d'Anconia, the key character in
Atlas Shrugged
of whom T. J. Rodgers is a living embodiment.

D'Anconia was a superb industrialist—as is Rodgers, the founder and longtime CEO of a leading semiconductor manufacturer. D'Anconia was superb at everything he undertook, in a wide variety of fields—as is Rodgers, the double major in chemistry and physics who owns vineyards and makes sublime wine. And d'Anconia was a flamboyant and articulate agent provocateur for capitalism and liberty—as is Rodgers, a fearless and controversial critic of government regulation, corporate welfare, protectionism, and political correctness.

These attributes come together in Rodgers, as they do in d'Anconia, as an integrated whole. He runs his highly successful business in accordance with his philosophy, and his philosophy in turn is informed by the realities of his business, which itself is informed by the realities of the physics of silicon.

This integration is central to all of Rand's greatest heroes. In
Atlas Shrugged
, d'Anconia and his two best friends, John Galt and Ragnar Danneskjöld, went to college together, where they all double-majored in physics and philosophy. As their teacher observed, “It is not a combination of interests one encounters nowadays.” But it made sense to d'Anconia. Planning a career in the copper business, he declared, “I'll study electrical engineering, because power companies are the biggest customers of d'Anconia Copper.” For similarly practical career reasons, Rodgers would study the same thing; in fact, he earned a PhD in it. Francisco continued, “I'm going to study philosophy because I'll need it to protect d'Anconia Copper.” For similarly practical reasons, Rodgers studies the philosophical underpinnings of capitalism, and devotes enormous energies to defending them and evangelizing for them.

This integration can be seen in the short list of Cypress Core Values on display in the headquarters building where Rodgers makes his office. They are an embodiment of Rodgers's personal code.

• We thrive on competing against the world's best.
  
• We do not tolerate losing.
  
• We are smart, tough, and work hard.
  
• We tell the truth and don't make excuses.
  
• We value knowledge, logic, and reason.
  
• We admit to solve problems quickly.
  
• We deplore politicians.
  
• We choose “Cypress wins” over “looking good.”
  

Rodgers's basic logical premise is the concept that, in his own words, “Freedom is good, period. End of discussion.” He doesn't need economic arguments to accept freedom as a fundamental moral good, but he also recognizes that freedom and wealth go hand in hand. He cites empirical studies from the Fraser Institute showing a clear, direct, and universal correlation between objective measures of freedom and economic prosperity among the nations of the world. The freer you are, the wealthier you are as a society. Both are good things, and you can't have the latter without the former. Many of his battles in the arena of public opinion have centered around the misguided notion that somehow money is inherently bad, money corrupts, and money is the root of all evil.

Wearing his signature wire-rimmed owl-round glasses, Rodgers slips easily into his chair—and the conversation. He weaves a complex verbal tapestry from threads of amusing anecdotes and hard facts peppered with mild profanities, including his catchphrase—“bullshit.” The experience is as entertaining as it is informative. Assertive but not bullying, persuasive without coming off as salesy, T. J. Rodgers glows with the gravitas found in those who are truly at ease in their own skin. When listening to Rodgers, you get the feeling he's not trying to convince you of anything; he's just calmly reciting the truth for those who choose to hear.

The Bad Boy of Silicon Valley

“If you look at second row up, second one from the right—‘The Bad Boy of Silicon Valley,'” begins Rodgers, pointing to an office wall with over a dozen framed magazine covers featuring him, “I got my picture on the cover of
BusinessWeek
for being the bad boy where I said we were losing to the Japanese because we had crappy quality and didn't manage our companies as well, and it had nothing to do with government subsidies, and government subsidies will only make it worse.”

Subsidies, or what T.J. refers to as “corporate welfare,” are a hot-button annoyance for the 62-year-old CEO. He has testified before Congress against government protectionism and pork-barrel spending. He even wrote and published a “Declaration of Independence” from corporate welfare, decrying a government tax burden totaling 35 percent of gross domestic product (GDP) and supporting major budget cuts, “even if it meant funding cuts for my own company.” The proclamation was signed by nearly 100 CEOs, including Jerry Sanders of Advanced Micro Devices (AMD), Wilf Corrigan of LSI Logic, and legendary venture capitalist John Doerr of Kleiner Perkins Caufield & Byers.
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“You listen to the CEOs of the really big companies talk blather about free markets and you think okay, I'm CEO, they're CEO, we're brothers, we face the same challenges: government intervention, socialism, in addition to real competitors, and so we ought to be kindred spirits,” explains Rodgers. “And yet when you interact on certain things with those CEOs, you see horrible things happening. They're trying to lock Honda out of the United States for chrissake, because they can't make cars well enough. They're going to Washington to get their fair share of the pork.”

Over the years Rodgers realized that the vast majority of his fellow CEOs traveled a distinctly different arc to achieve their positions of power. He has very little in common with them. Rodgers built his business through entrepreneurial effort, using his considerable mental power to dissect the very substance of nature down to the atomic structure of silicon itself and then used that knowledge to bring new value into physical creation.

Most other CEOs rose through the ranks of giant bureaucracies by playing politics, currying favor, building a power base, and not rocking the boat. “The statist businessman wins by using the state to gain competitive advantage,” Rodgers once wrote. “His perks—corporate jets, limos, lavish expense-account dinners—are the rewards for climbing the ladder.”
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Their primary focus is on holding on to the power and perks of office even at the expense of their own companies.

By contrast, Rodgers flies coach. He has no time for corporate power struggles. He's focused on creating competitive products in the fast-changing world of high technology against a constantly changing field of hungry start-ups and international competitors. “They aren't your buddies and they aren't your kindred spirits,” Rodgers finally concluded about many of his fellow CEOs. “They have the same title as you and that's it. And over the years, you find out that there are only a few real free-market capitalists who happen to be CEOs, very few.”

Perhaps the sharpest example for T.J., and the one that seems to rankle him the most, was the spawning of a consortium called SEMATECH (Semiconductor Manufacturing Technology). Billed as a “bold experiment in industry-government cooperation,”
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the very description sounds like socialist propaganda to Rodgers's ears—pure anathema to his core beliefs in free-market competition.

In 1987, the U.S. semiconductor industry was facing tough competition from Japanese chip makers who, according to Rodgers, operated well-run companies in a benign corporate environment with a good tax policy. Instead of upping their game to compete head-on, 14 U.S. technology companies, including big names like Intel, Hewlett-Packard, Motorola, and Texas Instruments, formed SEMATECH and went crying to Washington for help against the supposedly unfair Japanese threat. After the heavyweight consortium played the national security card by claiming that our military would be detrimentally impacted if the U.S. semiconductor industry were harmed, the government eagerly ponied up $100 million a year in subsidies for the group.
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It was more than double Cypress Semiconductor's revenues that year. Rodgers wanted nothing to do with it. He likened the group to “General Motors trying to become more efficient by having a centralized fin-design department.”
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His public denouncement and refusal to play along with industry leaders in their conspiracy to sucker the American people earned him an outsider's reputation. Or as he puts it with an air of subdued pride, “Well, ‘bad boy' of course is walking away from free government money.”

From the Gridiron to Silicon Valley

It's hard to imagine a more genuine American success story. T.J.'s father was literally the son of a sharecropper who farmed cotton in Alabama during the Great Depression. He was in ninth grade before he got his first pair of shoes. He never graduated from high school. The day after Pearl Harbor he left the drudgery of the farm and signed up for World War II and was gone for five consecutive Christmases.

The Army saw fit to make T.J.'s dad a mechanic, and he fought under General Douglas MacArthur in the Pacific. He developed a lifelong hatred of the Japanese, which makes T.J.'s own opposition to government subsidies to fight Japanese competition all the more remarkable. “I remember my dad waking up with nightmares about World War II, as late as the 1960s,” recalls Rodgers. “John Kennedy was already president and my dad was still having bad dreams about World War II.”

T.J.'s mother graduated from the teaching program at the University of Wisconsin at Oshkosh and began her career in 1940. She and four other single teachers shared a room in a hotel in Sheboygan, Wisconsin. “My mother comes into the hotel and there's this ‘cute lieutenant' in the lobby who's recruiting for World War II,” relates Rodgers. “So my mother starts flirting with the guy, and talks to him and fills out paperwork and stuff, so she has more face time with him. Then she gets a letter: ‘Thank you very much for enlisting. You will report to Truax Air Force base in Madison, Wisconsin.'”