scorecardCarl Icahn Told Us His Take On Piketty - And Trust Us, It Isn't Like Anybody Else's
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Carl Icahn Told Us His Take On Piketty - And Trust Us, It Isn't Like Anybody Else's

Carl Icahn Told Us His Take On Piketty - And Trust Us, It Isn't Like Anybody Else's
Finance2 min read

carl icahn

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Everyone is talking about "Capital in the Twenty-First Century", the deep dive into inequality written by economist Thomas Piketty using a seemingly endless parade of data from countries all over the world and eras throughout time.

It's a massive book so a lot of the talk is just talk. Hedge fund billionaire Carl Icahn, however, actually read the monster, and his takeaway is different from anyone else's we've heard yet.

"I think it's very good, very well thought out.... And I agree that there are storm clouds ahead," Icahn told Business Insider.

In his book, Piketty says that inequality is caused by the fact that capital investments grow much faster than GDP. That means those who invest (the rich) get wealthy much faster than everyone else who doesn't - and then that wealth is compounded.

Piketty says that in the 20th century, the domination of capital's growth was interrupted by periods when GDP growth surged, like the post-war years when the world was rebuilding.

Other than that, though, there is a constant imbalance which governments and societies must strive to correct. Piketty suggests that this can be done by taxing the rich. Icahn rejects that notion.

"Piketty's book basically says this disparity in wealth is going to lead to societal problems... the solutions, though, they're difficult for Piketty to come with them. Some of them are kind of naive. We're not suddenly going to start taxing at the level he's talking about."

Instead, Icahn sees this book through the lens of someone who wades deep in the much of corporate America. To him Piketty's book is a big call for more shareholder activism.

  1. Corporate boards need to be more transparent, democratic, and accountable.Workers should wake up to the fact that as pension holders, they are also shareholders, and should make their voices heard as such.
  2. Basically, Icahn wants a revolution in which the masses turn into active, vocal shareholders.

"You don't have a true election at the corporate level, so you don't have accountability," he said, adding "You got a lot of Americans who don't understand that they're getting screwed."

Take a second to dip into Icahn's mind (if you have the stones), and think of it this way: Until the 1970s companies used to handle defined contribution pension plans for their workers. It made sense that they had a close relationship with the pension funds running the money for these plans (which also included a bunch of company stock) because it was the company taking the risk and putting skin in the game.

"With exceptions, the funds that run pension funds are picked by the company themselves," said Icahn.
"They play golf together."

And that's a problem because while the entire retirement savings game has changed, the golf games haven't.

Now in many cases it's the worker who contributes their own money to their pension. Companies are just stewards. The way Icahn sees it, that means it's worker who is taking the risk, and they should have a say in how the company is run since, through their pensions, they are significant shareholders.

"Piketty says capital is getting more share than the worker. The question is who really owns the shares of those companies?" Icahn pointed out.

The short answer is the worker. But how do you wake people up to the fact that they have capital?

You might need a community organizer for that.