A Hero of Capitalism

F or about 40 years, Carl Icahn has been denounced as a “raider,” “pirate,” and “vulture.” People who don’t understand, or don’t like, how wealth is created call you a lot of names when you create a trillion dollars of wealth for shareholders.

As portrayed in an inspiring new HBO documentary, Icahn: The Restless Billionaire, the 85-year-old financier isn’t like Robin Hood. He’s far better. Robin Hood merely moved money around from one group to another. There is no net value to society in plunder, however dashingly accomplished.

Icahn unlocked value and created prosperity. Capitalism operates much like a piece of snowmaking equipment that, functioning properly, will spew money around. Powerful forces seek to gum up the machinery, or to rob it of fuel, or to steal its parts. People such as Icahn are mechanics of capitalism: They tinker with the machinery to make it work more smoothly. Today, there are 22 million American millionaires, and the vast majority of them didn’t do anything special or work their tailbones off. People get rich simply by checking a couple of boxes on a boring 401(k) form when they’re young. Ever wonder where all this money is coming from? Let this smart, briskly executed Icahn movie give you a hint.

Icahn started as innocently as any of us, in a middle-class home in Queens, although in his case, his mother compared him to Genghis Khan as a child. The family didn’t have much (Dad was a cantor in the local synagogue, but only because he liked to sing: He was a “dogmatic atheist”), but Icahn got into Princeton, became a stockbroker, and got a loan from an uncle in order to buy a seat on the New York Stock Exchange. As an investor, he first made a splash when he noticed that a manufacturer of stoves called Tappan was trading for far less than what he considered to be its actual value. Looking into the company, he decided it was poorly managed: corporate boards that were supposed to be working for the shareholders were instead much like boys’ clubs. Corporate aristocrats helped themselves to fat salaries while treating the shareholders like peasants. Icahn is, as much as anyone, the person who changed all that.

Icahn pioneered what is now called “activist investing” — he bought shares, got himself a seat on Tappan’s board and began making noise about how to unlock value. Thanks to the ruckus he raised, the company sold to a Swedish concern for more than double what he paid for it. Icahn’s relentlessness made himself and many others big profits, again and again, adding value in companies such as U.S. Steel and RJR Nabisco. During a time when Texaco was looking at bankruptcy due to a court-ordered settlement, Icahn bet big, drove down the settlement figure a lifesaving 75 percent, and profited handsomely. In another, fantastically entertaining, adventure, Icahn swapped insults on live television with fellow billionaire Bill Ackman, in a battle over the nutritional-supplements company Herbalife, which Ackman had shorted and publicly denounced as a scam while trying to drive it out of business. Icahn still backed Herbalife. Ackman lost a billion dollars while Icahn added to his profits, but the former was gracious enough to call with congratulations after getting his teeth knocked out in the fight.

The documentary, which is produced, written, and directed by Bruce David Klein (whose brother Phil is the editor of NRO) also takes us through the story of a notable failure: TWA, which Icahn helped keep alive for a few years, but which eventually went under like many other airlines staggered by legacy costs. A dispute with the flight attendants’ union in 1986 yields some marvelous vintage film uncovered by Klein. Besieged by the striking workers, who showed up en masse in a raging mob at Icahn’s country house, the financier opened up the gate, came out and started explaining his side of matters: The company was losing $200 million and needed to cut labor costs to survive. “You’re brainwashed,” Icahn is seen telling the strikers. Such episodes earned Icahn much sneering coverage: Dan Rather is seen denouncing him as “a bottom-line businessman.” That’s like calling someone a “breathing human.” A businessman who doesn’t respect the bottom line won’t be in business for very long, because unlike TV anchors, they don’t endure if they make a career out of being completely wrong.

Icahn so impressed Oliver Stone that, as the filmmaker explains in a new interview, he used several of the financier’s ideas in Wall Street. An amusing interlude intercuts an actual Icahn speech from the Eighties with Gordon Gekko’s very similar remarks at the shareholder convention in the 1987 film. Icahn mentioned a company that had five floors of overpaid vice presidents doing nothing much, and Gekko mocked the same corporate gluttony. Stone was intrigued by Icahn, which is why Gekko makes such strong arguments. Today, the director describes Icahn as half right and half wrong for making private profits while neglecting public profits.

Ah, but where do these public profits come from? Icahn has given hundreds of millions to Mount Sinai Hospital. He founded a homeless shelter in the Bronx, as well as charter schools and a rescue fund for children. Icahn has pledged to leave most of his estate (currently over $16 billion) to other philanthropic causes, and all of this is on top of the “giving back” he does automatically, as a matter of the tax code. The top 1 percent contribute more in federal income tax than the bottom 90 percent. Stone is simply wrong: It’s private-wealth creation that funds public largesse. If you like hospitals, schools, and children’s shelters, then you should grasp why greed is good. You can’t tax money that doesn’t exist. You can’t redirect wealth that hasn’t been created.

Icahn, by the way, says he thinks Bernie Sanders and Elizabeth Warren have a point when they talk about income inequality: Wall Street types are massively overpaid, he argues, and so are all of those brigades of useless corporate drones. He disdains the “ridiculous amount of money top management is paid for doing a poor job.” There is no contradiction here: Holding management fat cats accountable in order to enrich the little guy — the shareholder — is what Icahn has always been about. It’s a pity there were only so many companies that he could improve. May the future bless us with more Carl Icahns.