The Fifth Risk
Page 1
MICHAEL
LEWIS
THE FIFTH
RISK
W. W. NORTON & COMPANY
Independent Publishers Since 1923
NEW YORK | LONDON
for
Tom Wolfe
In Memoriam
Donald J. Trump
@realDonaldTrump
Very organized process taking place as I
decide on Cabinet and many other positions.
I am the only one who knows who the
finalists are!
9:55 PM - 15 Nov 2016
25,572 Retweets 112,055 Likes
CONTENTS
PROLOGUE: LOST IN TRANSITION
I. TAIL RISK
II. PEOPLE RISK
III. ALL THE PRESIDENT’S DATA
Acknowledgments
THE FIFTH
RISK
PROLOGUE
LOST IN TRANSITION
CHRIS CHRISTIE NOTICED a piece in the New York Times—that’s how it all started. The New Jersey governor had dropped out of the presidential race in February 2016 and thrown what support he had behind Donald Trump. In late April he saw the article. It described meetings between representatives of the remaining candidates still in the race—Trump, John Kasich, Ted Cruz, Hillary Clinton, and Bernie Sanders—and the Obama White House. Anyone who still had any kind of shot at becoming president of the United States apparently needed to start preparing to run the federal government. The guy Trump sent to the meeting was, in Christie’s estimation, comically underqualified. Christie called up Trump’s campaign manager, Corey Lewandowski, to ask why this critical job hadn’t been handed to someone who actually knew something about government. “We don’t have anyone,” said Lewandowski.
Christie volunteered himself for the job: head of the Donald Trump presidential transition team. “It’s the next best thing to being president,” he told friends. “You get to plan the presidency.” He went to see Trump about it. Trump said he didn’t want a presidential transition team. Why did anyone need to plan anything before he actually became president? It’s legally required, said Christie. Trump asked where the money was going to come from to pay for the transition team. Christie explained that Trump could either pay for it himself or take it out of campaign funds. Trump didn’t want to pay for it himself. He didn’t want to take it out of campaign funds, either, but he agreed, grudgingly, that Christie should go ahead and raise a separate fund to pay for his transition team. “But not too much!” he said.
And so Christie set out to prepare for the unlikely event that Donald Trump would one day be elected president of the United States. Not everyone in Trump’s campaign was happy to see him on the job. In June, Christie received a call from Trump adviser Paul Manafort. “The kid is paranoid about you,” Manafort said. The kid was Jared Kushner, Trump’s son-in-law. Back in 2005, when he was U.S. attorney for the District of New Jersey, Christie had prosecuted and jailed Kushner’s father, Charles, for tax fraud. Christie’s investigation revealed, in the bargain, that Charles Kushner had hired a prostitute to seduce his own brother-in-law, whom he suspected of cooperating with Christie, videotaped the sexual encounter, and sent the tape to his sister. The Kushners apparently took their grudges seriously, and Christie sensed that Jared still harbored one against him. On the other hand, Trump, whom Christie considered almost a friend, couldn’t have cared less. He’d invited Christie to his and Melania’s wedding and then pressed him to attend his daughter, Ivanka, and Jared Kushner’s wedding. That’d be awkward! said Christie. I’m paying for the wedding and I don’t give a shit, said Donald.
Christie viewed Jared as one of those people who thinks that, because he’s rich, he must also be smart. Still, he had a certain cunning about him. And Christie soon found himself reporting everything he did to prepare for a Trump administration to an “executive committee.” The committee consisted of Jared, Ivanka Trump, Donald Trump Jr., Eric Trump, Paul Manafort, Steve Mnuchin, and Jeff Sessions. “I’m kind of like the church elder who double-counts the collection plate every Sunday for the pastor,” said Sessions, who appeared uncomfortable with the entire situation. The elder’s job became more complicated in July 2016, when Trump was formally named the Republican nominee. The transition team now moved into an office in downtown Washington, DC, and went looking for people to occupy the top five hundred jobs in the federal government. They needed to fill all the cabinet positions, of course, but also a whole bunch of others that no one in the Trump campaign even knew existed. It’s not obvious how you find the next secretary of state, much less the next secretary of transportation—never mind who should sit on the board of trustees of the Barry Goldwater Scholarship and Excellence in Education Foundation.
By August, 130 people were showing up every day, and hundreds more working part-time, at Trump transition headquarters, on the corner of Seventeenth Street and Pennsylvania Avenue. The transition team made lists of likely candidates for all five hundred jobs, plus other lists of informed people to roll into the various federal agencies the day after the election, to be briefed on whatever the federal agencies were doing. They gathered the names for these lists by traveling the country and talking to people: Republicans who had served in government, Trump’s closest advisers, recent occupants of the jobs that needed filling. Then they set about investigating any candidates for glaring flaws and embarrassing secrets and conflicts of interest. At the end of each week Christie handed over binders, with lists of names of people who might do the jobs well, to Jared and Donald and Eric and the others. “They probed everything,” says a senior Trump transition official. “ ‘Who is this person?’ ‘Where did this person come from?’ They only ever rejected one person, Paul Manafort’s secretary.”
The first time Donald Trump paid attention to any of this was when he read about it in the newspaper. The story revealed that Trump’s very own transition team, led by New Jersey governor Chris Christie, had raised several million dollars to pay the staff. The moment he saw it, Trump called Steve Bannon, the chief executive of his campaign, from his office, on the twenty-sixth floor of Trump Tower, and told him to come immediately to his residence, many floors above. Bannon stepped off the elevator to find the governor of New Jersey seated on a sofa, being hollered at. Trump was apoplectic, actually yelling, You’re stealing my money! You’re stealing my fucking money! What the fuck is this?? Seeing Bannon, Trump turned on him and screamed, Why are you letting him steal my fucking money? Bannon and Christie together set out to explain to Trump federal law. Months before the election, the law said, the nominees of the two major parties were expected to prepare to take control of the government. The government supplied them with office space in downtown Washington, DC, along with computers and trash cans and so on, but the campaigns paid their people. To which Trump replied, Fuck the law. I don’t give a fuck about the law. I want my fucking money. Bannon and Christie tried to explain that Trump couldn’t have both his money and a transition.
Shut it down, said Trump. Shut down the transition.
Here Christie and Bannon parted ways. Neither thought it was a good idea to shut down the transition, but each had his own misgivings. Christie thought that Trump had little chance of running the government without a formal transition. Bannon wasn’t so sure if Trump would ever get his mind around running the federal government: he just thought it would look bad if Trump didn’t at least seem to prepare. Seeing that Trump wasn’t listening to Christie, he said, “What do you think Morning Joe will say—if you shut down your transition?” What Morning Joe would say—or at least what Bannon thought it would say—was that Trump was closing his presidential transition office because he didn’t think he had any chance of being president.
Trump stopped holler
ing. For the first time he seemed actually to have listened.
“That makes sense,” he said.
With that, Christie went back to preparing for a Trump administration. He tried to stay out of the news, but that proved difficult. From time to time Trump would see something in the paper about Christie’s fund-raising and become upset all over again. The money people donated to his campaign Trump considered, effectively, his own. He thought the planning and forethought pointless. At one point he turned to Christie and said, “Chris, you and I are so smart that we can leave the victory party two hours early and do the transition ourselves.”
At that moment in American history, if you could somehow organize the entire population into a single line, all three hundred fifty million people, ordered not by height or weight or age but by each citizen’s interest in the federal government, and Donald Trump loitered somewhere near one end of it, Max Stier would occupy the other.
By the fall of 2016 Max Stier might have been the American with the greatest understanding of how the U.S. government actually worked. Oddly, for an American of his age and status, he’d romanticized public service since he was a child. He’d gone through Yale in the mid-1980s and Stanford Law School in the early 1990s without ever being tempted by money or anything else. He thought the U.S. government was the single most important and most interesting institution in the history of the planet and couldn’t imagine doing anything but working to improve it. A few years out of law school he’d met a financier named Sam Heyman, who was as disturbed as Max was by how uninterested talented young people were in government work. Max persuaded Heyman to set aside $25 million for him so that he might create an organization to address the problem.
Max soon realized that to attract talented young people to government service he’d need to turn the government into a place talented young people wanted to work. He’d need to fix the United States government. Partnership for Public Service, as Max called his organization, was not nearly as dull as its name. It trained civil servants to be business managers; it brokered new relationships across the federal government; it surveyed the federal workforce to identify specific management failures and success; and it lobbied Congress to fix deep structural problems. It was Max Stier who had persuaded Congress to pass the laws that made it so annoyingly difficult for Donald Trump to avoid preparing to be president.
Anyway, from the point of view of a smart, talented person trying to decide whether to work for the U.S. government, the single most glaring defect was the absence of an upside. The jobs weren’t well paid compared to their equivalents in the private sector. And the only time government employees were recognized was if they screwed up—in which case they often became the wrong kind of famous. In 2002 Max created an annual black tie, Oscars-like awards ceremony to celebrate people who had done extraordinary things in government. Every year the Sammies—as Max called them, in honor of his original patron—attracted a few more celebrities and a bit more media attention. And every year the list of achievements was mind-blowing. A guy in the Energy Department (Frazer Lockhart) organized the first successful cleanup of a nuclear weapons factory, in Rocky Flats, Colorado, and had brought it in sixty years early and $30 billion under budget. A woman at the Federal Trade Commission (Eileen Harrington) had built the Do Not Call Registry, which spared the entire country from trillions of irritating sales pitches. A National Institutes of Health researcher (Steven Rosenberg) had pioneered immunotherapy, which had successfully treated previously incurable cancers. There were hundreds of fantastically important success stories in the United States government. They just never got told.
Max knew an astonishing number of them. He’d detected a pattern: a surprising number of the people responsible for them were first-generation Americans who had come from places without well-functioning governments. People who had lived without government were more likely to find meaning in it. On the other hand, people who had never experienced a collapsed state were slow to appreciate a state that had not yet collapsed. That was maybe Max’s biggest challenge: explaining the value of this enterprise at the center of a democratic society to people who either took it for granted or imagined it as a pernicious force in their lives over which they had no control. He’d explain that the federal government provided services that the private sector couldn’t or wouldn’t: medical care for veterans, air traffic control, national highways, food safety guidelines. He’d explain that the federal government was an engine of opportunity: millions of American children, for instance, would have found it even harder than they did to make the most of their lives without the basic nutrition supplied by the federal government. When all else failed, he’d explain the many places the U.S. government stood between Americans and the things that might kill them. “The basic role of government is to keep us safe,” he’d say.
The United States government employed two million people, 70 percent of them one way or another in national security. It managed a portfolio of risks that no private person, or corporation, was able to manage. Some of the risks were easy to imagine: a financial crisis, a hurricane, a terrorist attack. Most weren’t: the risk, say, that some prescription drug proves to be both so addictive and so accessible that each year it kills more Americans than were killed in action by the peak of the Vietnam War. Many of the risks that fell into the government’s lap felt so remote as to be unreal: that a cyberattack left half the country without electricity, or that some airborne virus wiped out millions, or that economic inequality reached the point where it triggered a violent revolution. Maybe the least visible risks were of things not happening that, with better government, might have happened. A cure for cancer, for instance.
Enter the presidential transition. A bad transition took this entire portfolio of catastrophic risks—the biggest portfolio of such risks ever managed by a single institution in the history of the world—and made all the bad things more likely to happen and the good things less likely to happen. Even before Max created an organization to fix the federal government, the haphazard nature of presidential transitions drove him nuts. “We have a legacy government that hasn’t kept up with the world we live in, largely because of disruptions from bad transitions,” he said. “People don’t understand that a bungled transition becomes a bungled presidency.” The new people taking over the job of running the government were at best only partially informed, and often deeply suspicious of whatever happened to be going on before they arrived. By the time they fully grasped the problems they were dealing with, it was time to go. “It’s Groundhog Day,” said Max. “The new people come in and think that the previous administration and the civil service are lazy or stupid. Then they actually get to know the place they are managing. And when they leave they say, ‘This was a really hard job, and those are the best people I’ve ever worked with.’ This happens over and over and over.”
Most of the big problems inside the U.S. government were of the practical management sort and had nothing to do with political ideology. A mundane but important example was how hard it was for any government agency to hire new people. Some agencies couldn’t hire anyone without sixty different people signing off on him. The George W. Bush administration had begun to attack that particular mundane problem. The Obama administration, instead of running with the work done during the Bush years, had simply started all over again.
Max Stier’s Partnership for Public Service had helped to push through three separate laws related to the transition. In 2010 Congress gave free office space and other resources to the nominees of the two major political parties right after the summer conventions. “The reason campaigns didn’t prepare is that they thought it would cost them politically: no one wanted to be seen measuring the drapes,” said Max. “The idea was to give the nominees of the major political parties cover to do what they should do.” In 2011–2012, to enable the president to put people in jobs more quickly, Congress reduced the number of presidential appointments that required Senate confirmation from about 1,400 to roughly 1,200�
��still over a thousand too many, in Max’s view, but a start. Finally, in 2015, Congress required the sitting president to prepare in various ways to hand the government over to his or her successor. The person who had already taken the test was now required by law to help the person who may not have studied for it.
As the 2016 presidential election approached, Max was about as hopeful as he’d ever been that the United States government would be handed from one leader to another with minimum stupidity. His partnership had worked with both the Clinton and the Trump campaigns. “Their work was good,” said Max. He was disappointed with Barack Obama in some ways. President Obama had been slow to engage with the federal workforce. He’d appointed some poor managers to run some agencies. The fiasco of the rollout of HealthCare.gov was not an accident but a by-product of bad management. But Obama’s preparations to hand over the government had been superb: the Obama administration had created what amounted to the best course ever on the inner workings of the most powerful institution on earth. What could go wrong?
Chris Christie was sitting on a sofa beside Donald Trump when Pennsylvania was finally called. It was one thirty-five in the morning, but that wasn’t the only reason the feeling in the room was odd. Mike Pence went to kiss his wife, Karen, and she turned away from him. “You got what you wanted, Mike,” she said, “now leave me alone.” She wouldn’t so much as say hello to Trump. Trump himself just stared at the tube without saying anything, like a man with a pair of twos whose bluff has been called. His campaign hadn’t even bothered to prepare an acceptance speech. It wasn’t hard to see why Trump hadn’t seen the point in preparing to take over the federal government: Why study for a test you’ll never need to take? Why take the risk of discovering you might at your very best be a C student? This was the real part of becoming president of the United States. And, Christie thought, it scared the crap out of the president-elect.