Growing up, I remember watching The Godfather and being confused about the famous refrain from Michael Corleone to his brother, Sonny: "It's not personal; it's strictly business." They were, of course, talking about killing a cop and paying off a newspaper to make it look like the cop was dishonest and mixed up in the drug racket. This, naturally, was accompanied by other similar "business" practices, like famously leaving the head of a prized racehorse in a dissenter's bed.
Apologies to all the guys out there who love The Godfather, but I didn't get it then. And I still don't get it. I have continued to hear that refrain repeated by others in the business world--It's just business--when talking about lesser evils: duping someone into paying more for a product or a piece of property than they think it is worth, or buying something for "a steal." Certainly nothing illegal about any of that. What we are made to understand by this refrain, though, is that what seems to me like taking advantage of another human being's poor circumstances or lack of education or lack of understanding is merely "business," and is an accepted and even lauded practice. We shouldn't let our emotions or our compassion stand in the way of a good business decision, no matter the cost to the other person on the other side of the table.
I have often questioned this practice to myself (and, of late, to Brian). The ethics of it don't work for me. It seems immoral, selfish, and downright mean. But this isn't a blog about morality (mostly); it's a blog about capitalism and the practices in it. I posit, however, that acting as though everything is "just business" without considering the effect to the person on the other side of the table is bad, not just because it lacks compassion, but because it IS harmful to persons other than the ones on the losing side of the deal. In other words, I posit that a compassion-less capitalism is harmful to capitalism.
As an example, take the recent subprime mortgage debacle, in which banks lent money at greater than 100% on the dollar to people who likely were never going to be able to pay it off. It was a get-rich scheme taking advantage of the real estate boom, low interest rates and, most importantly, many people who didn't understand the financial trap into which they were entering. It was lucrative for a while. But then interest rates went up, the economy went down, and now the largest lenders are having to request bail-outs, and massive foreclosures in some areas are driving real estate values into the toilet. And it hasn't only hurt the players in the deal--the mortgagor and mortgagee--it is now affecting the entire world market as fears about the United States credit situation cause massive sell-offs elsewhere.
And yet, meanwhile, CEOs in charge of the lending institutions at the heart of the problem exit with massives payoffs. (A much more reasoned and informed discussion of this can be found here: http://www.newsweek.com/id/98099).
It seems to me that this should be an obvious corollary of the butterfly effect: A lender takes advantage of a financially naive hourly wage-earner, and across the ocean, the Chinese market collapses.
But I'm not an economist, and I'm only recently a business-owner. I'm more of a humanist, hoping that there is a place for me in capitalist societies. Hoping that, just maybe, it's not just business.
I look forward to hearing what others think.
Thanks, Brian, for raising your hand.
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I got in my car today and heard a talk show host talking to a business owner. The business owner said his business isn't primarily about maximizing profit. The talk show host challenged him. Said by making his customers happy and keeping his employees happy and putting out a good product, his focus actually is maximizing profit. The business owner disagreed. He claimed that he'd rather do a great job and satisfy his customer than maximize his profit. The talk show host said, "Well, aren't you just a saint?" And he told the business owner that he's not a very good business man. I thought to myself, no I'm not a very good business man if that's what business is. I also thought what a money-hungry, belittling bastard this talk show host is. Do people not understand that sometimes, even in business, there are things that are more important than money? Some things are worth sacrificing money for. Believe it or not, some people in history have even thought that there were things important enough to sacrifice their lives for.
Dude. Love that you guys are talking about this.
Two works have had me thinking a lot about this lately...
One is a documentary I just watched called "Power Trip," about an American multinational corporation that purchased the public electric utility in Tbilisi, Georgia (as in, the former Soviet Republic of Georgia) - a place that has literally been living in the dark off and on for a dozen years and where people are not accustomed to paying to keep the lights on. It was a SUPER interesting angle for looking at capitalism, and it was shockingly entertaining for a film that... well... sounds really boring. (But, seriously, by the end, I was like Georgia! Georgia! I LOVE Georgia!) Also, the corporation is not the big bad guy here. So it had a lot of surprises. You can find it on netflix.
Two is that I am in the middle of reading "The Omnivore's Dilemma," which, I think, is a pretty good illustration of the distortions that happen when you let profit maximization trump all other interests. There are some serious long-term hidden costs to having arranged our political system to support maximum short-term profits for big business.
I'm no political philosopher, and I have not read most of the cats who have expounded at length on this stuff, but my opinion is that capitalism will continue to be ruthless and ridiculous in the way that that radio host exemplifies until and unless we collectively start to attribute value to the intangibles and externalities that are currently undervalued in our machine-operated version of capitalism.
And that strikes me as a cultural problem.
Looking forward to reading the rest of your thoughts...
A couple of thoughts at 12:57a:
*Capitalism is amoral.
Thank goodness. Free-market capitalism is a market system built on supply and demand economics. Laws are made to protect the individual (Brian, Audra) and courts determine guilt or innocence of crimes and resolves disputes. You FORCE morality into free-market capitalism and the system struggles. Is not government simply a protector, a moral enforcer of collective public wellbeing? Is not our government compassionate, well intentioned?
(NOTE: The US economy is defined as a mixed-economy – both free market and government controlled)
Ask yourself this – “Who do you want to determine compassion, morality, kindness, good business practices?” My answer is me. Not you, not government. Collectively, the business community will develop a ‘way to do business’ which evolves from all the businesses doing what’s best for themselves.
Why can’t money be a big part of that? If Audra works her butt off, uses her mind and talent for her clients and produces results, why not charge them a premium price if a premium is to be had and paid? If she is successful, then the money flows. Buy a nice house? New car? Sure, she EARNED it, and she can do whatever she wants. But, she could also cut her week to 4 days and use Friday’s for pro-bono work. Her choice, and her choice will be different than Brian’s choice which will be different than mine.
*Capitalism ain’t pretty.
The mortgage crisis (remember, we’re talking about very few people here compared to the whole). To me, it worked fine. BOTH borrowers and lenders took the risk, and in this case, both got smacked. The market didn’t want this to fly – the economy couldn’t support it and flopped it and some people and some financial institutions are suffering. Government intervention only flaws the system.
But what if it had worked? Smiles and rosy faces and white picket fences and no one complaining and asking the government for our tax dollars to bail them out of a risk THEY took on. Snake oil’s been around for a long time. Sucker born every minute. It don’t take rocket science to realize that money lent at greater than 100% on the dollar is risky. Owing a home is a privilege, not a right. You live with the consequences of your actions.
As for CEOs making out fine… they have to live with their conscious, just as we do. As long as they don’t break any laws, then I can’t really care what’s in their heart. Only what’s in mine.
Markets are global and intertwined and will react to each other. It’s a fact. The alternative - to close yourself off from global markets and the world - is much, much worse. Imagine if we could only get Kona coffee… the horror!
A couple of thoughts early in the morning in response to Jason:
You asked, "Is not our government compassionate, well intentioned?"
I don't know. Perhaps ideally. Perhaps even at times, it is. But I question whether it's true anymore. It seems to me to have ceased to become a regulation of amoral activity and have become just as much a part of the amoral capitalism as businesses. Because it is being driven, in large part, by lobbyists and politicians who owe more loyalty to the large businesses (who are, as you said in your second query, looking out for what is best for them). Even if there are some good intentions in government, there is still the competing tension of loyalty to the dollar. So, in that sense, while the ideal system would be an amoral market-driven system regulated by a well-meaning and compassionate government run by compassionate individuals, that's not what's happening.
And a second point. I'm not looking to the government for the answers to these questions. I am asking why the mantra in business/capitalism is that compassion (instead of making the best deal) is poor business judgment. I think, in the long run, it's not good business judgment if there is real harm on the other side, because I think that can cause ripple effects throughout the economy.
Your last question--what's the alternative--implies there are only two options here: live with the system or exit it. I suggest a third. I suggest that, as individuals, we ought to throw out the existing mantra and, as individuals, act compassionately in our businesses. It doesn't mean there aren't hard choices, as there are always in life. But taking advantage of others just because "it's business" ought to be a retired practice.
I'll tell you what pure capitalism means to me. Personally. It means I burro my head back into my accounting degree and get my nose in the financials. I figure out how to cut costs (i.e. how much more cheaply can I hire people to put out an acceptable product, how much more cheaply can I source acceptable coffee beans, etc.). And I figure out how to raise revenues. In my opinion, if I'm strictly living the capitalist life (as in following rules I can't change- a la working for Walmart), I'd be smart to create (via marketing or other means) a demand for a product or service (even a false demand if possible- you don't know you need something until I tell you that you do) and then sell that item at as high a price as I can extract from as many people as possible.
What's so wrong with that idea?
For one, on the surface it's cheap and plastic- it's McDonald's hamburgers (over how many billion sold now?). In a deeper sense, I can find a lot more wrong with this life- my life as Ebenezer Scrooge to your Bob Cratchit.
I'm not saying I want ANYONE to tell me how to live my life. You guys know me better than that, right? I'm asking, if we as business owners look into our hearts and ask ourselves "What is the best way to do business?" what will be the answer?
I probably could've been fairly wealthy as a personal trainer selling the gimmicky products and fad exercises that a lot of other trainers do. Just like I could forget all my beliefs about coffee and make a lot more money at this. If it's a purely market-driven economy and the best way to play is maximizing profit, we're not going to have very good coffee.
Here's a question for you, Jason (and whoever else wants to chime in): What makes you think that just because someone works and gets a lot of money, they EARNED it (thereby saying they DESERVE it)?
Not to bury Brian's question, on which I'd like to hear responses, but his post reminded me of something else (besides compassion) we've discussed that can sometimes seem at odds with a purely capitalistic motive.
Quality.
Jason's prior comment implies something that I hear a lot: Work hard, put out a quality product or service, and the money will follow.
I'm sure that is true sometimes. But, as Brian's comment suggests, focusing purely on the bottom line comes with sacrifices--sometimes compassion, sometimes quality, sometimes other things, I'm sure (I'm new at this).
Using my business as an example, I often will spend more time on a project than I feel I can charge, because I want to put out the best work I can under the circumstances. If I were focused on my practice solely as a money-making enterprise, I would either charge the full amount (which probably is more than the client can afford to pay in some circumstances for the work produced--a single brief, for instance) or stop work after a certain amount of time no matter the quality, so I could move onto another project for which I could charge that hour or 3.
It is probably not good business judgment for me to do this, but it's necessary for better quality. So I sacrifice one for the other.
Dude, Jason, the problem with our current "mixed" economy is that if Audra wants to devote every Friday to pro bono work, her shareholders have every right - some would even say they have an obligation - to stop her from doing so, because it is not in their financial best interests.
The multinational corporation profiled in "Power Trip" actually listed "integrity" and "fun" as two of its core values, and do you know what the SEC did? They sent a letter to all the shareholders of that company classifying those core values as a serious investment risk.
WTF?? Shareholder-driven capitalism is not just amoral. It prevents businesses that would like to temper their profit maximization with conscience-driven activities from doing so. Shareholder-driven capitalism has a morality all its own. It places one thing and one thing only above all else. That is a morality of a sort. And it is a morality at odds with the morality most humans feel at a personal level.
Moreover, it is often the case that when a publicly-traded company makes a decision that maximizes its own profits but has costs for society at large down the road - who pays those costs? Citizens and government. Cargill and ADM have convinced all of us that it's in all our best interests' to keep cheap corn flowing so that they can "keep the economy moving," but the additional costs of this - the obesity and diabetes epidemic, let's say - are not borne by those companies. They're borne by us. You can bet your ass that if Cargill was responsible for footing some of the bill for the diabetes epidemic, they might find a better way to make money than by pushing high-fructose corn syrup. This is one of the downsides of the mixed economy you're talking about - corporations reap all the benefits without bearing very many of the costs.
I agree with Jason that the market corrects itself, generally. And that, generally, outside (gov't or other) intervention only messes with that equilibrium that naturally will take place. But when we talk about the society that this "free" market produces, I'm not sure we really know what we're talking about. I have serious doubts that it's ever really existed in a human society without intervention. And what we might find is something really bleak and cheap. Like living under the fluorescent bulbs on the white specked vinyl tile of an aisle of Super Walmart. It seems like idealism to think that capitalism creates an amoral situation in which we, as humans can live generous, quality lives. I don't know. But in my mind it's like the idealism that makes communism a good idea. Or socialism. Or my favorite: ANARCHY.
Again, forget about everything you might know about someone. Pretend you look around in a capitalist society and see someone with a lot of money. What makes you think that person EARNED or DESERVES that money? Is that necessarily true?
In my opinion (and I could be way off here, but) when I see someone in our society with a lot of money I don't think they earned it or deserve it; I think they undervalued other people's time and accumulated undeserved wealth. I generally look at those people with disdain. I see them with an enormous wealth OF TIME, sitting on their asses, wasting it. Wasting precious time that others are so desperate for. People who might actually deserve more time than they have.
That's just my opinion.
More in the future about the substance behind why I feel that way.
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