As far as I could tell from listening to a synopsis on NPR, the most interesting aspect of Creative Capitalism boils down to a conversation between Bill Gates and Warren Buffett. Gates, whose company made vast profits when it created a niche and shut out competition, thinks that corporations should spare some of their resources for charity. Buffett, who managed a firm that thrived in a fiercely competitive environment, thinks that donating corporate resources to charity amounts to stealing from shareholders.
I hope it will not shock readers to reveal I side with Warren Buffett. Wonderful as it sounds when that people like Bill Gates finally realize that he could never spend all his money (I bet he thought about it), his initiative has the look of a food-sick morbidly obese man weighing whether to donate some leftovers. Corporate philanthropy, at least the systematic version proposed by people like Gates, strikes me less as a great idea than a depressing symptom of a second gilded age. Andrew Carnegie’s huge gifts was nice but America still won when we changed the system to make them unnecessary. Modern noblesse oblige, insofar as it survives the looming depression, is mostly a sign of how far our economic system has decayed from whatever high water mark we hit in the mid 20th century.
It may sound weird from an unapologetic liberal, but some days I feel like one of the few capitalists in America. I think the job of private enterprise is to make money, and as far as I’m concerned that is a good thing. I think that free enterprise helped win the cold war. However, supporting capitalism means more than some Randroid fantasy of benevolent merchant overlords. You expect a private business to serve the public good like you hope that the hospital IT guy can remove an appendix. There might be some who can, but it hardly seems fair given his job description.
The key point is that believing in capitalism should mean supporting the idea of separate domains. The domain of private business has nothing to do with the public interest. That is the government’s job. Building on that point, I don’t blame tobacco executives or wall street traders for looking after their shareholders and their own fat parachutes. Like Gordon Gekko I don’t think that greed is anything shameful in business. What else motivates a successful executive? I suppose if we added up people motivated by a passion for floor tile, radio components, empire building, showing up the rest of the high school reunion and changing the way America works with fiber-based insulation we might run a decent sized city. For the rest of the country greed will have to do.
The job of business is to make money. That is greed, and it’s fine. Liberals and, these days, practically everyone who blames a crisis on ‘greed’ either have no idea what they are talking about (liberals), or they are making pointless noise from the food hole to head off useful discussion (Republicans). Greed only breaks the system when the other domain falls asleep at the switch. If the public interest depends on tobacco companies disclosing the carcinogenic addictives in their product or Wall Street execs not leveraging each other to the point of catastrophe then it is the job of government to mandate those things. It is silly to expect a business to sacrifice for the long-term public good if that means that in the short term the business will lose market share and replace its executives.
At the risk of belaboring an obvious point private business is good and even vital, but it is only good for the things that it is good at. Schemes that interfere with the appropriate domains of business and government, whether it comes from overstuffed entrepreneurs like Bill Gates or appeals by Republicans to the benevolent self-regulating magic of private enterprise, unnecessarily complicate what should be a fairly simple picture. Such efforts inevitably get ignored (Gates) or else they destroy the same system that they naively fetishize (Republicanism, with an assist from Clintonomics).
Eli Rabett
If you want shareholder value to be the only driver of a company’s policy, be Eli’s guest. Of course, we will also impose unlimited liability. You own the whole thing, you need to be exposed to all the risk.
On the other hand companies and their shareholders who wish the benefit of limited liability need to contribute to the common weal.
Foxhunter
Jesus. Tim F’s posts make me feel as if I’m reading Sterling Newberry. I come here for pet pictures and stuff about football. Not this analytical goo about the schism between capitalism and benevolence . Ok, just kidding. That is some serious food for thought; should do a nice job of getting my sheep count over quick. And also……err, nevermind.
demimondian
Only one problem with your argument, Tim: the facts.
Under Gates’ leadership, the "Microsoft match", a $12K one for one match for every charitable donation made by an employee, whether in money or in time (at $17/hr.), reshaped philanthropy throughout Puget Sound, and eventually around the world.
feral1
Tim,
That is a truly brilliant post (mostly because I agree with it 100%).
But seriously, as a far left leftie, I also think capitalism, market economies, and greed serve the public welfare by spurring production and innovation and efficiently distributing goods. However, a society that relies on the good will of its business sector is setting itself up for a world of hurt.
I’ve never understood how the tobacco companies ever even got into the position to lie about their product research. That shit should have never been left up to them in the first place. The government should be conducting that research.
Sean
A huge part of so-called corporate philanthropy is putting a nice face on otherwise shitty companies. Archers Daniels Midland supports NPR, not for the cutting reportage, but to soften people’s image of the company. As such, it is a good expenditure of the corporations assets, if it keeps them from getting significant scrutiny, or if it affects a juror’s judgment somewhere down the line.
I think it also keeps corporate spouses occupied, feeds egos at ‘thank you’ banquets, etc.
J. Michael Neal
Agreed, sort of. Individuals can, and should, make charitable donations. Corporations shouldn’t. For them, it’s nothing but a PR gimmick, not a sign of any sort of virtue. Individual donations by wealthy people can be similar, but aren’t necessarily.
It bugs me when an intangible entity tries to pretend that it’s my friend, or that it has virtue. When I shop at Target, I am not a guest; I’m a customer. Characteristics of personality adhere to people because they are human. Corporations aren’t.
TheHatOnMyCat
For perspective you might want to visit this website, which details the work that the Bill and Melinda Gates foundation is doing around the world. This well planned and targeted organization is taking part in the abatement and possible eradication of tuberculosis as a scourge of mankind, as well as numerous other worldwide initiatives which you can discover on the website. Gates has not only funded this rather large global suite of projects, but has departed Microsoft to spend more time in the management and direction of the Foundation and its work.
I strongly urge anyone reading this thread to familiarize themselves with this work, and form their own opinions. Visit the many corners of the website, read up on the various projects, and draw your own conclusions.
This material describes the general approach to the TB campaign, one of several campaigns the Foundation is moving on at the present time:
We support the mission and goals of the World Health Organization’s Stop TB Partnership. The goal of this plan is to treat 50 million people with TB and prevent 14 million deaths in the next decade. We’re working to ensure that better drugs, diagnostics, and vaccines are developed and made accessible to those who need them the most.
We work with partners globally to save lives by getting better TB care to those most in need. We support the following strategies:
Research the basic biology of the disease.
We’re supporting research to better understand what causes TB. We don’t yet understand the basic biology behind the disease–knowledge that’s essential for developing solutions to end TB.
Develop better tests.
We’re supporting research and development of new diagnostic tests to identify people with TB rapidly and before they infect others. Early detection can break the cycle of transmission that perpetuates the epidemic.
Develop new vaccines.
We’re funding efforts to develop new, more effective TB vaccines and ensure their affordability and availability to all who need them. An effective vaccine will protect children, adolescents, and adults against TB, including multidrug-resistant (MDR) and extensively drug-resistant (XDR) forms of the disease.
Develop fast and effective drugs.
We’re supporting the development of more effective and faster-acting TB drugs. We’re partnering with pharmaceutical companies to test promising drug compounds that could become beneficial treatments.
Make better use of existing methods.
While new vaccines, drugs, and diagnostic methods offer great promise, they will take time to develop. Therefore, we’re supporting programs to make better use of existing strategies to fight TB and TB-HIV.
Raise public awareness about the disease and advocate for funding.
We’re supporting efforts to increase public awareness and inform policymaking regarding TB and TB-HIV. We are also working to encourage other funders to increase support for the fight against TB.
The Gates Foundation has partnered with this foundation:
The Thinking Man's Mel Torme
In the Soul of Capitalism, William Greider says (in a nutshell) that shareholder-value capitalism is fundamentally and irredeemably anti-democratic, because its success depends on the active destruction of what (we like to think, at least) we hold dear in western liberal societies. The end game is the loss of workers’ rights, the social safety net, consumer protections, personal privacy, environmental stewardship, and honesty and transparency in contracts, as all of these work against maximizing profit growth and thus share value. We’d best tax and regulate the bejeesus out of business, then, as it’s an unalloyed malignant force which will devour what the callow among us like to think are the material benefits of being a free people.
Oliver's Neck
I fail to see how this point is obvious. What do you mean?
El Cid
What any institution is "good" at also depends upon the parameters set by its internal incentives and disincentives.
Businesses which are structured and which are situated within a context in which maximizing short term gain of profit over long term harm to corporate stability or even societal coherence will do so.
ENRON was very good at what it did. It did what it was supposed to do.
Yet even though you can apply an argument that the other domains were not functional (i.e., Phil Gramm’s wife on the board of the body set up to permit & control ENRON’s ‘new’ business model), at the time people were quite vehemently arguing (including ‘Third Way’ Democrats) that what I would consider the proper regulation & control of this company by another domain (government) was in fact the misapplication of the domain of government on the well and efficient functioning of an enterprising new corporate business model.
If this separate domains approach is supposed to work, there would seem to need to be fairly broad agreement across societal decisionmakers about what those domains are and the proper extent of each’s power.
At the time, the leading view was that ENRON was doing what it was supposed to do. And in the end it was, it’s just that its purpose was different than that of its many boosters.
Fifi
Yes, corporate charity is quite often a symptom of serious confusion in the little brains of corporate officers and even more often nothing more than self-serving tax-exempt PR.
Corporations are meant to generate profits. Period. And they should be treated as such.
Comrade Stuck
Yes, I have flippantly used the word greed to describe what the basic problem is, even though it doesn’t accurately describe my thoughts on the matter. It’s a single word and connotates a negative, but I also don’t think greed is bad in the context of what business entities should be about.
My own reflections on the current state of affairs has more to do with a kind intellectual and moral laziness brought about by prolonged periods of prosperity, such as we’ve seen since WW2. It was the trauma of the Great Depression that brought about the reforms of how free enterprise should be carried out and is what brought about a large and productive middle class, pretty much unfettered since. It is the illusion that total freedom is the way to go in economic matters and has been championed by the so called Free Trader mentality mostly of Republican Conservative ideology. But I think it was Nietzsche who said something like Total Freedom is the Ultimate Prison. We are learning today of that truth. Nothing like the prospect of an empty pot to focus the mind, and many more people in American are truly afraid their pot may go empty. This is a good thing, as any country, even one as successful as ours, is put in jeopardy when it’s citizens are complacent and take success for granted as permanent.
It is the people who vote for their leaders, who watch the Chicken Coop to keep away the wolves who are most responsible for our current plight, IMHO. And the old maxim of No Pain No Gain will once again prove to be ,hopefully, our friend in the end.
Tim F.
All right, let’s get real. I know Stirling Newberry. Stirling Newberry is a friend of mine. Sir, I am no Stirling Newberry.
For everyone citing Microsoft as an example, consider my point again. Microsoft is a fantastically profitable company with an almost unparalleled stranglehold on its competition. That makes it a poor example for a generalized point, no? The great things that Andrew Carnegie established did not validate robber baronism.
Bill Gates is asking major companies to follow Microsoft’s lead, which Microsoft only started setting after its death star competition destructor beam had long become fully operational. How many companies do you think will follow? I would feel safe in predicting that most executives will go on as if Gates had asked them to take up competitive glass eating.
AnotherBruce
Maybe greed is a reality, but I can’t accept it as any kind of "good". It is ultimately destructive to societies and individuals. I think to a large extent you are confusing greed with success. One can be an individual who is driven to success without being greedy. And Warren Buffett is wrong. If you want a successful business, you can’t let the environment it’s thriving in go to hell around it. You have an obligation to be a good citizen. That is the problem we are facing today, we are choking to death as a society due to the macrocosmic problems we are facing because of greed. It’s a kind of idiocy that we have developed this impoverished philosophy of myopic self interest that we try to pass off as "individualism". The planet is too small for us to shit on anymore. We need to move beyond, way beyond 19th century ideas of selfishness.
Michael G
What do you call it when businesses sacrifice their OWN long-term good for temporary short-term market share?
demimondian
@Tim F.: This claim is simply false, Tim:
That’s. Just. Not. True. The match was an important part of Microsoft’s culture long before Windows 95.
gnomedad
There’s no disputing that the Gates Foundation is doing good things, but arguably those billions came from a virtual tax on consumers due to Microsoft’s quasi-monopoly. Is this really what we want as opposed to, say, a government-funded initiative paid for by actual taxes? Or do we think such things are better managed by corporate philosopher-kings?
srv
Back in the day, before Corporations became limited liability people, they had to serve some public purpose and had a limited lifespan.
That slap you hear? It’s Tim’s invisible hand slapping our founders.
Corporate greed and ingenuity will always outpace authority, particularly when the fox owns the henhouse. How many more bubbles do there have to be before you get it? How many people in The Gov’t really understood derivatives? Or hedge funds? These people did not have a clue.
Get rid of personhood, the unaccountable "Federal" "Reserve" "Bank", and clone a few Spitzers and Fitzgeralds, and we can talk.
AnneLaurie
People versus corporations: Separate (but Equal) Domains!
Didn’t that formulation become… unpopular, for some reason?
Brandon
I agree with the sentiment, and Tim’s managed to express it better than I’ve ever been able to.
But I think there’s an important corollary to this that both anti-regulators and liberals should realize. Much as businesses act in their self-interest, they act to maximize that self-interest in the context of the existing regulatory environment. You don’t like the outcome, you change the rules. You can’t blame business for rationally assessing the regulatory environment and optimizing their behavior.
Right now you have a regulatory environment that favors arbitraging the labor market by relocating production to countries with few labor regulations/low costs. The long term feasibility of this is questionable, and its effects on the American public are probably quite negative. But ranting about how corporations are "evil" for doing it is absurd. Corporations are not evil, they’re amoral–they only appear to have ethics and morality to the extent that it is in their best financial interests to act that way.
Chuck
Tim, I completely agree with 95% of the principles you lay out here, but I think that, at least for a company like Microsoft, it’s far too reductive to say that giving to charity is stealing from the shareholders. For Buffett’s company, that would be true, because they have nothing real to gain from being charitable (that I can see). But for Microsoft, especially in the late 90s, a little bit of PR could go a long way, both in driving good will toward their brand, and in making the political environment more accepting of their tactics. That’s the more obvious argument, and there is something to your notion that these "efforts get ignored". I certainly don’t have actual data to the contrary, but I doubt that for every dollar Microsoft spends on charity, there’s actually a dollar lost.
The other side of the equation, though, is how the program affects the employees of Microsoft. Firstly, whether or not it’s ignored by the world at large, the PR side is definitely not ignored by the employees. Good people with good employment options want to work for a place that makes them feel good. And if demimondian is right that Microsoft has such a huge matching program, that is bound to be a huge competitive advantage in recruitment and retention of top talent. And in software industry, moreso than most other industries, the best people can be orders of magnitude more productive than the almost-best people. Overall, with no numbers at all to back me up, my gut tells me that Microsoft doesn’t actually lose real money through its charitable efforts.
None of which is probably addressing the issues that Gates talks about, per se; it’s just a response to the idea that charity is stealing from shareholders, in this case. Now, your point is probably 100% valid when applied to a lower-profile company most people don’t have any particular opinion about, with a lower percentage of extremely high-productivity jobs, like, say, a Whirlpool or Weyerhaeuser.
OK, after reading your follow-up comment about Microsoft being a special case, I realize that part of what I’m saying was actually your point, but now I’ve written too much to delete it all.
gnomedad
Exactly! My great fantasy would be for liberals to stop expecting altruism from corporations and for conservatives to stop denying the need for regulation. Na ganna happen, of course.
PeterP
Robert Reich, in Supercapitalism, makes much the same point. In essence, he states that companies have only one duty, to make money for their shareholders, and any other "societal good" we expect from them must be legislated. It’s a very good read.
Brick Oven Bill
The successful (small) businessmen I know are not motivated by greed. They are motivated by perhaps ambition. But I’d say also by the pursuit of excellence, which is far more satisfying than booze or couches and TV, if you are able to pull it off. Not everybody is.
The survival of the nation is threatened when a charismatic demagogue chooses to paint these Citizens as bad guys. They can just say screw it.
Personally, my backup plan is to get a job passing out food samples at Sam’s Club. Then I’m going to stash a corkscrew, and see if I can get away with polishing off one bottle of wine per shift. I can’t figure out what to do with the empties.
Comrade Luke
Love your posts in general, but:
Sorry, that’s not true. And it’s not true that Microsoft encourages charitable giving only for PR reasons. I’m not talking about the Giving Campaign, which is simply an executive pissing match, but all the other aspects such as corporate matching.
I love how the fact that Microsoft has a ton of money means that they’re inherently evil.
Finally, we need to get off of the "I’m a liberal but I still believe in capitalism" shtick, because it’s playing right into the GOP meme.
Most liberals aren’t against capitalism, they’re against unregulated capitalism. Big difference.
Oliver's Neck
Alright, since you won’t let me play Socrates then I’ll just make this claim: all of the societal "goods" which you associate with "private business" (read: Capitalism) are not only achievable but more robustly so without the private ownership of capital.
Private ownership of capital simply concentrates wealth in the hands of a few for the benefit of a few. You’ve played "Monopoly" before, right? While the Keynesian economic policies of Europe and the U.S. (during the middle-part of the 20th century) somewhat mitigate that process, it still is a foolishly inefficient way to get things done (not to mention morally unjustifiable).
We need a successor system to Capitalism which takes the best parts of that system (the market, collective labor) and couples it with worker self-management and public re-taking its rightful ownership of capital. Entrepreneurship and innovation are not inextricably tied to the private ownership of capital and can be far more rewarded by the goals of a radically democratic polity than the profit motive.
"It can’t be done!" I hear you say.
A good example of it working for more than 50 years
A good book on the topic
Brandon
My POV on this is mostly driven by friends I have, progressive, quantitatively-minded friends, who happen to work for certain management consulting firms. They base their decision on the data, and make a logical assessment about how a given corporation can save money–and often this is by relocating operations. But this isn’t necessarily some insane groupthink that believes outsourcing is the solution to all problems–presented with a different set of corporate regulations/tax incentives, it’s likely that the same analysis would tilt toward keeping operations stateside.
TenguPhule
No, it would be because they destroyed a lot of other companies in ways that were unethical at best and criminal at worst.
Also Windows Vista should have required a mandatory 10 years in the pen.
TenguPhule
And now we know Brickoven doesn’t know any businessmen, small or otherwise.
El Cid
Of course, the purpose of a lot of Carnegie philanthropy wasn’t bettering the world — but selling the image of the desirability of his wealth and companies. It was PR. During a time when a lot of the upper classes and corporations realized that they needed to do some selling of themselves or face the heavy hand of regulation.
tammanycall
I don’t think I agree. There could be a cynical reason to engage in public works: charity as marketing. Why not exploit an opportunity to create a positive association between your brand or product and the consumer? The societal benefit would not be the main goal, but a pleasant side effect.
Brick Oven Bill
It can’t be done Oliver’s Neck.
The best restaurant in America is Basque. The Star, kitty-corner to Stockman’s, in Elko, Nevada serves a meal for around $20. You get a thick ribeye, salad, spaghetti, fries, bread, and a desert for that price. There is common serving bowls for tables. They sit you down at community tables, and you will likely be eating next to someone you don’t know. If you ever get to Nevada, go to The Star.
The Basque are hard-working, intelligent, and ethnically homogeneous. In Spain, they are a persecuted minority.
Successful collectivism has historically happened in Scandinavia as well. It is not working too well these days in Malmo though.
Church Lady
@tammanycall-
The reality is that corporations do give to charity as a marketing/public realtions tool. It’s the same reason they put their names on sporting events, sponsor NASCAR vehicles, fund college scholarships, etc. It is a way to have their name in the public sphere associated with something good. Charitable giving by corporations generally has nothing to do with altruism.
bob
I rarely comment, but I have to say I (mostly) agree with you, with a subtle but important distinction Tim.
I personally believe that greed (or drive*) and raw capitalism has its place in society and is a vital part of what makes us american. I also think that we should not sugar-coat the ideas of capitalism and business is to, first and foremost, to make money. On something like objects (cars, toothpaste, apples) that’s great in that there is little difference from one guys apples to the other. May the guy who can make the best car, the best toothpaste, or pick the best apple for the price win. Godspeed.
Given that, there still needs to be regulation, by an interest made up of the people designed to preserve the peoples interest – this is government. Someone has to make sure that cars are safe and efficient, toothpaste actually cleans teeth and doesn’t have rat poisoning in it and that the apples were not picked by children. Government is there to make the ground rules by which everyone must abide by, and persecute those who do not play by the rules. The capitalists are there to pursue their dream (be it of apples or money) and make this game interesting to watch. There is an ongoing balancing act between the forces that make the rules by which the game is played and the players who play the games.
However, as the implications of a system of capital investiture become more entwined with basic human morality, where there is a difference between what is profitable and what is right such as health care, regulation needs to become advancingly entwined. I will use the example of health care, in that you become sick and I as a health care provider could cure you, or I could just make it so that you have to take this pill every day for the rest of your life. Were I a capitalist, with my primary responsibility to my investors, I have a moral choice which is clearly at odds to the morality of helping a fellow human being.
* – Okay, two things. I think you underestimate the number of people who, at least start out with, the intention of doing a good job first and profiting second. After the greedy person is rewarded over the person who does a good job do the smart ones learn. A little more emphasis on accountability, and I think you will see the pendulum swing back. Self-reflectively, that last one is a pretty big if though.
Wilson Heath
Generally agree. I believe in free enterprise on an even, well refereed playing field. Not some bullshit, unchecked, "natural law" conception of a free market. (In a state of nature, we’re lucky if we’re banging rocks together rather than flinging our own feces. Good stuff on Sullivan’s blog lately about how natural law is a crutch for an argument from personal identity alignment.)
So why do I believe in free markets with sound government oversight and control? Because I’m a liberal and I believe that such a system does the most to encourage individual freedoms. Efficiency can take a back seat, so far as I’m concerned, but I think the efficiency fetishists have some ‘splaining to do lately.
Oh, and corporate social responsibility is just advertising. I’ve never seen any explanation that shows that it’s anything but. Unless it’s some avoidance of fines in some settlement with local government . . .
Comrade Kevin
@Brick Oven Bill: What’s your second best restaurant? The Samoa Cookhouse? Hometown Buffet?
Cassidy the Racist White Man
@TenguPhule: Don’t hate on Microsoft because they were better at being a business. Bottom line is that if any of the companies they "criminally stamped out" had done something worth a shit, then people would have bought it. Netscape? It was crap, no better than Explorer at best.
Ambition is a nice way of saying greed. We all want the nice car, and the big screen HDTV, and the best beer all the time…there is nothing wrong with greed. It is human nature to constantly want more.
Brick Oven Bill
The second best restaurant is Connie’s Pizza, in Chicago.
Limniade
I think the difference people are hitting on is the matter of exploitation. Be successful, sure, but don’t cheat in order to do so. Wal-Mart would be a prime example of an incredibly successful company that engages in unethical and unfair practices to remain so, such as sexual discrimination, forcing employees to work unpaid overtime, union-busting, and artificially suppressing wages and hours worked so that employees don’t qualify for health benefits, requiring them to fall back on federal programs like Medicare just to be covered.
*That* is the kind of thing that should not be allowed.
And then you have Wall Street, which created an entire industry out of encouraging people to buy homes they couldn’t afford, in order to profit from the defaults, and then bet the whole fucking farm on that industry. Another example of greed justifying profit from harm.
As unfair as it may seem, I can see the logic behind outsourcing to countries with cheaper wages and fewer workforce protections. I might view that as totally counterproductive in large scale (since people who don’t have jobs can’t afford to buy what you’re selling–see also: today’s retail crisis) but not unethical. It’s the unethical behaviors I have a big problem with.
Brick Oven Bill
Although Connie’s went corporate and you can buy one of their little pre-packaged pizzas in the box at O’Hare. I rescind.
The second-best American restaurant was Connie’s-1990. Today, I just don’t know.
Going international, the world’s second best restaurant is owned by a Texas oilman, who married a beautiful Italian woman, and started a place on the beach of Placencia, Belize. They make their own noodles and there might be ten tables. He BS’s and she cooks. It is to the north of the Purple Space Monkey, on the sidewalk. You can eat for ten bucks. Really, really good. The food and the stories.
owlbear1
"Greed" is a polite euphemism for Theft.
Mylegacy
This may sound funny – but actually Karl Marx is to blame for the fall of the US of A.
Most people think of Communism and dear old Karl. Which is true(ish), but not completely. Karl produced very little work about “socialism/communism” but a great deal about the intrinsically fatal flaws of capitalism.
To paraphrase it he summed up the ultimate tyranny of capitalism this way (my apologies to the deceased Mr. Marx): A smart businessman will see that there is a shortage of potatoes in country A but a surplus of potatoes in country B. When there is a surplus prices drop – so the business man buys cheap(ish) potatoes in country B ships them to country A – and because there is a shortage of potatoes their prices are high – he then sells his potatoes for a very nice profit. He then takes his newly increased “capital” and looks for other opportunities.
That’s what a smart business man does, Adam Smith’s “invisible hand” at work to the benefit of all – classic capitalism 101.
However, the smarter businessman understands that if he CREATES shortages and surpluses and gains either a monopoly or oligopoly control of the markets he is manipulating then viola – instant – excellent – on-going but slightly crooked profit.
This is the “Marx Predicted” Capitalism, which has now destroyed the world’s money markets, the American economy and most of the world’s economy.
Why didn’t this happen back in the 1800’s you say? IT DID. We called it the “Robber Baron” era. After that – the capitalists READ Marx’s book, “Das Capital,” and their governments kept just enough regulation to ensure that labour was cheap and plentiful, capital reasonably cheap and regulation was just enough to stop totally rigged markets.
Everything was going swimmingly until capitalist governments got so confident they kept removing regulation after regulation after regulation – the end result – OOPS – DIDN’T WE USED TO BE A WEALTHY NATION?
Karl, you sneaky old bugger – why didn’t you remind us to keep re-reading your book periodically.
Beej
While I agree with a great deal of what Tim says here, I’m not quite so willing to dump every business and businessperson into the same vat of corporate greed. There are businesses and businesspeople who do care about the welfare of the country, maybe, chiefly because they care about the health of their markets, but they do consider themselves as having an obligation to the communities around them. Take a good look at Warren Buffet. There are some excellent books and TV documentaries about him. This man doesn’t see duty to shareholders and duty to community as mutually exclusive. Remember, he has signed over a considerable portion of his wealth to the Gates foundation. Admittedly, Buffet is somewhat unique, but there are others like him.
I’m also going to agree with Brick Oven Bill. I know a number of small business owners, and most of them are very involved with their commuities. Is it all for PR? Some of it certainly, but not all. Business looks different in small towns and smaller cities.
TenguPhule
New contender for stupidiest statement of the year.
Release the lawyers!
Jay Severin Has A Small Pen1s
Didn’t we just get through the massive profits phase of our economy? How’d that go?
bizzle
@Church Lady:
I don’t think this world is entirely run through with cynicism.
See Johnson and Johnson’s mission statement – "the credo."
A document written in 1943 that says that for a business to be truly sustainable, all parties involved must profit, not just the shareholders.
TheCauseGuy
Shareholder value increases with good cause marketing campaigns. It creates differentiation and affinity in consumers.
Brand halos for brands created by cause association and yes, charitable giving measurable affect decision making by consumers.
This is established fact. See any Cone report.
This post is like a bad Michael Douglas movie.
Conservatively Liberal
Business has been MBA’ed to death. Everything is a one way street with them now, everything is about them. The employee and customer are mere nuisances that a business has to deal with, sometimes harshly. I run my own small computer business and I enjoy making my customers happy. I will go the extra mile because I want to earn their respect and trust. Doing so is just smart business and good for customer relations. I may make a little less for every hour of labor expended, but it pays off in the long run.
Not so with big business today. Everyone at the top is in it to milk the system for all it is worth, taking huge payments and bonuses even when everything they have touched has failed. Big business has lost touch with the people in the never ending search for a profit. All it has been for the last eight years has been ‘what’s in it for me?’, with no thought given to a sustainable future for both the customer and the company.
I succeed because I want my customers to succeed, we both profit from doing business. I earn a fair profit and that is good enough to make an honest living, and that is the problem. These people don’t want to make an honest living, they want the rest of us to pay for it. They will lie, cheat and steal and claim that it is just ‘the way it is’, that’s the cost of doing business. They don’t care about the employees or the customers, they care about their own bottom line and what they can do to enrich it. By hook or crook.
bago
I seriously don’t get the Vista hate. It has extensive back-compat (including the original windows 3.11 issue with non domain accounts verifying on hash alone) while rewriting the kernel, driver model, and tcp/ip stack from the ground up with security in mind.
Lots of people see the UAC prompts as annoying, but honestly, the number of people that click yes on any pop-up, including ones that say "This might install a virus" are surprisingly large.
As someone who lets other people use his computer, I appreciate the fact that my guest login requires me to authorize any changes to the core of my system.
Fuck that purple gorilla.
Conservatively Liberal
When policy and security are configured properly on XP Pro (unlike the welcome mat it comes set up as), it is just as secure as Vista. Add a good browser, antivirus, adware and software firewall and it is a good solid system with excellent performance. I have to work with XP and Vista (along with the other variants) and I still prefer XP Pro. Vista is nice, but it is ‘eye candy’ nice, not ‘necessity nice’. When it comes to gaming, hard core gamers still prefer XP Pro because it has lower overhead (cpu/momory/threads/processes) thus allowing more system resources to be focused on gaming and not just keeping the system running. XP is poorly configured as installed, but once nonessential services are disabled, user rights and security policies are in place, remote registry/accessibility disabled and application permissions are set, it is a pretty secure and hassle free system.
I just set up a system for a customer with three daughters, all requiring secured user accounts (from each other too) with Mom having ‘overlord control’. ;) Her daughters nuked her two previous XP setups that were "secured", and now they can’t do any damage to it whatsoever. If they want to install anything, it has to be cleared through Mom. Anything. Needless to say, the the Mom loves me and the daughters don’t. That’s ok, Mom pays the bill. :)
Me? I will stay with XP Pro until I have a reason to upgrade. As it is, I use it mostly for gaming and work/repairs, and FC9 for everything else.
El Cid
The Basques are not a persecuted minority in Spain. If you want to argue under Franco, that’s different.
On Vista / XP, I’m fine with new systems that have Vista on it, I just wouldn’t upgrade to it unless someone gave it to me for free, and only then if I had a lot of free time to troubleshoot. But the native Vista machines I’ve used seem to be, well, pretty much identical to XP with a few ‘neato’ changes.
Doug H. (Comrade Fausto no more)
srv was a goldbug. Who knew?
Caravelle
I’m fine with the idea that companies are inherently greedy and that this isn’t a bad thing. I like to point out that the same logic that says companies’ only interest is to make a profit and should be allowed to do as much as it can, also says that workers’ only interest is to have good working conditions and benefits and should be allowed to do anything they can to make it happen.
Funny how pro-business right-wingers tend to not notice that.
And as you point out, the Government’s interest (theoretically) is to look out for the public interest, so by that same logic it should be allowed to curb companies’ and anyone else’s behavior to reach that goal.
Hugh
This thread became too long for me to read every comment before I begin my work day – but I read many. Lots of good insights. I have no problem with corporations donating for the public good. But that cannot replace smart, social investment by the government. We are indeed in the second Gilded Age, a terrifying time when chaos abounds and our government appears to be basically rotted through with corruption. What world will my 5 year old girl grow up in to?
JR
What is this idea that "corporations" are some kind of natural force? It is an artificial construct that acts like a cancer within society, wanting only growth and existing outside the resource bounds of the living beings it feeds from.
I have come to expect better from Tim than all this ritual, airy fooflaw about what government "should" be this (ignoring that humans in a greed-oriented society will be bought by business money) and how businesses are in business to make money, hohoho, and that greed is good because it motivates and we simply couldn’t find another way for people to get out of bed in the morning.
We need to rethink corporate structures and remove the profit motive from every aspect of our lives. Very sad to read this today from someone I really thought had a better grasp.
Commerce’s dreams are human nightmares, if you know enough about history. The market has been free forever, all through history, and it never achieved thought or human advancement unless carefully regulated. Worshiping it is a poor exercise.
Robert Johnston
"Buffett, who managed a firm that thrived in a fiercely competitive environment, thinks that donating corporate resources to charity amounts to stealing from shareholders.
I hope it will not shock readers to reveal I side with Warren Buffett."
Surely the real problem here is that it’s more or less impossible for shareholders to do anything about a decision to give to charity if the shareholders disagree with that decision. And just as surely the solution to this and many other problems characterized as issues of corporate malfeasance is to put a lot more power in the hands of shareholders to fire directors.
In any event, :
"RCW 23B.03.020
General powers.
(2) Unless its articles of incorporation provide otherwise, every corporation has the same powers as an individual to do all things necessary or convenient to carry out its business and affairs, including without limitation, power:
. . . .
(o) To make donations for the public welfare or for charitable, scientific, or educational purposes;"
Microsoft’s charter and bylaws do not exclude the power of charitable giving.
Microsoft clearly has the power to make charitable donations, and the terms of its incorporation make that clear to all shareholders. So long as shareholders are made aware of this power and it can be incorporated into the price they pay for their shares, there’s no good faith argument that charitable giving is theft from the shareholders.
Emma Anne
Good post Tim. I do agree with some others here, though, that you are over-simplifying. People – even business people – have a number of drives, not just greed. Just contrast Walmart and Costco for one example. Costco limits prices to a certain fraction above costs. They treat their employees well, pay them enough, and give them benefits. Making profits is very important, but maximizing profits clearly is not.
lethargytartare
@JR:
+1
sparky
one thing that seems to be overlooked in this thread is that many people are treating this as a question of individuals. in the corporatist state we inhabit corporations have taken on a life or weight of their own. though sometimes a corporate structure is turned to purely personal ends, that’s the exception. managing or deciding the extent of institutional power is not a question of individuals, or greed. it is a question of ends, power allocation and control.
Michael D.
@gnomedad:
Count me as one would would rather billions be spent by an organization with a long term plan that will only spend the money if they are reasonably sure the effort will work, as opposed to a political organization that is motivated only by getting re-elected and telling people they can have the AIDS drugs if they just stop having all that sex.
random asshole
Wow, I can’t remember the last time I read a post with which I agreed 100%. Excellently put, sir.
Fundamentally, I don’t understand the arguments where people expect companies to do certain things. Corporations have legal obligations to shareholders to provide a return on invested capital within the bounds of legally accepted activities. If there’s a widespread belief that a company should do X, then change the law to require it instead of putting on some phony outrage about corporate greed or some other nonsense. At the very least, any advocacy in that realm brings the issue from business into politics where the people (at least, theoretically or indirectly) have a say.
liberal
@Eli Rabett:
But they do contribute to the commonweal by paying taxes. And it is reasonable and just that the corporation pay taxes separately from the shareholders themselves.
liberal
@Tim F.:
Absolutely.
Great original post, BTW.
Duke of Earl
The word "greed" has been used multiple times on this thread, however the dictionary definition of greed is basically entirely subjective.
# excessive desire to acquire or possess more (especially more material wealth) than one needs or deserves
# avarice: reprehensible acquisitiveness; insatiable desire for wealth (personified as one of the deadly sins)
After a Reichwing radio talk show host a decade or so challenged his audience to come up with an objective definition of greed I crafted this one.
greed: that degree of acquisitiveness which will cause one to knowingly and deliberately cause harm to unconsenting others solely in order to enrichen or empower oneself.
True, it’s not totally objective, but it is far more so than what is in the dictionary. For instance, how does one determine what is an "excessive" desire for wealth, or what level of wealth is necessary or deserved?
When I finally got the talk show host on the air, he hung up on me without replying and killed my definition on the tape delay after I gave it, I took that as a victory.
Anyone who has listened to talk radio in Atlanta for an extended time probably knows which Reichwing talk show host I’m talking about, to the best of my knowledge he is still issuing the same challenge (surprise, a dishonest Reichwing talk show host).
liberal
@JR:
I don’t think Tim F. worships the market. AFAICT from his post he’s in favor of regulation when it furthers just, desirable ends.
liberal
@Emma Anne:
Even that [viz, that this isn’t motivated by profit] is not so clear—treating employees well and paying them well can be highly profitable. (Cf cost of employee turnover.)
liberal
@Michael D.:
Yeah, but those aren’t the alternatives offered.
liberal
@Cassidy the Racist White Man:
People in the know don’t hate Microsoft because they’re "better at being a business," unless "business" is redefined to "an organization that makes money by collecting monopoly rent."
bootlegger
Only problem I have with this is that the corporation is not a person and people pay taxes. If you tax a corporation it will simply pass the cost on to the consumer so, in effect, a tax on corporations is just another tax on the consumer. I, for one, like the value-added tax (VAT) because it is up front about who is paying it (you, the consumer) and you can pay less tax by consuming less. Consume more, pay more.
Redleg
The notion that the only concern of business is to create shareholder wealth is not even argued any more in business school. In fact, that sets a pretty low standard for what we expect of businesses in return for what society and the state provides them (i.e., natural and human resources, status as a legal entity, various legal protections, an infrastructure in which businesses can compete, etc.).
Shouldn’t we expect at least a minimum level of concern for the impact the business has on the environment and on society?
Tim F.
Who is we? If by we you mean private citizens and businesses themselves then get ready for disappointment. Self-regulation always fails. Activism, which is another name for non-governmental intervention, mostly shoots holes in its own feet.
Or, by we you could mean to say government. In that case you reiterated the point of my post.
HyperIon
@Chuck:
blasphemer!
Leisureguy
I wonder what you think of the movie "The Corporation" and the book "The corporation: the pathological pursuit of profit and power" by Joel Bakan. I fear that in the corporation we’ve created an immortal psychopathic golem that will in time destroy us all. (Have you taken a look recently at the environment?) The idea that private enterprise must focus on profitability (and, in the event, short-term profitability) is what drives the damage.
TenguPhule
Actually not true.
But Corporations like to pretend it is.
demimondian
@liberal: You really don’t know what you’re talking about, chum. Even Penfield Jackson acknowledged that Microsoft did not charge monopoly rents; that, in fact, the price of Windows and Office were far lower than Microsoft could have charged.
demimondian
@HyperIon: BWAHAHAHA! Another soul led into error!
Reverend Dennis
@demimondian:
Whenever I see a "Microsoft is an evil monopoly" comment I have to wonder if the commenter ever tried computing before Windows. Windows and Office succeeded because they enabled non-specialists to do productive work with a computer and they were affordable. No one attributes the absence of Hudson, or Studebaker or Nash to Big Three monopolism yet the fact that we’re not running OS2 Warp or BeOS or Copeland is the fault of the predatory Bill Gates.
Reverend Dennis
Your comment is awaiting moderation.
Not again.
Joel
I agree (in principle) with Warren Buffet, but it’s worth mentioning that "stealing from the shareholders" works in two directions. If the shareholders feel that their money is not being handled properly, they can take their investments elsewhere.
Watts
@Reverend Dennis:
I’m going to chime in here with (very) mild annoyance. Yes, I did use computers before Windows, actually. Windows wasn’t the first system to make computers "usable for non-specialists"; it was the first to do it without requiring new hardware.
More to the point, the systems you actually mentioned are all post-Windows, and in fact were directly affected by Microsoft’s anti-competitive behavior. I was a registered BeOS developer in the late ’90s. There were companies that wanted to put BeOS on their machines, but Microsoft’s license for Windows specifically prohibited OEMs from shipping machines that dual-booted Windows and another operating system — and many of those contracts actually stipulated a cost to the OEM based on the number of computers they sold. Not "number of computers they sold with Windows pre-installed," just number of computers they sold. If they wanted to put Windows on any machine, they had to pay for all of them. OEMs told Be, Inc., point-blank that they wouldn’t go through the hoops technically necessary to comply with Microsoft’s stupid contracts and still ship BeOS because they didn’t want to piss Microsoft off. That continued even without Be in the picture, in fact: Gobe Software made a nifty "Works"-style office program for BeOS which they later ported to Windows. When they tried to get it bundled, manufacturers told them, more or less, that Microsoft had decreed that wasn’t gonna happen: you see, in the last year of Be’s life, Gobe had actually become the BeOS publisher/distributor.
And the added punchline here is that this behavior actually predates Windows… look up the history of Digital Research and DR-DOS sometime.
Trust me: there are good things to say about Windows, but don’t think for a minute that Microsoft didn’t go out of its way, time and again, to hobble competitors in ways that have nothing to do with Windows’ clear superiority over everything else available.