The Business Bogy

Everybody knows that the words, “Alas! poor Yorick! I knew him well,” are taken from Shakespeare’s Hamlet. Everybody knows that Sherlock Holmes was given to muttering, “Elementary, my dear Watson!” Everybody knows that Cinderella wore glass slippers to the handsome prince’s ball.

Unfortunately everybody is wrong. The relevant lines in Hamlet read, “Alas! poor Yorick! I knew him, Horatio . . .” Sherlock Holmes’ famous dictum doesn’t occur even once in the fifty-six short stories and four novels Sir Arthur Conan Doyle penned about his celebrated detective. The seventeenth-century French text of Cinderella asserts that the good lady’s slippers were vair (ermine) not verre (glass); Charles Perrault, who translated the tale into English in 1697, was re sponsible for a mistranslation which condemned generations of readers to bewilderment and poor Cinderella to a thoroughly uncomfortable evening’s dancing.

But try convincing a “true believer” of his error about Hamlet, Sherlock Holmes or Cinderella. Argument is an exercise in frustration, indeed futility. The “true believer”just knows, and that is that!

Similarly with business. Everybody just knows that business exists to “rip off” consumers, that business profits are evidence of exploitation, and that men and women engaged in business are a shady lot.

• Ralph Nader visited Australia recently. His public addresses were well received. His audiences listened with an intensity and responded with a fervor an “old-time religion” preacher would envy. The words “business,” “corporation,” “businessman,” and “business executive” were clearly “bad” words, and the audience recognized them as such, booing and hissing on cue. His suggestion that many executives of “big businesses” should be imprisoned for defrauding the public received rapturous applause.

• A recent Harris poll in the U.S.A. revealed that public confidence in the “essential honesty” of business had dropped some thirty per cent over ten years, most significantly among the young. Australian young people share this attitude. Career guidance programs in secondary schools frequently include materials enabling students to “clarify” their values when making a career choice. They are asked to rank a number of career areas in terms of these careers’ “moral worth,” usefulness to the community, and prestige enjoyed (or prestige the students believe them to enjoy). Out of sixteen career areas listed, business ranks, on the average, fourteenth.

• A recent interview by T.V. Guide with Mike Wallace, star interviewer and investigative journalist of the Sixty Minutes program, included the question, “Do you handle someone who may have something to hide differently from a Baryshnikov or a Horowitz?” Mr. Wallace replied, “Of course . . . In both cases the interviewer ‘role-plays.’ With the businessman he may play prosecutor, or if the individual responds better to lulling, then the interviewer goes that way.” (T.V. Guide, November 24, 1979) The shift is significant. Mike Wallace simply assumed that a person who has “something to hide” is a “businessman.”

No government ever lost office for underestimating community sympathy for business; no newspaper ever suffered a massive decline in readership for criticizing business; no clergyman ever emptied his church by denouncing business. Business is, apparently, fair game for attack. “Until proved innocent assume business has something to hide .”

Why Pick on Business?

Yet it is all very odd. Are businessmen striving for advancement more ruthless than academics plotting their next promotion?

Is the world of art conspicuously free of the confidence tricksters allegedly crowding the world of business?

It is not enough, however, sadly to observe that individuals who are deceitful, lazy, negligent or fraudulent in the practice of their profession are universal, and leave it at that. It is necessary to ask why dishonesty—indeed, crime—is widely perceived as an alien intruder in most professions, but an expected inhabitant of the world of business.

Answers are plentiful. “Marx’s rhetoric about ‘exploitation’ has filtered down to common parlance.” “Frustration welcomes a scapegoat and many sources of frustration—rising prices, a declining job-mar-ket, even the failure of a family’s washing machine—can conveniently and with some semblance of rationality, be attributed to the shadowy villain ‘business’ . . . . . The masses are woefully ignorant of economic reality, hence misperceive the nature of business.”

Maybe. But such answers merely delay the significant question. What is there about business that gives Marx’s rhetoric any degree of plausibility? What feature of business makes it a popular scapegoat? Why should a misperception of economic reality invariably result in business being cast as a “villain”?

The answer is the same to each question. Whereas most professions are perceived primarily in terms of a service rendered and only secondarily in terms of financial gain achieved, business is perceived primarily—perhaps totally—in terms of gain.

The Heart of the Problem

For centuries significant professions have “justified” themselves essentially by reference to the way they enhance the lives of those served by these professions; that human beings acquire for themselves what they need to enjoy the “good life” by laboring at these professions has been politely down-played. The doctor, according to this fiction, labors primarily to further the art of healing; the teacher bat-ties to defeat the ogre of ignorance; the opera singer exhausts herself in the service of her art. The beneficiaries are those healed, instructed, or inspired. To be sure, the doctor, the teacher, and the opera singer gain financially by exercising their skills, but the initial answer to the question as to what these people do relates to their professions and those benefited, not the professionals’ reward. Ask what the businessman “does,” however, and the answer is invariably, “he makes money.”

Wisely, some businessmen have attempted to correct this strange contrast. They are wise to do so because public attitudes control, within limits, politicians’ actions. That an economic proposal is damaging to business is widely heard as a point in favor of such a proposal; the politician who attacks business invariably receives a more enthusiastic hearing than the politician who defends business. Irving Kristol is correct to observe that at the moment corporations have no con stituencies, no one ready to defend them and come to their aid when they are attacked.

Bluntly, the gap between the public’s perception of business activities and the activities of other professions must be closed, or business enterprise may find itself being closed. Lewis Powell, Associate Justice of the U.S. Supreme Court and author of the well-known Powell Memorandum, was right to observe that “business and the enterprise system are in deep trouble, and the hour is late.”

Yet frequently businessmen, seeking to defend their profession, do so by pointing to external consequences of their activities. They point to revenues gained by government through company taxes; they point to the jobs private businesses create; they even point to charitable programs supported by business! And this “defense” is madness! It increases, rather than diminishes the seeming “gap” between business and other professions. Doctors “justify” themselves by reference to what they do, not by reference to the taxes they pay or the nurses, drug company salesmen, and debt collectors they employ! Teachers refer to their teaching, not the chalk they consume and the text-book market they create! Opera singers refer to their music, not the theater ushers and program sellers whom they keep in a job! Business must be “justified” by what the business professional does.

What Does the Businessman Do?

Before specifying what it is that the businessman does, it must be acknowledged that the businessman exchanges his skills and time for money—more precisely, for the goods and services for which the money can be exchanged. Similarly with the doctor who forgoes leisure and exchanges his time for his patient’s fee, and the patient who forgoes some other goods and services that fee could have procured in favor of the doctor’s time and skills. The situations are parallel. And as is the case with any voluntary exchange, each party gains what he values most. After all, in the absence of coercion two parties only make an exchange because each believes he will benefit by so doing.

Yet, what skills does the businessman exercise?

They vary. Consider the businessman as an entrepreneur. He is an expert at perceiving information gaps in a complex society and acting to close those gaps. He observes, say, that apples are available in a particular locality for thirty cents a pound. The person growing those apples wishes to exchange them for thirty cents, preferring what that money can purchase to the apples. He observes further that people in a distant locality are willing to pay seventy-five cents for one pound of apples, preferring to forgo other goods that sum of money could purchase. Neither party is aware of the other’s existence. The entrepreneur observes the information gap, and locates a further party who is prepared to exchange his time and the use of his truck to transport apples from the producing locality to the consuming locality for, say, five cents per pound. The parties are brought together and all, including the entrepreneur, benefit, Each has made the exchange he wished to make. Each has parted with what he values less for what he values more. The entrepreneur has exchanged his skills of noting and closing information gaps for the goods and services his “profit” can purchase.

And his role is vital. In a complex society information gaps are inevitable. The noting and closing of these gaps is essential if people are to make the exchanges they wish to make. The entrepreneur’s initially large profit will, of course, tend to decline, for large profits signal to other apple growers, transport drivers, or “co-ordinators” what they can do to achieve lesser but real profits. Fairly rapidly the market price of apples in the consumer district will drop and remain constant. The gap has closed and a state of equilibrium obtains. But the entrepreneur is by now off to close yet a further information gap he has noted—this time, perhaps, a gap between a consumer need and the capacity of a new but undeveloped product or process to meet that need.

What about the producer? Again he co-ordinates: he co-ordinates countless separate and distinct skills to manufacture one particular product. And to do that he must deal in time. In a sense his peculiar trait is a preference for future as against present goods. By forgoing present consumption, he has accumulated capital, enough capital to enable him to exchange money here and now for labor here and now. The seller of labor thus acquires his desired present good. The producer, however, is prepared to wait until the object being produced is completed, brought to the attention of purchasers, and sold before receiving his reward. He has exchanged his skills as a co-ordinator, and his capacity to wait for a future good, for the “profit”—the payment—he at last receives.

The businessman is also an anticipator. He must anticipate what consumers will want in the future, then efficiently co-ordinate the suppliers of raw products, of labor, of advertising space or time, and of transport so that the needs of consumers are met when they arise, more efficiently and more cheaply than competitive producers could meet them.

The information-gap perceiver and bridger. The skill co-ordinator. The anticipator. And the risk-taker, for the businessman usually has to exchange a present and certain good for materials leading only to a possible future good for himself.

Are these tasks contemptible? To be sure the picture presented is grossly simplified; the complex reality of business life involves more skills than this simple sketch has noted. And more than professionals, the businessman’s success depends on his enabling other people to achieve what they want. He can only make “huge profits” if he satisfies and keeps satisfying the actual needs of real people more cheaply or more pleasingly than do others. He does not enjoy the coerced custom guaranteed the teacher. The numbers of competitors entering his profession are not as tightly controlled as are those entering medicine. His customers are just as fickle as—perhaps more fickle than—those of the adored opera singer. He is hardly to be condemned.

The Death Wish of Business

Yet, there may be in the behavior of the businessman one tragic and fatal failing. He acts quickly to close information gaps between the seller and eater of apples, but he does lit-fie to close the information chasm between his own profession and a critical public. He daily exchanges present certain goods for future possible goods, but he chooses “business-as-usual’ today at the expense of the possible non-existence of a free market in the future. He draws upon the expertise of those able to inform the public as to the excellence of his products, but he either will not or cannot employ such experts to sell himself and what he does to a grossly uninformed community.

That is his failing, and possibly his fatal failing. Popular myths about Hamlet, Sherlock Holmes, and Cinderella’s slippers are harmless. Contemporary myths about business could be lethal.

Like all myths, these myths “die hard.” Yet, attacked intelligently enough and determinedly enough, die they will. That they are attacked is important. For if they do not die, business enterprises will, and all of us—including thankless consumers—will be the poorer. []