The retiring board chairman of Sears, Roebuck and Company plans to devote a considerable amount of his time to explaining business problems to college students and teachers.
"It is important that we dispel some of the erroneous and misguided thinking about the American business system," said Arthur M. Wood, "and that we communicate our viewpoint to faculty members as well as students."
I wish him luck. And, since I’ve devoted many years to precisely the same task, perhaps Mr. Wood will consider an idea or two on communications I’ve picked up along the way.
First it’s necessary to understand why Sears beat all its competitors last year, with sales of $17 billion and profits of $900 million. I’m quite sure that the retiring chairman understands that their success was due solely to their ability to produce what we consumers want at prices we are willing to pay. Please note that I said "they produce what we want," not necessarily what we need or should have for our own good. That’s the key to success: give us what we want in retailing, politics, or any other area where consumers have a choice.
I’ve observed the frustration of scores of successful business managers in their sincere efforts to "make a contribution to America" after they retire. They are usually unsuccessful. They forget that we patronized them in the past only because they gave us what we wanted. Suddenly they decide to become statesmen instead of market men, and to give us what we need and should have for our own good. If they had followed that policy as businessmen, they would have failed there just as they will now surely fail in their efforts to sell us the idea that business and profits are good for the nation.
Why Should We Change?
If Mr. Wood wants to change our anti-business attitude, he’s got to explain what’s in it for us. Why should we change? After all, those fat-cat capitalists are ripping us off and making enormous profits at our expense, aren’t they?
If that’s not so, then Mr. Wood should offer us some specific (and persuasive) examples of how we underlings also are better off when business is profitable. If that approach appeals to him, here are a few possible examples he might use.
According to Professor Peter Drucker, the actual owners of our largest corporations are the pension funds of employees, teachers, and similar groups. For example, both of my teacher retirement funds (private and state) own billions of dollars of the common stock and bonds of Ford Motor Company and various other industrial giants. The president of General Motors is not the owner of that company, as so many of us seem to believe. He’s an employee. We common stock owners (mostly persons who hold the stock for retirement purposes) hired him to manage our company for us. He may or may not own any GM stock himself; it’s not relevant to his position as president.
The size of the retirement pension of teachers, teamsters, and GM employees is directly dependent on how much profit the president of that company (and others) makes for the owners. To cite another company in the same way, if Kodak makes high profits, my pension check from both of my teacher retirement funds will be bigger. But if Kodak continues to make small profits, I’ll just have to work longer than I have in mind. That same "pension connection" exists for the overwhelming majority of all of us.
According to the American Council of Life Insurance, most of the cost of my insurance is not paid by my premiums but by the profits earned on the ownership shares of companies the insurance agencies have invested in. If the industrial giants make no profits, the Council estimates that my insurance premiums could increase by 65 per cent.
How Profits Serve Me
The higher the profits of America’s big businesses, the more money I get when I retire and the less I now have to pay for insurance of all kinds.
That’s why I’m in favor of profits—high profits—Mr. Wood. I don’t care much about the alleged fact that big business needs bigger profits to buy more machines and equipment. And I can’t get real excited about how much money is behind every job in America. Statistics bore me. Anyway, isn’t that the sort of stuff we owners hire professional managers to handle for us? We pay them well—in fact, extraordinarily well—to keep our facilities intact and things like that. My concern is a dependable source of funds when I retire. And I’m well aware that it can’t come from any source other than the profits of big business. That’s why I become unhappy when profits fall off and the stock market goes down. That’s when I begin thinking about new managers for "my companies"—and also for my country.
I’m also opposed to the current double tax on profits—you know, about 50 per cent when the company first earns the profit, and then about 25 per cent more when I get what’s left in dividends. This strange method of taxation increases my insurance premiums and decreases the size of my retirement check. Don’t try to tell me that this double taxation is bad because it cuts down on needed capital formation. I don’t really understand (or much care about) that. All I know, Mr. Wood, is that if you had used that dull, academic approach as the top manager of Sears, I’d have closed out my account with you and opened one with Wards.
While you were at Sears, you gave me what I wanted, and you always told me what was in it for me. Please continue to follow that sound rule in your explanations of competitive enterprise as the business system most likely to give all of us what we most want. We may not always believe what you say, but you are sure to attract our attention when you tell us what’s in it for us.