I remember listening to the History 5 podcast a few years ago from the University of California at Berkely. One particular lecture struck me; the speaker was talking about commerce.

The lecture was “capitalism and it’s critics”, discussing the ideas about business in the 16th and 17th century. The accepted idea was that capitalism — commerce itself — was considered sinful, but the sin was a sort of minor sin, compared to, say, serving in the military.

Both of those statements shocked me. After all, my experience with the military was positive; these were people who could have earned more money in private industry but chose a life of risk and service. Likewise, I thought of industry as a competitive, efficient way to deliver goods and services, and that competition meant the customer got his pick of products, and could vote “with his wallet” for the best product, service, price point, or combination. This was heresy!

Then the author spoke of the early Marxists and Communists, and how one of them had, working in his father’s shop, stopped a customer about to make a purchase and pointed out that the bag of flour was had a hole in it, and had leaked. The father took the son out and beat him for it; after all, capitalism meant “let the buyer beware.”

My thought at the time was: That’s not capitalism.

That’s being an asshole.

(Think about it: Even if you “just” care about your own long-term best interest — even out of pure selfishness, well, you’ll want to deliver a good product so your customers are happy, under the belief that good reputation leads to more customers, customers who are willing to put up with a mistake made in good faith tomorrow. Being an A-hole isn’t just rude; it’s also stupid.)

Still In History 5 Class …

I kept listening, and thought about the historic context; how, at the time, kings were jockeying for power, and soldiers made a living stealing land. Likewise, think about what the great ‘commerce’ of the 17th century was: Buying slaves from Africa, taking them to Jamaica, buying sugar, taking that to New England to trade for Rum, taking that back to Africa, or, perhaps, to England. Each step is a trade that debases your trading partners: The Africans sold themselves (and what do you offer to do for trade? To get the leaders drunk.) The Jamaicans buy chattel and sell an ingredient for liquor, the Americans purchase the sugar made from the back of slaves and give the Rum that will be used to purchase more. Meanwhile mother England, which banned slavery early in the trade, looks on and pockets the money, without having to break any of it’s laws about slavery, because, after all the slaves are somewhere else.

That kind of capitalism? Yeah, not so great. Yet what is capitalism today?

On Making Money

I personally like the idea of “making money”; of turning your sweat into something people value, with that value manifesting ultimately as some type of currency. When we talk in terms of business, it’s easy to think “success” means dollars and cents on a balance sheet. Thus, if profits exceed expenses, you are “making money” or successful.

But there’s more to it than that. Consider, for example, a coal mine or an oil well. Sure, they make money — but how do they do it? Why, buy a parcel of land and rape it for it’s raw materials. If the raw materials are larger then the purchase price of the land, you’ll be ‘successful’, on paper … for awhile. Yet that particular plot of land is not sustainable. Eventually the oil runs out, and you hope, you’ve got enough money in the bank to find a new well.

The thing is that the amount of oil in the ground is hard to measure, just like the amount of coal in the mines, so we tend not to measure it. So, while the next economic outcome after ten years looks like a big pile of money, there is an invisible debit on the other side — all the coal in that hill is gone, and it would take thousands (or tends of thousands) of years to replace it.

To put it a different way, consider a large fast food corporation. What do they measure? Well, they may measure the profitability of menu items, the number served, the operating expense of each store and the number of locations. Those numbers are probably tracked, and may create a sort of “Balanced Scorecard.” And, to paraphrase someone paraphrasing someone else “What gets measured gets done.”

I agree, at least that it is likely all those numbers improve over time.

What is the fast food corporation not measuring? Well, likely, the waist size of it’s best customers, their cholesterol, blood pressure, and obesity level.

Can you imagine working in a system where you do actual harm to the environment, to your suppliers, to your best customers?

Look around. It ain’t just the African slave trade.

Meanwhile, Back On The Internet

This month’s blog post from ASQ is on “Social Responsibility“, a concept that has my hearty endorsement. At the very least, it’s the start of a dialogue about adding new categories to that ScoreCard — categories that the company should enhance the communities it works in, about a responsibility to treat employees decently and to try to treat customers fairly. Oh, I’m enough of a libertarian to believe that folks can make their own choices, but there are deceptive ways to market services, and there are ways with integrity.

What I’m leery of in the Social Responsibility debate is institutionalizing the idea, turning it into a checklist.

If you think about it, the one thing we’ve learned from Balanced Scorecard is this: if you give people a handful of metrics they will find something else not measured and steal from it pay for what is measured.

Thus if we boil Social Responsibility down into a quick checklist, some joker is going to find a way to steal from something else in order to cook the books. The alternative, or ‘fix’ to that problem is to make a huge exhaustive checklist, so big that there is little to miss, so big that auditors are required to become involved to “prove” conformance.

Yet in the Enron and Woldcom scandals we learned that checklists that large cause fatigue on the auditors, and, since the company is paying for the auditors, there is a conflict of interest that can often cause auditor to completely miss rule violations in plain sight.

So if you have five elements on your balanced scorecard, people can manipulate what isn’t measured. If you have five hundred, they can simply lie about the numbers, and no one can check.

What’s A Poor Quality Fan To Do?

The folks at Google used to have a simple slogan; “Don’t be Evil.” The idea was that if you were in a meeting and talking about something that you wouldn’t want done to yourself, you could say “… but that would be evil” and the idea would come to an immediate and full stop. Anyone could “pull the rope” to stop the line, at any tine.

I found that refreshing. And, while you could debate how well Google has stuck to that vision, there are other examples that are less debatable: The honor code of Washington and Lee University is “We have but one rule here,
and it is that every student must be a gentleman.”

This way there is no welching, no equivocating, no argument that it is okay to drink beer if you are under age and the barman never asks you for an ID because, strictly speaking, you did not lie.

That honor code has stood for over a hundred years.

So I’m interested in the “Social Responsibility” angle, but my take is less in systems and more in business. What would it mean if, instead of a checklist, companies made a promise to the communities they served in?

Here at Excelon Development, my goal is to serve my customers, collaborators, and vendors in a responsible way. That means I’m going to tell you the truth, provide you information and products I would use myself, do things in a sustainable way, and generally try to make money by improving my community instead of exploiting it.

A (Quick) Case Study in Social Responsibility

Consider the debate about generically-modified soy, the ‘product’ that is patented by Monsanto Corporation yet viral. So if some soy seed blows into your field and you do nothing, it will take over the field and you’ll be liable to Monsanto for breaking patent law — even if you carefully separate and maintain your own seed. Consider the seeds generically modified to not reproduce, forcing you to repurchase from the supplier every year, or the laws enacted on patented seeds, making it illegal to collect seed for your own re-use. Consider those things in light of that brand promise.

I suspect that if Monsanto had made such a promise then things would have turned out differently.

Yet companies make promises like this all the time, at least in the vaguest possible corporatespeak, and fail to live up to them.

I believe the answer is in changing culture, not in checklists.

How do we accomplish this? Well, we’ve got some work to do.

One thing we can all do is vote with our wallets and start asking tough questions. That is, after all, the beauty of the free market, something I still believe in.

Sure, some companies are selling us products unfit for use and not telling us about it. But like that dad whose attitude was “let the buyer beware”, you’ve got to understand, I’ll say it one more time:

There’s a difference between capitalism and being an asshole.