flinthills

Buzz Merritt Responds

I received the following email from Buzz Merritt, author of the book Knightfall, which I commented on in the previous post.  I provide his comments below unedited:

"If I had in fact said what that Business Journal story said, you'd be justified in your label. The conversation was about why things go wrong in some businesses--Enron, etc.--and the role that greed plays in those situations. There's nothing in the book to reflect such a view, for, indeed, I don't hold that view. Be nice to see that fixed on your site so the book doesn't look silly." --Buzz Merritt

I don't understand the "Enron / Greed" comment, i.e. what position is being stated, but again, I'll have to wait for the book to come out to see what he actually wrote.  My thanks to Buzz for taking the time to respond and I look forward to seeing the book on the shelves of the local bookstores.

My thoughts below are not directed at Buzz, just the rantings of a frustrated lover of liberty and markets incensed by the misuses of the "meaning of Enron":

Enron is a story of arrogance and criminal behavior.  It is also a story of the brutal efficiency of markets -- which metaphorically shot Enron in the street at high noon once it became aware of the transgressions. 

It was markets that created the smoke that led regulators to the fire.  Greed may be applicable in a criminal, immoral sense, I suppose -- but it is so often used as an argument against self-interest, as if self-interest and "selfish" were the same thing. 

Criminal behavior exists everywhere -- in socialist regimes, monarchies, tyrannies, and capitalism.  Why do you see it more in capitalist societies?  Well, in the words of Willie Sutton, the infamous bank robber, "because that's where the money is."  We have very effective institutions to provide negative incentives for robbing, cheating, fraud, etc.  Interestingly, the very people who were complaining about the criminal behavior of Enron leaders were also the ones yelling the loudest for government to step in and save Enron from collapse -- that is, to remove the very mechanisms that promote healthy, principled behavior in society!

Capitalism -- private property, freedom to exchange, individual liberty, rule of law, etc. -- businesses freely pursuing the self-interest of their shareholders and employees -- isn't the cause of the problem.   The principled pursuit of profit is a good thing.  Period.  It drives all the right behaviors in society, and has proven over the last three hundred years to generate unimaginable wealth which allows us to afford the luxury of time to even have the education and leisure with which to criticize it.   Without it, the vast majority of us would be spending every waking hour merely subsisting, wondering where our next meal would be coming from.

Capitalism is morally superior to all other known forms of societal order.  We need to understand that before we start attacking it. 

Knightfall and Bad Economic Thinking

According to the Wichita Business Journal there is a new book coming out titled Knightfall by the former editor of the Wichita Eagle, Davis "Buzz" Merritt.  I haven't read the book, but the review says it, "documents Merritt's views of the decline of journalistic standards in the newspaper business."  Not satisfied with newspapers, Buzz decides to start cookin' with gas and generalizes his insights into a grand unified theory of ethics in the business world at large (quoting from the review):

Merritt, who lives in WIchita and teaches a media ethics class at Wichita State University, says the issues at newspapers can also be seen in the business world.

"Whenever increasing mandatory profits becomes the operating guide for your company as opposed to a good product or service, then a lot of bad things happen in a lot of businesses," he says.

I sure hope this is either a mis-quote or it is taken so far out of context as to be unprofessional of the reviewer... Again, I have not read this book, but if the quote is accurate and not out of context,  this is pure nonsense . 

How does one go about determining if a product or service is "good" or "bad" in the absence of profit?   What other guide is there for a company than making a profit?  Profit is the sole objective measure of a company's ability to add real value to the community, assuming it is conducting its affairs lawfully and with integrity -- and assuming the community isn't being coerced to buy its products and services.

Mandating profits?  Nice idea, not real practical.  I suggest an experiment for Buzz: go run a lemonade stand and attempt to mandate profit and see how many glasses you sell.  At some point I think it will become obvious that forces like demand, supply, innovation, and competition have much more influence on the price of a glass of lemonade than any "will to mandate" on the part of the owner of the lemonade stand.

Profits make it possible to stay in business, to grow the business, to employee people in the community, to pay taxes, to donate to charities, etc.  A company's corporate social responsibility to is make a profit by creating real (as opposed to illusory) long term value for its customers by the economic (as opposed to political) means, lawfully and with integrity.  That's it.

So, Buzz, here's the deal: if companies focus on the profitability of their products and services, they will, by definition, be providing good products and services to the community.  By attempting to increase their profits in a principled manner, a lot of good things happen in a lot of businesses -- and we are all better off because of it.