The Equanimist

REPOST: Part I. "It’s Just Business"

While I continue to conceive this ongoing untitled series (among other things) I think this — a week during which banks (e.g., Goldman Sachs and JPMorgan Chase) reported extraordinary profits while ordinary citizens, who footed the bill, are jobless and homeless — this is a perfect time to repost Part I. “It’s Just Business”.

How does a businessperson* (often a salesperson in this capacity) “make” money? In the simplest sense, s/he buys or finances or otherwise brings goods and services (that somebody/-ies designed/engineered/whathaveyou and produced or otherwise will either provide or facilitate – sometimes his or her own goods or services) to market where s/he peddles them to the consumer. To the extent that s/he profits off this ingenuity and productivity or other work s/he makes more or less money.

Of course, design/engineering/whathaveyou/production &c. cost money, and, materials have inherent cost. For the sake of argument, assume that the total cost of the product is its worth irrespective remuneration owed a businessperson (or businesspeople) in his or her (or their) managing/marketing/sales capacity. In a freemarket, to the extent that a businessperson can keep total production or service costs down, convince a consumer to pay a higher price above a product’s worth and to buy more of same s/he makes more money. That is, businesspeople (often paid bonuses/commissions/whathaveyou) are incentivized to devise techniques to sell products and services at increasingly high profit margins above their worth and to do so en masse whenever possible.

By nature, this system cannot make anybody rich if everybody does it so the rules are such that it is very difficult (generally impossible for most people) to pull off. (If, for example, few can understand codified techniques and fewer still can afford the training and fewer still will be able to do both and fewer still will be able to apply the training skillfully, we’ve already narrowed down the population of potential businesspeople a great deal; and, in this way, everybody cannot do it). Nor can it work if people are given to know that the worth of the products that some businessperson is peddling is less than the price that they are being asked to pay.

‘Transparency’ is, thus, the enemy of the businessperson, who is incentivized to misrepresent actual product worth and obfuscate his or her own share in the profits (and that of his or her employer where applicable). If s/he can swindle one percent (or two or even five percent) on a million cheap units at one (or two or even a dozen) times a year then swindling becomes so extremely advantageous that s/he lives like a god.

Language becomes a weapon! Jargon, jargon as far as the eye can see. “First-in, last-out” (sometimes, FILO) accounting, for example, what’s that? Imagine that you have a hundred identical widgets. The first one that you bought only cost you five dollars and the last one that you bought cost you one hundred dollars. Further, for the sake of simplicity, suppose that the cost of each successive widget is always (over some finite period) more than the last. You sell a widget. FILO allows you to claim that though you’ve got a hundred identical widgets in your stock that range in cost from five dollars to one hundred dollars, you kept the cheap widget and sold the most expensive one for a relatively small profit or even a loss. What a concept!

What’s a company’s profit margin? How many widgets at what profit margin does a company sell in a given period? How much does it make? What does it own? What does it owe? What’s it worth? What are you really getting when you buy a share of stock in some company? Financial widgets, shares of stock, for example, take the cake as far as widgets go.

A quick look at the “Financials” section of a stock listing from a free website like Google reveals a list of “Total Revenue”, “Gross Profit”, “Operating Income”, and “Net Income”; the “Balance Sheet” section lists “Total Current Assets”, “Total Assets”, “Total Current Liabilities”, “Total Liabilities”, and “Total Equity”; the “Cash Flow” section lists “Net Income/Starting Line”, “Cash from Operating Activities”, “Cash from Investing Activities”, “Cash from Financing Activities”, and “Net Change in Cash”. Have you got any idea what that means? Probably. But do you really know – to a certainty? Do you, for example, know how they account? Know how they report? Even the P/E varies from site to site.

Delving into a business report reveals a seemingly limitless array of terms each denoting a specific concept and probably connoting another (that even educated businesspeople and financial experts cannot be expected to fully understand) strung together in a sort of word soup. Delving into the fine print on a so-called “financial product” is somewhat less revealing. Are the terms useful? When people who know what they mean talk to each other and interact, sure; to everybody else, they’re worse than useless – not merely incomprehensible but misleading when incorrect meanings are inferred from context clues – misunderstandings that few people have energy, time, intellectual capacity and resources to clear up.

Jargon makes it impossible for most people to understand what a widget is actually worth. And, it is generally impossible to uncover what a businessperson is actually “making”. This is by design – even when the intent of the information provider may be to provide good intel. A small few will have a pretty good idea. But why wouldn’t they play it close to the vest? They’re out to make money – especially if they’ve put the time and energy into understanding it all. And, everybody can’t make money because, all else being equal, if everybody made money then there’d be smaller shares for the few, and, they could not live like gods.

Businesspeople know that they thrive at the expense of the many – that somebody actually starves so that they might live in greater luxury. And, that’s why they give meaningless, obtuse and arcane answers to even simple questions: they wield deceit to their advantage at others’ expense. Even otherwise respectable men and women who drive innovation and get it to the marketplace, get rich organizing a salesforce (or otherwise act as such) in order to swindle more money out of consumers’ pockets than “their” goods and services are worth and to persuade “willing” investors to capitalize them.

But, when a businessperson can control the laborforce, too, profit climbs even higher. So, the same logic undergirds many hiring processes and pay packages. The savvy businessman or -woman attempts to hire people at some price below their worth, and so forth, in order to maximize his or her own profits. They despise the unions for this reason.

Academic institutions (businesses themselves, just ask the head coach of a good college football team) furnish a particularly elegant and relatively uniform example with which the author is intimately familiar. Colleges and universities generally offer new hires just a little less than somebody who has already worked at same for some short time, like a year. H.R. people either tell the candidate that they will make some salary toward the bottom of a range because they’re new (inexperienced in some way or an unproven commodity) or they leave it to the candidate to infer. Then, when the time arrives for a raise, it turns out that the institutions give only cost-of-living increases. In other words, new hires don’t make less because they’re ‘junior’ but because they haven’t yet received cost-of-living increases. That is, by their logic and practice, a new hire should get what the oldest hire at the same tier is being paid because the old hire is not getting a cent for performance or experience – just cost-of-living.

Savvy businesspeople get it at both ends: charging exorbitant fees (see the escalating cost of tuition for example) and ‘keeping costs down’. This is the freemarket. “It’s just business.”

Is it too much to expect that businesspeople should understand why a civilized society must curtail their prowess? We don’t let physically superior people run rough shod over their weaker cousins. We don’t let large men, for example, beat smaller women or take from them what they want. We make them conform to the requirements of a civil society. (But we let shrewd crafty people give weaker people the business.) We must curtail even the aptitude of all people who would run rough shod over our civil society and we know this.

For some time businesspeople have either shrugged or otherwise kept our laws off their bodies by convincing people that capitalism is equal to democracy, that patriotism is equal to rabid individualism. But, we know that capitalism and democracy are not part in parcel. And, patriotism is antithetical to rabid individualism. Patriotism is knowing and doing (and, to some extent, feeling) what’s best for your country, your state, your community, your home – because “charity begins at home;” n’est-ce pas?

So, what is the businessperson worth? What’s s/he earned? Now may be one of those rare opportunities when you get to ask and be heard to answer. Let me suggest that we start by asking what we’re worth – what are you worth? – because what you pay him or her will bear directly on the value of what you earn.

Would you pay a businessperson a million dollar salary/”pay package”/whathaveyou – how’s about ten million dollars – or a hundred million dollars – when you make twenty-five or fifty or a hundred thousand? If s/he had to come to you for it, would you authorize it? The answer is probably, “No.”

Even when we assume “freewill” – when we say, “Biology, Chemistry and Physics are crap” – when we say stupid things like “anybody can achieve the American dream” (while we know full-well that many just don’t have the intellectual wherewithal to succeed) – even when we allow all “men” are “created” equal to mean that everybody is just as capable as everybody else, how much remuneration does a salesperson, a marketer, a swindler deserve? What should we incentivize? Do we want the ‘best and the brightest’ people to go into business?

It’s not just business. It never was.



Business (n.): (1) “widgets for money;” an exchange of widgets (final products) and other services accompanied by terms and conditions that adequately (if incomprehensibly) describe same (such as they are) for money (an abstract representation of work – buffer between work and remuneration) (as in, We do business on four continents); (2) organization of the production or provision of same widgets and services (as in, She manages a small business, and, He generates a lot of business for the company); (3) organization of the production or provision of same widgets or services for the purpose of (1, above) (as in, That’s no way to run a business); (4) the hierarchy within which widgets and services are made or otherwise provided and sold (as in, That’s the business); (5) a beating (as in, I gave him the business.)

Businessperson (n.): (1) somebody who does, generates or conducts (runs) exchanges of widgets and other services accompanied by terms and conditions that adequately describe same for money; (2) a facilitator of same (e.g., a regulator or policy maker); (3) a gangster (as in, I’m a businessman).

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