Good afternoon Jim,
I have been thinking hard about your editorial of a couple of weeks ago, where you roasted the role of government and especially environmental rules in the paper industry. I thought I might offer another perspective, not that I completely disagree with what you said, but to change the direction of the dialogue a bit. I’m forwarding this note by bcc to some other people (not my whole NAB) for their consideration and perhaps additional discussion. Feel free to quote me as you deem appropriate in any future volume of Nip Impressions.
I suppose that you like clean air and clean water – well, everybody wants those things. In an ideal world where everybody is responsible and all else is equal, businesses would clean up these resources as they use them and give them back in at least as good condition as they were received. Unfortunately, all is not equal in the world, and business is required to keep score to see if they are equal or not. That “score” is how much profit did the company make…last year in some places; last quarter in others; perhaps yesterday in yet others. Clearly it is not in business best interest to clean up air emissions (for example), because they add cost while not adding value (thus not increasing profitability). If a business does not make a good profit as well as having good products and good customer service, it most certainly will go out of business. There is nothing more useless than a company which is unprofitable.
But we (society) all want these “things” – clean air and water, safe workplaces and products, etc – that cost money and have a negative impact on business’s bottom line. What that forces is consideration of the reason for business to exist. After much consideration, I concluded that businesses exist primarily for the benefit of society, in that they provide goods and services people need more efficiently and effectively than could be done if everybody had to do it for themselves. However, for a business to be effective and efficient it needs to be driven to make a profit. For that reason, there needs to be something that trumps the best interest of business. In this country, that role is given to government – in fact, it is the basis of the national constitution:
“We the People of the United States, in Order to … promote the general Welfare … do ordain and establish this Constitution for the United States of America”
I would argue that these “things” that we want fall into the category of general welfare that the government is responsible to provide. I would further argue that government has, to at least a certain degree, been successful in accomplishing some of these things. My question to you is, if not at least oversight by government, what is the check and balance to make sure that society’s needs are met?
It seems to me that the problems that really need to be addressed include:
1. My liberal friends telling me how much it is worth to them to pay in extra cost for a car that not only does not pollute, but is well made, protects it’s passengers, and gets high mileage; and is built by a company that has a documented record of not polluting while manufacturing the car in a factory where nobody got hurt last year. I am willing to bet the answer would be a resounding “not too much”.
2. My Chinese friends telling me how they justify reaping the benefits of capitalism including trading with the largest market in the world; while at the same time preventing that market from competitively trading in China through the use of predatory monetary policies, business rules that exclude foreign corporations from doing business in China, and an active policy on the part of the Chinese government to use espionage to steal the ideas and products of others. Oh, and pollutes the environment, treats the people badly, and sells products that are unsafe for the people who buy them. I expect their response likely would be either incendiary or dismissive. There are people in other countries who should do the same thing and, I imagine, they would have a similar unresponsive reaction.
3. My media friends getting back to doing the simple things that I learned from my newspaperman uncle about the news business – get the story, get it first, and get it right. Sunlight is a great disinfectant, and any competent person can draw the correct conclusion from well presented and balanced information. There is a reason why Walter Cronkite is greatly loved and respected.
4. My friends in science and medicine telling me how their work is toward the benefit of mankind and is ethical in all respects. Specifically, I question the notion that medicine exists to provide a cure at any price for all diseases or conditions that an individual has, and whether the use of such things as antibiotics and chemical fertilizers has been ethical. I admit to being disingenuous on this point, as I use these products too. I am just thinking there is a point at which people need to endure their fate, bad luck that it may be.
5. My attorney friends, dubious characters that they may be, proving that their habit of working solely in their client’s best interests are also in the interest of society and justice in general, and not solely for their own financial benefit. I know they can out-talk me, but I sense they will leave me unconvinced with their logic.
6. My banker friends showing me that the financial instruments that they dream up are not a risk to the economy in general, that they are lending money to people and businesses appropriately considering their ability to repay in a timely manner, and that they are managing their financial risks even at the expense of making lower profits than they could otherwise.
7. My investor friends explaining how they can justify moving their factories offshore, closing their facilities in the United States, and then selling their products here.
8. Finally, my friends in business convincing me what they consider ethical business practices to be; and that they can be trusted to treat their employees well, make safe products, not pollute, and make a fair profit.
Now, I don’t want to imply that I think government works well – it clearly does not. Why else would social security be going bankrupt, or our soldiers having rifles that are less than the very best in the world, or why there is a bridge to nowhere in Alaska, or milk sells for less in California than it does in Eau Claire WI (when, according to my father-in-law, it costs more to make milk in California than it would to make and ship it from Wisconsin)? There are lots of other examples of stupid stuff in government, just as it is easy to find stupid stuff in most businesses. I suspect that the root cause of these and similar discontinuities can be found in the egos of people who have built and are now protecting their little empires. For that reason, my friends in government, if any, need to show me that they are doing the work of the people at the lowest possible cost, that they can have a reasoned discussion based on differing principles, that they can come to a compromise decision that honors the will of the majority while protecting the rights of the minority, and that they will loyally support the people charged with implementing the decision once made, and that they are providing the oversight for the benefit of society that they are specifically charged to provide. Finally, again, that they are doing the work of the ALL the PEOPLE, not just the ones in their home districts, as they promised to do when they took their oath of office. I would argue that these last questions are at the root of discontent with government today. And yes, where these things are not happening, they need to be addressed and fixed too.
First off, thank you for the thought and effort you have invested in this matter. I assume you are referring to Nip Impressions of 16 Aug 10, titled, "40 Years of Appeasement equals 40 Years Wasted." You wandered around a bit, so allow me to do likewise:
Yes, I agree, we all want clean air and water. Perhaps the issue is "how clean?" I am rapidly reaching the conclusion we have now succeeded in building sensors that can detect pollutants beyond the level that matter to any living thing in the environment, including people. Cynically, I think we are rapidly reaching the point where water will not be defined as clean unless it has been freshly distilled.
In reality, the most polluted object we each touch is most likely paper currency. It is well documented that most of it has traces of fecal matter and cocaine on it.
In this day and age (not forty years ago) it is in businesses' interests to clean up air and water for there are countless environmental groups which will launch a public relations blizzard putting anyone out of business who doesn't comply with their wishes. Printing and writing paper manufacturers, in particular, are facing extraordinary and duplicate costs these days to acheive multiple forestry certification certificates for their products simply because one loud-mouthed group does not recognize the ceritification program of another. Today a business that is not PERCEIVED as a good steward of resources is not long for this world.
I do disagree with you on the purpose of business. More precisely, you have all the elements, we disagree on their order. The first purpose of business is absolutely to make a return for its investors, be they public or private. You, and I, and anyone else with an investment or retirement account of any kind drive this. Far removed from the direct activity of producing a good or service, we will ruthlessly move our investment monies to an account offering us the best balance of safety and yield. Our money is THE money which is the foundation for all businesses. Yes, they must make products that benefit society (however you define that, from green cars to push-up bras, for instance), but that is the means to the end--getting us a return so we will stay invested. Even employees, as you know if you have been reading me for a long time, are merely a necessary evil, so going off shore is usually just fine for us as investors.
So, I will agree with you that we need oversight by the government, but we need accountability for that oversight as well. Fortunately, or unfortunately, I can back up my criticism of the US government's incompetence with specific personal examples (Click Here). In Exhibit 1, you will see a letter I received from ther IRS a year ago, calmly informing me that I owe them $546,719.66 in Form 941 taxes from the year 2000. A bit about Form 941 taxes--these are the funds that an employer withholds from an employee's paycheck--regular taxes, medicare, and social security taxes. The IRS takes a dim view of not paying these, in fact, for even the biggest corporations headquartered in the United States, paying these taxes reverts to a personal liability of the CEO and CFO and cannot be discharged in bankruptcy. I learned this the hard way nearly three decades ago. In my current life, mindful of this, starting when I formed my company in 1992, I have always used an outside payroll service to handle this and pay these taxes. These firms, in turn, purge their records monthly when they reach the age of seven years, the IRS's statute of limitations. Nevertheless, I had to hire a tax attorney, at the cost of $1,000, to go visit the IRS on this matter. The IRS's conclusion--they were wrong to write this letter, however, they were unwilling to write another letter correcting their mistake. So this lies out there in another IRS file, ready to be mischevious again sometime in the future.
In Exhibit 2, you will find another matter from this past spring. In this case, I applied to AAA for a new life insuance policy. They turned me down, due to information they had received from Milliman. Ever heard of Milliman? Neither had I, but they apparently collect all sorts of medical information. When I asked them where they got the medical information on me, they said that was confidential. So I filed a HIPAA (Health Insurance Portability and Accountable Act) complaint with the Department of Health and Human Services. After all, we are led to believe HIPAA protects our privacy. See their explanation--AAA and Milliman are not covered by HIPAA! I might as well post my medical records on the Internet.
Now, the cause of this denial was no doubt my second bout with cancer in 2006. I had Burkitt's Lymphoma, a once relatively rare lymphoma. However, it has, in recent times, been linked to teenagers of the 1950's and 1960's who had lived on a farm, drank well water from shallow wells, handled fertilizer and handled tobacco, especially having tobacco plants brush against their arms. When they told me that, I said, "Guilty on all counts!" For weeks at a time, I shoveled truck loads of fertilizer in the spring and hung tobacco in tobacco barns in the fall to dry. I am clean of all cancer and have been for 3 1/2 years (just had my semi-annual checkup two weeks ago) and am statistically as likely to get cancer as anyone else. So, I could contact your lawyer friends and sue my dad's defunct estate, but I don't work that way. I wouldn't think of suing the feritilizer companies, for they were as ignorant of these problems as I was in those days (you can imagine what I think of the asbestos suits).
Now to your investment banker friends, where we can neatly wrap up this wandering discourse. Wall Street Bankers, and corporate heads, are universally loathed these days, for they essentially, through their hand picked boards of directors, vote their own salaries and bonuses (it is only human nature to be this jealous, see the Book of St. Matthew, Chapter 20, v. 1 - 16). This (voting for their own raises and bonuses) has probably been a bad idea, at least when it reached the proportions it has now. However, if we are going to stop them from voting for their own salaries, I say we should stop anyone and everyone from voting for their own salaries if we are not going to be hypocrites. This means anyone that receives a government check. It is a conflict of interest, from my point of view, for legistlators, other office holders, teachers, firefighters, police, and any other government worker, including road construction companies' workers, military contractors or any other workers whose pay depends on a government contract, to be allowed to vote, for they vote for policies that favor the perpetuation of what they do. Same goes for welfare, unemployment, and social security recipients (I also believe anyone who does not pay at least $1 in income taxes should not be allowed to vote, but that is a matter for another time). There is one group, and only one group that receives government checks, that I would allow to vote: the active military personnel.
Every time I hear a politician talk about "just wanting to be a public servant" I want to throw up. Servants, of any ilk, do not get to vote for their own salaries.
Let the people who pay the bills and only the people who pay the bills be allowed to vote, and the efficiency and effectiveness of all government services, including regulations, are likely to be cleaned up in a short period of time.
Cynical about the government? Yes, and it is not a new philosophy for me. I think it started when Richard Nixon took us off the gold standard and tried to rein in the rampant inflation that foolish act caused by putting us all on wage and price controls. This kept me from getting a raise from $2.75 per hour to $3.00 per hour when I was a co-op in the early seventies. President Nixon, glad I could help, even if it was involuntary. I am sure giving up 9% of my income, or $10 per week, greatly helped cool the raging inflation inferno.
Government cynicism runs deep in my veins and is somewhat non-partisan.
However, you can all rest assured, this country or any country is not likely to adopt my views any time soon!
By the way, a copy of my book, "On Employment" is on its way to you for your fine efforts.
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