Commerce
By Michael Phillips
Copyright 2004
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Table of Contents
Introduction
Nearly all of us live in the world of commerce. The surface wave of commerce began several thousand years ago. It grew rapidly a hundred years ago; now our lives are engulfed in the tsunami of commerce.
Today, the words commerce and modern world describe nearly the same thing. Neither can exist without the other. The tsunami of commerce created our modern world.
The term commerce, as used in this book, means more than the word business. Commerce is broader because it includes barter. Barter is commerce, but not business. Businesses can succeed or fail. Commerce and only be suppressed.
Over the past century, communist governments disbanded businesses and tried to eliminate commerce, but communism never succeeded in burying it. When I visited Moscow in 1981, commerce was alive and well in nearly every alley, offering souvenirs, currency and sex. Business can be destroyed but commerce can’t.
Commerce is a unique system that contrasts with: the military, the arts, government, the intellectual world and religion. Each of these provinces - government, intellect and religion ‑ have a different mind-set than the mind-set of commerce. Soldiers, participants in the military, have a different worldview than participants in commerce. Commercial people and the commercial mind are distinct.
Chapter 1 Commerce is indifferent to morality
Many people consider commerce a part of our current moral system. They believe that good people are rewarded with money and success. Such a moral view leads to confusion in understanding what commerce really is.
Commerce is indifferent to our current moral order. Commerce enthusiastically delivers immoral products: drugs, contraband, slaves and so on. Commerce readily provides illegal goods to any buyer and can reward immoral people with great wealth.
We need mental tools to understand and appreciate the moral indifference of commerce. In this chapter, we compare commerce to other morally indifferent systems such as technology and science.
Chapter 2 New commercial values
Commerce thrives when specific social values are present: diversity, openness, meritocracy, markets, technological affinity and decentralization. The presence of these values promotes commerce, and their absence retards it.
Chapter 3 Commercial Minds
Living in a commercial world promotes a commercial mind in each of us. Among the many attributes of the commercial mind are: the monetizing of nearly everything, the unlimited potential for avarice, cynicism, blasé attitudes, the rise of irony in our perception, the adoption of a managerial perspective, the elevation of whim and selfish absorption to major living values, and the emergence of global commercial behaviors.
Our commercial mind also values and expects a world of constant surprise and becomes inured to wonder.
Chapter 4 Commerce and the State
The vigor of commerce, in any country, depends on the government. Commerce needs a government that is neither too weak to protect private contracts, including citizens’ property rights, nor so strong that it squashes those contracts whenever it wants to. The government we have in the United States does well with commerce; the government of Cuba does poorly.
It would be helpful to know how a government can promote commerce by fine-tuning laws, taxes and government agencies to create exactly the right mix of not too weak and not too strong.
Unfortunately, right now, in the beginning of the twenty first century, we aren’t close to knowing the right mix of government policy that will promote commerce.
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Introduction
I opened an old leather-bound register in the archives of my employer, the Bank of California. An entry in March 1906 showed that my grandfather had taken out a commercial loan for $5,000. The rest of the line was blank. Grandpa Henry never repaid that loan.
Commerce
Nearly all of us live in the world of commerce. The surface wave of commerce began several thousand years ago. It grew rapidly a hundred years ago; now our lives are engulfed in the tsunami of commerce.
Today, the words commerce and modern world describe nearly the same thing. Neither can exist without the other. The tsunami of commerce created our modern world.
The term commerce, as used in this book, means more than the word business. Commerce is broader because it includes barter. Barter is commerce, but not business. Businesses can succeed or fail. Commerce and only be suppressed.
Over the past century, communist governments disbanded businesses and tried to eliminate commerce, but communism never succeeded in burying it. When I visited Moscow in 1981, commerce was alive and well in nearly every alley, offering souvenirs, currency and sex. Business can be destroyed but commerce can’t.
Commerce is a unique system that contrasts with: the military, the arts, government, the intellectual world and religion. Each of these provinces - government, intellect and religion ‑ have a different mind-set than the mind-set of commerce. Soldiers, participants in the military, have a different worldview than participants in commerce. Commercial people and the commercial mind are distinct.
Business is a part of commerce and nearly all major institutions. Each major institution, such as the military and the arts, has within it a form of business, such as the purchasing of military supplies and the selling of tickets to theatrical performances.
To understand and appreciate the modern world[1], it helps to recognize the indifference of commerce to traditional morality. For me, the first step in understanding the modern commercial world was my acceptance of this state of indifference.
Accepting the indifferent nature of commerce reduced my confusion about the role of commerce in our existing moral and cultural orders.
Technology and science are good models for understanding and appreciating the value of the morally indifferent systems that exist around us. These include technology and science.
With an understanding of the morally indifferent nature of commerce we can move on to the second chapter in this book, appreciating the positive values inherent in the emerging commercial world.
The third chapter of this book examines the interaction between our individual minds and the commercial world we inhabit.
The final chapter of this book examines how commerce thrives or falters within the larger world of politics and government.
Morally Indifferent Technology and Science
Technology seems to fight a never-ending battle with other human institutions because of its indifference to existing morals. In 800 B.C.E., Indian surgeons restored amputated ears and noses and removed tattoos from their patients. The surgeons, pioneers to whom we are now deeply grateful, were condemned for interfering with the judicial processes and offending the morality of their time. The courts had amputated the ears and noses and branded the victims with tattoos as punishment.
In the past several decades, medical practitioners have gotten better at preventing human conception and terminating pregnancy. Many people today are offended by the use of technologies that allow contraception and induce abortions. Indifferent technology has a never-ending fight on its hands. When technology brought the next development in birth control to market, the “morning after” pill, RU482, the whole moral battle was reengaged.
Science, too, often gets into trouble because of its indifference to morality. When Copernicus determined that the earth orbited around the sun and was not the center of the universe, religious opposition was vehement, and sometimes lethal. For more than a century, the Roman Catholic Church, the Inquisition and many Protestant denominations rejected Copernicanism and punished, even with death, Copernican advocates.
The same strong reaction against science was evident centuries later with the scientific advances in geology and evolutionary biology. Science proclaimed a long history for the earth, billions of years, not the instant creation told of in Genesis, and announced evidence that life on the earth connected single cells to plants, trees, insects, pigs, monkeys and humans. The prevailing moral order fought back, and some parts of it still are.
Social Values
Commerce thrives when the right social values are present in a society but it struggles when those values aren’t present. The difference between right and wrong social values is the difference between a lush valley and a sparse desert. The values that nourish commerce are fruitful: diversity, openness, meritocracy, markets, technological bias and decentralization. The presence of these social values promotes commerce while their absence restrains it. These social values are discussed in detail in Chapter 2. In general, many people consider these commercial values positive values.
We have a long history of ignoring the positive contribution that commerce makes to our society and its values. Many of these social values were in place before the explosion of commerce; commerce has rewarded those societies that have these values.
Commercial Mind
Living in a commercial world promotes a commercial mind in each of us regardless of the extent of our commercial-market immersion.
Among the many qualities of the commercial mind to be aware of are the fungibility of nearly everything, the unlimited potential for avarice, the triumph of cynicism, blasé attitudes, the rise of irony, the adoption of a managerial perspective in daily life, the elevation of whim to a major factor in human behavior and the emergence of global commercial behaviors.
Some qualities of the commercial mind are negative, some we take for granted, some are neutral and a few may be positive. The commercial mind and its impact on our society are considered in Chapter 3.
The State and Commerce
We have many nation states on this twenty-four-thousand-mile round planet and we can compare them with each other to see where commerce flourishes and where it struggles. This surfeit of nation states allows us to answer the questions “What state policies promote commerce, and what state policies stifle commerce?”
Nation states where commerce thrives, such as Singapore, immediately come to mind. Nation states where commerce once thrived but has been almost extinguished also exist. In Cuba, for example, commerce is struggling to reassert itself.
Our pool of Nation states provides a laboratory that tells us which state policies promote and which retard it.
Examining a large array of nation states, we find strong arguments that commerce thrives in societies that have diverse populations, that value openness and honesty in communication and that place a premium on meritocratic workplaces.
We also find that commerce can thrive when the state is neither too weak to enforce private contracts, including property rights, nor so strong that the state can abrogate these rights. Commerce can’t do well when el presidente can imperiously confiscate a successful business and hand it over to his brother as a gift.
Recommending the ideal balance between the extremes of a weak state role in commerce and too great a state role is not what this book is about. This book aims to understand the reality of commerce. We know that finding the right mix of state control and commerce is possible, over time, when interested people perform the right scientific experiments and study the right data.
Understanding the relationship between the state, its people, and commerce is not simple. We Americans take a great deal of a successful governmental and commercial system for granted.
· We can take anyone to court to settle our personal differences.
· We serve on juries that adjudicate contractual disputes for billion-dollar corporations.
· We would never let the sheriff’s brother take over our home for his family without compensation.
· A package sent through the postal service that has been opened and pilfered is unacceptable.
· We are outraged when we think a neighbor got a zoning permit in return for a bribe, and we consider it a social goal to eliminate this type of behavior.
We Americans perennially debate tax policy on city, state and national levels. We debate whether taxes should be progressive or regressive or neutral. We have a never-ending debate on the types of taxes we prefer: sales tax, income tax, excise tax and so on. We debate government deficits, tariff barriers, free trade, public education, drug use in the workplace and much more. We fight our battles about commerce and the role of the state at a high level of intensity and vigor. We don’t have clear solutions.
Making sense of these state-commerce interactions requires research, experimentation and extensive study. This process is just beginning.
In the past two hundred years, we have gone from a world of modest commerce with only a few prosperous participants living in a few cities to billions of commercial participants in hundreds of thriving urban areas, with trillions of dollars in income and luxurious lives that were formerly unimaginable.
We have gone from traditional homes shared with farm animals, from lifetime travel usually limited to a small radius, and from living with high infant and maternal mortality to a very different world. Two hundred years of commerce has overwhelmed us with a large population that is literate, healthy, that lives a long time and that travels over vast expanses rapidly
Our history of commerce has created a large population that enjoys a wide range of emotional comforts and physical luxuries.
It is reasonable to expect a change in the worldview and personal perspective of the people who have undergone these changes. Some transformations were expected and many more have arrived unanticipated.
One change of perspective has not occurred in the period since the tsunami of commerce has inundated us. That change in perspective is the modest goal of this book: to encourage a deeper appreciation of commerce.
Chapter 1
A loan ledger in the Bank of California archives shows that a loan to my grandfather was made in March 1906. Grandpa Henry Phillips was a dentist practicing in Union Square in San Francisco. In April 1906, downtown San Francisco was destroyed by earthquake and fire. My grandfather closed his practice and left the country with my grandmother. The loan was never repaid.
Indifferent to Old Morality
Many people believe that good people are rewarded with money and success. Such a moral view leads to confusion in understanding what commerce really is.
Commerce is indifferent to traditional morals. It enthusiastically provides immoral products such as drugs, contraband and slaves. Commerce readily delivers illegal goods to any buyer and can reward morally corrupt people with great wealth.
We need mental tools to understand and appreciate the indifference of commerce. In this chapter, we compare commerce to other morally neutral systems such as technology and science.
As we will discuss in Chapter 2, commerce does have positive social values, however. Oddly enough, it is the moral indifference of commerce that underlies its genuinely positive values.
One clear way to understand this dynamic is to examine other morally indifferent institutions that have created out modern society.
Technology
Beer, wine and whisky are the products of early technology. These alcoholic beverages have been the targets of moral outrage in many societies over the centuries.
The same technology of controlled fermentation creates bread and yogurt, which don’t evoke the same moral outrage.
In its broadest definition, technology is all human-made and human-organized arrangements of the physical world intended for human use. A chair is an example of technology - from the most rudimentary log used for sitting next to a campfire to the more complex example of an ejection seat in a jet fighter. Knives and forks, drinking glasses, reading glasses, clothing and shampoo are the products of technology. Each is a human artifact created for human use.
We humans have a long history of technology; from making a smooth footpath hundreds of thousands of years ago so our tribe could walk faster and carry large loads, to the undersea fiber optic transmission cables of today, which carry international communication.
Technology for human use doesn't necessarily mean for each humans benefit. Technology can be used for both good and evil. A knife can cut a loaf of bread to share with friends or to cut a fellow human's throat in anger or warfare.
Because technology can be used for both good and evil it is neither moral nor immoral - it is indifferent to morality. The thousands of people who developed knives over thousands of years were driven by countless motivations. The creators of knives were driven by an even greater variety of motivations in selling the knives. The entire venture of the creation of the knife belongs to the morally indifferent history of technology.
War, murder and a wide range of human inhumanity to other humans are closely connected with technology, from the most rudimentary chipped arrowhead on a spear to a laser-guided missile launched with an eight-hundred-pound bomb tip.
Selecting a single technology of war and identifying it as evil, doesn’t work. Defining the laser-guided missile as evil does not properly place the missile in the framework of technology. We would be ignoring the phone call to the missile-launch commander, which uses phone technology, the missile launcher made of steel and derived from advanced-material technology, and we would be ignoring the fact that the designers of the bomb did their design work in buildings that were the product of technology. Since technology is pervasive, it is not possible to separate out the particular part of technology that is used for good or evil. Technology is pervasively used for both.
Technological objects and processes are used in everyday life, and everyday life is filled with moral and immoral actions. An ice cube can be added to a glass of water to give to a sick and thirsty ninety-year-old neighbor. The same ice cube could be used by an indiscreet uncle to serve a ten-year-old nephew a glass of whiskey.
Technology is also indifferent to morals because the humans who make technology don’t have a universal moral system. Moral and immoral refer to social and cultural standards that are not universal. Consider the wide range of technologies that are designed to induce human fetal miscarriage. Some readers would consider these technologies immoral; others would consider them moral, maybe even virtuous.
A great deal of technology is designed for purposes that some people consider moral and others consider immoral. The list of examples is long and includes chemical poisons used in warfare, weapons designed to maim soldiers, plant poisons sprayed on marijuana plants to make marijuana smokers ill and the classic electric chair for state executions.
Each of these examples has supporters who consider the particular technology moral and others who consider them immoral. Weapons of war are considered moral when used for defense, national liberation and "just" wars in Roman Catholic theology. Poisons sprayed on marijuana plants are considered moral by opponents of that drug and immoral by users of marijuana. Opponents of the death penalty can consider electric chair technology immoral while death penalty supporters treat it as an instrument of morality.
A technology can change from being popularly considered moral to immoral and back to moral. Thalidomide was used as a drug for reducing nausea in pregnant women in the mid 1950's -- a morally positive use of the drug. Thalidomide became immoral to administer when if was found to produce limbless children. Thalidomide became a morally acceptable drug a decade later when it was found effective in treating leprosy. It is best to treat the pharmaceutical technology that developed Thalidomide as indifferent to morality.
Increasingly, technologies have become extensions of our body and mind; they enlarge our systems of expression and perception. Over centuries, we have gained the ability to move faster, to communicate over larger distances, to perceive smaller objects and to move heavier loads as well as to work with delicate microscopic objects. These technological extensions of ourselves can be used for moral or immoral functions. Think of a telephone or an automobile. Because each seems to be an extension of ourself it is easy to use a phone for insulting someone or helping a friend and to use a car to take a pregnant woman to the hospital for a delivery or get rid of an unwanted cat out in the country. But the car and the phone are not really extensions of ourselves: They are morally indifferent separate objects.
The automobile works because it is morally indifferent. Imagine that you were an anti-Semite or an anti-white Black who would avoid taking a walk with a dozen Jews or half a dozen whites because it would violate your moral code. You wouldn't likely go for a casual stroll in a Jewish or white neighborhood.
But if you want to drive an automobile, you have to be willing to drive with an unknown number of Jews and whites driving behind you, in front of you and next to you. The moral indifference of the automotive traffic system is what permits it to operate. The same is true for driving through neighborhoods. In most cases, the technology of traffic does not tell drivers what neighborhood their car is morally designed to drive around in.
The same moral indifference of technology is true for the telephone. The telephone does not listen to your voice and say, "I don't make phone calls for gay men, African-Americans, Floridians, people with New England accents, people under twelve or people who weigh more than one hundred kilos." The telephone is morally indifferent. Thank goodness. That is why the telephone system works.
While you may not be in any of the hypothetical groups listed above, you might have friends, relatives or clients in these groups and have a need to reach them by telephone. A telephone system that would not connect to people based on any belief system (moral or immoral) would not be a useful telephone system. We need a morally indifferent telephone system.
One of the interesting arguments in the history of technology is that some moral systems retard technology. This argument is made by David S. Landes in his landmark book Revolution in Time: Clocks and the Making of the Modern World (Harvard University Press, 1983). Landes reviewed the rapid development of clocks and watches in Europe in the 1500 to 1700's. He studies the absence of clock development in China during the same period at a point when China had many advanced forms of technology from gun power to moveable-type, to printing presses and paper. Landes concluded that comparing Confucian morality versus European commercial moral indifference yielded the best explanation for the significant difference in the developments in clock technology.
In China, the time for a meeting was set precisely, but the social hierarchy within the Confucian system determined the nature of the encounter. The lower-status person always came early. If the meeting was set for 11 a.m, the person with lower status used shadows in the street like a sundial (Chinese streets were usually laid out north-south and east-west) to come early, well before 11, and the other person came as close to 11 as suited his or her status. We still have the phrase "fashionably late" referring to social-status time considerations.
Landes points out that Europe was developing a non hierarchical commercial system, where many people had to meet regularly for business and trade without knowing who had higher social status. European businesspeople used clocks so that both parties could arrive at the same time. This arrangement produced a demand for more accurate clocks, more public clocks and, ultimately, for watches. Middle-class merchants were the first people in Europe to have clocks inside their homes.
The technology for clocks and watches was better suited to a morally indifferent system where social class was unknown. The morality of class hierarchy was an obstruction to technology; the moral indifference of technology, which permitted it to operate as if it were in a society of social equals, was conducive to technological development.
Science
The first example of the moral indifference of science that comes to most people’s is Galileo Galilei. Excommunicated from the Roman Catholic Church in the early 1600s, Galileo refused to renounce the Copernican theory that the earth rotates around the sun. The Catholic Church viewed the Copernican heliocentric view as immoral and a threat to the teachings of the Church. The Inquisition targeted followers of Copernicus.
Isaac Newton, often considered the first great physicist, went out of his way to argue that his scientific work on light, calculus and motion was consistent with existing religious morality, so that religious authorities would not punish him.
The evolutionary issues raised by the scientific theories of Charles Darwin were considered a direct threat to much of established religion and morality when first published in the mid-1800s. Many of the scientific arguments raised in Darwin's day continue to threaten religious moralists in America today. Science has been in conflict with religious norms for several centuries and has been attacked as a threat to the moral order as a result.
Science is often used to prove the validity of some moral point or to disprove it. Since science is empirical, a scientific proof one day can disappear the next and leave the moral arguments subverted. This has been the case for many health claims and many medical discoveries that had moral or immoral values attached to them.
For many years, popular writers argued that a wide range of species of birds were monogamous. The scientific evidence of this was offered as proof of the moral value of monogamy. DNA research has since found that the birds, so often glamorized in the past, were actually cheating on their mates.
As centuries pass and more people learn to live with science, the morally indifferent nature of science becomes a more comfortable reality. Science is an empirical approach to the world, a world that exists independent of human conceptions. As a consequence, when science is interacting with a real world, it cannot be expected to support preexisting human moral systems. Science works when it is morally indifferent.
Moral Indifference is Acceptable
Technology and science are accepted parts of our society. The detailed processes of technology and science and the specific steps in the processes are what we accept. Examples of our acceptance are the following:
- We can read a science journal as if we were the wealthiest or the brightest of people.
- We can setup a nuclear magnetic resonance machine in the same way as anyone else, regardless of our sexual preferences, our religious beliefs or our country of origin. Being a technologist or doing science involves independent steps and detailed processes that ignore our personal moral status.
- We can stand before a piece of technology, say a measurement device, that takes voice commands, with the same acceptance (the measurement device accepts us), whether we are strong or weak, whether we are educated or not and regardless of our ethnicity.
The neutral mechanisms of technology and science are indifferent to morality.
Commerce is Indifferent to Traditional Morality
Like technology and science, commerce displays an indifference to traditional morality. There is no way a commercial transaction will occur or not occur because of the moral values of the individual carrying out the transaction. If a drug-dealing, obese, seven-foot giant with splotchy skin and wearing a fur coat on a hot day tries to buy a microwave oven in a store that sells microwave ovens, the transaction is just as likely to occur as if the person were a mild mannered sixty-year-old matron. If the giant has a problem buying the microwave at one particular store, he or she will find someone somewhere else who will sell it.
The buyer can be moral or immoral, and the seller can be moral or immoral but the commercial transaction will occur because commerce is indifferent to morality.
Commerce has no effective mechanism to judge buyers, morally or otherwise. There are neutral non judgmental sellers, invariably, to be found somewhere in the commercial world.
Commerce rewards people for their success in commerce. Commerce rewards people for reasons that have nothing to do morality. Cruel people can gain great wealth and kind people can be poor.
Example of Commercial Indifference to Morality
Pacific Bell faced local competition a few years after the giant Bell Telephone monopoly (American Telephone and Telegraph Company) was broken up. New competitors began entering the West Coast telephone market.
Pacific Bell decided to energize their telephone salespeople in order to protect their home market, and in particular to protect Pacific Bell’s existing residential telephone customers. A simple sales incentive program was introduced that rewarded successful telephone sales people with new cars, fancy TV’s and vacation trips to Hawaii. The sales promotion program was effective, and the salespeople became very aggressive.
I became involved in this because I am an expert witness in legal matters relating to business practices. I was hired after an organization of California farm workers noticed that many of their migratory members, who didn’t speak English, had phone bills with minimum monthly charges of $35 when the phone bills should have shown a monthly $10 charge.
The farm workers’ organization phoned other minority organizations and found the same telephone-bill problem in the Chinese-American community, the Vietnamese community and several other minority communities that had large populations that didn’t speak English.
The minority organizations realized what was happening and went to a public interest law firm2 who hired me.
I learned that aggressive telephone salespeople were phoning existing residential telephone customers to sell upgrades to their phone service. When the salesperson found that the owner of the phone, on the other end of the line, didn’t speak English, the salesperson would illegally install the maximum number of telephone services on the line. As a consequence, a seventy-year-old Vietnamese widow, who could barely operate the phone in the first place, would find that she had call forwarding, caller ID, three-way calling and several more specialized services on her phone when her bill arrived.
The salespeople were correct in assuming that non-English speakers would have trouble realizing that their phone bills were excessive.
This fraud was not itself the result of moral indifference by Pacific Bell. Pacific Bell could have accepted complaints about their aggressive sales staff and changed their sales practices.
That is not what Pacific Bell did. The company denied there was a problem -- claiming the problem only existed in a few thousand cases.
The denial by Pacific Bell forced the public-interest law firm and its minority clients to do a survey to measure the extent of the problem. The number of non-English-speaking people who had been involuntarily signed up for $35 monthly phone bills when they should have had $10 bills turned out to be more than 700,000 families.
Over the many months it took to detect this fraud and the several years before it was finally heard by a judge, Pacific Bell collected tens of millions of dollars in extra fees.
Pacific Bell vigorously fought the case against them, lost, and reluctantly repaid some of the victims of the telephone fraud.
Pacific Bell and its parent company had a long history of good corporate behavior, derived from the moral authority of their founding leader, Theodore Vail. Long after Vail was gone, the company became like most other companies: indifferent to conventional public morality.
Summary
Technology and science succeed in the modern world because of their indifference to morality. Most people are comfortable with this indifference.
Commerce, which sells missiles to terrorists to fire at civilian airliners, drugs to drug addicts, irrelevant phone services to aged immigrant widows and sells slaves to whomever wants them, is indifferent to morality. We are not comfortable with this commercial moral indifference.
Commerce is indifferent to morality. The reality of this five-word statement reflects the way the world works. Our reaction to this five-word statement has much to do with the way each of us perceives the world. Those who believe that commerce is either moral or immoral, or that it should be moral, will nearly always be disappointed if they try to judge the world on that basis.
Chapter 2
My grandfather, Henry Phillips, was unable to continue his dental practice after the earthquake of ’06 destroyed downtown San Francisco and his office building burned to the ground. Dr. Phillips was a graduate of the Dental School of the University of California at Berkeley. An American dentist was in such great demand and so highly valued in the world that he was able to immediately move to Berlin to become the dentist to the Kaiser. He moved to Berlin and built a practice there.
New Commercial Values
Commerce thrives when specific social values are present: diversity, openness, meritocracy, markets, a technological affinity and decentralization. The presence of these values promotes commerce; their absence retards commerce.
Moral Indifference Can Be a Positive Value
If I walk into a drugstore to buy a pack of condoms I don't have to answer any questions from the salesperson; I don't have to explain my sexual plans.
The freedom to buy condoms without question was not the case when I was growing up. A few decades ago, condoms were kept behind the counter in drugstores. Buyers had to ask for them and at all times be prepared to answer intrusive questions about their sex lives. Young people were often refused the sale or lectured on the purchase. That was morality intruding on commerce, when I was growing up.
Sunday business was closed in nearly all of America due to Blue Laws up until the late 1960s. At the same time, public morality was openly hostile to the country’s gay population.
The tyranny of a pietistic rural majority governing urban lives over the past century was humiliating and in many ways disgraceful. Today, morally indifferent commerce has triumphed. Condoms are sold legally in the open and San Francisco’s Castro District (pictured on the cover), among other neighborhoods in the United States, caters to gay men. Commerce triumphed to sell condoms to whoever wanted them. Commerce triumphed to sell hardware, clothing and alcohol to gay men. Retail stores are now open even at night and on Sundays in the United States. These are all the triumphs of commerce over traditional morality.
The forces of morality have also been visible in the form of government enforcement of restrictions on commerce, such as the Federal encouragement of the monopoly of druggists on dispensing drugs and their practice of secrecy. But commerce continually struggles in its efforts to be unrestrained by traditional morality.
In most of America today, stores are allowed to open on Sundays and stay open twenty-four hours. Commerce never stopped violating the established Sunday sabbath; traders never respected the demand to stop business on the sabbath and the demand to stop carrying on business late at night. Commerce has won much of the public battle about retail store hours, but it will be a while before Americans can buy alcohol legally in bars at times that suit customers’ desires. Bars that allow smoking have been suppressed and are now a relic of the past in much of America. Commerce can be counted on to move smoking bars underground for a time and one day, to bring them back to the legal commercial realm.
The evidence for the moral indifference of commerce is even more convincing when we look at our history. The vigor of indifferent commerce is most evident when we look at the way illegal products and services entered our society from the outlaw sector to become mainstream commercial successes.
Docks and dockworkers have been the vehicle for forbidden commercial products to enter commerce for centuries. Tobacco came to us from the illegal smuggling of dockworkers in the 1600s. The same is true for coffee, which was smuggled by dockworkers into the urban surroundings of a variety of ports, throughout Europe. Tobacco and coffee were both illegal imports in most of Europe for more than a century in the 1600s and 1700s. When tobacco and coffee became legal, they often became government monopolies, and tobacco is still a government monopoly in some countries.
Erotic, pornographic and antireligious books have been sold clandestinely by underground commerce for centuries. Now, centuries later, we know that most important private European libraries had good collections of clandestine. The illegal underground was extensive even in the most repressive countries.
In the early 1700s, most countries imprisoned publishers and sellers of Baruch Spinoza’s philosophical works. Spinoza’s works were, nevertheless, recently found in numerous eighteenth century libraries in Europe. The same is true of Mark Twain’s widely circulated nineteenth century scatological tome.1
The triumph of commerce in connecting underground suppliers with willing buyers of alcohol has been a reality for several centuries. Most recently, 'rum runners' brought Americans their beloved illegal alcohol during the 1920s Prohibition Era. Commerce continues to bring us other illegal drugs: marijuana, cocaine, heroin, amphetamines, ecstasy and so on. No amount of government enforcement seems to stop commerce from delivering to people whatever they are willing to pay for.
Government pressure on large corporations has failed to deter commerce. In the mid 1960s, all the Arab oil states threatened to stop oil sales to any oil company or nation that sold oil to Israel. Royal Dutch Shell secretly sold oil to Israel. The actions of Shell were moral or immoral, depending on your side in international politics.
Today, commerce continues to thrive on moral indifference. Videotapes and portable video cameras became a global market thanks to the driving force of pornography. In most parts of the world, pornography has been considered immoral and has been illegal. Governments were fairly successful in suppressing pornography in the form of books and films. The 1980s saw the introduction of the new medium of home video recorders, whose images didn’t need to be developed in photo laboratories, and home video players. Home video existed completely outside the day-to-day retail world and created an instant medium for pornography that was outside the reach of government. This technology created an entirely new industry. Sales of pornographic videos rose in the United States from tens of millions of dollars to several billions in a ten-year period.2
The triumph of morally indifferent commerce is also evident in the history of the RCA video disc.
RCA introduced the video disc in the early 1970s. The video disc was a rapid failure because it lacked the two elements that made the videotape format successful five years later: The video disc could not be used to make amateur home pornography, and the only video discs available were those sold at retail and produced by RCA. RCA had a strict anti-porn standard for their video disc marketing. There was no medium for porn, no way for an underground to get started, and no basis for an above-ground commercial product to succeed.
The RCA video disc failed, and shortly afterwards the videotape succeeded thanks to the rapid appreciation of the market for pornography (outside the censorship of the government).
The continuing triumph of morally indifferent commerce through underground channels was also evident again for the Internet in its early days. The first Internet search engines found that the number-one or number-two word in searches during the explosive Internet growth years was sex. Searching for and finding sex sites was a significant factor in attracting early users to the Internet. For many of the early years, sex and pornography were the largest revenue producers for Internet businesses.
In the long, long historic ledger book of commerce, one entry stands out: interest on money. Shylocks, money lender, and a multitude of other terms of opprobrium have been applied to the morally indifferent actors in the theater of commerce. The history of the hostility and forceful suppression of interest on money is also the story of the triumph of the morally indifferent nature of commerce.
From the eleventh century until the eighteenth century, loans were also made to those who needed them despite official antagonism. Loans were usually made to the kings and aristocratic elites who most vigorously suppressed money lending. Much of the historic hostility to money lending remains in the world today, not just in Islam but wherever the interest rate is high because the risk is high. Americans still use the term “junk bonds” for high-risk bonds. Yet commerce still makes junk bonds available. “Loan sharks” make high-interest personal loans. Despite the opprobrium of the word sharks, high-interest, high-risk personal loans continue to be offered by commerce.
Morally indifferent commerce never gives up its function of satisfying customers; governments and moralists ultimately do give up.
Diversity over Homogeneity and Ethnic Cleansing
For the past four centuries, many Euro-Anglo cultures have been certain of the “natural” superiority of people with pink skin, light hair and light-colored eye pigmentation. This was not a moral ideology, just a regular everyday ideological certainty.
Commerce has had little or no truck with this view. Many parts of the “darker world” have successfully sold goods and services to the international commercial markets, and many “dark” ethnic groups have been successful in the world of commerce. The notable successes were the extensive commercial markets created by the overseas Chinese, the African coastal tribes (Fulani, Senegalese and Woloff) and the “dark Mediterranean” people, the Lebanese and the Indian Gujurati.
Later, the people formerly labeled “copycats” and “slave laborers,”3 the Japanese, created the world's second-largest economy.
Factories and industries of many types have moved to Mexico, Southeast Asia, and outback India to employ the formerly certified “lazy natives.”
Diversity is the word that describes the mingling of people with differing human physical, cultural and mental characteristics. Fortunately for everyone, morally indifferent commerce has no inherent bias against groups of people because of their cultures, their presumed moral inferiority, or their superficial anatomical characteristics.
Diversity is a positive virtue in the commercial world. Nearly all commerce began and thrived in urban areas such as the Phoenician capital of Tyre in 600 B.C.E., later in Alexandria, and then in Carthage, followed by Baghdad and Venice. All these cities were cosmopolitan centers where commerce flourished in a diverse population. Baghdad was such a thriving and diverse center in 600 C.E. that it had hundreds of Chinese doctors in residence.
Commerce has always thrived on diversity. The traditional urban diversity of religions, languages and ethnicities brought a wide range of skills, knowledge and information to a central urban site, which fertilized exchange. Diversity generated vital partnerships. Partnerships were formed based on unique sets of knowledge and skills of different partners. Traders needed the skills of craftspeople and both traders and craftspeople needed the skills of shippers.
Commerce thrived in diversity, and diversity required tolerance, so commerce became a vehicle for tolerance. The urban commercial centers of Tyre, Alexandria, Carthage, Baghdad and Venice were widely known as centers of tolerance. They had to be because commerce brought diverse people together. Adam Smith, the first and greatest theorist of commerce, in his 1756 book The Wealth of Nations, commented on the contrast between religions, which were intolerant and provoked most of the wars in Smith’s day, and commerce, which thrived on tolerance.
In trying to see the connections between commerce, diversity and tolerance, imagine you are a Jew or Muslim businesswoman from Alexandria in 750 C.E.; then imagine the difference for you doing business in the countryside of northwest Italy, a religiously and ethnically homogeneous region. You would have been safe in Alexandria, versus being in impossibly dangerous conditions in socially homogeneous northwest Italy.
Openness Versus Secrecy
Commerce has a strong bias toward openness. Commerce entices secrets away from official secret keepers. If commerce were a metaphoric container, it would be too porous to keep secrets.
Think about the secrecy problem in a commercial society. Imagine what it would be like if you were running a secret organization and had to cope with international spies. Most secret agencies are government run because a government agency has the authority to legally punish employees for not keeping secrets. The threats of a military tribunal, capital punishment and long prison terms are necessary to protect secrets, and governments are best at carrying out these threats.
If you run a spy organization, your enemies will using sex, blackmail and money to try to persuade your employees to counterspy. People can almost always be bought off. The enticements of commerce are great enemies of secrecy. Very few people want to defect to a foreign country, especially a non commercial country like the Soviet Union or Cuba. The same people will spy on their own country if they are offered enough money.
The direct enticements of money to buy secrets are usually the way that commerce displays its bias toward openness. Spies customarily buy secrets from each other and from people trying to keep secrets. That is commerce in action betraying secrecy.
Commerce also offers indirect enticements, including job offers, payment of college expenses for the prospective turncoat’s kids, and most often, helping people to start a new business using the secrets they have stolen.
In the marketplace, keeping trade secrets is very difficult. Nothing can really stop an employee from moving around in the job market. Employees are expected to keep trade secrets. Ex-employees invariably pass secrets along, if not in the short run, definitely in the long run to new employers. Almost any industrial process is likely to be copied by a former employee. Trade secrets are invariably modified and implemented by spin-off entrepreneurs.
The same failure of business to keep trade secrets applies to other operating secrets. Suppliers, customers, consultants and advisors can reveal secrets. Everyone who deals with a business can be expected to figure out how the business operates and guess its secrets.
Imagine a restaurant that secretly skims a portion of the gross receipts so as to avoid taxes and pay less rent in a lease that calculates rent as a percentage of gross revenue. Employees will be the first to figure out that skimming is going on. Customers will occasionally see a sale that is not entered on the cash register and customers will guess that skimming is going on. Suppliers will be aware that they are delivering more supplies than is consistent with the publicly stated volume of the business. Commerce is always too much of a multi person effort to keep secrets for long.
Probably the strongest evidence supporting the openness of commerce is the inexorable movement toward more public, complete, understandable and accurate reports by publicly traded corporations. This movement has been underway for two hundred years and takes a few more steps toward openness every year.
The trend to open corporate records to the public and to make more financial statements public has never retreated and always moves in the direction of greater openness. The reason is obvious. Investors want and need more openness in order to optimize their choice of investments.
In 1900, The Wall Street Journal was nearly 100 percent business news, as it still was in March of 2000. It grew from 16 daily pages about business and business data to 56 pages in March 2000. The New York Times grew from 2 pages of business news and data to 22 pages, including advertising.
In 1900, the annual report for Proctor and Gamble in was published in one column of a Cincinnati newspaper. By 2000, the annual report was 46 pages including 40 pages of financial data, all required by the norms of corporate reporting. The Sears Roebuck annual report grew from one column in a Chicago newspaper to 60 pages with 42 pages of financial data.
It is the commercial bias toward openness that helps commerce spread and thrive. Businesspeople duplicate what they know works in one realm, whether geographic or social, and once a success has occurred the knowledge of the success spreads and cannot be restrained or suppressed. Commerce is a genie in a bottle that keeps getting out of each bottle and can never be put back in.
I watched dozens of businesses being created in the exuberant entrepreneurial world of 1970s San Francisco. Many became national and international business successes. The Body Shop on Union Street was copied, then bought-out, to become a global franchise. The chocolate cookie makers in Sausalito became a national chain; mountain bike inventions in San Rafael became a global phenomenon; windsurfer technology spread over the planet. The same copy- and-spread pattern was true for New Age business training schools, acupuncture practitioners, homebrew computer makers from Palo Alto, home-schooling experts, adult comic book distributors and paralegal specialists.
In that era, I watched the phenomenon of open business innovations go from small markets and single entrepreneurs to global commercial successes.
Openness is not the same as honesty. The words are not synonyms but they are very close. Commerce inadvertently favors honesty because dishonesty cannot thrive in an open environment. The openness comes first --- the honesty is a by-product.
Meritocracy Beats Everything
Commerce is meritocratic.
Meritocracy rejects prejudgments of people based on their birth status, heredity, physical conditions, religion, ethnicity, nationality or any other identity tag. Meritocratic means accepting people for their empirical, testable attributes.
Meritocracy rejects inherited aristocracies.
Commerce almost defines meritocratic. In the commercial world, meritocratic means that giving two people who appear to be able to do the same job or function (such as building a chair) a chance to show their skills. Commerce is able to choose one over the other, based on output or sales. It really doesn't matter what the physical, intellectual, emotional or political skill of the producer is, meritocracy will expose the commercially favored one.
It is easy to have warm feelings about a family business. I go to coffee every morning in a lovely espresso shop that was created and owned by Franco, a Sicilian immigrant. When Franco’s son was young, he regularly helped out in the shop. When Franco died, the son, Sergio, and his wife took over the business. Now the couple works hard every day seven days a week, and they bring their two young sons in to play with crayons and keep the parents company. Over time, Franco’s grandsons will take an active role in the coffee business which has grown a wholesale arm and an espresso-machine-repair arm.
At my coffee shop, the four or five regular employees are all hired from the church that Sergio and wife loyally support.
Nepotism wouldn’t feel so warm and comforting if I were working for a four-hundred-person corporation and the daughter of the company owner was assigned to my department. The daughter would presumably be on track for the top job. Merit would be far less important to my boss than my friendship with the owner’s daughter. The same would be true of others in my department. Office politics could become more difficult and more highly charged. I don’t think it would be a pleasant situation to be in, either for my boss or me.
We take the meritocracy of commerce for granted. Picture in your mind one of the many non-meritocratic societies in our world; Arab, Ibo, Lao. Giving a job to a family member, to a loyal member of your clan, or anyone whose physical appearance is the same as yours, is non-meritocratic. In the non-meritocratic world, you would fill a job based upon your own loyalty to your family, clan or peers. That rarely happens in the commercial meritocratic world.
Now, picture what happens in the commercial world to the goods or services of a seller who uses any of these non-meritocratic, pro-family, pro-clan models.
There are limited circumstances where a non-meritocratic business will thrive. Most skilled people in the labor market don't choose to work for a business because it has family members working there unless they are members of the same family. On a small scale, clans, tongs and tribes may favor their own businesses. They may generate some in-house business. The favoritism that may work locally is, however, a limitation on the scale of the business. The business only succeeds in the limited geography of the clan, tong or tribe.
I have given some thought to the problems of third-world development, particularly Arab societies. The most conspicuous commercial problem third-world societies have is that they do well in day-to-day trade environments but do poorly wherever large-scale employment is required.
The reason is simple. No family is large enough or has diverse enough talents to run a large-scale business. No clan and no network of relatives has sufficient talent to run a large-scale business. Ultimately, such businesses either rely on meritocracy or they are surpassed by other commercial ventures in the larger world. Nepotism only works on a small scale, if ever.
Family and clan businesses also face the problem that meritocracy doesn't mix very well with nonmeritocratic values. Think about a talented Indian engineer working at a family-run Chinese shipping company. If the Indian engineer gets a chance to go to work for an ethnically diverse meritocratic company, he’ll most likely leave the family company. The Indian engineer has a better chance of thriving outside a Chinese family milieu.
Markets Versus Monopolies or Near-Monopolies
Commerce is disposed to favor markets over non-market environments. Insurance is usually the reason.
Consider the examples of a craftsperson who has one loyal family member as the main client, and an aircraft manufacturer whose primary client is one military agency. Both the craftsperson and the aircraft manufacturer would be better off with a broader market, simply for insurance reasons. The loss of the one customer could mean the end of either business.
Of course, the monopoly relationship can be so profitable that long-run survival is discounted. Nevertheless, the forces that will lead a business to prefer the market over a narrow range of customers will always play a significant role in the world of commerce.
The market, with multiple buyers and sellers, has several advantages for the seller who starts with a limited number of clients.
First, the market will be a source of innovation that may be so rapid and dramatic that the narrow monopolistic supplier will become a high-cost outmoded business. That type of innovative market change happens regularly in the aircraft and crafts fields. The specialized narrow market for military aircraft means that other, more market-driven companies regularly buy out military aircraft companies. The same is true of craftspeople whose clients see a new product which is nearly impossible for the craftsperson to duplicate, in the market and move away from the single supplier.
Likewise, family dynamics change (one sister marries a better, more loyal, or more intimately connected craftsperson), and the original family choice of craftsperson loses out.
The market preference of commerce inevitably ousts corruption. Corruption can thrive only in secretive non-market environments.
A typically corrupt situation would be if a small group of telecom buyers had the power to choose new telecom equipment from one of a few sellers. Secret bribes would be a likely element in the selection of the final seller. This corrupt situation would evaporate as more buyers and more sellers entered the marketplace.
As more goods and services move into a market, corruption plays a smaller role. This anticorruption quality of commerce and markets could be identified as a separate social value of commerce, but it is really a by-product of the commercial preference for open markets. Therefore I haven’t treated anticorruption as a distinct commercial value.
I don’t mean to suggest that corruption is entirely negative. Corruption refers to the violation of a moral stricture. Corruption and bribery are tools that commerce will use whenever and wherever it is effective. Commerce is indifferent to the use of corruption. Corruption is often the only mechanism that permits commerce to succeed.
In San Francisco, I have watched businesses that needed to work on the waterfront, an area controlled by a corrupt landlord employed inside the Port Commission. Businesses were quite willing to pay whatever bribes were needed to rent waterfront space. The corrupt practices of the waterfront businesses, acting in conjunction with the corrupt port landlord, were ultimately good for the citizens of San Francisco. The citizens got vital businesses to serve them, and the city got revenue from space that would otherwise have been empty.
The Port Commission had rules and restrictions on property use that were arcane, irresponsible, bureaucratic and contrary to the interests of the users of the port. In this case, corruption and bribery were effective ways to circumvent the poor governance of the Port Commission.
Monopoly Position in the Market
Much has been written about monopolies in the economic literature. Commerce would appear to have an affinity for monopoly sales opportunities. Economists have shown what common sense teaches, that a monopoly seller extracts excessive revenue from buyers, working against the common good.
Commerce, being indifferent to morality, including an indifference to the common good, will always seek a monopoly seller opportunity.
Economists have pointed out that monopoly sellers are usually generated by government decree or government regulation or where there is a land monopoly for geographic reasons. A piece of dry land near the confluence of two great rivers is an example.
The fact that government can create and protect monopolies and that government monopolies can be bought by businesses is not a reflection of the corruption of commerce. Commerce will always find a willing buyer for a government that wants to sell a monopoly opportunity. It is the government that is corrupt. Commerce is indifferent to the corrupt nature of the transaction.
Technology and Commerce Have Strong Affinities
Commerce has an affinity for technology. There is an affinity for technology, but not a bias toward technology. The affinity comes from the fact that both commerce an technology are empirical worlds.
This affinity was evident not only in the last few hundred years of our blooming industrial society, which is inseparable from the expansion of technology, but is also evident today when we look at details of the interaction between commerce and technology.
Most of us have been taught to see the industrial revolution as a by-product of the steam engine, the cotton gin and the railroad. But the incorporation of technology into commerce, or more accurately, the marriage of technology to commerce, is the outcome of many miniscule independent processes.
I suggest that the important interaction of commerce and technology occurs at the level of these processes.
Technology and commerce have some parallels. Both are morally indifferent approaches to the world; both learn about the world empirically. Commerce evolved clocks to help merchants deal with each other efficiently. Technology ground glass lenses and put them in telescopes to deal with the awesome sky that appeared to rotate around the earth.
As a consequence of lacking much real knowledge about the world, we humans continually test, experiment with, guess about and use approximations to try to understand our world. We go about our lives in the world of commerce and technology by learning which of the views we hold that are refutable and which are usable.
Refutable means that a particular technology or form of commerce works inconsistently and can be replaced with one that works more consistently. The replacement works better, presumably because it represents a more accurate interaction with the world.
We use quartz watches now because they are more reliable and accurate than the escapement watches they replaced. Quartz watches also suited the marketing practices of the Swiss watch making industry better than escapement watches or the alternative digital watches.4
Technology, as time moves on, is incremental in the sense that a contemporary bridge is a product of the many centuries of technology. When predecessor bridges were blown over or swept away by rivers or tides, each of those earlier bridges was based on a technology that was refuted by the physical world. A current bridge is an incremental product of what was learned from the earlier bridges.
Let me offer an example of commerce interacting with technology. This example shows how the two work together on a specific detailed level.
A medical doctor finds that by asking a series of questions about eating habits and family history she can predict an incipient case of diabetes in a patient. Commerce will favor a business mechanism that will help the doctor to train other doctors in the same methodology of diagnosis, given that patients will pay for this improved diagnostic technique. Our doctor may establish a training course or a consulting firm to commercialize her diabetes prediction methodology.
Let us assume that there exists a technology in the form of a blood test that performs a similar function in predicting diabetes, but the blood test has a lower success rate. Commerce will favor the training course/consulting mechanism over the blood-test technology. Commerce has no pro-technological bias in this case.
However, the potential for improving the blood test will drive technologists to do so and commerce may eventually bring the improved blood test to market.
The technology of a blood test has a greater commercial potential because it may be far more replicable, consistent and reliable in a variety of circumstances. The training/consulting business may lose out in the long run because a lab technician will be able to do the test accurately without the need for a higher-paid doctor.
In this example, commerce has an affinity for technology but not a bias toward it. Technology and commerce work together.
Many examples exist where technology has run rapidly ahead of commerce and been ignored by it. The accuracy of intercontinental ballistic missiles reached the point where they were landing accurately within tens of meters over tens of thousands of kilometers, but this level of technical accuracy was never used in commercial aircraft because commercial aircraft guidance systems only needed gyroscopes that would get the plane to within a half dozen kilometers of a destination airport. The technological advances in gyroscopic accuracy were irrelevant to commercial airlines.
Technology is not worshipped by commerce, no matter how beautiful or powerful it is. But commerce has a propensity to consider any technology seriously.
Distributed, Decentralized Decision Making
Commerce appears to have a bias in favor of distributed and decentralized decision making rather than centralized decision making.
This bias is not so obvious when we see that giant corporations thrive and franchise/chain outlets proliferate. In the success of both giant corporations and franchise/chain outlets we seem to see the power of centralized decision making.
Big corporations and chains clearly grow because of economies of scale, but the bigger the corporation the more likely it is to operate with distributed decision making.
There are only a small number of large corporations in the world. There are roughly 4,000 businesses on the planet with more than 20,000 employees, out of more than 100 million businesses. This ratio of small corporations to large business has been stable for many decades at 10,000 to 1.
This small-to-large business ratio, a hundred million to a few thousand, suggests the metaphor of many blades of grass to a few tall pine trees. I take the small-to-large ratio to mean that local decision making is significantly more efficient than centralized decision making. That is why there are so many more small businesses.
Moreover, many of the four thousand large corporations are temporary anomalies of equity markets. What happens is that a large business starts to fail, and management quickly sells out to a larger company. That creates a few larger corporations. On a regular basis, the newly absorbing larger corporation fails and splits up into modest-sized segments a few years later. My guess is that this is happening to 10 percent of all large corporations at any one time.
The franchise/chain phenomenon has the same strange quality as the large corporation. We all think of McDonald’s and Starbucks as large centralized systems that thrive. What we have in the large scale in fact are economies of scale in managerial talent for marketing, finance, accounting and training. The rest of the business is successfully operating with decentralized decision making. Both McDonald’s and Starbucks succeed, as do other similar chain businesses, because they cater to the highly mobile populations of the world. Customers want a consistent experience wherever they go in the world; customers want their food and drink to have the same taste and safety qualities. This desire for consistency in an unstable world makes the replication of commercial experiences of McDonald's and Starbucks appealing.
In both the McDonald’s and Starbucks cases, the corporations have distributed their hiring decisions to local stores and leave many marketing decision to regional managers. Both corporations adapt their practices to local markets in overseas locations. Their adaptation is more impressive than their standardization. Distributed decision making struggles with centralized economies of scale within these large corporations. The visible outcome of the struggle between centralization and distributed decisions reflects the value of distributed decision making more than it reflects the value of centralization. The Tokyo outlets of McDonald’s and Starbucks are a far cry from the same name versions in San Bernardino, California and Seattle, Washington.
I have worked as a consultant with many small businesses that have confronted expanding franchises and chains in their local markets. I’ve worked with bookstores, restaurants, coffee shops, hair salons, bakeries, bagel shops and other retailers faced with nearby expanding chains.
The solution for locals wanting to retain customers and stay in business against a chain is always the same: The local business must be more responsive to local customers. This means (1) offering the same level of service that the chain offers, such as cleanliness, courtesy, access to information and excellent recourse and (2) accommodating local product/service tastes and responding to local social traditions (such as participating in neighborhood events and Rotary Clubs).
That is the reality of distributed decision making in commerce. Local businesses have many advantages over centralized-chain decision makers. When we look at specific industries, we can see the positive role of decentralized decision making and when we look at industry we can see the same effect.
Summary
Morally indifferent commerce has a few positive social values built into it: diversity, openness, market preference, technological affinity and a distributed-decision bias. These social values are functional, not moral. These are the positive values that are celebrated in this book.5
Chapter Three
When I found the unpaid commercial loan that my grandfather had left with the Bank of California, more than half a century earlier, I felt the need to inform management. I was a vice president of the bank that my grandfather had skipped out on. Did I have an unwritten moral obligation to the bank?
The executive committee of the bank heard my story and told me to forget about.
Commercial Minds
Living in a commercial world promotes a commercial mind in each of us. Among the many attributes of the commercial mind that we need to be aware of are the monetizing of nearly everything; the unlimited potential for greed; cynicism; blasé attitudes; the rise of irony in our perception; the adoption of a managerial perspective; the elevation of “'whim” and self-absorption to major life values and the emergence of global commercial behaviors.
With our commercial mind we also expect to live in a world of surprise and wonder.
I was talking to a friend over the phone, a real estate broker, who was standing on the upper steps on a lovely hillside overlooking San Francisco Bay. I was about to fly a single-engine plane over San Francisco from an airport twenty miles south. I asked Annie, the realtor, over the phone, “How do things look?” I was expecting a description of the cloud coverage over the Bay.
Annie replied that she was "distressed." She said: “I’m seeing so many magnificent large houses in a neighborhood where so few people are dying.”
In my mind, I wondered what people dying had to do with clouds over the Bay.
Annie explained herself.
What she meant was that, for her real estate business, too few of the houses she was looking at would come on the market. If more came on the market there would be more houses for her to sell.
Thank you, Annie; you just made two of the points I want to make in this chapter: First, commerce has shaped our minds and our modern worldviews. Annie sees houses as objects of income for her. Second, irony is a characteristic of the commercial mind and a subject of this chapter. Annie was using irony in her comment.
Monetizing Nearly Everything
It is hard for us to realize just how commercialized our minds have become. Of course, we can see beautiful homes in a variety of perspectives, from color to architecture to imagined comfort. Most of us have a monetary perspective as well.
We can guess the price of a house, the cost to buy a lot and build a similar house, the amount of property the taxes, the cost of keeping the house heated and the rental rate for the house. We can also be fairly accurate about details such as how much a new roof or a new exterior paint job would cost and the income necessary to live in the house. Having the ability to approximate all of these market prices is a core part of our commercial mind. Not all people have this ability to bring to mind many commercial prices. This monetizing perspective is infrequently found in rural areas and even more rarely in third-world nations.
A Central American farm worker, even after living decades in the United States, would not know most of the prices the reader knows, even if he was currently working in the construction industry. The commercial mind was not part of his worldview in rural Central America.
Two businesses in modern America reflect the monetization of our world. One is the Antique Road Show. The show is a weekly TV program that sets up travels to major cities and invites citizens to bring their antiques to the show for evaluation by experts. The show is premised on the notion that a knowledge of antiques results in some household artifacts being undervalued (“Oh my goodness, its really worth $5,000?”) and others being overvalued (“So, wiping off the patina ruined it?”). Such a show only makes sense where people are pricing everything in their lives.
The other business is eBay. This Internet company allows people to buy and sell nearly anything over the Internet. A large number of people do arbitrage on eBay. They find an object that is underpriced in their local market or on eBay itself and resell it. Tens of thousands of people in the United States make a living buying and selling on eBay.
There are many perspectives on the world around us (religious, military, academic and so forth), and the commercial perspective exists specifically because we are living in a commercial world. We have become part of the commercial mind: We are ourselves commercial entities.
In the next few pages, we will look at a number of interactions that individuals in a commercial society encounter daily. These include humor, defeat, wonder -- and many more. My list is far from exhaustive. My list is intended to convey some idea of the commercial mind we all share.
Using Price to Make Everything Fit One Scale of Measurement
Just as Annie, our realtor, sees houses as potential sources of income, we can see nearly all the physical world in commensurate terms. Everything can be compared to everything else through the medium price. We can price nearly everything. The commonality of price puts everything on the same scale of measurement.
There are three ways to put a price on the tree outside my back window. That eighty-foot-foot tall Norfolk Island pine would cost $400 to have removed. If properly done, it could be sold for raw timber for $2,000. It could be sold and relocated, just as William Randolph Hearst planted fully-grown trees at San Simeon, for $25,000.
Most of the physical world can be put on a single continuous scale by using price. Fifteen thousand dollars buys a good secondhand car, a year's rent in a modest one-room beach house in San Diego or a new kitchen in a modest home. Most of us know the prices of tens of thousands of goods and services and can make a good guess about tens of thousands more. That puts nearly everything on the planet on the same scale.
This scale of measurement, price, is very different from an artistic perspective of the world or many other traditional perspectives of the world. It has taken centuries for a world of mental price tags to develop. An object or behavior in the world doesn't enter the price measurement scale until it enters the market. Since mountains rarely get bought and sold, it is hard to price a mountain. But mountains are now bought and sold, often to the government. There are professional assessors who can price mountains.
Human life has long been considered priceless, or it has been considered morally objectionable to put a price on a human life. However, courts are regularly called on to price humans, and they do it based on earnings potential. An example would be a school principal killed in an auto accident with her husband and one child aged less than six years old. Her surviving family asks the court for a settlement from the insurance company based on the amount of money the two adults would have earned over the span of their working years. Earning potential is a market measure. We humans sell our work in the market, therefore we have a price. Courts are asked to price the value of parenting and companionship as well.
We can price a wide range of nonphysical entities. We price college education; we price an orchestral performance with different prices for different seats. We price a vacation in Kauai, a guide on the John Muir trail in the Sierra Mountains and a ride into orbit in a space ship.
Simmel on the Commercial World
Georg Simmel, a Central European sociologist at the beginning of the twentieth century, made many astute observations about commerce. He was the first to examine the subject of the moral indifference of commerce. He also commented on greed, cynicism and blasé attitudes.
For us, Simmel can be like a visitor from another time. He actually lived in a period well before modernity had developed. He could still remember a pre-commercial era.
Avarice
Avarice, Simmel pointed out, may well be distributed widely at birth in a society, like the cards in a well-shuffled deck, but when commerce comes along to create a middle class, providing jobs and money for a large part of the population, commerce allows many more people to experience avarice. Commerce makes avarice far more accessible.
In a farm village, avarice can have a modest effect; maybe someone hoards potatoes or buys more and more neighboring land. In the modern world, there is no limit to how many people can be avaricious, and there is no limit to how much they can accumulate. Many people have fifteen-thousand-square foot houses with four-car garages, and many people have a net worth of more than a billion dollars.
Simmel’s first observation about avarice is obvious: If more people have jobs, more people are able to be avaricious. If jobs are abundant, almost anyone can experience avarice in its multivariate forms simply because it is therefore easy to be in the middle class and middle-class status allows us to acquire abundant possessions easily.
This is not to ignore the observation that there are homeless people on the street pushing several shopping carts loaded to capacity with their possessions. Avarice in an abundant society does not require a middle-class job. Homeless people can be avaricious too. Middle-class people fill up houses and garages. Homeless people fill up shopping carts.
Avarice is so acceptable and pervasive that an avaricious modern person can readily find a comfortable community to live in. There are many communities where avarice or an unlimited desire for possessions is a normal value.
Simmel's second observation is interesting: The main contribution that commerce makes to the experience of avarice is that it supports the convenient accumulation of money. Money is the potential to buy; it can be easily and safely stored in infinitely large quantities. When enough money is available, any physical barrier to satisfying avarice is eliminated. Avarice no longer has any bounds.
When wealth could be measured only in gold, it was much harder to accumulate large amounts because safety and bank capacity were limited. Even today, avaricious dictators have to store their money outside of their own country because they can't rely on the confidentiality of their bankers and they have to worry about losing their wealth if they are overthrown.
The development of government bonds in the late 1700s helped to reduce the storage and risk problem of large amounts of money, and the later development of registered bonds, which allow the owners to own bonds without having the physical bonds on hand, was an improvement. Today, there are safe ways to own and store billions of dollars for one individual. Modern forms of money safety make wealth and greed truly boundless.
Cynicism
Simmel also made observations about cynicism and blasé attitudes. His observations are particularly valuable. One hundred years after Simmel wrote, we can see that we have been increasingly absorbed into the commercial mind.
According to Simmel: “The more money becomes the sole center of interest, the more one discovers that honors and conviction, talent and virtue, beauty and salvation of the soul are exchanged against money, and so the more a mocking and frivolous attitude will develop in relation to these higher values that are for sale for the same kind of value as groceries.”
We have almost forgotten the meaning of words like honors and virtue. They were still central forces in everyday life in Europe a century ago. We have become cynical, and many of us are comfortable with that. Most modern cynicism comes from the forces that Simmel described.
It would be a surprise, today, to hear a seventeen-year-old say, “I'm going to become a Marine officer for the honors it will bring to my family.” Such a statement would not have been surprising a hundred years ago. What notions of honor that still exist in our commercial society are greatly diminished.
It would be a surprise to hear a parent say to a child “We don't do that, those aren't our kind of people” in reference to seeing a man drop a beer bottle out of a moving car. A modern parent might have a number of reasons why dropping a beer bottle out a moving car is bad but the allusion to "our kind of people" is based on an earlier concept of virtue that is passé.
We are not entirely a cynical people, but the traditional concepts of honor and virtue are seldom praised in our commercial world
Blasé Attitudes
Simmel says the commercial mind is blasé. He considers a blasé attitude different from a cynical attitude: “The blasé person has completely lost the feeling for value differences. He experiences all things as being of an equally dull and grey hue, as not worth getting excited about, particularly where the will is concerned. Blasé is not the devaluation of things as such but indifference to their specific qualities from which the whole liveliness of feeling and volition originates.”1
Most readers can recognize the pervasive blasé attitudes around us. While the rich and glamorous jet setters are notorious for their blasé attitudes, the same viewpoint permeates much of the lives of ordinary people.
I look at the large number of soap operas and the endless parade of melodramas in the theater, on TV and in the movies; these are a testament to blasé lives. A jaded and apathetic life drives people to have sexual affairs with their neighbors, insult family members at family gatherings and file meritless lawsuits in hope of bringing melodrama into their “dull and grey” lives.
Not only has commerce given us extra time in our lives to become blasé, the extra time has contributed to a loss of the clear sense that we have to work to survive. The extra time forces us to examine the meaning of our unstructured lives; otherwise we don’t know what we can do in our free time that is worthwhile. Apathy is an emotional luxury that results form commercial success.
Irony
Irony is a powerful and distinct contribution of the modern world. It has arrived, full blown, just in our lifetime; irony today is a common worldview.
People around us use irony in discussion: saying one thing but meaning the opposite. Often a situation is recognized as ironic because the actual outcome and the expected outcome are different. Irony works well with incongruous situations and with paradoxes. We find irony nearly everywhere.
Examples of three common forms of irony are:
1. Saying one thing that has a literal meaning but intending to convey the opposite: “I play the lottery because the overhead in the lottery goes to support education.” That kind of statement is usually ironic. The lottery is very popular, but the reason why is that people hope to win a great deal of money for themselves.
- A situation is recognized as ironic when the actual outcome and the expected outcome are different. TV is full of irony that seems popular with a broad swath of young people. A program called Who Wants of Marry a Millionaire? involved a cluster of women trying to catch a handsome young man they were told was a millionaire. The viewers of the program knew from the beginning of the show that the man was not a millionaire. The show wallowed in the irony of the viewers knowing what the participants did not.
- Irony works well in incongruous situations and with paradoxes. Sally came to a winter party in white summer clothes after her part of the country had suffered three weeks of continuous rain. “I'm dressed for spring, this will certainly change the weather.” Everyone, as far as we know, recognized the irony of an individual suggesting the clothes she wore could change the weather.
Irony is particularly strong on America’s coasts, where the more intense commercial clans live, and weaker in the midlands where older traditions still survive. Nevertheless, irony is an integral part of modernity, and it was brought to us by the commercial world.
One of our great contemporary philosophers, Richard Rorty, celebrates irony in modern life because he sees it as a healthy response to the absence of a “certified world.”2 The book is Contingency, Irony, and Solidarity. Cynicism and a blasé attitude are negative responses to a morally indifferent commercial world. Irony, Rorty says, is a positive response. Irony is the way that an individual can comfortably hold multiple perspectives at the same time. Rorty believes that irony contributes to debate and complex thought and ultimately contributes to democracy.
Managerial Values at Home
Much of what people learn in their work environment is carried home into child-rearing practices. This is becoming increasingly true as more people become supervisors and managers.
In traditional families, I've observed that a child will do several things wrong and the parent will correct all of them at once. “Johnny, you weren’t paying attention to traffic, you didn’t look first left and then right, you ran across the street when you should have stopped and walked carefully and you don’t seem to remember that cars can’t see as well when there is rain on their windshields and the sunlight is behind you.”
By contrast in a family where one or more parent is a manager in a work environment, that parent will often bring managerial practices home. In the case of Johnny, they would borrow from their behavior with an employee at work. They would pick only one mistake and emphasize that particular mistake so that one solid lesson can be learned. They will also reinforce good behavior. “Johnny, it is very important to be extra cautious crossing a street on days when it is raining and drivers can’t see pedestrians as well. I’m glad you look sheepish about your behavior, I’m proud when you pay close attention to safety matters.”
There are other ways that employment experiences shape our home lives. Promptness, reliability and working steadily for long hours have become ingrained in the modern commercial person’s life. These work practices are so deeply ingrained that salaried workers are commonly offered the option of working at home, unsupervised.
Credit Worthiness
I did business consulting for Visa in Japan and was surprised to find that one reason few Japanese use credit cards is because Japanese young people have never been trained in the practice of credit. Japanese are raised to save their money before buying anything.
Americans very commonly get credit cards at college age. Most spend the next decade of their life learning from experience how to use credit. Some rapidly use up all their credit and make minimum payments for years. A few never learn to keep their expenditures under control and lose access to credit. Most Americans learn how to use credit from experience.
Creating a mind set that allows individuals to connect their desires to their income while using credit is a significant accomplishment of the second half of the twentieth century in America. Other societies may follow suit, but commerce in America is leading the world in this element of the commercial mind.
The World of Whims and “Personal Authenticity”
A commercial society such as ours creates a core worldview that seems to me to be very different from traditional core worldviews. This difference arises largely out of the consumer is king nature of the marketplace. We can buy nearly anything, and a seller will nearly always accommodate our wishes.
One of the consequences of the consumer is king is that we become people who live our lives focused on whims.
When people are close to the edge of survival needs, they focus on a strategy for daily survival. “Do I have the energy to work overtime, take the bus and save money, and make my own lunch instead of eating out?” Many of the rest of us spend a great deal of time exploring and catering to our whims. “What shall I wear today? Should I travel or take a class in fabric design? Should I visit Don or make a fancy dinner -- or go shopping? What do I feel like doing?”
We are living in a world of whims. The commercial world creates an opportunity to live a life devoted entirely to frivolity and the pursuit of fleeting desires.
It would be hard to argue that the commercial world we middle class people live in is, anything other than a creation of whims. Need constitutes only a small part of our automobile, home, clothing and food decisions. Whim constitutes the greater part of these choices.
Canadian philosopher Charles Taylor believes that focusing on whim is related pursuing a positive ideal.
Taylor argues that a focus on whim is a degraded version of the individual’s search for authenticity. In a commercial world where nearly everyone has large amounts of time and economic resources, this time and wealth can be used to seek personal authenticity. In his book The Ethics of Authenticity, Taylor argues that the difference between pursuing our whims and seeking our own authenticity is the difference between conducting our search without reference to the positive values of our society and conducting our searches in dialogue with wise peers, mentors and people we respect.
For Taylor, whim versus authenticity is the difference between spending a year counting the number of freckles on one’s left leg and working as a volunteer in a prosthesis clinic. The freckle-counting exercise is done without reference to the values of society. Society has no need to know how many freckles any particular person has on his or her left leg. Doing volunteer work in a clinic is socially meaningful and can be a step in the search for personal authenticity. Doing volunteer work in a clinic is also something that wise peers and mentors might recommend.
Commerce and the commercial mind can make a valuable contribution to society when individuals use the freedom commerce generates to seek personal authenticity and make the society richer in vitality, imagination and compassion. Personal authenticity can provide a social gain derived from the abundance created by commerce.
The Changing Definition of Beauty
Contemporary consumers have, almost without notice, decided that mass-produced objects can be beautiful. Our museums are stuffed with Movado watches, Charles and Ray Eames furniture, early Harley Davidson motorcycles, Leica cameras and countless pieces of art and artifacts that were manufactured on an industrial scale. This is a big change. Only a few centuries, earlier mass-produced objects were invariably considered déclassé and only one-of-a-kind objects or one-time performances were thought to be objects of beauty.
We commercial humans have decided that beauty can be found in mass-produced artifacts. A Movado watch can be a thing of beauty even when produced by the millions; the same can be true of a car, a camera, a vase, a skirt – anything, for that matter. The same can be true of a movie that will be seen by millions and a recording of a performance. All of these can be beautiful to a modern person with a commercial mind.
The commercial mind accepts beauty in the object it beholds without requiring that the object one of a kind. We know that expensive Persian rugs each have a flaw in them to convey the one-of-a-kind hand-made nature. We can find beauty in an Aubusson carpet, regardless of the number of copies manufactured.
Surprise
One of the delights in living in our modern commercial world is the element of surprise.
In a traditional society, nature brings the unexpected in the form of weather, animals, earthquakes and volcanoes. But surprises like disease and death are not the kind that we commercials moderns anticipate and expect. Instead, we value the surprise of newness: a new movie; a new TV program; the latest styles of clothes, shoes and autos. We want new stores, new food products, new buildings, new houses and new sculptures in our world. Commerce is heavily built on surprise. We love it.
Wonder
Wonder has always been a part of life. Nature and natural objects are traditional sources of wonder: butterflies, clouds, lightening, mountains and spring flowers.
Commerce brings us wonders of extraordinary quality, but we often end up taking them for granted.
Commerce has brought us urban downtowns with dozens and even hundreds of enormous buildings ten, twenty and a hundred times our own height. We have bridges and airplanes that weigh ten, twenty and hundreds of times our own weight. Bridges allow us to span rivers and bays and airplane allow us to fly like birds. While tall buildings, bridges and airplanes are technological achievements, there would only be a few of them if it were just a matter of technological accomplishment.
Think of the supersonic commercial airliners that are now nearly gone; they were technological wonders. They were built and operated because they were technological wonders. Commerce didn’t need them – that is why commercial supersonic jetliners are nearly gone.
Commerce brings technology into everyday life and creates hundreds and thousands of replications. The wonders of technology are usually available to us because they are also wonders of commerce. But because technology and commerce are so pervasive in our lives, sometimes we forget how wonderful they are.
Global Commercial Behaviors
I have spent much time living in other cultures. I think I’ve succeeded in living an ordinary life among non-Americans. As a consequence, I accepted a view of culture that is close to the strict Whorf-Sapir3 model that each language and culture incorporates its own distinct worldview.
My personal experience led me to believe that cultures are deeply different from one another. Once I started paying attention to cultural differences, I was convinced that they were hard to recognize, hard to accept and the significance of their differences was generally unappreciated.
That was the cross-cultural perspective I had a few years ago after living and traveling for decades outside the United States.
My experience over the past few years and my thinking about the issues covered in this book have led me to a different conclusion.
I now believe that commerce, like technology and science can bring of effective intercultural interaction to a genuinely productive level. We can learn a language and communicate with other people, and we can effectively understand and work with people of different cultures.
Technology has taught a wide range of people, across cultures, to drive cars and use electricity and sophisticated tools and appliances. Urban people around the world have developed many common experiences based on common technology. Electrical and mechanical engineers find cross-cultural work fairly easy.
The same is true of science and mathematics, which allow a wide range of scientists and mathematicians to communicate comfortably across traditional cultural and language boundaries.
Commerce is the most surprising and, in my opinion, important common ground between urban people the world over. We get up in the morning to a clock, go to work, usually commuting to a similar industrial office setting, working roughly forty hours a week, using an education that prepared us for the work and employing a plethora of tools and documents that are common to a global trade system.
Individually, we use accounting, banking, credit and a wide range of media, including the Internet and television, that have common commercial functions.
Because of commerce, the minutiae of our daily living patterns -- the way we spend our time each day -- is very similar in cities the world over. That creates a pervasive and extensive common culture on top of the traditional language-based cultures that separate us.
Commerce, more than anything else, has created a common cultural base: a set of common behaviors that allows the daily lives of several billion people to interact.
Summary
Commerce has changed the way members of commercial societies view the world. We can price nearly everything and we do.
Our perspective on daily life differs significantly from that of pre-commercial societies. We have allowed avarice free rein at a level and extent never before imagined. Cynicism and blasé attitudes run rampant in our society. Many people in our society take irony for granted; some find it a positive value.
Business values have entered our home lives, including managerial techniques for child rearing, scheduling our lives and controlling personal credit in a businesslike way.4 We have entered a world where whims are a common motivation and beauty can be found in many common forms.
The commercial world feeds our daily desire for of surprise and inures us to wonder.
As commerce spreads between cultures, it provides a shared and powerful common experience among diverse peoples of the world.
Chapter 4
My grandfather, the dentist, had a successful practice in Berlin from 1906 until 1917, when he was forced to leave Germany and return to San Francisco to start his dental practice all over for the third time. The whole family, including my father, who was born in Berlin, were not able to stay in Berlin after the United States entered the war against Germany. Grandpa was able to rebuild a thriving practice.
The 1906 loan that my grandfather got from the Bank of California was apparently forgotten or forgiven because his business was one of many destroyed by the 1906 earthquake. Today, such a loan would have been repaid with Federal disaster relief funds.
Commerce and Government
The vigor of commerce, in any country, depends on the government. Commerce needs a government that is neither too weak to protect private contracts, including citizens’ property rights, nor so strong that it squashes those contracts whenever it wants to. The government we have in the United States does well with commerce, and the government of Cuba does poorly.
It would be good to know how a government can promote commerce by fine-tuning laws, taxes and government agencies to create exactly the right mix of “not too weak and not too strong.” Unfortunately, right now, at the beginning of the twenty-first century, we don’t know the answer. We aren’t close to knowing the right mix of government policy that will promote commerce.
Wisdom suggests that we keep an open mind on the best ways for government to help, not hinder commerce. We should encourage governments to experiment with new laws, new tax ideas, new administrative policies and new judicial approaches. We need to learn what works best to keep commerce vigorous.
Mancur Olson taught economics at the University of Maryland. He was the first person whose fertile mind gave us a clear idea of the real relationship of government to commerce. Olson’s framework was the start of my thinking on the subject of commerce and the state.
Olson observed that the ideal government for commerce is somewhere between too weak and too strong. Too weak a government and property laws are not enforced, contracts are unreliable and long-term planning doesn’t exist. Industrial commerce needs long-term planning.
To appreciate the value of long term planning, think about running a stove-manufacturing business in Lebanon, Somalia, Nigeria, Afghanistan or any other country where the central government exerts little or no control over the country. Your stove company would have to be located in the capital city to protect the facilities and the inventory, and you would have to hire full-time guards to protect your facilities. You would also have to pay protection money to the local police. Trucks bringing your supplies would be regularly hijacked, and vital parts imported from outside the country would rarely make it to your factory. With little or no government, your production would limp along at a very low level with very high costs. Weak government is bad for industrial commerce.
The opposite is also true. When you have too strong a government, the government often dictates prices and ownership conditions. The too-strong government operates by fiat. What the government wants, the government gets.
A government that is too strong to be good for commerce would be a traditional Latin American country in 1900, where the dictator lets his brother seize control of any business that seems to be thriving. Think of Russia under the Bolsheviks, China under Mao, Iraq under Saddam Hussein or Cuba under Castro. A government that is too strong is a threat to commerce.
Three Different Types of Commerce
It would be nice if commerce had a simple definition and meant the same thing whether we were talking about the flower shop on the corner, the dentist upstairs or the chain bakery next door. But commerce is not one way of doing business.
Before we can talk intelligently about commerce and government, we need to consider the three different forms of commerce. Government has different ways of affecting the flower shop, the dentist and the chain bakery.
· One form of commerce isn’t hurt by the absence of government
· One form benefits from government
· The third form of commerce can exist only with the right kind of government.
The recognition of three types of commerce first appears in my book Gods of Commerce. My discovery of these varying forms of commerce came from twenty years of working with thousands of business clients. Nearly all the businesses I worked with fell into one of three distinct categories. The three categories are: trade, clientry and industry. Commerce includes all three ways of doing business.
Trade
Trade is a form of commerce that is five thousand years old. We all take trade for granted. A trader is a person who carries a bag of yarn from town to town, selling skeins one or two at a time. A trader can also run a flower shop on the corner that buys flowers from local growers and sells them at retail. And a trader can be selling at a flower stand in a large outdoor market.
The distinguishing mark of trade is the determination to sell one product (or service) at a time. “I’ve got to make this one sale right now.” “One pot of flowers, one bouquet.” Each sale requires a sale price that is high enough to keep the seller in business. The distinguishing trait of trade is one sale at a time.
Trade occurs everywhere and anywhere. It occurs in prison, at the South Pole, in war zones. It existed in the heart of Moscow under Stalin. Trade is present regardless of the conditions of government. Prisoners can always buy cigarettes.
The customers of a trader tend to be responsive to price and will change suppliers when another trader offers a lower price. The next time the trader comes along, the price he/she offers may be higher or lower than that of other traders. The customer usually seeks the lowest price.
When we think about trade on our current urban streets, we think of coffee shops, flower shops, flea markets and local grocers. These are traders who stay in business by selling one product or service at a time. These sellers price their products high enough to stay in business. Some traders may haggle, as they traditionally have for thousands of years. The trader may make it appear that haggling is lowering the price and may tell stories about the price being “below cost,” but that is usually not true. Each sale must be priced high enough to keep the trader in business.
There are also giant trading companies that sell millions of board feet of lumber from a lumber producer in one country to the overseas processors in another.
Mitsubishi Trading Company, selling over $100 billion a year, is still a trading company. If you could look at their books, you would see a large ledger with a separate line for each completed transaction. The one accounting line, in a trading company’s ledger book, includes all the details: name of seller, buyer, price, volume and a description of any credit involved. Billion-dollar trading companies still make one sale at a time.
Successful traders usually have to have something in their hands or wagons to sell (the exception being services, like those of storytellers and masseuses). These objects of trade need to be created and stored somewhere.
In the days before industrial commerce and large stable governments, cities were the safe places where trade goods were assembled and produced. Cities usually had some form of secure storage for goods and a few financial organizations (banks to hold gold and insurance companies to protect merchandise against loss). Cities were usually safe because local rulers hired military protection and in many cases built protective walls. Safe cities have always existed, even if an individual city didn’t survive in one place for long. Traders were always able to find a location for assembly, production and shipping. Early locations were Baghdad, Tyre, Carthage, Alexandria, Constantinople, Venice and, later, Amsterdam and Milan.
The trade form of commerce does not require a state or a government. Trade goes on in war zones, on the streets under communist tyranny and in prison. Trade benefits from stable markets, and traders will centralize their business in cities that offer safety. Trade does not need states or government.
Clientry
Clientry is a new word. Clientry is the form of commerce that is based on lifetime relationships. The goal of clientric commerce is to provide a product or, more often, a service to a customer many times over a lifetime. In clientric commerce, the price of the transaction is set at a point that satisfies both the seller and the buyer. The goal of the pricing is to make sure that business relations continue over a long period.
Clientric commerce is very different from the trade form of commerce. A trader finishes one sale and is immediately looking for the next. Traders aren’t necessarily honest, since many of them can move on to the next town.
Clientric business people stake a great deal of their business on their integrity, since they plan to service the same customer many times over a long period.
Clientric businesspeople include doctors, lawyers, graphic designers, healers, tutors and gardeners.
Clientric businesses don’t operate the same way that traders do. A trader wants you to believe that you are getting the lowest price and the “best deal.” Not so the clientric businessperson.
The clientric businessperson wants the customers to feel they are getting the best service. Price is a subsidiary concern; service is most important. Few people choose a dentist because he or she is the cheapest dentist available. People want a dentist who is competent and personable. The same is true for all other forms of clientric commerce. The long term relationship, trust and competence are what matter; far more than the price alone.
The size of a business doesn’t determine whether it’s a trade or clientric form of business. Large corporations can be clientric. An aircraft repair and maintenance business is clientric. An aircraft repair business will have the goal of a long-term relationship with their corporate airline customers and they have to plan for a long-term relationship since our safety depends on it. The same focus on long-term relationships applies to a good hospital and a good life insurance company.
Clientric commerce has existed for as long as trade; think of ancient temple prostitutes, healers and advisors of every sort.
Clientry does not require a state or government, but clientric business benefits significantly from social stability, however provided. A dentist in a war zone or on a cruise ship is not likely to see the same patient again. But in a stable location the dentist can develop a loyal, long-term clientele. Stability is not necessary, but it is important. 1
Industry
Industrial commerce, the third form, absolutely requires government.
Industrial commerce only exists because of government. Government was the system that made industrial commerce possible.
We tend to think of industrial commerce developing in parallel with technological innovation, and we ignore the coronary artery of industrial commerce: government. Josiah Wedgwood was one of the first practitioners of industrial commerce. Wedgwood refined the manufacture of China with production lines for painting, glazing and firing, but in order to do so he needed the rock-solid British Empire -- with its financing, water power, skilled laborers on hourly wages and the customer base of London, the style capital of the world. All of the things that made Britain strong and -- stable also made Josiah Wedgwood’s marketing and high sales volume possible.
A Josiah Wedgwood could never create a great industrial company in Cuba, Nigeria or Libya today. Industry needs a stable, good government.
Trade and clientry differ greatly from industrial commerce. Industry is any business where increasing production decreases cost. Its simple, if you make more plates, then each plate costs less to produce. We all know that concept (or we should). The increase of production and decrease of unit cost occurs when a business uses every known form of physical and social advantage.
When most people think about industry, they think about the application of power or technology to the production line but that is only a small part of industry. There are several other ways that increasing production decreases cost. A chain bakery may have a production-line oven, but what makes it a chain bakery are its many outlets with large-scale marketing programs.
High-school textbooks still teach that industrial commerce is tied to production lines and technology. High-school students are still hearing about the application of power to the production process in the form of steam, electricity, railroads and cotton gins. These are old tales of industrial efficiency; Adam Smith discussed them extensively in the mid-1700s.
The most significant reductions in unit costs, however, have come from changes in our social life. Picture yourself eating a thawed frozen microwaved apple pie for dessert. Thousands of people had to be willing to eat a store-bought pie before pies could be mass-produced. Traditional women, only a few decades ago, were proud of their home baking and would never have thought of serving a store-bought frozen pie. Our social life had to change before industrial commerce could be applied to apple pies.
Another example of changes in our social life has increased production and decreased unit cost is the supermarket floor plan. Picture a supermarket; now picture an old-fashioned grocery in a cowboy movie, with barrels of pickles out front on the porch, a cash register near the front door and the owner in a rocking chair. The supermarket is very different.
The supermarket has an entry/exit area, long parallel aisles and a checkout stand near the entry/exit area. This standard supermarket floor plan compels the customer to move about the store the way the store wants him or her to move. The floor plan increases the amount of product that gets displayed and sold, while decreasing the number of employees. We’d have a hard time imagining one old-fashioned clerk in a rocking chair handling thousands of different items, in large volumes, in his dark, crowded grocery store.
Because we are willing to walk around grocery store aisles and stand in line at checkout stands, the industrial production and sales of a wide variety of foodstuffs has become more efficient.
Another example of consumers changing the way they live to make industrial commerce possible is the wristwatch. In the 1880s, the few stable governments of the world created standard time zones. Standard time zones -- Eastern, Central, Mountain and Pacific in the United States -- made the watch a tool of productivity. Before standard time zones were established, everyone set their watches and clocks based on what time the sun came up in their town. The time was different everywhere. Railroads needed conductors and a large staff to make even a simple train system work. Railroad people had to have their own complex time schedules to make sure that trains coming in opposite directions didn’t crash. In the absence of standardized published time schedules, it was the conductor who made the decisions on when a train should leave, arrive, speed up, or slow down. Standard time zones made schedules possible, and running the train could be left up to the engineer at the controls. (Watches for railroad workers took the form of wristwatches for the larger working population).
Industrial Commerce Requires Government
Government is essential to industry in many other ways than establishing time zones. Industrial commerce couldn’t take its first breath until government created courts and judicial systems to ensure the stability of contracts. The Magna Carta in 1215 was an early English document that provided fertile soil for the growth of industrial commerce. The Magna Carta was a contract between nobles and a central government to enforce property rights and trade agreements. It was profoundly significant because it was a contract establishing the right of private property that made other contracts possible. The Magna Carta bound the nobles to support the weak central government and bound the weak central government to provide a service that the nobles needed: protection of their property by sheriffs and courts.
The first countries where industrial commerce began to grow, a few centuries later, were those that had long-established stable judicial systems: Britain, home of the Magna Carta, and Holland, a trading center with the best elective government in Europe.
Once a working judicial system was put in place, industrial commerce next needed corporations. Government charters created the corporation, a brilliant invention for accumulating capital over long periods of time from decades to centuries.
Partnerships existed long before corporations and coexist with corporations today. But the corporation was the government-backed innovation that was needed for industrial commerce to develop. In addition to greater potential for capital accumulation, shareholders are easier to replace than partners and create a greater need for managerial continuity.
The list of other government functions that were essential to industrial commerce is long, and we take many of them for granted now.
· A common and stable currency.
· Equity markets to raise capital and price the value of the business.
· Criminal laws and law enforcement.
A common currency creates larger markets; Equity markets allow strangers to provide a business with capital; Criminal laws and enforcement have always been vital to minimize theft.
What Type of Government is Best for Commerce?
What types of government are conducive to industrial commerce?
Under what conditions and at what point are governments counterproductive?
To provide useful comments on these questions we must try to look beyond centuries-old arguments about unions, socialism and free markets.
People have long argued that industrial corporations are ungovernable and that in order to restrain their obsessive growth and monopoly tendencies, we need unions to organize workers to counterbalance the corporation power.
· People have argued that governments should own all large corporations to keep them under control and distribute profits equitably to the citizens of the state.
· Still other people have demanded that governments own all corporations.
· Others believe that government should own very little, that nearly all industrial commerce should be conducted in open markets, and that many government services should be privatized.
When we look beyond these arguments we find a vast amount of data to consider. Industrial commerce existed two hundred years ago in northern Europe. Since then, it has been introduced in more than 150 countries, though it was not successful in all of them.
Many of these 150 countries first encountered industrial commerce one hundred years ago, others more recently. That means we can get a large number of observations by multiplying the number of years a country has had industrial commerce by the number of countries. The total is roughly 10,000 government/years in which industrial commerce has interacted with different forms of government.
The evidence from these 10,000 government/years is summarized most effectively in the descriptions given by Mancur Olson at the beginning of this chapter.
There has been a wide range of governmental arrangements with industry. Alfred Chandler covers much of this material in his book: The Dynamics of Industrial Capitalism, Belknap Press, 1994. Chandler points out that Germany, France, Japan and the United States have followed different approaches to government regulation of industry.
France has managed industry as part of a national plan with industry supporting French foreign policy and labor union policy. Germany has used an approach that Chandler calls stakeholder industry, where the state, labor unions, the equity shareholders and the banks all play a consensus role in industrial management. Japan has used a bank-financed form of corporate control with four families of industrial companies working together as networks. The United States employs government regulation to keep financial data public while exercising modest restraint on industrial monopoly practices.
The problem of untangling the relationship between commerce and the state is seen in a comparison of the United States and Japan.
Both countries are among the wealthiest large industrial nations. The United States has one of the highest crime rates in the world, Japan the lowest. Americans are the world leaders in joining voluntary organizations; the Japanese are laggards. Americans have distinct God oriented religions, the Japanese have a combination of animistic and Buddhist theologies but no personal God.
America has a highly decentralized political system, with federal, state and local governments all collecting their own taxes, writing their own laws and administering their own affairs. America’s federal government spends a relatively low share of national income directly. This country has more elective offices than any other, including, in some states, those of judges, which means that in each four-year cycle we hold about one million elections. American government bureaucracy is bloated and notoriously wasteful.
Japan has had a central government for over one thousand years. Four hundred years ago it became more centralized. It became strongly centralized150 years ago. More than half of all Japanese live in two metropolitan areas. Government bureaucrats pride themselves on their efficiency and sparse staffs. Japan also has a relatively low total tax rate, comparable to America’s but it comes mostly from a national tax.
The United States has no large socialist party, and never has had. Nor has it ever had a significant fascist movement. Unlike conservative parties in Europe, its home-grown version has no aristocratic roots. Japan has had a modest socialist party and a highly structured society. Japan does not have a European or Indian style class society. It is structured in a descending social ladder from the Emperor at the top to a homeless person in Osaka at the bottom. Arranged marriage and adult adoption assure mobility between steps on the ladder.
America has the world’s highest military spending, Japan one of the lowest. America has the most lawyers per head, Japan the least. Both countries have a high proportion of young people in universities and a persistent work ethic.
America has an abundance of natural resources; Japan is a narrow island that is mostly mountains, with virtually no resources.
America takes in the largest number of immigrants of any country. At the end of the twentieth century American had 33 million people living in the country who were born outside it. America’s population is growing, and the average age is young and stable. Japan has few immigrants a declining and aging population.
Technology in both countries is fairly comparable. However, America has almost three times as many Nobel Prize winners than the next country (Britain), and Japan is far down on the Nobel list.
America has the greatest differentials of income of any industrial country and Japan the least. More billionaires live in Seattle than in all of Japan.
America has many hundreds of large corporations, and those corporations have few or no connections between them, either social, political, alumni, university or family. Most American corporate capital comes from public market equity stock.
Japan’s top corporations, with few exceptions, belong to one of four families that provide very close ties on social, political and most importantly, financial matters. Most outside corporate capital comes from bank loans within the corporate families.
America has had higher unemployment rates than Japan for fifty years. Japan aimed for low unemployment using government protection of small business. Laws protecting small businesses were implemented in the 1950s. Japan has many times the number of small businesses per capita than the United States. Small business sops up unemployment and uses the least skilled workers in the labor market. Today, as a consequence, Japanese consumers pay more for their market basket of discretionary goods than Americans. Japanese have significantly higher savings than Americans and very little consumer credit. The opposite is true of their American counterparts.
Considering the differences between these two societies and knowing the intricate nature of commerce and state regulation, it is hard to see how any general rules of governance could be constructed to make sure that commerce thrives in both industrial societies.2
No clear pattern of success emerges from these general patterns of government/industry interaction.
General Points
Without clear and direct conclusions from looking at the interaction of government and commerce there are, nevertheless, some general observations can be made:
· There is positive evidence that freer trade is good for all commerce, both domestic and international.
· There is positive evidence from Singapore and Hong Kong that commerce can thrive in a small city/state environment. Industrial commerce doesn’t need much hinterland, but it does need skilled, educated and reliable workers.
· We know from Cuba that driving the entrepreneurs and managers from a country can stifle commerce for decades.
· State ownership of industrial commerce is rarely productive.
There is not much more strong evidence. There are counter examples and strong disagreement on all these issues. Some countries with vibrant commerce have high taxes; others have lower taxes and commerce does well, while still others have strange tax arrangements yet commerce survives.
In summary, there is a great deal more to learn about how government stimulates or retards commerce.
If we are wise, we will encourage experimentation and observation.
Summary
The interaction between commerce and the state is complex and includes corporate structure, finance and detailed regulation. Even in societies that want to promote commerce, the most effective tools for success remain elusive and are the subject to on-going experimentation.
Footnotes
Introduction:
[1] Our modern world thrives only in parts of the planet. Large numbers of people live in tribal societies and in communities that are distinctly not modern. Modernity is the result of a combination of commerce, technology and urban living. Nevertheless people outside the modern world interact with modernity, willingly or otherwise, and that interaction could benefit from an understanding of commerce.
Chapter 1
[1] My personal view on morals and morality is that morality exists in an amoral world. Morals exist without any religious or super-human reference. Millions of Americans with a variety of different religions have morals, as do atheists and those who follow no religion at all.
These same Americans sit on juries and judge their fellow citizens in courts. We don’t think twice about the disparity of their religious backgrounds.
Morals exist in a society as conventions of behavior.
It is easy to find moral virtues in commerce, which traditionally encourages hard work and rewards deferred gratification.
It is even easier to find moral outrages in commerce, since it rewards obscene, illegal and outrageous behaviors as well as well-intentioned ones.
2 The public-interest law firm was Public Advocates in San Francisco. The lead lawyer was Robert Gnaizda.
Chapter 2
1 Mark Twain’s scatological book is still found in rare books rooms. 1601: Conversation, as it was by the Social Fireside, in the time of the Tudors.
2 Newsweek: September 20, 1999.
3 Fortune magazine Japan Issue: September 1936
4 The Swiss watch industry has long concentrated on marketing watches through a wide variety of global marketing channels. The industry has historically tried to use a standard mechanical watch core with extensive variety in the case designs.
When digital watch technology arrived in the 1960s, the Swiss industry focused on developing a single electronic core for use in the myriad cases. The core became the Swatch (Swiss Watch), a quartz mechanism used in nearly all Swiss watches.
5 Commerce has another positive social value: It is a non-zero sum institution. In commercial transactions, it is extremely rare that the seller or buyer is the winner while the other is a loser.
In static societies, many transactions, whether social, military or political, are zero-sum transactions where one person is the winner, the other is the loser. (The term zero-sum came from mathematical game theory after World War II.)
It may have been hard for thinkers living in the eighteenth and nineteenth centuries, when global boundaries were rapidly expanding, to recognize that commerce was a non-zero-sum environment. It was easy to overlook the power of non-zero-sum commerce and ascribe prosperity to growing world resources.
Adam Smith and David Ricardo recognized that in voluntary commercial transactions, all parties benefited, but they didn’t have the powerful language of mathematical game theory to explain how socially valuable this non-zero-sum quality is for the common good.
Chapter 3
1 All Simmel quotes are from pages 255-6, The Philosophy of Money, Routledge, 2001.
2 By a “certified world” Rorty means to say that our reality is based on a variety of perceptions not on a god-ordained, universally-accepted, concrete, physical environment.
3 Whorf and Sapir were anthro-linguists in the early part of the twentieth century, who explained, using the Hopi culture as an example, that a culture includes its entire worldview in its language. As a result, Whorf and Sapir said, people from different cultures who grew up having seen the world through their own language could never really understand people of another culture.
The Whorf-Sapir model argues that the most people from different cultures could hope for would be enough commonality to get along superficially. The languages of different cultures embody such different worldviews that cross-cultural understanding is only a dream. Whorf-Sapir believed that there is inherent incomprehensibility among cultures.
4 One of the pseudo-commercial worldviews that was excluded from this chapter is the widespread view that most people are driven by money and make decisions based on considerations of monetary self-interest. This is a mistaken view and it does not come from observation of life in a commercial world.
The neo-Marxists claim that nearly all political and behavioral acts are self-serving, done for monetary reasons. This is a view that is found in many places in the world, including former communist countries and among the millions of people who have the ideology of rebellion that was promulgated in Marx’s nineteenth-century anticommercial milieu.
This neo-Marxist view of the world is wrong because successful commercial behavior is premised on the basis that each individual has unique tastes and appetites. People have a wide variety of personal motivations and drives, and these multiplicities combine to create markets. Money or selfish monetary interests alone may motivate some individuals, but the number of such individuals and the impact of their self-serving behavior is limited.
The notion of homogenous human behavior (i.e., all people are all driven by money) is ideology, not a reality based on commercial experience. Business people know that human behavior has a variety of motivations and an even greater variety of commercial outcomes.
Chapter 4
1The following section is selected from Gods of Commerce to supplement Chapter 4 material on the three forms of commerce.
The nature of clientric business can be understood by studying differences. Consider the following list of headings in the San Francisco Yellow Pages:
Contractors-Paving
Contractors-Pile Driving
Contractors-Pipe Line
Contractors-Pole Line
Contractors Referral Services
Controls, Control Systems & Regulators
Convention Services & Facilities
Convents & Monasteries
Conveyors & Conveying Equipment
Cookies & Crackers
Cookies & Crackers -Whsle & Mfrs
Cooking Schools
Cooking Utensils
Coolers-Evaporative
Cooling Towers
Cooperatives
Copper
A yellow pages listing is about as close as one can get to business reality. There are nearly 380 separate businesses listed in these categories in the San Francisco book, including many national and a few international businesses.
Some eighty of the 380 yellow pages businesses are traders.
A few traders are found in the convention services listings: local print-copy shops, local hotels that depend on walk-in convention business, a bus tour of the city. Most of the cookie listings are traders listed as retail bakeries. Some of the cooking-utensil listings are retail stores. In most of these cases, customers come in only once and are not seen again. Not all retail business is trade, because some unique stores, such as custom-made women's clothing, receive 60 percent of their business from repeat clientele. That makes them clientric.
Two hundred of the 380 yellow page listings are industrial companies and appendages of industrial companies.
In the contractor categories, several contractors own large pieces of equipment that are cost-effective on large-scale jobs. That puts them in industrial commerce. These businesses have grown to fill geographic niche in their area. In the controls category, nearly every business is the appendage or outlet for a large, specialized industrial manufacturer. Each control device or system is highly specified to a technical niche, such as the Fenwal thermo switch and automatic gas ignitor. These pieces of equipment are made in low-cost, heavily equipped factories that distribute worldwide. Some of the cookie companies are production lines, like Pepperidge Farms. The conveyor equipment and the cooler companies are similar to the control systems companies. The copper companies are vestiges of the earliest industrial forms, not very different from their industrial commercial ancestors a hundred years ago.
Among many of these industrial companies are some that have clientric attributes.
Most of the contractors work with a short list of clients over a long period of time. Many of the distributor outlets work with a limited number of repair workers and engineers who are long-term clients.
Slightly fewer than one hundred listings appear to be clientric companies.
A few of the smaller contractors are really subcontractors who work for a short list of general contractors. Most of the convention services are small, specialized companies that work with a client list that provides 80 percent of their revenue. These same clients provide word-of-mouth referrals for the remaining 20 percent of the revenues.
Convention services include catering services, specialized tour services, convention organizers, facilitators, display and exhibit experts, equipment rentals, and audio-video specialists. The cooking schools service communities of special interest. Scattered through all the categories are especially skilled workers, consultants, professionals and technical institutions that are clientric, with repeat customers and established reputations. Not all of them understand the clientric nature of their businesses, not all run their businesses well, and not all will be in the yellow pages next year.
There are several listings that elude my three categories. Convents and monasteries are not commerce. Some of the convention centers and bureaus are built with public funds and managed by government agencies for civic goals that are not 100 percent commercial. The contractor referral services are oddities because their client appears to be the public, but it is really the contractors who hire them. I can’t categorize the five names listed under cooperatives.
Distinct Clientric Characteristics
A clientric business, when it is well run, has five distinct characteristics: recourse, employee and customer esprit de corps, a general absence of advertising, open or transparent systems (especially the financial ones) and cautious expansion plans.
Recourse is the implicit and explicit message that the customer will always be recompensed in the event of errors, omissions and misunderstandings. Recourse is the touchstone of long-term relations.
Esprit de corps reflects the everyday working and operating environment of customers and employees. Maximum authority is delegated to employees with customer contact, which imbues employees with a positive attitude.
Advertising has little or no relevance for a company that has a list of its customers and seeks long-term relations. Satisfied customers promote the business.
Openness is the sine qua non of trusting relationships. A trusting relationship is at the core of long-term customer interaction.
Caution is important to clientric businesses. Expansion is seldom considered important if it might reduce attention to existing customers.
Clientric Business World View
The clientrist’s focus on long-term customer relations requires a calculus-like approach to human relations that is very different from the short division people skills of industrialism.
People remember being mistreated and deceived, and will behave differently as a result. Because of this longer-term clientric calculus (and it is a calculus) arising from a worldview of social-resource optimization, clientric business behavior favors honesty, caring, and concern for the common good.
Clientrists are postindustrial in this most essential business worldview. Business doors remain open in physical, metaphorical and behavioral ways. The number of clientric businesses in most readers’ friendship networks is limited. The clientrist you know could be your doctor, lawyer, graphic designer or business consultant of exceptional caliber.
The need for this open-door worldview arises from the desire to establish long-term client relations. Such relations are generally founded on mutual trust and the customer's recognition of competence in the business.
Both trust and recognition of competence are in turn based on the known absence of deceit and the ready access to objective evaluations. This in turn favors openness in information, openness in finances and participating in or creating organizational structures that cope with the occasional lapses of mutual confidence, such as legally binding warranties, consumer mediation groups and labor contracts.
In other words, the client must be told the truth. The business must have public audits and publish financial statements. The open-door business worldview is predicated on the trust that the business is safe to deal with. Failures of trust exist, and are dealt with methodically with the help of friends, associates, affiliations, organizations or technology. Such failures are also of low probability. Technology is helpful here, in the sense that a credit system will keep most frauds away from a business.
The clientrist businessperson, like a technologist, can be found in many nations and in many skin colors. What distinguishes this person is his or her business worldview.
A worldview is created by experience in a family, in a culture and in a business.
These questions are uppermost in the clientric mind: What's really going on? What is the evidence? What are the numbers? What are the rewards? What changes will it cause? What is the most efficient way to do this with materials and people? What are the organizational implications and could they be helpful to my clients? The clientric businessperson’s first recourse to problems is always to mediation and establishing mutual advantage in order to preserve a friendly relationship.
2 Pages 108 to 113 excerpted loosely from an editorial article in The Economist, November 6, 2003
Bibliography
Chandler Jr., Alfred D. Scale and Scope: The Dynamics of Industrial Capitalism: Belknap Press, 1990. ISBN: 0674789946
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Recommended Reading
Appleby, Joyce. Liberalism and Republicanism in the Historical Imagination; Harvard University Press, 1992. ISBN: 0664530136
Beniger, James R. The Control Revolution: Technology and Economic Origins of the Information Society; Harvard University Press, 1986. ISBN: 0674169867
Douglas, Mary. How Institutions Think; Syracuse University Press, 1986. ISBN: 0815602065
Drucker, Peter F. Managing for the Future; Truman Talley Books/Plume, 1992. ISBN: 0452269849
Ferguson, Niall. The House of Rothschild: Money’s Prophets 1798-1848; Penguin Books, 1998. ISBN: 0140240945
Israel, Jonathan I. The Dutch Republic: Its Rise, Greatness, and Fall 1477-1806; Clarendon Press-Oxford, 1995. ISBN: 0198207344
Kuwabara, Takeo. Japan and Western Civilization; University of Tokyo Press, 1983. ISBN: 0860083381
Nakayama, Shigeru. Academic and Scientific Traditions in China, Japan and the West; University of Tokyo Press,1984. ISBN: 086008339X
Muller, Jerry Z. The Mind and the Market: Capitalism in Modern European Thought; Knopf, 2002. ISBN: 0375414118
Sowell, Thomas. Migrations and Cultures: A World View; Basic Books, 1996. ISBN: 0465045898
