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 Peg's
Polemic
Every
month, philosopher Peg Tittle casts off the calm, measured and qualified
style of her profession to deliver her opinionated and impassioned
column, exclusively for the TPM philosophy café...
Number
7. Profit
and Loss - and Marbles
Years
ago, Joseph Schumacher examined the ethics of unlimited growth and
concluded that "Small is beautiful." The business world, with no
shortage of conglomerates and an increasing number of mergers, seems
to have missed the message.
One
might quip 'Well, that's because hedonistic greed governs the business
mind,' but a quick survey of a second year Business class - in which
not one student answered the question 'Why is profit good?' with
'Because it gives me pleasure, it makes me happy, I wanna be a rich
sonovabitch' - suggests that either denial starts early or something
else is going on. (Or both.)
Most
students responded, by the way, with something like 'Profit is good
because it enables you to expand: to hire more people, to establish
branches in other cities, to increase production.' 'And why is this
expansion good?' 'Well, because then you can make more profit.'
(Can you say 'circular'?)
Limitlessness
is so ingrained in business policy and practice. Why is this so?
Because profit is so idealized in business policy and practice.
People in business assume that making a profit is their purpose.
('Non-profit business' is an oxymoron, apparently.) Some even assume
that making a profit is their right.
Defence
of maximizing profit/growth often includes an appeal to the responsibility
to shareholders. (Can you say 'pass-the-buck'?)
I
put aside, for a moment, the question of why a business has more
responsibility to its shareholders than to its stakeholders. (Distributive
justice according to contribution is not the only option.)
It
is explained to me that if someone invests in your company, giving
you money to use, you have an obligation to give them the best return
on their money. The best? Again, this notion of unlimitedness
appeared. Why not, I suggest, set a fair rate of return,
and then include that as an expense, rather like the interest on
a loan?
'Well,
why should people invest in your company if they can make more with
another company - they're taking a loss then.' Thus was I introduced
to the strange definition of loss.
In
business, apparently loss is defined as the difference between what
you got and what you might've gotten. The baseline is not an actual
amount but rather some ideal amount. (And they say business people
are realists.) The measure of all things is the maximum potential.
For
the rest of us, loss is the difference between what you have at
Time 1 and what you have at Time 2. Yesterday, I had 10 marbles;
today I have 7; so I lost a few - 3, to be exact.
Business
people have a different arithmetic: if they get 10 marbles and they
think they could've gotten 100, they 'suffer a loss' of 90 marbles.
(I'd like to point out, by the way, that by their own reckoning,
they've lost quite a few more than I have.)
All
of a sudden, someone's comment to my purchase of a CD player - "How
much did that set you back?" - made sense. At the time, I was puzzled
by his use of 'set you back'. It didn't set me back anything
- it cost me $300. But if you use as a baseline some imagined
million dollars you could make this year, buying the CD player will
set you back $300 from that million.
It's
a very strange definition. It's a very dangerous definition. First,
because it's not reality-based. (That in itself begs for the label
'schizophrenic'.) 'Could' is not the same as 'would'. And even 'would'
is a far cry from 'will'.
Second,
this definition of loss is simply illogical: you cannot lose what
you never had. What is actually being lost is not a certain amount
of money, but the opportunity to make a certain amount of
money.
Third,
it's very manipulative. The word 'loss' typically suggests cause
for condolence: it suggests you do not have what you should
have. But this definition entails a rather suspect sense of 'should
have', it presumes some sort of entitlement that is, at least in
my opinion, completely unjustified.
The
classic symbol of business success is a graph with a jagged line
on the diagonal up to the right: growth - unlimited growth. But
surely there is a point at which we have enough. Don't we all learn,
when we're about two years old, to 'say when'? (At that, I hear
a student in the back quip, 'No, we didn't learn that lesson. That's
why we're in Business.')
Peg's
Polemic will next be updated on June 1st 2001
Previous
polemics
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4.
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