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Can a business be ethical and survive?

A couple weeks ago I drove up north to a cabin in Algonquin Park with a bunch of books, a guitar and Damon Vicker’s audiobook “The Day After The Dollar Crashes” on my iphone for the drive. It was a weekend intended to be a mini-retreat where I recharge and map out the next year for my business, but I ended up thinking a lot more about business in general.

Perhaps it was a combination of listening to the Damon Vickers book, then after a long hike I ended up starting to watch Zeitgeist Addendum on the iphone. The first half of the movie does a great job explaining the insanity of the current monetary system, but the second half of the movie then steers hard-left as Jaques Fresco appears on the scene to explain how a world subject to his command would be utopia.

Once again, people make the old mistake of looking at what’s wrong with the world and blaming it on “free markets” and “capitalism”. What is now becoming a mantra for me,

What passes for “Free Markets”, aren’t and “Capitalism” isn’t.

Peter Joseph has done the world a service with his first Zeitgeist movie, although I caution one to watch it with a grain of salt and keep your tin-foil hats nearby. The world is not run by a shadowy cabal at the top who controls everything, but it certainly does operate within some very flawed and unquestioned frameworks, much to it’s detriment.

Alas, the left turn is a red a herring. As Jaques Fresco declares that it is impossible for a business to be “ethical”, his example is a storekeeper:

If you came into my store and I said this lamp that I got is pretty good, but the lamp next story is much better, I wouldn’t be in business very long, it woudn’t work, if I were ethical it wouldn’t work.

I found that one seemingly innocuous and simplistic example stuck with me and bothered me because it demonstrated such a clear ignorance of business.

Off the top of my head, here’s why an ethical businessman could inform the customer about the “better” lamp next story and remain viable:

  • The lamp next door may be better, but more expensive.
  • The lamp next door may be better, but harder to get replacement parts for.
  • The lamp next door may be better, but the store may be closed.
  • The lamp next door may be made from the skulls of baby seals.
  • The lamp next door could be a 110V lamp while the customer needs 220V.

So there are all kinds of reasons why you could tell a prospective customer about the better, superior lamp next door which would serve to inform that person, and there are a myriad reasons why you would still make the sale of your lamp to that customer.

Let’s say you didn’t though and that customer went next door and bought the lamp. What could happen?

  • You’ve done that person a service, and they will remember you for in the future. I know this from direct, personal experience spanning over 15 years of operating businesses. Figure out what the customer wants and then help them get it, whether it’s from you or not. I guarantee, that business comes back to you down the road. I know this to be fact.
  • You’ve done the merchant next door a service, and maybe you carry something that’s better than what he has, and next time he’ll send a customer your way instead. By co-operating with the merchant next door, you both extend your reach into the marketplace.
  • You could collect a commission from the store next door for the referral (and you could pay him one for any customers he sends over to you).
  • Because you have put the customers overall needs first and given him information to meet that need,  you have likely proven to be a worthwhile source of information, and earned permission to communicate with that person in the future. You could collect his contact information and generate a lead.
  • The market could be communicating important information to you about the lamp sector and your place in it. This is the market’s job. Not a committee of experts deciding what  lamp everybody should be using via the scientific method, but rather people making choices based on their requirements.
  • And finally, if the store next door really truly has better lamps, at better prices and on better terms with better deliverability then maybe you shouldn’t be in the lamp business.

An unethical operator can always make the short-term decision for the “quick buck”, but what I and many other business people know from direct experience and from the operating results of our own (profitable) businesses over time: the quick buck is most often the last buck, or rather: putting the customers needs above your desire for a quick buck, results in recurring revenue over time.

Whichever way you arrive at goal of matching the customer up with the best lamp for his needs (taking the ethical route) you wind up with greater rewards over the long term. Because even by losing the sale, you may have acquired goodwill, a lead, a referral or important market signaling.

There is a new wave occurring and it is going in the opposite direction of the “Zeitgeist Movement” or “Venus Project”, it basically one where natural capitalism (real capitalism, and true market forces) are going to deliver the solutions to the problems we face.

In other words, to quote Amory Lovins in his “Winning The Oil Endgame” lecture

“…thus the Whales Were Saved by Profit Maximizing Capitalists.”

…is the shape of things to come and the ethos of true capitalism.

Watch this space to see it unfold. In the meantime, get and read Damon Vickers book. It is more a book about repairing and rebuilding than it is about the dollar crashing.

About the author

Mark Jeftovic

Mark Jeftovic is the creator of Wealth.net, founder and CEO of Canadian domain registrar and DNS provider easyDNS.com and member of the indie rock sensations The Parkdale Hookers.

His personal blog is at markable.com

18 comments
Stefan Fincken - March 4, 2011

You seem to dismiss a resource based economy only on the lamp comment. I hope your readers delve into the subject themselfs and don’t take you as a gatekeeper.

http://www.youtube.com/watch?v=k5kHACjrdEY&feature=player_embedded

Reply
    Mark Jeftovic
    Mark Jeftovic - March 5, 2011

    The lamp comment illustrates Fresco’s core belief that it is inherently impossible for business to be ethical, and he’s wrong.
    I dismiss the “resource based economy” ideas put forth by Fresco and ZM because quite simply: command economies do not work.

    Thanks for stopping by and thanks for the comment.

    Reply
      Stefan Fincken - March 5, 2011

      So, some people practise their business ethically. That doens’t mean there are none that misbehave in their business practises. Give them free reign, and they’ll buy their way into politics, they buy the policy that is beneficial to the company or corporation. Look at corporate spending in the U.S. With corporations richer then many countries, they can put a lot of pressure on policymakers. Also look at what the (proponents of the)free market has done to countries in debt to the IMF and such. Shock-economics en resource exploitation haven’t brought much prosperity in for instance, Haïti.

      Then there is the demand for constant economic growth to geep the wheels of production turning and to steer away from inflation. Manufactured demand, plannend obsolescence, and the mountains of waste and environmental destruction thet go with it. Fractional Reserve Banking coupled with interest asked on every loan given means there is more debt then money.

      Please tell me, how is this sustainable? Endless economic growth in a finite world with finite resources… How is this sustainable?

      Have a good weekend!

      Reply
        Mark Jeftovic
        Mark Jeftovic - March 8, 2011

        “Give them free reign and they will buy into politics” – or, give politicians free reign and they will eventually consume the entire resource base of the population and reduce the populace to slavery.

        What we have today is an oligarchy: business interests (this includes big unions, btw) closest to the political nexus are exempt from economic law and consequences are perpetually deferred (and thus amplified). When a bank gets greedy and makes too many bad loans it goes bust. When a car maker finds itself making overpriced, low quality goods nobody wants to buy, they go bust. Except in our system, where consequences of bad decisions are chronically kicked down the street and then somehow it becomes the fault of the “free markets”. In a truly free market, interest rates would not be zero, it would not be illegal to short sell financial stock, and when a mountain of b.s. derivatives goes up in smoke, the counterparties go with it.

        The money system is theft, pure and simple: inflation and taxation hard code a treadmill into the entire facade, so that savers and those who produce value are punished while consumption and indebtedness is rewarded.

        The origin of true wealth is saving, it is in the resources and capital you don’t use. You can’t get to prosperity via borrowing, and today savers are punished while people are rewarded for buying stuff they don’t need with money they don’t have and being exonerated from the consequences of their own stupid decisions.

        “Proponents of a free market” don’t really want a “free market”, they want the same jerry rigged mess to continue. People like me want an actual, real, honest to god free market.

        Wrt planned obsolescence and resource depletion, take a look at a book called “Natural Capitalism”, If Damon Vickers book is the call-to-action, this one is the playbook.
        By shifting business toward what I call an “*aaS” model (the book calls it a “service economy” but that too has baggage: visions of out-of-work middle management flipping burgers), what they and I mean is *anything*-as-a-service model, especially for large capex items suddenly flips the model on it’s ear. Longevity and radical resource efficiency suddenly become a lift to the economics, not a drag. This is truly a revolutionary shift and indicative of the kinds of shifts smart, ahead-of-the-curve businesses are going to make.

        Reply
Colby Mortensen - March 8, 2011

The lamp next door may be better, but more expensive.
How is it ethical to knowingly sell an inferior product? Ever.

The lamp next door may be better, but harder to get replacement parts for.
Why would we make high quality products that are difficult to fix? Service industry? Hmm

The lamp next door may be better, but the store may be closed.
We can wait

The lamp next door may be made from the skulls of baby seals.
Someone who buys this probably has low moral standards.

The lamp next door could be a 110V lamp while the customer needs 220V.
Why wouldn’t we make high quality lamps that work in a higher variety of situations.

The truth is that cyclical consumption and like the guy up there said manufacturing of demand are unethical. You can be ethical and do good things in business for sure. But that by no means makes it good for society on a whole.

Reply
    Mark Jeftovic
    Mark Jeftovic - March 8, 2011

    “How is it ethical to knowingly sell an inferior product? Ever.”

    Let’s switch to laptops. I have a laptop for sale, you want one. You have $500 to spend and I have a nice laptop within your budget that meets your needs. The guy next store though, he’s got an AMAZING LAPTOP! Way more RAM, more hard drive space, faster bus speeds, dual processor. 4X as expensive. I’d be happy to tell you all about it, the contrasts, the differences. But at the end of the day, you want to spend within your budget and I have this “inferior” product right here for you. Am I being unethical? Or do you get decide what inferior AND ethical means? (Because in Fresco’s paradise, these determinations are made…how?)

    “The lamp next door may be better, but the store may be closed.
    We can wait”

    What if the item you’re buying is a component in something else or part of a supply-chain and waiting is not an option. Deliverability is a larger concern amongst professional corporate buyers than even price.

    “The lamp next door could be a 110V lamp while the customer needs 220V.
    Why wouldn’t we make high quality lamps that work in a higher variety of situations.”

    Well first off, who is “we”? Are you thinking of starting a lamp company? Bravo to you. I’m sure you’ll find the world of the business start-up tremendously exciting and rewarding, and your idea to manufacture a dual-power-mode lamp sounds interesting and it may even result in success in the marketplace. As long as you can keep the additional costs of building a lamp that runs under two incompatible systems under control and the additional cost of doing so doesn’t price it out of reach to your intended market, then you may have a shot.

    Oh, you mean “the royal we”, SOCIETY will decide WE NEED BETTER LAMPS dammit! and set out to make the best lamp ever. That worked out really well in every single command economy that’s attempted it. I hear North Korea is going gangbusters these days.

    Your answers to me suggest a tunnel vision that severely discounts economics. Economic laws, by the way, are not man-made, they are as natural as gravity see: Nature: An Economic History.

    What we are all in agreement on is that we have as a society been violating economic laws to the detriment of ourselves and our ecosystem, where we disagree is on methods forward.

    Command economies don’t work. There will be a new revolution around precepts of radical resource conservation, waste elimination, and energy efficiency…and it will be the next wave of businesses and entrepreneurs who will lead the way there….if we let them.

    The alternative is a descent into authoritarian rule, vicious resource competition and extreme socioeconomic polarization.

    Reply
Stefan Fincken - March 10, 2011

Nature, an economic history views the economic institutes as `living´ entities. Now what is really important? Those institutes, or the people they were made to support. If all economics is as the book suggests en evolutionary process, our current state must spring forth from the initial idea of true free market economics. Even though true free market economics was the goal, it apparently evolved to our current market system. Which is as you say not a true free market.

Also, what about environmental protection. Take away all regulations and company’s will want to produce their products as cheap as possible. This probably means les investment in clean production methods, less reduction or replacement of toxic materials, less incentive to recycle, more dumping of waste.

Look at cosmetics. There are still many company’s that produce lipstick containing lead and other heavy metals, even though they know it’s not healthy. Why do they do it, there is no regulation that prevents them from doing it! To see what products contain dangerous tocixs: http://www.cosmeticsdatabase.com/

Take Monsanto, producing plants that don’t produce seeds. The farmer needs to buy new seed for every season. All for profit, and all because there are no rules condemning it. I find it sickening. http://www.healthy-eating-politics.com/genetically-modified-plants.html

I suggest people read the book ‘the Story of Stuff’ by Annie Leonard.

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AT - March 12, 2011

I think the “better lamp” comparison is good, you just need to be honest and understand that with “better lamp” Jaques Fresco meant a lamp that has better value for money. So you sell lamps and you know next store sells the same lamps much cheaper or sells better lamps for the same price as your lamp. So you know lamp next door is better value. And if all other things being equal you just have ethical dilemma if you are honest.

Reply
    Mark Jeftovic
    Mark Jeftovic - March 15, 2011

    Please explain to me what exactly “better” and “value” are in the context of this discussion. You can’t, because what is “better” and has “value” is different for everybody.

    This is the essential underlying mechanism that makes “free markets” and (real) capitalism work. Individual people making individual choices around how to expend their capital and trade aggregates into a “market”. The less that market is distorted and interfered with, the more accurate signals it communicates to all participants.

    Contrast with The Venus Project and the Zeitgeist Movement which according to their Wikipedia page states that:

    there will be no decision-making process, decisions are arrived at by using the scientific method, based on the carrying capacity of the Earth, rather than human opinions

    (emphasis added)

    And since ZM adherents are actively scanning the net for mentions of themselves, I assume this statement is well known to them and not disputed.

    So in “plain english” terms what this means is a total command economy and dictatorship, because decisions will not be permitted. Nevermind the issues of “who gets to dictate?” and the fact that people have actively resisted totalitarian regimes from time immemorial, even if they didn’t (everybody repeat after me):

    command economies don’t work

    Reply
      Stefan Fincken - March 15, 2011

      Dear Mark,

      What holds ´value´ and is considerd ´better´ differs from culture to culture and from person to person. Ofcourse there are also a lot of things we can agree on. The fact that every man woman and child needs Clean Water to drink, Food to eat, Clothing, and a roof above their heads. Sadly, most people on this planet do not share in the abundance and excesses we in the western world have. Do you truly believe these problems will be solved when we free the market from all regulations? I for one think exploitation of weaker countries will only increase.

      Consider food. A basic human need. Even while food production has never been as high as it is today. It is the free market that brought us this global system. While considering food, consider almost all of it is produces with high demand for fossil fuels. Price of oil goes up, the price of food does so aswell. I guess your just out of luck if you can’t afford your dinner anymore? Ofcourse, you could say the millions of deaths occuring due to hunger world wide each year is the market correcting itself. That still leaves those people DEAD.

      Also, you haven’t adressed my previous comment. I’m interested in your opinion about safety meassures in extraction and production for workers and end-user. Safety meassures are expensive, they kost money, and a lot of it. Without any regulations, what is the incentive to provide safe work and products when the norm is maximizing profits? What is the incentive to internalise now externalised costs? What is the incentive to not exploit low-wage workers in sweatshops in poor countries in free-trading zones. I recommend ‘No Logo’ by Naomi Klein as a good place to start research.

      As for your “total command economy and dictatorship” comment, I think it’s not fair to just sling their arguments into that possition. They only say that if somewhere a decision is need to be made about something, the goal is to use all data available to find the best way of approaching the problem. Nowhere is there any mention of creating a totalitarian regime within TZM. I’ve checked. If anything, most people i’ve talked to think it would provide more of an participatory democracy instead of the representative democracy we have now.

      With kind regards,

      Stefan

      Reply
        Mark Jeftovic
        Mark Jeftovic - March 15, 2011

        Hi Steffan, sorry I never replied to your other comment. I’m traveling at the moment.

        I think there’s a need to pull things back a bit and clarify what my premise is and what I am and am not saying:

        Contrary to the position of Jaques Fresco, businesses can be both ethical and viable
        There is a revolution of sorts coming, and I believe that revolution will be defined by a next generation capitalism which will embrace extreme materials efficiency, waste reduction, biomimicry and a large “Manhatten Project” style push into clean energy.
        Most governments in this revolution will be more of an obstacle than an aide. They will dig in, cling to power and impede progress at every turn. As such, leadership will come from the private sector

        What I am NOT saying

        The world is great, and we have capitalism as we know it to thank for it
        That the current wealth disparities between countries and classes is non-existent or the just result of free markets
        That the economic and environmental mess we find ourselves in is a necessary result of progress and free market capitalism

        To paraphrase how Ghandi once responded to a question about Western Civilization, he called it “a good idea”. That’s how I feel about free market capitalism. What we have today isn’t that.

        Reply
        Radek - February 8, 2012

        This is soo btaueiful 🙂 I love your blog! I know a lot of people must have told this to u already but I have to say you are very creative. Continue to spread sunshine.. Warm regards from India~ Vasu

        Reply
Stefan Fincken - March 16, 2011

No problem, I have very little time to spare myself. Still, I find it good to talk about these things, few people seem to do. I appreciate an intelligent conversation. Other blog/website owners resort to banning as soon as there is a possibilty of a discussion or when opinions conflict. I guess they can’t see that someone’s opinions depend very much on their background, education, experiences and the environment they grew up in. Once you realise that, it should create some understanding i believe.

I agree, business can be viable and ethical. Where i don’t agree with you is, I don’t think a true free market would promote ethical behaviour if unethical behaviour is more proffitable, which it is, in a lot of cases. For instance in my toxic product argument a few posts back. Think of stuff like PVC (Polyvinyl Chloride: http://en.wikipedia.org/wiki/Polyvinylchloride#Health_and_safety) that is used in a lot of products. PVC keeps off-gasing chemicals that were used during it’s production, which isn’t very healthy, and unethical, wouldn’t you agree? When it’s burned the result is dioxin, which is associated with cancer. Now PVC is still in use, and being produced. This even when there are safer options.

The Global Development and Environment Institute of Tufts University in Somerville, Massachusetts has done research on the “The Economics of Phasing Out PVC” They state:

“The health hazards associated with the production, use, and disposal of PVC are, for the most part, avoidable. Alternatives are available across the range of PVC products. In some cases the alternatives are no more expensive than PVC; in other cases there is a small additional cost. Often there are good reasons to expect the costs of alternatives to decline over time.” (Source: http://www.healthybuilding.net/pvc/Economics_Of_Phasing_Out_PVC.pdf)

Sadly, PVC is still massively in use, even though meanwhile (the paper is from 2003) cheaper options are likely available. How would you suggest a switch is made in production if there aren’t any regulations that make sure producers stick to healthy alternatives?

Jacque Fresco never stated all businesses are unethical and unviable. He only says our current system will promote unethical business when it is more proffitable. Now he doesn’t say everyone will choose the unethical route when faced with the dilemma. Sadly, as we kan see in everyday life, some people choose the unethical route if it means more proffits. Or maybe they don’t know any better. Or can you provide a quotation and source to prove Fresco stated otherwise?

You mention the Manhatten Project:
“There is a revolution of sorts coming, and I believe that revolution will be defined by a next generation capitalism which will embrace extreme materials efficiency, waste reduction, biomimicry and a large “Manhatten Project” style push into clean energy.”

The Manhatten Project was instigated by government. It needed the government push to succeed. Now in your very next sentence you claim:
“Most governments in this revolution will be more of an obstacle than an aide. They will dig in, cling to power and impede progress at every turn. As such, leadership will come from the private sector”

Which is a bit contradictory to say the least.

Now I agree that government isn’t always healthy. But in my honest opinion, this is most likely the case when government isn’t controlled by the people. Take ‘Corporate Personhood’ for example (http://en.wikipedia.org/wiki/Corporate_personhood). It has thrown the door open for corporate (private sector) lobbying in politics in the U.S. fortifying the allready excisting and well known ‘revolving door’ between corporate bigcats and politics. In this case, a deregulation isn’t a positive thing I would say.

I mostly agree with the things you are NOT saying.

And Ghandi was right. It was a good idea for the knowledge of the time. I just hope we can all see that something has gone terribly awry. Now i’m not stating the Venus Project is THE SOLUTION to all our problems, but it is a course largely unwalked, and with the state of modern technologies, atleast worthwhile looking into. I think it would be foolish to disregard it, and foolish to follow it blindly. It’s a theory, and it needs some testing.

Reply
    Mark - April 13, 2011

    Hey Stefan, I am back. Been busy running the business, there’s a whole world out there to pillage and destroy 😉

    Quickly: My “Manhattan Project” metaphor may have been a poor choice of words, given it was a government initiative. Although I guess I have to admit, *sometimes* the government *almost* gets it right.

    Example: here in Ontario there is an initiative for alternative energy and renewables where the government guarantees your price on electricity you produce, this helps spur development in the field (much needed) and hopefully gets some inertia going with clean energies.

    As for Fresco, he basically said in the ZG Addendum movie “If a business were ethical it wouldn’t work”, which I think sums it all up. To me this statement means that businesses must be intrinsically unethical to be viable. Something I know to be wrong.

    Ethical vs unethical really comes down to time horizons: short term mindsets (and accompanying lack of ethics) may always outperform ethical behaviour, but, as per one of my favorite quotes of all time “sooner or later, everybody sits down to a banquet of consequences”.

    Regards

    Reply
Stefan Fincken - April 11, 2011

Hi Mark,

I hope you are doing well. Are you still traveling?

I’m very interested to hear what you have to say to my previous reply and would like to see the above discussion continue.

With kind regards,

Stefan

Reply
Stefan Fincken - April 13, 2011

Hahaha, you bastard! 😉

Indeed, government could spur the develpment of cleaner energy sources in lot’s of diffirent ways.

I agree, that “If a business were ethical it wouldn’t work” is a too black&white statement. There are businesses that are ethical. Still, rules and regulations help keep businesses in check. If you don’t agree, imagine the world without any child-labour laws. Or would you say child labour isn’t wrong if the market demands it?

I fully agree with your last alinea, maybe only adding “social norms/values” to the ecuation.

What are your opinions about the pvc-argument in the previous post, and the fact that corpartions now have personhood in the U.S.A?

Greets,

s

Reply
Money Crumbs - May 22, 2011

Ultimately, all economies should be about a better product. A better product would in theory get more sales and consumers would eventually elect to only purchase the better product thus weeding out mediocre / bad products which in turn would put companies producing mediocre products out of business – but not really.

Turns out that “better” is a very subjective concept. As the laptop example indicates above, the concept of “better” is really split across 2 new ideas “regular” and “premium”. Once again, the consumer gets to select which options is better *for them*.

Ultimately, in this wonderful world of ours where everyone is allowed to sell everything (all you need to do is pick up one of these “ordering books” on American Airlines filled with some really REALLY weird products), everything is in the consumer’s hands.

If I own a company and want to market my product as THE BEST and sell it for an astronomical price than it’s my call to do that. Why? Because the consumer will decided whether they agree with me or not. If they are stupid or ignorant enough to fall for it and purchase my “THE BEST” product for an astronomical amount of $ – it’s not my problem it is theirs. The question here now becomes: is the majority of the consumers stupid or not? Because if they are not stupid, than I will go bankrupt as not enough people will believe my “THE BEST” product – and than, the joke is on me as I am the stupid corporation living in a pipe dream thinking I have “THE BEST” product.

What I do consider extremely unethical however is the disproportionate price of gas these days which oil companies play with. Why would I consider that unethical? Because car fuel is an essential resource for *everyone* – if you can’t afford to use the gas station, may be you won’t be able to get to work and that impacts everyone.

In my opinion, anyone should be entitled to sell anything for any amount of money and let the customer decide. Exceptions being essential services which should have a government-regulated price; electricity and fuel would be 2 examples of essential resources. Everything else as far as I am concerned is better off privatized.

Unfortunately the above is not realistic because politicians are de-facto corrupt and very economically-stupid (with perhaps a few exceptions) – at least with the current choices out there….

I could keep typing forever, but i’m getting lazy 😉

Cheers,

MC

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Jay - October 12, 2011

Congnitive dissonance – sour grapes.

How can educated people honestly believe that capitalism works.

3rd world countries being exploited by the 1st world. – Capitalism

Offering so called ‘aid’ which african countries like Burkina Faso can never pay back. enslaving nations.

People reaping the benefits of this corrupt unjust system will always find ways to justify and defend it.

Enslaving nations so a that a small minority can live their lavish lifestyles.

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