A salesman sells you a tube of toothpaste, claiming it will make your teeth whiter than they’ve ever been in just a week of use. It’s a bold claim, but he wins you over — for twice what you’d normally pay for toothpaste. A week later, your teeth are still yellow, and you’re tremendously ill. Not only was the toothpaste nothing special, but it was also contaminated with a nasty bacteria; apparently, it was cheaper not to sanitize the toothpaste factory equipment. Now your friends certainly won’t buy any of this not-so-miracle toothpaste, but the damage is done. You’re vomiting, and the salesman’s got your money. Herein lies the problem with the profit motive: bad behavior is profitable.
Today, to some degree, bad behavior in the pursuit of profit can be met with a lawsuit, but if indeed the world is moving towards an unregulatable, irreversible currency such as Bitcoin, we can’t rely on reactionary, punitive measures to put a band-aid on this problem; it needs a solution. Fortunately, it isn’t insurmountable. It’s a bug in the system, and bugs can be fixed. To fix a bug, you often have to dig deep to find the root of the problem, deconstructing it — and the system it exists within — to its bare essentials.
This is an article in a series on how Zacqary proposes society might debug the profit motive. This is the first article, on the bug of profitable bad behavior. The others are on the “shiny gold coin” bug, and the pressure bug.
Problem: Profitable Bad Behavior
The profit motive emerges naturally in a money-based economy, because money equals power. One needs a bare minimum of money-granted power to pay for essentials (food, water, shelter), and any money beyond that grants more and more freedom: the more money you have, you can acquire more things, do more things, and get people to do more things for you. Therefore, the incentive is naturally to get as much money as possible.
Of course, as our example of the unscrupulous toothpaste salesman shows, “profit” and “good” don’t always intersect.
The most widely implemented solution to this has been government regulation. Truth-in-advertising laws are designed to prevent, for example, the salesman’s bogus claims of miracle toothpaste. Health and safety laws require the toothpaste factory to sanitize their equipment. The penalties for breaking these laws, in theory, end up costing more than the expenses of disinfecting a factory, or coming up with a truthful marketing strategy. With well-designed, well-enforced regulations, it becomes more profitable to do the right thing.
Other laws, it should be noted, contribute to the problem. Sometimes, should a corporation do the morally right thing, it results in them making only 46 bazillion dollars in a quarter, as opposed to 47 bazillion. This would be all well and good if corporations, in most jurisdictions, weren’t legally obligated to maximize value for their shareholders, no matter what. This tends to result in the mindless pursuit of short-term profit, and total disregard for its effect on the world.
In some cases, perhaps the regulations which outlaw scummy behavior correct the problem caused by the make-money-or-die laws: they mandate the extra cost of complying (by doing the right thing), thus lowering the “maximum” amount of profit. Therefore, you could argue, that if government got out of the way entirely, businesses would be free to do the right thing of their own accord.
At which point I would argue, “Yeah, sure they would.”
In a profit-motivated system, businesses will do what’s profitable. If screwing people over is profitable, somebody’s gonna do it. This is the bug in the system.
But like lawsuits, government regulation is a kludge, a temporary workaround. Not a fix.
Problem: Coercion and Bureaucracy
Legal regulations are an ugly way of making bad behavior less profitable. They coerce businesses, with the threat of punishment, into submitting their products and practices to an often inefficient, bloated bureaucratic process, in order to enforce the regulations. This works, in the sense that a car with tree stumps instead of tires “works”, but it’s hardly desirable. More importantly than the fact that regulations require bloated bureaucracies to enforce, coercing businesses into doing things that they wouldn’t otherwise do is akin to mommy and daddy forcing you to turn off the Playstation and do your homework; it breeds contempt and resentment, so it’s no wonder that you’d say, “just five more minutes!”, or that a business would sell “meat” that’s only 35% actual beef.
So how do we come up with a true fix for the bug of profitable bad behavior? To go back to our toothpaste salesman example, we must ask, why was his bad behavior more profitable? Simple: you didn’t know the truth until it was too late. Free market theory posits that individuals will act in their own rational self-interest, and only make trades and purchases that are beneficial. But without the truth about the salesman’s terrible toothpaste, you had no idea what your rational self-interest was.
Fortunately, the truth is easier and easier to come by every day. Wikileaks, Anonymous, and other Robin Hood-esque hacker groups expose the secrets of powerful organizations, including profit-seeking companies. Reviews of most products and services are just a Google search away. This doesn’t yet prevent bad behavior before it happens, but as it becomes increasingly more difficult to hide wrongdoing, then wrongdoing is likely to happen less and less.
Problem: Human Beings
Unfortunately, it’s not that simple. Free market theory posits that individuals will act in their own rational self-interest. Reality posits that people often don’t.
Even when completely aware of the truth, human beings still do irrational things. We eat at McDonald’s too much, despite knowing how caloric and non-nutritious it is. We smoke tobacco and sunbathe without sunscreen, despite knowing that it’s going to give us cancer one day. We get hideously drunk, and then drive our cars, despite knowing how dangerous it is. We buy shiny crap that we know we don’t need. We regret it all the next day, vow never to do it again, and then do it again anyway. While we can all learn to be more rational, we’re not robots. To be 100% logical and rational, every day, all the time, is asking far too much of our meaty, fleshy human brains.
The toothpaste salesman comes back to you. He’s dressed differently, cut his hair, and grown a moustache, so you don’t recognize him. This time, he sells you heroin. He comes back every week to sell you more, and you keep on buying and buying. You know that it’s killing you, but you can’t stop. The salesman doesn’t mind; he’s making lots and lots of money by exploiting your addiction to his product. The bug is not fixed. Bad behavior is profitable.
Ending government intervention might stop some businesses from pursuing amoral short-term profit, but it’s not that simple. Total, radical transparency of businesses might stop some businesses from duping and scamming their customers, but it’s not that simple. Encouraging people to be as rational as possible might help people make better decisions with their money, but it’s not that simple.
The Real Problem: Shiny Gold Coins
Like Falkvinge and many others in the pirate community, I’m fond of Bitcoin. And yet I can’t help but feel that perhaps, as a future monetary system, it too is a kludge and a workaround. For all the bugs it fixes in trade, it still falls prey to the main problem with money today: it does not, and cannot, always correlate with happiness.
Much like how measuring innovation with patents is a fallacy, today’s money — as a system of determining power — measures the wrong thing: how many shiny gold coins each individual has. Just because one individual has managed to acquire more shiny gold coins doesn’t mean they should have more power; they could have gotten those shiny gold coins by lying, cheating, and stealing, after all. Though a combination of market freedom, transparency, and rational behavior can mitigate this problem, it’s not a complete solution.
But shiny gold coins are just another bug. In part two, I’ll discuss how we might fix it.