Saturday, October 08, 2005

Free-range technocracy

In a fascinating Reason colloquy, Whole Foods CEO John Mackey says Milton Friedman wasn't thinking expansively enough 35 years ago when he penned "The Social Responsibility of Business Is to Increase Its Profits." Mackey argues that from now on, successful companies will have to acknowledge the "humanitarian" dimension of capitalism, incorporating charitable contributions (presumably directed to the local community) as part of the business model.

Cypress Semiconductor CEO T.J. Rodgers counters that Mackey's little more than a Marxist decked out in libertarian pleather. Sure, companies can be good corporate citizens and help charitable projects. But they must keep shareholder value their top priority, or more-efficient competitors will drive them out of business.

Friedman plays peacemaker, noting that in a diverse marketplace, it's possible for corporations to succeed by selling their conscience, if you like -- so long as they also serve their customers, employees and shareholders well.

Friedman has it right, but he lets Mackey, who claims to be a free-market libertarian, off too easily. Had Mackey adopted the, say, Maoist defense of his business philosophy -- let a thousand flowers bloom -- he'd have convinced me. Problem is, Mackey becomes messianic in his message.

The ideas I’m articulating result in a more robust business model than the profit-maximization model that it competes against, because they encourage and tap into more powerful motivations than self-interest alone. These ideas will triumph over time, not by persuading intellectuals and economists through argument but by winning the competitive test of the marketplace. Someday businesses like Whole Foods, which adhere to a stakeholder model of deeper business purpose, will dominate the economic landscape. Wait and see.
This isn't free-market libertarianism; it's central planning garnished with yogurt and granola. When Mackey argues in the inevitability of his model -- the one best way -- he shows a profound misunderstanding of the dynamic nature of free markets, where no one can predict the long-term structure of a corporate sector, let alone a global economy.

In his own field, Whole Foods thrives alongside Costco and Safeway, and often cater to the same customers because each type of store offers something different -- in the variety of products, pricing and personalized service. Beyond that, though, he's using his relatively brief success in a narrow niche to predict how entrepeneurs must behave if they hope to succeed decades from now.

Whole Foods may have a license to print money today. But look at how its success has forced more-traditional stores to upgrade their offerings; compare the meat and produce sections of any modern supermarket in 2005 with the same store a decade ago. Remember the narrow aisles, the limited selection, the unattractive displays?

Whole Foods' profitability has also spawned (and grown) new local, regional and national competitors -- Trader Joe's, Bristol Farms, Wild Oats. Over time, this competition could trim Whole Foods' profit margins, making Mackey's new vision hardly seem inevitable.

Before making bold predictions about the future of capitalism, I'd recommend reading not just Adam Smith but also Frederich von Hayek ... not to mention Virginia Postrel.

Friday, October 07, 2005

How atypical am I?

I didn't opine on the Roberts nomination to the Supreme Court because: a) by all accounts, he's a very bright, qualified man who knows his way around a courtroom and has confronted constitutional controversies for a quarter-century; and b) Bush didn't ask me who I'd put on the court. (For the record, the 9th Circuit's Alex Kozinski would be a Brian McCann shot over the wall. But Kozinski's too honest about his views of the law to ever be confirmed to another federal bench.)

From what I've seen and heard, though, the Miers pick is entirely different, because, well, it alienates people like me. I tend to vote Republican for one reason: The alternatives are unpalatable. The Libertarian Party is a joke; it lost me forever after 9/11 when its leading lights expressed sympathy with the view that Osama, et al, had legitimate grievances for U.S. foreign policy. To the extent the Democrats hold any discernible views, they seem to be based on a model from 1973 -- redistributionist economics and timid, if not apologetic, foreign policy. Nor can I abide the Democrats' embrace of identity politics, treating everyone as a member of a group rather than an autonomous individual.

Republicans, on the federal level at least, pay lip service to free trade; they keep taxes in check; they know who the bad guys are on the world stage and are willing to expend some capital and effort to pursue them; and, until the Miers pick, the Bush administration talked a very strong game on judicial philosophy and the courts. I've come to endorse a more-limited role for the judiciary over time, believing that the political branches of government should settle most policy issues, following the proper procedures laid out in the Constitution, of course. I'm not looking for judges who agree with me, but instead judges who apply the law and do nothing more -- even if the outcome isn't to my liking.

Bush's discussions about the courts reassured me, and gave me more justification to trust his judgment. Now I'm not so sure. To return to the baseball analogy: Bush is pinch-hitting with two outs in the ninth inning of Game 7 of the World Series, down by a run with a man on base. Rather than swing for the fences, he bunts. Why would a manager have faith in him in a similar situation?

While I remain convinced that the Bush administration will not cut and run in Iraq or Afghanistan, that's about the only reason I plan to pay any attention to this presidency. It has zero credibility on fiscal responsibility, let alone any fidelity to government reform (bye-bye Personal Retirement Accounts, hello Medicare drug benefit). Now it has frittered away any cause to support its judicial appointments, for SCOTUS, anyway. If I'm still in California next year, I'll probably vote for Schwarzenegger, but I'll have little interest in any other partisan race, because there's no reason to be excited. How many more people are like me? In a nation as deeply divided as ours, the Republicans better hope there aren't many.

Thursday, October 06, 2005

Miered in Congress

Want some local knowledge about the Harriet Miers nomination? Virginia Postrel, who hails from Dallas (and notes that much of her family income is provided by SMU), has cogent thoughts here and here. For starters. By all means, go to the main site here and keep scrolling. Virginia's point on "Miers-Briggs Jurisprudence" strikes particularly close to home. Over my many lifetimes I've worked for extreme "S" types, who may lack either the interest or inclination to look beyond their own experiences and think the world is simply an extension of what they know. They can make wretched bosses -- if they're in a position where setting long-term goals is important.

Meantime, Peggy Noonan nails this point:

I find myself lately not passionately supporting or opposing any particular nominee. But I'd give a great deal to see Supreme Court justices term-limited. They should be picked not for life but for a specific term of specific length, and then be released back into the community. This would involve amending the Constitution. Why not? We'd amend it to ban flag-burning, even though a fool burning a flag can't possibly harm our country. But a Kelo decision and a court unrebuked for it can really tear the fabric of a nation.

I'm sympathetic to the argument for term-limiting Supreme Court justices, if for no other reason that it would limit the amount of time a truly awful justice could do harm.

UPDATE: Matthew Franck, on NRO's Bench Memos blog, brings up a troubling prospect: If Miers is confirmed, could she wind up like Charles Evans Whittaker? Whittaker, appointed by Eisenhower in 1957, was such a detail freak that he worked 17 hours a day, 7 days a week until he collapsed of a nervous breakdown and had to step aside after five years on the bench. Franck predicts nothing, but simply underscores what Charles Krauthammer noted in today's Washington Post: "constitutional jurisprudence ... is, by definition, an exercise of intellect steeped in scholarship. Otherwise it is nothing but raw politics." Even more reason to be underwhelmed by this nomination.