Debunking the Capitalist Cowboy
bostonreview.net
bostonreview.net
This article runs off of this huge premise that there was no actual innovation, just clever and malicious rent-seeking. But do we really buy that inventing a cigarette rolling machine didn't actually radically reduce the cost of cigarettes?
Let's not throw the baby out with the bathwater - innovation is obviously an important part of the economy. We should not confuse it with rent-seeking behavior. Even in this case, it was a simple Patent that allowed Duke to establish his corporate dominance.
However, to get to point where you can seek rent, you have to be genuinely innovative first. Rent-seeking is a competitive field!
> Duke was not the first to use the cigarette machine; in fact, all of the major producers used it by 1887.
He was not the inventor (that was James Albert Bonsack) or even the first to use them.
I, too, am strongly against the throwing out of babies. But in this case is seems clear that the celebrated entrepreneur is being misrepresented.
In my opinion, innovation is an important part of the economy. It is also my feeling that this innovation is all to often mistakenly paired with a fabled "entrepreneur", one who is taking a lot of credit for others people work. In this sense, this story about Duke seems like just another example of this common (and erroneous) trope.
>None of these points is accurate. Duke was not the first to use the cigarette machine; in fact, all of the major producers used it by 1887. Nor did he have the best royalty deal for the most efficient machine; that was held by the Lone Jack Tobacco Company. Duke was not the first U.S. entrepreneur to make a success with cigarettes or to find a foreign market for them; Lewis Ginter of Richmond, Virginia, achieved as much before Duke even began making cigarettes. Duke did not force his competitors to merge into the ATC, and he was not its first president. The five major producers formed the corporation in order to gain clout in negotiations for the foreign rights to the best cigarette machine, and Ginter was the first president. No one checked the story against primary sources. Even a look at New York Times articles from the 1880s would have revealed telling inconsistencies and errors.
The way I think of innovation in this context is this. It may give an initial advantage, but it doesn’t last and isn’t as big of a contributing factor in creating lasting monopolies as is the corporate form and the shield it provides against regulation, public obligations, and even the competition that future innovation might bring.
I don't think that corporations are particularly innovative, nor can they necessarily be, as they are actually hamstrung by the profit requirement, and by the fact that we externalize far too much when it comes to economics: for example, we would probably innovate far more with battery technology, nuclear tech and renewable energy if the true ecological costs of burning fossil fuels were born by the industry.
I simply think that true innovation arises from the scientific method, and that we should start applying that to the administrative and management structures that run our corporations, as I think that people in those spaces are overpaid to guess about how to run a company. Corporate innovations that arise primarily from marketing and a shiny exterior are anything but, and are a dark pattern for me.
But Sun wouldn't have been bought by Oracle, which would have been nice.
That being said the iPhone is arguably just as innovative if not more so and that has been proven nearly impossible to compete with outside of capitalism due to the need for massive coordinated investment to create the whole thing.
Also, Linux is Unix for commodity hardware. That hardware definitely was not created via open source or free collaboration. It was created at a scale only possible by corporations or possibly nation states (chip fabs...).
Not all major innovations need to be completely revolutionary, but there are far better evolutionary actions that we have taken that might be considered truly innovative and revolutionary. A good example would be the creation _and widespread adoption_ of the MMR vaccine.
I agree that there are plenty of good examples of incremental innovation (which the iPhone may debatably be). It's a very well known and obvious example of meaningful innovation (society is different post-iPhone) that demonstrates the point I was trying to make which is: not all innovation can happen at a grass roots level.
I'll leave that standing as it is, but it's worth noting that "libertarian" economist Schumpeter predicted the demise of capitalism in unison with the concept of "creative destruction":
https://en.wikipedia.org/wiki/Capitalism,_Socialism_and_Demo...?
Another week, another swipe at successful people. It’s really interesting to see academics who have never built a business, hired employees, etc deflate and downplay the value of hard work.
How many reports like this until everybody is ready to give the wealthy a bath? Or better yet, hand over economic independence to our loving, caring government? Time will tell.
Nan Enstad is the Robinson Edwards Professor of History at the University of Wisconsin, Madison, and author of Cigarettes, Inc.: An Intimate History of Corporate Imperialism
Anti-free market thinking pervades academia, despite the fact that free markets have generated an unprecedented level of material wealth. Markets feed, cloth, and employ academics who haven't the faintest idea where the money comes from.
No one disputes the fact that monopolies capture an undue amount of wealth. But to launch a general attack on entrepreneurship is fatuous and offensive. I'm sitting here are my desk living that life right now, creating a product that, down the road, will indirectly make that smug academic wealthier. Maybe he should spend five minutes in the business world. He might learn something.
Sounds pretty innovative to me.
To be fair, this is corporate legal shenanigans, not scrappy, innovative, hard work.
If in reality hard work was the only measure of whether or not a business will succeed then it would be fine to claim that this article is attempting to "donwplay the value of hard work". But that's not at all the reality of how systems interact in our quasi-capitalist country.
Anecdotally, numerous friends who are ideologically conservative lament the state of corporate influence over government regulation. They believe that a handing over of economic independence to our loving, caring government has already happened but it's a proxy for the corporations who have the most influence. Which removes the ability of the free market to choose the winners and losers.
You don't seem to know much about what academics do. A large part of their work consists of project planning, obtaining funding, hiring people to do the research work, advertise the results to get other people to contribute and so on. Only junior academics can really focus on the research. From a certain level of seniority, many academics are really research managers. It's very much building a business.
Without personal financial risk, there is no comparison between the two. I've seen up close how unbelievably perilous it can be to risk your personal fortune (sometimes a meager one at that) on an entrepreneurial venture.
Don't kid yourself. If running a business was easy and without downside, everyone would be doing it. Lots of folks try their hand at business only to find out that they don't have the will to ride out the very tough times.
Comparing a person who is trying to build a business on a (possibly) new and unproven innovation to a (likely) tenured professor is worthy of a chuckle.
I'm not saying that building a business is easy. But neither is building a career in academia. It takes many of the same skills.
Very few academics declare bankruptcy when their businesses fail. Very few academics pour their life savings or retirement funds into their academic career only to walk away with less than nothing and owing money they might never be able to repay.
Comparative skills is one thing. Comparative risk is another.
Let's try and understand that this isn't a race to see who has it worse. My point is that an academic in the arts isn't likely to possess the understanding of entrepreneurship and its challenges any more than an entrepreneur is to understand the challenges of a career in academia.
The difference is that one isn't pointing at the other and trying to blame them for all of society's ills.
I'm not blaming successful people for being successful, I applaud people who build products and create jobs. Thinking outside the box and innovating is great, but when your innovation is in the field of evading the intended consequences of regulations, that's not the kind of success I value.
In this thread, you began by replying to a comment ultimately making the point that the OP commenter brushed off academics unjustifiably. Your reply suggested that the relevant comparison was between a professor whose position is secure and a startup founder in the early throes of trying to gain traction and stability. This was the clear essence of your point -- that somewhere somebody suggested, through such a comparison, that running a business is easy, and that this is wrong.
That comparison is obviously not relevant, especially since the slightly broader context is this article about "capitalist cowboys", i.e. people like James Duke. Duke was born into money and the tobacco business. He did not risk everything for his business. If his cigarette company went completely under, he would not have been destitute. People like Duke are relevant for comparison.
The reference in OP's comment is a common one, to "academics" at large, and is uselessly disparaging. Beyond user "lower"'s point about the skills needed in academia being comparable to those needed for business, we should note that many academics, especially in business schools, have themselves literally been successful in industry and business (read outside of academia). This is a proven way of getting a faculty position at a business school.
I think your point doesn't stand. But you are right that starting and having a business is a nuanced, often risky... business.
The original article used a straw-man to impugn capitalism. That's hardly fair. For every bad faith player there are a thousand farmers (all small businesses IMHO), restaurant owners, inventors, and others who start a business to serve the public with a good or service and are willing to risk their time and money to do it. Lots of those folks don't make it and lose their investment for a multitude of reasons. Sometimes it's because of bad management; sometimes the economy; sometimes illegal action by a competitor. Such is life.
In this discussion, we have to be careful of choosing our examples to suit our argument. The original article seems to be blissfully unaware of survivorship bias when she rails against capitalism.
Economics isn't a morality tale. It doesn't care who is "good" or "bad", just who is able to provide something the market needs at a price it's willing to pay.
I know this outrages a lot of people butI would argue that there is more hazard entrusting that determination to government (as the author seems to suggest as a solution) than letting consumers decide for themselves.
I used to use Uber. Now I use Lyft. That was a choice I made when I learned of their management culture. You might care; you might not: it's YOUR choice.
Capitalism isn't the best solution to our scarcity problems but nobody has come up with a better solution yet. Ideas are great but you can't eat ideas. You can't sleep inside of a conjecture.
Capitalism wins because it works in spite of the imperfections in implementation.
If you love capitalism you should be the strongest advocate against legal structures that allow for the creation of monopolies.
It was the opposite of unaware of survivorship bias; the whole point is that such biases (and others) explain why capitalist-cowboy heroes are seen as heroes, instead of actual outstanding acumen and brilliance.
This is part of why I think your original point doesn't stand; you are defending something that wasn't attacked. I care about this mostly because of the framing of the OP, in which capitalism is somehow put in opposition to "academics", which is spurious.
For one thing, this is an article written by a history professor who is pitching her book: " Cigarettes, Inc.: An Intimate History of Corporate Imperialism"
The term "corporate imperialism" is your first clue. I spent some more time perusing her other writing and I'm not impressed. She's got an agenda here and that's to take a specific example of corporate power run amok and extend it to other areas. THAT is what I was pushing back against.
There are a litany of other examples that would have served this subject better (oil, sugar, hell, even bananas) because the connection between production of a commodity item and the effect on the economy and society would be much clearer.
In this example, she's focusing on cigarettes as the central player. The problem is that cigarettes aren't a commodity; they're branded. You could easily make the case that Heinz Ketchup doesn't deserve their position as market leader because they control so much of the market that nobody else stands a chance. That kind of backing into a theory of history is what I'm talking about when we discuss survivorship bias. If there hadn't been a monopoly, she'd have nothing to write about. Nothing in the article serves to identify how to prevent a monopoly from forming in the current day nor does she cite any examples of markets where it's nearly impossible (despite their best efforts) for someone to achieve and maintain a monopoly because the pace of innovation constantly forces an evolution of the market.
So, to sum up, I think she's reaching. I don't find her account useful as a prescriptive when trying to understand if monopolies are bad (however they are formed) or if there are ways to prevent a monopoly from forming when a competitor has a product so good that nobody else can come close.
As a book of the history of cigarettes and jazz, sure, whatever.
You're correct that academics too often dismiss the "soft skills" needed to successfully run a business. But it sounds like you're also dismissing the legitimately hard work that goes into a successful academic career.
A young tenure-track professor isn't at risk of losing their degree if they fail to achieve tenure. It's also unlikely that they might owe thousands (or hundreds of thousands) to the IRS or state tax authorities for which they could very well be personally liable for. That's not a figurative example. I actually saw this happen with a small ISP.
I recall a news story about a congressman who left public service to try and run a business (something not technical) and he was dumbfounded by the practical affect of the laws that he helped pass and how unwieldy and challenging it is for an entrepreneur to actually succeed when faced with the never-ending cascade of regulations and approvals needed to actually open. The gist of the article is that he didn't appreciate the reality of business ownership until he tried it. Then he saw the light.
I would encourage any academic that thinks the only way to succeed in business is to cheat to give it a try themselves. Something as simple as an ice-cream shop can be a real eye-opener in terms of regulatory complexity, financial disclosure, and employment law.
It's certainly possible to be significantly successful in any of those areas by being a hard working and ethical human being. But the kind of person who is hellbent on being in the top 0.01% (a Fortune 500 CEO, a top-level bureaucrat, the head of a prestigious academic department/institution) is someone who, to some degree, values their personal success over the suffering of others.
This is how you get Monsanto, Communism and $100k+ in debt for a BA in English.
What dogmatically anti-academic, anti-government and anti-capitalism arguments miss is that the fault is in sociopathic behavior, and not the arena that a given sociopathic individual excels in.
In the statement above, successful people are literally conflated with the stories being told by these business schools. In my opinion, the majority of successful people (and, surely, some of those are entrepreneurs) do not fit into the mold fetishized by the business schools in this piece. Indeed, that type of alleged "super entrepreneur" strikes me as very rare.
I believe successful people in general have no need to feel attacked by this article. It's those who have accrued bizarrely large amounts of wealth by leveraging someone else's innovation through legal cleverness and rent-seeking that should be (somewhat) concerned.
What does "swipe" mean to you?
Who is subsumed by this weird monolith of "successful people", and how is it that academics avoided being included?
Why is "downplaying hard work" something you think this article does?
Do you seriously think that claiming many "prominent heroes" did not succeed because of personal brilliance is the same as the claim that personal brilliance is never a factor in [business] success?
Whatever "economic independence" means to you, why do you think you have it? Do you think everyone has it?
I don't remember ever seeing "swipes" at successful scientists, doctors, nurses, midwives, school teachers, etc etc whose hard work has tangible benefits for the entire community. It is obvious that the article is targeting people who are successful at being "egotistical assholes" that "succeed" by harming everyone else's prospects.
I don't find anything strange in that. I find it strange that this is not a more widely adopted attitude.
When someone succeeds as a doctor, people are hardwired to think "they deserved it" because of the very human drive to seek a hierarchical tribal structure, while when a businessman succeeds without going through what is seen by polite society as the "proper channels", they are vilified for not respecting the structures of authority, regardless of them contributing to society or not.
It is a very widely adopted attitude. I'd say over 90% of human beings find the professions you mentioned to be the most "respectable" of all, while businessman are seen as the lowest of the low. Policemen also used to be treated that way, but they've fallen out of favor a bit.
I find it sad that people who don't feel the need to cringe and submit to their supposed "betters" get treated as troublemakers who wish to destroy the harmony of society, except at the highest levels of business achievement (which are in turn disproportionately lionized)
Is doctors' work beneficial to the community? Is teachers'? Firefighters'? Nurses'? If it is, what is the purpose of assuming some other reason that this work is appreciated?
If the rules of society have been used in unexpected ways and created unintended consequences, why not examine them and evaluate a better alternative. If some one is talented they will successful under different rules.
Your last sentence ignores so much reality. China has lots of large successful businesses and clearly ignored “economic independence”. Commerce is merely one arm of multiple vectors of state objectives.
Time will tell if America, with its libertarian, government hands off ideal will prove to be the most effective system.
Let’s be clear. There is nothing free about a market dominated by monopolies. There will be less successful people, less new business formation, less innovation, and less wealth creation over time if monopolies and dualopolies stifle competition.
> academics who have never built a business, hired employees
When I see this type of argument made I often think a. as if someone else wouldn't have come along and created/serviced the market sooner or later, yet we heap praise upon the person that happened to get there first and b. the wider benefits are really just happy side-effects - if a business's costs could be lowered by automating all tasks and employing zero staff, wouldn't it be compelled by capitalism to do so?
If it's employment we want, we can just follow Keynes and employ people to bury money and dig it up again..
IBM did what would be considered a massive business mistake and allowed cheap clones to be made without licensing restrictions. IBM loses, and the world gains. But had IBM followed modern practices, the resulting surge likely wouldn't have happened.
The Internet was a govt enterprise, but is definitely not JUST a govt enterprise. I honestly don't know enough about the underpinnings to say much, but it's clearly not a corporate effort looking to profit.
The Web exploded because of it's open-ness. Back when I started in the late 90s, you just hit View Source on a site and got all the info on the UI. For all that it's cool on HN to mock know-nothing web developers, the fact that someone with a text editor, an FTP client (!), and some persistence can still publish a page is a huge deal. Dropping in CGI for some interactivity that can be as complex as PRINTING TO STDOUT is remarkably accessible. I also remember what corporate networks were like then - sysadmins HATED that you could open up port 80 and a vast amount of basically unrestricted traffic to/from EVERYONE would come through. (In terms of security, they were right, but in terms of functionality, this allowed things to blossom in ways nothing before it could). Heck, MS had locked down the browser market (I recall when they declared that IE6 would be the last version of IE) - while other browsers existed, none got any real traction before Firefox, and Firefox itself was built on the decision of the defunct Netscape to open source their code.
Linux has undoubtedly changed everything - and it (arguably) only got the chance to do so because BSD was locked down in lawsuits. And BSD only came about because AT&T was prevented from doing what a corporation would normally do. And BSD and Linux only prospered because the various Unix vendors all couldn't make anything work that wasn't a nightmare of licensing restrictions. I remember what Microsoft was like in the 90s - I believe they held back innovation then, not that they spurred it. Where would we be if they only had commercial Unix vendors to compete with? Or just AT&T?
I won't have to defend the impact of free/open software to this crowd, and while there are debates as to the sustainability model for extremely large packages without corporate sponsorship, and we do have packages nowadays being born from corporate efforts, I think it's fair to say that the current situation would never have come about from pure corporate efforts alone.
I think capitalism has a lot of good points when it comes to incentives...but every time I hear someone trash a different economic system by saying that it fails to take into account human nature, I think they are doing the same with capitalism. Just because greed exists and can be used as an incentive doesn't mean that's the only element to consider, nor does using greed in one way mean that you've removed it as a concern. (See Wall Street incentives to abuse the market)
Imagine a world where meritocracy is demolished; in favor of 'equality.' Being 'good' or making customers happy doesn't matter anymore.
Can we please unite behind things like hard-work, quality and discipline to fight off this thinking?
The prime predictor of financial success in life isn't merit or hard work, but still is what it always was: who your parents are.
Are the rich in the US more likely to have discovered, innovated, or created value, when compared to the rich in Russia? Or more despotic governments? I think so.
Does this mean the US is the platonic ideal of meritocracy? Probably not, rent-seeking does exist. Some rich have provided negative-value to the US.
I mean, when you drill deep enough, the entire concept of merit is pretty messy. There really isn't a clean way to isolate merit as a pure, elegant, factor. We are very much the product of our parents.
(There is another perspective as well, that success in part due to your parents isn't even bad or non-meritocratic. The concept of the family business, or an investment in the success of a lineage, was the typical way of viewing the world up until recently. A parent working hard in order to provide their child a higher chance of success doesn't have to violate meritocracy -- although this is a point of values).
Ugh, let's please not. I value a marketplace of ideas, in which those with totalitarian personalities know they shouldn't attempt to badger us all into "thinking the right thoughts".