Big Business: A Love Letter to an American Anti-Hero — Tyler Cowen

The question underlying Big Business: A Love Letter to an American Anti-Hero is, “How can problems best be identified and solved?” (Although the book is much more interesting than my question may imply.) Sometimes individuals acting alone are the best agents; sometimes groups of individuals who agree to be lassoed together under a corporate aegis are the best agents (that is a long way of saying “business”); sometimes government(s) are the best agents, depending on the type, scale, and fixability of the problem(s). Many political arguments are essentially arguments that want to move problem domains or solutions from one of these classes to another.

Pages 22 – 23 deal with industries that exist despite selling products that, at the very least, likely don’t do what proponents say they will do—industries like dentistry, stockbrokers, sales reps, and food. The food industry is particularly notable, as a lot of food is what Michael Pollan calls “edible foodlike substances.” Another way of looking at those products, though, is that they’re selling hope or reassurance, and people like buying hope much more than they like buying evidence-backed products. Consumer Reports is not all that popular and their evaluations rarely if ever go viral. Perhaps most importantly, a lesson from industries Cowen cites, like dietary supplements, is that most people have bad epistemic hygiene—and, in most circumstances, don’t care about it. I spent much time attempting to teach undergraduates research strategies and how to evaluate claims and sources, and most of the time I wasn’t very successful. It took too long for me to realize that, rather than start with peer review, publication reliability, and that kind of thing, I need to start with a question: “How do you know what you know?” From there, it’s possible to build out towards epistemic hygiene, but the overwhelming majority of students seemed not to give a shit, and, indeed, if you go around asking normal people questions like, “How do you know what you know?” they will at best look at you strangely and at worst leave to talk to someone else about fun topics—at least, I speculate that that may happen.

Human rationality is often not that strong, and we like to give ourselves reasons for our failures while castigating others for theirs. People working in businesses are often engaging in similar activities and ways of arguing.

“How do you know what you know?” is a context question, and Cowen is a great expert in context. He asks us to “step back and consider what standard we are measuring business against. The propensity of business to commit fraud is essentially just an extension of the propensity of people to commit fraud.” The problem is mostly within us, rather than in the specific structures of business.

The chapter “Is Work Fun?” resonates:

I am not trying to whitewash the burdens of the workday and the workplace. Nonetheless, a lot of the other evidence points us toward the more positive side of work. Work provides us with a lot of what we value in life, including affirmation of our social worth, a structure for problem solving combined with rewards, and an important source of social interactions [. . .]

Yet we can rarely say as much in public or among our friends. Why not?

This paragraph is also characteristic of Cowen’s thought, where words like “but” and “nonetheless” play key roles. He’s really trying to get us to rejigger our levels. The “burdens” are real, but so are the benefits, even if those aren’t emphasized. Cowen is great at connecting ideas that are underemphasized and not often foregrounded. Chapter 9 asks us, “If Business Is So Good, Why Is It So Disliked?” Many possible answers are advanced. I will add one that I didn’t see or that I missed: it is easier to blame abstract “business” than ourselves.

I want to quote the book’s last sentence and paragraph but would prefer you to experience it after reading all of Big Business.

One chapter discusses tech companies; many of the criticisms against tech companies are misguided, as you’ve read here. More vitally, I see those criticisms as really being criticisms of individual people. If we, collectively, wanted to, we could all switch to DuckDuckGo for search—a boon for privacy—and many of us could be using Linux as a primary desktop operating system, especially today, when so much software is delivered via the browser. Dell offers high-quality Linux laptops, and using Linux is probably an improvement for privacy; homing beacons and tracking seem much less prevalent in open-source software. Yet most of us—including me when it comes to Linux—don’t choose the privacy-focused option. We don’t choose free software. We choose convenience. Is that the fault of tech companies or individual choices? To me, it looks a lot like we see the faults of tech companies when we look in the mirror in the morning. The number of people who really care about freedom, broadly defined, seems to be small, and far smaller than the number of people who say they care about freedom. Most people want convenience more than freedom or privacy, just as most people want junk food more than they want physical health. To return to my photography examples, most people want greater sharing convenience than the best image quality or artistic effect.

It’s possible to imagine an even more pro-business book than this one; a company like Amazon is amazing, for example, in that what I order, almost always shows up, and it’s convenient too. Contrast that with the many dealings I’ve had lately with New York’s tax office; I could go into detail, but the reader would likely want to stab their eyes out, as I have often wanted to do.

Cowen touches on alternatives to for-corporations:

Another possible way to test the honesty of business would be to compare nonprofit and for-profit organizations. If you think profits induce corruption, you might then conclude that nonprofits should be especially trustworthy. The evidence, however, will show that for-profits and nonprofits, at least if we are comparing enterprises in the same basic economic sector, usually operate in pretty similar ways.

This has been my experience; it’s also apparent to me, having worked for nonprofits for years, that nonprofits are much more like businesses than most people realize. I’ve also spent a lot of time working in and around universities, and they are the ultimate businesses: just try taking classes for grades if you can’t pay tuition. Try returning a low-value, high-cost degree. For a while I’ve been advancing the argument that many parts of the university system are self-interested (and sometimes just bad) actors that have great marketing skills. Most people react to that argument skeptically, but as evidence of student loan burdens grows, the skeptical reaction seems to be declining.

I’m not against nonprofits and the best ones are very important. The science research function at most universities still works fairly well, despite having some well-known incentive problems. The gap between university-in-theory and university-in-practice, though, remains wide, and most universities don’t want to publicize some obvious truths—like the idea that not everyone should go, or that not everyone has the conscientious and IQ necessary to thrive in an academic setting.

Among nonprofits, one possible purpose of the grant system is to keep nonprofits both honest and effective. It is possible to be honest without being particularly effective, and vice-versa. Ideally one wants both. Few of us do both perfectly, despite the way we often demand that others do both perfectly.

One chapter asks whether CEOs are paid too much: Cowen mostly says no, they’re not, and he cites a lot of empirical evidence on the subject. But he also says, “it’s hard to find someone who can both run the day-to-day operations of a company and do these other things [like social media and PR, communication, Congressional and other testimony].” I wonder if it’s really hard to find people who can do those things, or if there’s a kind of weird selection and vetting process going on through which only a small number of people are considered by the relevant people, and thus the number seems smaller than it is because those doing the selecting won’t broaden their search criteria. Think of it as the CEO equivalent of companies that only want to hire from certain schools that reject as many qualified applicants as they admit. I also wonder what level of compensation, if any, is necessary for satiation: many CEOs seem to reach, and to have reached, that level long before. Can we shift from money to some other yardstick? If so, how?

Is the business world changing faster than it used to? If so, is agility more important than it used to be? Many businesses may not be “set it and forget it” anymore (if they ever were). My personal favorite example is camera companies: standalone camera shipments have been dropping for the last six years, and the response of photo company CEOs has mostly been to shrug. No companies have made substantial efforts towards making their camera bodies into smartphones combined with superior image sensors. As a result, Apple and Google have come to dominate the imaging and video worlds, while camera makers seem to lack the agility necessary to compete. In many consumer industries, competition seems to be increasing; to cite another example I’m familiar with, large bike companies like Trek are facing a host of Internet startups like State, Priority, and numerous others that source direct from China and Taiwan. Innovators in electric bikes have not been the biggest companies. Low agility may result in eroding market share and profits. The future is happening and it doesn’t seem to be happening evenly, to everyone.

The modesty of many Big Business claims stand out: “[CEO pay in the aggregate] could be better, but it works much more effectively than many people think.” “Much more effectively than many people think” could still be not all that effective; in this and in many other sections, Cowen is trying to move the needle a bit. He’s describing situations with a large number of potential analogue, intermediary places, and in this he’s moving against the modern Twitter tendency to see things as binary: good or bad, zero or one, shit or brilliant. Most of things in the most of the world are in this intermediary space, including all humans, however virtuous all Twitters may portray themselves to be (in contrast to their vile enemies).

Big Business is much more story-based than one might expect from Cowen, who argues that we should be more suspicious of simple stories. Fortunately, Big Business is not a simple book.

As with all the Cowen books I’ve read, there’s much to think about and much more I could write here; he is very good at finding the space where “rarely argued/articulated” and “possibly correct” intersect. Common arguments and ideas are common, and incorrect or ridiculous ideas are common, but finding the Cowen quadrant is too rare. I sometimes worry that my own ideas are too common to be worth repeating. Finding ones that hit the Cowen quadrant is satisfying, like a deadlift PR.

The world is filled with problems and our goal as humans is to solve them until we die. We very rarely see life formulated in that way, but maybe we should say this explicitly more often. “What problems have you solved recently?” may be a more valuable question than, “What do you believe?”

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