ETHICS & SAVVY CAPITALISM!

ETHICS & SAVVY CAPITALISM!

James R. Fisher, Jr., Ph.D.
© December 21, 2008

“Conduct (ethics) is the great profession. Behavior is the perpetual revealing of us. What a man does, tell us what he is.”

Frederick D. Huntington (1819 – 1904), American clergyman

A WRITER WRITES:

I have broken a relationship with a firm designed to help the disadvantage, as I find them unethical. My role as a venture capitalist was to lead this nonprofit start up company into servicing the community, making it a better place. Clearly, their interests and aim are not that but solely for profit.

Jim, I thought you might be able to commiserate, if not give me added perspective, on my first entry today, entitled, “You & Ethical Companies.” www.savvycapitalist.blogspot.com

Ted

* * * * *

DR. FISHER RESPONDS:

Ted,

I find your word “commiserate” interesting, as you should know by now I am not too good at consoling. As true as I find your blog consistent with the way you think, I fail to see the ethical implications. Permit me to explain.

You are selling here, but not explaining, justifying your angst, but not elucidating. My take on ethics is this: "It works to the advantage of self and others and does no harm."

I’m speaking now of the short Q&A content of your blog (mentioned above). While I see no problem with it, I don't quite understand your intentions or the impact you expect.

You have accused a business association of which you have been involved as being "unethical," while not explaining what you mean by ethics, as if "being ethical" is self-explanatory, which clearly it is not. Ethics is a meeting of the mind with the mind of the one who would be ethical, nothing more, nothing less.

Is ethics conduct? Is it morality?

Of course, it is both along with set standards, standards that have become dodgy in our materialistic society; otherwise we wouldn't create such characters as Ponzi, Madoff and Abramoff, not to mention (Martha) Stewart and (Governor) Blagojevich, among others. They, I would imagine in their rationalizations, attempted to self-delude themselves into thinking what "is legal" is necessarily also "ethical," when seldom is the case in my experience.

Whether it is "for profit" or "non profit," capitalistic, socialistic or communistic, the society of man has had an inordinate capacity to be unethical.

Pardon me for quoting Epictetus (c 50 - c 150 AD)here, which I do rather often because we are not improving, as a society as we acquire more electronic toys and more recreational distractions from ethical considerations.

Epictetus said nearly 2,000 years ago:

"In all the affairs of life, let it be your great care, not to hurt your mind, or offend your judgment. And this rule, if observed carefully in all your deportment will be a mighty security to your undertakings."

"Do no harm," is the way I put it, either to others or myself. I have walked away from a number of such occasions, nearly all of which I've written about. I'll share one with you now.

* * * * *

When I was 27 years old, a chemical sales engineer with Nalco Chemical Company, father of three small children, and active in my community, being Secretary of the Zoning Board of Appeals of Marion County (Indianapolis, Indiana), I was successful and ambitious.

A man with whom I was working, thirteen years older than I was, and relatively well off, said he wanted to go in business with me in the purchase of virgin land on a main thoroughfare out of Indianapolis on which I planned to build a medical-professional building.

The land cost $30,000 and was 27 acres with a railroad spur. I was not a rich man but a saver. He told me to go ahead and put the $3,000 down necessary to hold the land, and he would write a check for the balance the following Monday. I was the idea guy with my medi-pro complex, complete with architectural blueprints, and he was the venture capitalist.

Over the weekend, he got cold feet. He cried on the phone with all kinds of justification, asked me to be understanding. All I could think of as I listened was, ‘I am out of all of my savings!'

Then I thought I would go downtown to the attorney for this major builder in the area and state my situation. I did so the following Monday nervous beyond measure.

The attorney listened dutifully, then called the builder, explained who I was and my situation, and the builder said to the attorney, "Let me talk to him."

I got on the phone, and he said, "Sorry, young man, you're out of $3,000, and there's nothing I can do about it."

I'm an emotional guy, but I had had to think on my feet several times already at age 27. "Sir," I said, "can I ask you a question?"

"Yesss," he said hesitantly clearly wondering where this was going.

"You do want to sell this land?”

“Yes, of course, I do. That’s why it’s up for sale."

“I've lived in the area for five years now, sir, and that 'for sale' sign has been there for at least three years."

"So?"

"I don't think you want to take my $3,000 without justification. You want to sell the land."

"See here, young man, I've had a legal contract with you and your partner, and you have failed to live up to it."

"I'm not disputing that. You are correct. But I have a proposition to make to you."

"Such as?"

"You keep my $3,000, and I will pay you $3,000 every quarter over the next four quarters for a total of $15,000. If I don't sell your land in that time for the full amount of $30,000, you have $15,000 of my money with no obligation to return it should I fail in my quest to sell the land."

"Those are not very favorable terms to you."

"But they are, sir."

"How so?"

"I'm a salesman and they give me great incentive to sell the land."

"Put the attorney back on the line." I did. They talked. He put the phone down and shook his head.

"How old are you?" I told him. "You're not going to have any trouble in this life."

I smiled. "I am if I don't sell the land."

IT DOESN'T END HERE!

Over the next three months, I did due diligence to sell the land. Then I got a buyer who needed the land "right now" to build a plant for a foreign contract that had to be filled within the next year. My land had a rail spur, accessible to heavy equipment and truck transport, and was ideal.

He didn't negotiate a selling price, but simply said, "My firm will give you $50,000 for the land, draw up the papers with your attorneys and we'll close the deal." (For reference, that would be the equivalent in 2008 dollars of about $500,000)

Then we found there was a glitch, one that I should have noted, but hadn’t. The land was zoned "suburban industrial” (SUI), and not "urban industrial" (UI). The difference on metropolitan zoning restrictions was a matter of a stamped “S."

The builder needed to put a road through the property for ingress and egress of trucks, and the 15-foot required on either size of the road for SUI was too restricting for the plant the company intended to build.

"Get this restriction changed in the next 36 hours and you have a deal." That was impossible because the Zoning Board met only once a month. Usually, it took two or more months for changes to be made, as it had to go through the mayor and city council as well.

There was one possibility: have the “S” removed from documentation. Who would know? Give the recorder a $5,000 "bonus" – he happened to be an acquaintance, someone who liked me. Who would be the wiser?

I never told my wife, but thought about it, made a visit to my church, sat there and played tag with my mind for a long time in that empty church, and then got up from the pew a changed man. I WOULD KNOW! FOR THE REST OF MY LIFE, I WOULD ALWAYS KNOW I WAS A FRAUD.

I called the man and told him "no deal." It couldn't be changed in time, I said, and likely would not have been changed at all. Suburban industrial expansion was going in that direction. He thanked me, and that was it. But it wasn't. It prepared me for South Africa and everything else that has come down the road.

IT DIDN’T END THERE EITHER!

It was the fourth quarter, and I had already given the builder $12,000 of the $30,000 agreed to for the purchase, and was soon to give him the final $3,000 without any prospects of selling the land. Every attempt to sell it had failed.

It was December more than forty years ago, three weeks from when the final payment was due of $18,000, and I got a call. “I understand you have some land for sale. It is right near an auto dealership in which I have an interest. I live in Ocala, Florida. I’ve been up here in Kentucky buying horses, and I heard of about your property. It is just what I need. “What are you asking for it?”

In the intervening year, I had been promoted to area manager of Kentucky and was living in Anchorage, Kentucky, a suburb of Louisville, Kentucky. I’ve always hated talking on the phone, need to see people in person, so as a phone conversationalist, I’m often silent, driving the person on the other end of the line a little frantic. “You there?” he asked.

“Yes.”

“What are you asking?”

Again silence, as I had no idea what I should ask, certainly not $50,000 because it couldn’t be used for urban industrial purposes. “Well, here’s the deal,” he said, breaking the silence, “I’m willing to pay you $35,000 for it, and would like it on the books before the end of the year.”

I was euphoric. ‘He would like it on the books! I had to have it on the books!’ “Where are you now?” I asked. He was in Lexington, Kentucky. “Well, I’m right down the road as you come into Louisville.” I explained where I lived.

My home some place. Although out in the country, it was near the city, preserved to be almost antebellum in its southern ambience. I mention this because he seemed reassured when he came to the house. We completed our business within the week before Christmas.

IT STILL DIDN’T END THERE!

As mentioned earlier, I am rather high strung, and it sometimes gets in the way of my thinking. I paid off the builder, and had a nice nest egg of savings for my year of anguish. But then in February of the following year, I received a call from the builder.

“My accountant tells me you overpaid us by $3,000. A check is in the mail. Sorry about that.” He didn’t say anything else, not nice to be doing business with you or anything, just that, “A check is in the mail.”

With this surprised check of overpayment, which I think was a matter of exuberance from selling the land, I completely finished the large basement of this three story house with an elaborate study bookcases all around, fire place, and a completely finished playroom separate from the study for the children. My family had increased in the year from three to four little ones.

* * * * *

Therefore, Ted, when I think of these people that have not had a "come to Jesus meeting" like I did, I have only empathy and understanding for them. I know how easy it is to fall off the log, to consider putting one over on others, which means as Epictetus said 2,000 years ago, is to attempt to put one over on ourselves. It never works. I know. I have met that enemy and it was I.

The moment we think we are ethical and do not have the same bloodline as the unethical is the moment we move away from the human race.

My da, who stopped being educated after seven grades of Irish Parochial Catholic education, once said to me, "Don't me impressed with the wealthy. Chances are they have met the devil at one time or another and became fast friends. It is very hard but not impossible, Jimmy, to make a fortune without such contact, but so rare I can't think of anyone who has managed that in my lifetime." Nor have I in mine. But I have known people with similar experiences to mine.

Be always well,

Jim