Category: Business Ethics

The Man Time Forgot

The Book of the Week is “The Man Time Forgot” by Isaiah Wilner, published in 2007.  This ebook tells the history of Time magazine, and contains the biographies of its two original business partners. According to this account, Brit Hadden alone came up with the concept for the magazine, and partnered with Henry Luce to create the publishing company for it.

The concept was to cobble together days-old stories from all the news outlets and retell them in a sassy way, intended to provoke controversy. Hadden believed “Controversy is unrest, and unrest breathes the spirit of progress.” In the mid-1920’s, one could get away with reprinting articles without crediting his sources.

In the nineteen teens, Luce and Hadden had developed a contentious but complementary relationship at the elitist Hotchkiss, a private boarding school in Connecticut, and then continued their teamwork on academic publications at Yale college. There, they competed in a rigorous contest whose prizes consisted of opportunities to work on the school newspaper. They both made the cut.

During WWI, the president of the college allowed academic credit to be given for military courses. In fact, the school became largely a military training ground in the war years. Hadden and Luce availed themselves of training but stayed stateside, although in 1918, President Wilson lowered the age of conscription to 18.

Postwar, consumerism abounded. “As households bought their first automobiles, washing machines and phonographs, companies plastered the streets with billboards.” The public spent its leisure time partaking of magazines, newspapers, books, movies and radio. Sensationalism had become big business.

More and more American residents were able to experience common entertainment. This was advantageous for the ad sales success of Time. When the magazine met its “rate base”– a minimum number of magazines being circulated among the public– it was able to charge more money to its advertisers. Direct mail was a budding advertising outlet for the magazine itself, of which it took full advantage. By the early 1920’s, Time had tens of thousands of readers.

It took several years for Hadden to convince the Post Office to classify Time as a newspaper, affording the national publication faster delivery from its sole office in New York City.

Letters to the editor (some were fictional, concoted by Hadden) was a favorite section of the magazine. The author contends that “Time remained the place to hear the full-throated call of the average American moron, expressing his prejudices with confidence and joy. Subscribers enjoyed reading such letters…”

Sadly, Hadden’s poor health resulted in his untimely death. Until he himself died, Luce was extremely reluctant to concede that Time was Hadden’s idea, and released propaganda making himself and Hadden co-founders. He failed to credit Hadden as the magazine’s true sole creator. Such deception boosted his ego and brought him undeserved honors. Such can be the nature of publishing and public relations.

Louis D. Brandeis, A Life

The Book of the Week is “Louis D. Brandeis, A Life” by Melvin I. Urofsky, published in 2009. This is the lengthy biography of an attorney and Supreme Court Justice.

The youngest of three siblings, Brandeis grew up in Louisville, KY in the 1850’s and 1860’s, and graduated from Harvard Law School.

Prior to the early 20th century, Brandeis felt that his job as an attorney was to help develop a fair solution for all parties involved in a dispute. He felt he was a mediator and moralist, rather than an attorney being paid to favorably act on behalf of and give legal advice to only his client. This mentality led Brandeis to engage in a few conflicts of interest in dealing with his firm’s clients.  For instance, he represented a corporate client in litigation in which a third party was represented by his firm.

Despite becoming embroiled in a few episodes of hypocrisy, Brandeis fought against corrupt, monopolistic practices of various large American institutions. He felt obligated to do what he considered public service, pro bono. Fortunately, his income as a law partner allowed this.

In the United States at the turn of the twentieth century, there were three big insurance companies that wielded an amount of power similar to that of big-name brokerages in the early 2000’s. The outsized ego and greed of the insurance executives, too, led them to manipulate the government, commit accounting irregularities, and abuse their power and the public’s trust. Brandeis took them on, exposing what he thought was their moral depravity. He then found a way for the public to avoid adding to the profits of the evil insurance corporations by initiating the sale of affordable life insurance through savings banks.

Brandeis was nominated a Supreme Court Justice by President Woodrow Wilson in 1916. “When confronted with the first Jew named to the Supreme Court, and in a time of growing nativism, clearly those who ‘feared foreigners’ would oppose the appointment.” Brandeis had to endure four stressful months of hearings and background checking before he was appointed.

Around 1920, Brandeis became active in the Zionist movement. He controversially defined the movement as one in which oppressed Jews could receive financial assistance to improve their lot through settling in Palestine. Since the persecuted Jews who had found a haven in the United States had become successful in their adopted country, they did not need to go to Palestine to build a homeland there. But they were urged to help their fellow Jews who were worse off than themselves, to do so. Other people in the movement felt Brandeis did not truly understand the mentality of the oppressed Jewish immigrants, who viewed Palestine as a place they could freely practice their religion.

During the 1930’s, when Great Britain realized that Arabs greatly outnumbered Jews, and that there was so much oil in the Middle East, she changed her political position on Zionism as mentioned in the Balfour Declaration. She found the Jews argumentative, and wanted Palestine to be “an Arab-dominated region under English tutelage.”

Brandeis favored a workday shorter than twelve or fourteen hours, in order to give unionized American workers time to fulfill their civic responsibilities to get involved in local politics and “as parents and members of their communities.”

As a Supreme Court Justice, Brandeis left an influential legacy in that he had a “… great impact not only on jurisdictional matters but on commercial law, antitrust, administrative law, utility regulation, federalism, and individual liberties.”

Until the Sea Shall Free Them

The Book of the Week is “Until the Sea Shall Free them” by Robert Frump, published in 2001.

This wordy, repetitive, yet suspenseful book tells the detailed story of the February 1983 shipwreck of the Marine Electric, among many other briefly described maritime catastrophes. The scurvy old 605-foot bulk carrier transported coal in the North Atlantic Ocean from Boston, MA to Norfolk, VA.

The investigation of what happened conducted by the Marine Board– a panel of industry officials– was subject to the vagaries of the maritime legal system. Safety inspections of ships were performed by the U.S. Coast Guard and the American Bureau of Shipping. The National Transportation Safety Board was yet another regulatory body of maritime matters.

The Marine Board generated reports on shipping accidents. In rare cases, its recommendations might include Justice Department investigation and prosecution of a shipping company executive, or a review of the license of a ship’s captain; the latter, for criminal law violation, like for negligence in putting men’s lives at risk for failure to follow safety procedures.

A ship’s officers were usually blamed for disasters because ship owners and builders had a friendly relationship with the federal government. Political contributions helped elect candidates who turned a blind eye to regulating safety in marine commerce.

The ship’s top officers were under tremendous pressure to go on a voyage despite safety violations. Whistle-blowing behavior might get them fired. There was always the threat that a rival union would be awarded their current shipping contract. Some men waited more than a year before they could be assigned their next job on a ship.

For years, disasters were waiting to happen, due to the “rationalization, denial, greed and stubbornness” in connection with repairing and mantaining of decades-old ships. In the mid-1970’s, more than one fifth of all deaths from shipping accidents were due to structural failures of the vessels.

Heartbreakingly, during a winter storm at sea, some crew members die when they are so close to surviving. The lifeboats are buffeted about by rough waves and dashed on rocks or into a seawall, or men who lack protective clothing and proper safety equipment, fall into the freezing water while trying to board a rescue boat.

As in many other industries, shipping is one in which the big companies care more about money than seeking to reduce dangerous conditions. Despite poor safety records and the expenses of lawsuits and damage to their reputations, the large players stayed in business through the decades of the twentieth century. On the flip side, in accidents, numerous greedy seamen abused a lenient system that awarded them big bucks in personal injury cases.

Read the book to learn the fates of the parties associated with the Marine Electric after its fall from grace.

I Got A Name

The Book of the Week is “I Got A Name, The Jim Croce Story” by Ingrid Croce and Jimmy Rock, published in 2012. This is a career biography of the singer-songwriter Jim Croce.

In struggling to be his own man, Croce’s strengths and weaknesses emerged. In the early 1960’s, Croce rebelled against his parents in various ways. He broke free of his strict Catholic upbringing by converting to Judaism, marrying a Jew and pursuing a music career irrelevant to his Villanova University education in psychology and German.

He was able to stand up to his family but not the music company he chose to represent him and his wife. Although Croce had incredible talent and passion for composing and singing folk songs about working class people and love, the couple got swindled due to their phobia for dealing with attorneys. For years, Croce’s music made only his promoters wealthy. The couple stayed dirt poor even after there was widespread purchasing of his music.

In the late 1960’s, the Croces were pressured by the music company to go on concert tours at colleges. In the early 1970’s, Croce, without his wife, went on long, grueling road trips, during which he adopted the stereotyped rock-star lifestyle– taking drugs (not the hard ones, though) and philandering, but without the luxury accommodations and high pay.

Read the book to learn the full story (that ended tragically) of the suffering that Croce and his family endured in order for him to pursue his dream.

A Sea In Flames

The Book of the Week is “A Sea In Flames, The Deepwater Horizon Oil Blowout” by Carl Safina, published in 2011. This is a description of the disaster that spewed millions of gallons of oil into the Gulf of Mexico starting in late April 2010.

British Petroleum (BP)– the oil company– was the major party responsible for killing eleven workers and causing ongoing long-term emotional trauma and major financial hardships for thousands of people. BP’s poor safety record, and favoring money over human beings made it more of a scapegoat than the other parties involved– Halliburton, Transocean and other subcontractors that were providing equipment and services for deep exploratory drilling.

The accident’s aftermath was a cluster screw-up. Both plugging the oil leak and cleaning up the oil were uncharted territory, literally and figuratively. Previously, greedy politicians had been loath to regulate the oil industry because they needed the industry’s campaign contributions to win elections.

A month after the disaster, President Obama prohibited deep sea drilling for six more months. Even so, in June 2010, a federal judge nixed such legislation for economic reasons. It was clear that the government continued to woo the oil companies, at the expense of the victims. That judge cared more about the nation’s fiscal health than about people’s health and the environment.

The victims include not just humans, but civilization as a whole. This blogger contends that it does not matter that the victims are voters. They are easily psychologically manipulated. The oil mess has incalculable, ambiguous biological and environmental consequences. However, hard economic numbers win elections because money is more important to voters, too. Voters will readily believe a storm of economic misinformation, including the incorrect notion that clean fuels cost more than fossil fuels. Electoral mudslinging that asserts that the opposing candidate allowed serious health problems and scary ecological goings-on to occur, to which oil contamination might or might be attributable, do not win elections.

This is just one more depressing piece of writing that reminds us that we are all destroying our earth.

The Black Swan

The Book of the Week is “The Black Swan” by Nassim Nicholas Taleb, published in 2010. In this book, the author explains his theory about rare, unexpected events, “Black Swans”– unexpected by those affected, because human traits and uncertain situations cause people to draw the wrong conclusions, formulate the wrong predictions, and make the wrong decisions. “Black Swan events are largely caused by people using measures way over their heads, instilling false confidence based on bogus results.” The author applies his ideas mostly to “experts” who manipulate the financial markets.

While Taleb makes some good points, this blogger suspects that very few readers of this book will come away fully understanding what a Black Swan is. Taleb tries to provide several examples; his illustrations are unclear as to why one event is a Black Swan and why another is not.

One example consists of five trading managers at a European-owned financial institution who wrote a five-year plan. Having neglected to consider all possible adverse future events, they were done in by “the Black Swan of the Russian financial default of 1998 and the accompanying meltdown of the values of Latin American debt markets.” Yet, Taleb writes that the 2008 financial crisis was not a Black Swan. He says such a cluster screw-up will happen again. A Black Swan is a negative or more rarely, a positive occurrence that in general, has never happened before.

One human trait people have is that they are reluctant to attribute events to randomness. But Taleb thinks randomness plays a part in all sorts of events, including long winning streaks of investors. He even generated a computer simulation showing how it would be impossible not to have money managers who beat the market year after year– he says they did so simply by luck alone. Another reason these investors are overrated is that people hear more often about winners rather than losers.

Taleb writes, “We want to be told stories, and there is nothing wrong with that– except that we should check more thoroughly whether the story provides consequential distortions of reality… Just consider that the newspapers try to get impeccable facts, but weave them into a narrative in such a way as to convey the impression of causality (and knowledge).”

The Fall of the House of Forbes

The Book of the Week is “The Fall of the House of Forbes” by Stewart Pinkerton, published in 2011.  This volume describes the changes that occurred at Forbes (a magazine publisher named after its founding family) in the post-Malcolm Forbes era.

Malcolm, a major shareholder of the company, spent extravagantly on a collection of mansions, art, and vehicles that traversed land, sea and air; not to mention business parties. He had managed the company until his mysterious death in 1991. Thereafter, his successors imposed frugality. Nevertheless, Forbes was unprepared for the new realities of the internet.

When the magazine was finally forced to restructure its operations by instituting massive layoffs and integrating print and Web, it had already been plagued for years by arrogant and petty editors, office politics, high turnover and numerous inefficiencies. While the magazine previously had a sterling reputation for meticulous fact-checking, it has jettisoned quality for dumbed-down content and Web traffic at any cost.

It is thought that the way to achieve profitability on the Web is to foster interactivity with readers.  The Huffington Post does so, but has yet to make any money. Furthermore, research has shown that people have much poorer focus and information retention when they are reading news on a backlit screen, than when reading news in print form.

Read the book to learn the history of the Forbes family, and the people and bad choices behind the collapse of this media empire.

Fateful Harvest

The Book of the Week is “Fateful Harvest” by Duff Wilson, published in 2002. Here is yet another book that describes one of the countless ways humans are destroying the earth and themselves.

Wilson, a journalist, revealed an environmental problem (and by natural extension, health hazard) perpetrated by large corporations on people in a small town in Washington State. It is unknown how many people elsewhere are affected, since it is extremely difficult to prove proximate cause when it comes to cancer in people who have had unmeasured exposure to countless carcinogens throughout their lives. The story was reminiscent of the book and movie “A Civil Action.” However, in Quincy, Washington, there has yet to be a class action suit.

In recent decades, companies have found a way to save millions of dollars disposing of toxic wastes they generate. In the 1990’s, they paid $50-$100 a ton to have fertilizer companies use those wastes in fertilizer, which was then sold to farmers. They would have paid $200 or $300 a ton to dump the wastes in a landfill instead. The fertilizer companies take advantage of a loophole in the law, which regulates “wastes,” not “products.” Fertilizer is a “product” even when it contains fly ash, contaminated phosphoric acid, beryllium, cadmium, chromium and other toxins from automakers, zinc smelters, copper recycling plants and steel mills.

Food becomes contaminated when grown in contaminated fertilizer. The farmers grow the potatoes, corn and beans, etc., sold to food processing plants that make and sell French fries and other edible products.

Read the book to learn how this serious environmental threat was discovered, and the various reasons why outspoken farmers, a horse breeder and the mayor, among other adversely affected Quincy residents, could not acquire sufficient power and influence to close the loophole in the law.

Coronary

The Book of the Week is “Coronary, A True Story of Medicine Gone Awry” by Stephen Klaidman, published in 2007. This book recounts what happens when people are afflicted by certain aspects of human nature:  greed, power-hunger and fear. It is a sensational story, the kind even tabloids could not fabricate.

In the 1990’s and single-digit 2000’s, there was a cardiac surgeon, one Dr. Moon, who exhibited the first two aspects in spades– instilling dire panic in impressionable patients, telling them that their clogged arteries could kill them at any second, and therefore, they had to be scheduled for triple or quadruple bypass surgery within the week. Those patients underwent the rigorous, dangerous, and worst of all– in the vast majority of cases– unnecessary procedure, taking weeks to recover, getting saddled with medical bills.

Dr. Moon loved the control he had over people, and enjoyed a lavish lifestyle. His reputation was sterling, due to word-of-mouth and great public relations (people truly believed he saved their lives). The hospital where he committed his medical malpractice was one owned by the then-disreputable holding company, National Medical Enterprises (which later changed its name to Tenet Healthcare).

Wait, there’s more! There were other greedy parties involved in the story. Three people saw what was really happening, and found a way to capitalize on the situation. They brought a Qui Tam lawsuit against the doctor and his accomplices. This means they accused him of bilking Medicaid and Medicare out of big bucks by billing the federal government for unnecessary surgeries. They were expecting to reap a large reward for reporting the errant doctor.

Read the book to learn the sordid details and outcome of this extreme saga.