Is ruthlessness in business executives ever useful?

post by Desrtopa · 2012-12-28T19:46:02.819Z · score: -3 (14 votes) · LW · GW · Legacy · 24 comments

We have a tradition of treating ruthlessness in businesspeople as something of a virtue. Certainly, ruthlessness can help one get ahead in the business world, and companies often benefit from executives who're willing to put aside scruples while devising means of turning a profit. So ruthlessness in business executives can certainly be useful for businesses.

 

From a societal perspective though, businesses are only valuable to the extent that they increase the wealth and quality of life of society as a whole. Businesses are allowed (indeed, required, in the case of publicly traded companies) to attempt to maximize profits, on the presumption that in doing so, they'll enrich the broader society in which they operate. But there are plenty of ways in which businesses can increase their own profits without becoming more wealth productive, such as cooperating with competitors or establishing monopolies in order to keep prices artificially elevated, use of advertising to promote a product or service relative to equal or superior competitors, lobbying with politicians to slant the legal playing field in their own favor, and so forth.

 

I have reasons to expect myself to be somewhat biased on this issue, so I'm not sure how telling it is that I personally come up short of any examples of ruthlessness in business executives being useful from a societal perspective, when compared to business executives who're highly competitive, but compassionate, with restrictive senses of fair play. So does anyone else have examples of ruthlessness in businesspeople as a social virtue?

24 comments

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comment by Dr_Manhattan · 2012-12-28T19:51:31.354Z · score: 9 (13 votes) · LW · GW

Building a great (very productive) company may require getting rid of less productive workers, which might be considered "ruthless".

comment by TheOtherDave · 2012-12-28T23:20:48.785Z · score: 1 (1 votes) · LW · GW

OTOH, being a great (very productive) company might also require creating systems that encourage productivity from less productive workers, and it's not clear to me that a company that, when faced with an unproductive worker, attempts to engage with them in some vaguely sensible way in order to increase productivity, and only gets rid of them when such attempts fail, deserves to be considered "ruthless."

comment by Desrtopa · 2012-12-28T22:56:30.479Z · score: 1 (1 votes) · LW · GW

I actually thought of this as an example slightly before sending in the post, and wondered if I should thereby discard the question as resolved. If the workers are really so much dead weight though, I have a hard time seeing the action as ruthless, and if the tradeoff is close to borderline, I'm not sure that as a matter of policy, firing the workers is really beneficial from a societal standpoint.

In a society with sufficiently advanced technology, most or all workers can be replaced by machines, for an increase in wealth production. But if this results in most of the population having no wealth because they're not doing any useful work, then society as a whole really isn't better off for it. So I'm inclined to suspect that for a given technology level, the societal optimum is likely to have people compensated on average at some point beyond their own economic productivity.

On the whole, I accept this an an example, but with reservations.

comment by Alsadius · 2013-01-02T09:55:40.656Z · score: 0 (0 votes) · LW · GW

You're basically making the Luddite argument here - technology will put humans out of work. Empirically, it's not true. We've shifted people away from all the boring stuff machines are good at(plowing fields, welding car frames, etc.), and into the sorts of jobs that actually require a human brain(service industries, largely). But 200 years of industrialization, and we're still at full employment, with no sign of that changing soon.

And even if we take your thought experiment at face value, and assume that all production is outsourced to machines, then you basically suggest that nobody has to work in order to have stuff. Why would people be poor in that situation? The biggest threat would be hedonistic ennui, the self-destructive spiral of boredom and addiction that seems to afflict the vast majority of any group that doesn't have to work(be it nobility or people on welfare). But you'd never have to worry about a roof over your head.

comment by Viliam_Bur · 2013-01-06T14:54:48.672Z · score: 1 (1 votes) · LW · GW

We've shifted people away from all the boring stuff machines are good at (plowing fields [...] and we're still at full employment, with no sign of that changing soon.

The price many states pay to achieve this result is giving tons of money in form of various subventions to people who work in agriculture. So in my opinion, the technology is already able to put many humans out of agriculture... but we are paying them to stay there regardless.

Because if we removed all those subventions, then... well, in theory, in a long term the people would move from agriculture to something else. But in practice, in short term we would most likely have social unrests leading either to a revolution, or to some political party gaining votes by putting the subventions back.

The situation where all the work is outsourced to machines, can be OK if those machines are Friendly. I see bigger problem in a possible intermediate situation where most, but not all work is outsourced to machines, and maybe 10% people are able to do the remaining human work, and the remaining 90% are economically useless.

The problem would be one side saying: "Hey guys, if you never work, and just enjoy your 24 hours of free time daily, why exactly should we work so hard just to keep everyone happy? We demand some huge rewards for our efforts!" And the other side would be saying: "Shut up, we are the majority and you are the minority, what makes you think that we would willingly give you higher status, you freaks?"

So the Luddites were partially right, and the problems are not as big as they predicted, because the society pays some money to sweep them under the rug. But if fact, many people today are made useless by technology; we just pretend they remain useful to prevent the social consequences.

comment by Alsadius · 2013-01-06T18:58:39.642Z · score: 0 (0 votes) · LW · GW

We have empirical evidence of what happens when agriculture subsidies disappear - New Zealand ended them all in the early 80s, when they were having financial trouble. Within a few years, their farming sector was actually healthier, because they moved away from being subsidy whores and became farmers, and it turns out that farming is a better business. Also, a revolution? Less than 1% of the first world is farmers. Who exactly would be doing all this revolting?

As for the machines replacing humans bit, I specifically mean "machines" to be the unintelligent ones - AIs are people, not machines.

comment by Desrtopa · 2013-01-02T23:21:45.689Z · score: 1 (1 votes) · LW · GW

We're rather short of full employment right now. Unemployment levels are still close to 8%, and there are currently a lot fewer job openings than there are people seeking employment. I've heard some economists contend that it's in part due to the fact that we're actually reaching a point where there are fewer "burger flipping jobs" available than there are people trying to fill them. Not everyone can be a programmer.

Even if they're mistaken, and that isn't yet the case, if the proportion of jobs that need a human to fill them decreases enough, we'd be bound to reach it eventually.

And even if we take your thought experiment at face value, and assume that all production is outsourced to machines, then you basically suggest that nobody has to work in order to have stuff. Why would people be poor in that situation? The biggest threat would be hedonistic ennui, the self-destructive spiral of boredom and addiction that seems to afflict the vast majority of any group that doesn't have to work(be it nobility or people on welfare). But you'd never have to worry about a roof over your head.

Due to increased mechanization, we're producing multiple times more wealth now than we were a hundred years ago. Why should anyone be poor now? The system we have isn't designed to provide much compensation for people whose productivity is low. It could be, and if it isn't eventually it's liable to become a rather large problem.

I never said that this would result in most of the population having no wealth; it's certainly not a historical inevitability. But our production levels have already come a long way in the past several decades with most of the gains being concentrated in a small proportion of the population.

In the extreme case where almost nobody is producing anything, but some people retain ownership of the means of production, it's obvious that society isn't better off if the median citizen isn't compensated beyond their level of productivity. But we don't necessarily have to reach that extreme before we reach a point where society as a whole is better off if the median individual is compensated beyond their level of productivity.

comment by Alsadius · 2013-01-03T05:46:51.998Z · score: 0 (0 votes) · LW · GW

Economic cycles exist, and we're at a bit of a bad point in them right now. I don't buy the thesis that this is somehow permanent, though - there's always been a cottage market in talking about how This Time Is Different, whether on the upswing or the downswing, and it hasn't been right yet. Even if the total amount of labour needed to run a modern society is dropping, that can just as easily be absorbed into shorter work hours instead of unemployment.

Also, by the standards of a hundred years ago, almost nobody(in the developed world) is poor today. The biggest health issue among the poor today is obesity - try telling someone in 1913 that someone who has the cash to buy enough food to get fat is poor. Even the "means of production" have been greatly democratized, with the rise of mutual funds.

It's not a problem to be ignored, but I don't intend to worry too much about it. Distributional problems in society have a tendency to get solved, because the people who are on the wrong side of them tend to be the most numerous.

comment by Desrtopa · 2013-01-03T15:53:55.592Z · score: 0 (0 votes) · LW · GW

Also, by the standards of a hundred years ago, almost nobody(in the developed world) is poor today. The biggest health issue among the poor today is obesity - try telling someone in 1913 that someone who has the cash to buy enough food to get fat is poor.

Plenty of people can't afford to pay for their homes. I think that a person from 1913 could accept that a person who could afford the food to get fat is poor if they live in an apartment with twice the people it's meant to hold and have to budget their paycheck down to the cent to keep their belongings from being repossessed.

It's not a problem to be ignored, but I don't intend to worry too much about it. Distributional problems in society have a tendency to get solved, because the people who are on the wrong side of them tend to be the most numerous.

Unfortunately, distributional problems also often end up being solved badly, see for instance the rise of the Soviet Union.

comment by Emile · 2012-12-28T22:31:16.419Z · score: 3 (3 votes) · LW · GW

We have a tradition of treating ruthlessness in businesspeople as something of a virtue.

Who does? Americans in general? Libertarians? Lesswrongers? The general impression I get is that it's rarely considered better than a necessary evil, but I could be wrong. To my ears your post sounds a bit like "Many people think that it's good to eat babies. However, I don't think so, and here is why ...."

comment by Desrtopa · 2012-12-28T22:38:20.784Z · score: 0 (0 votes) · LW · GW

You may be right. I had this comment particularly in mind when I wrote the post, but even if it resonates with what I've heard a lot of people say in the past, that's not equivalent to a polling result.

comment by buybuydandavis · 2012-12-29T10:24:15.879Z · score: 0 (0 votes) · LW · GW

From a societal perspective though, businesses are only valuable to the extent that they increase the wealth and quality of life of society as a whole.

I am the Lorax, I speak for society, for society has no tongue.

comment by asparisi · 2012-12-28T20:31:59.620Z · score: 0 (2 votes) · LW · GW

Your title asks a different question than your post: "useful" vs. being a "social virtue."

Consider two companies: A and B. Each has the option to pursue some plan X, or its alternative Y. X is more ruthless than Y (X may involve laying off a large portion of their workforce, a misinformation campaign, or using aggressive and unethical sales tactics) but X also stands to be more profitable than Y.

If the decision of which plan to pursue falls to a ruthless individual in company A, company A will likely pursue X. If the decision falls to a "highly competitive, compassionate, with restrictive sense of fair play" individual in company B, B may perform Y instead. If B does not perform Y, it is likely because they noted the comparative advantage A would have, being likely to pursue X. In this case, it is still in B's interest to act ruthlessly, making ruthlessness useful.

Now, is it a virtue? Well, for a particular company it is useful: it allows the pursuit of plans that would otherwise not be followed. Does the greater society benefit from it? Well, society gains whatever benefit is gained from business pursuing such plans, at the cost of whatever the costs of such plans are. But it is a useful enough character trait for one company's executives that it grants a competitive advantage over other companies where that trait is absent. Thus, it is an advantage- and perhaps a virtue, I am not sure how that word cashes out here- for each company. Companies without ruthless executives may fail to act or fail to act quickly where a ruthless executive wouldn't hesitate. So in situations where ruthless tactics allow one to win, ruthless individuals are an asset.

I'm not sure what more can be said on this, as I don't have a good way of cashing out the word 'social virtue' here or what practical question you are asking.

comment by Desrtopa · 2012-12-28T22:11:05.191Z · score: 1 (1 votes) · LW · GW

Your title asks a different question than your post: "useful" vs. being a "social virtue."

I chose a somewhat misleading title deliberately, although I can understand if people take issue with that. As I acknowledged in the post itself, it's clear that ruthlessness can be useful from the perspective of individual companies. From the perspective of a person judging their value to society, it's not so clear that ruthless business executives are useful. Their competitive advantage may lie purely in allowing them to make decisions that are in the company's interest, but not the public interest.

comment by asparisi · 2012-12-29T00:18:33.441Z · score: 0 (0 votes) · LW · GW

Where is the incentive for them to consider the public interest, save for insofar as it is the same as the company interest?

It sounds like you think there is a problem: that executives being ruthless is not necessarily beneficial for society as a whole. But I don't think that's the root problem. Even if you got rid of all of the ruthless executives and replaced them with competitive-yet-conscientious executives, the pressures that creates and nurtures ruthless executives would still be in place. There are ruthless executives because the environment favors them in many circumstances.

comment by Desrtopa · 2012-12-29T00:53:52.273Z · score: 1 (1 votes) · LW · GW

I'm not arguing that the core of the problem is that business executives are too ruthless. But I do suspect that to the extent that the current system rewards ruthlessness, it may be purely or almost purely due to ways in which it deviates from a system that offers no perverse incentives from a societal perspective.

comment by DaFranker · 2012-12-28T21:52:20.730Z · score: 1 (1 votes) · LW · GW

X is more ruthless than Y (...) but X also stands to be more profitable than X.

I'm guessing you mean X stands to be more profitable than Y?

comment by asparisi · 2012-12-29T00:12:14.769Z · score: 1 (1 votes) · LW · GW

Edited. Thanks.

comment by passive_fist · 2012-12-28T22:24:53.073Z · score: -1 (1 votes) · LW · GW

I have a hunch that your downvotes don't indicate that people are disagreeing with you; it's just that your question is very vague and ill-posed.

If you think about it, you are basically touching on the age-old question of trying to give a rational refutation (or justification) of unethical behavior.

Your question is of course a limited version of this, namely: "Should ethical behavior, even if necessary in society at large, be temporarily suspended in business transactions?"

This is a very complicated question which I don't think can be easily answered in a forum post.

comment by [deleted] · 2012-12-28T21:17:45.066Z · score: -2 (2 votes) · LW · GW

Weapons merchants. Privately owned prisons. Beneficial to the society they operate in, as you specify. I would not call them brimming with ruth. The Zeta Cartel is beneficial to some of the society it is in at least, but is outside the law and exceptionally ruthless.

comment by Desrtopa · 2012-12-28T22:33:07.216Z · score: 3 (3 votes) · LW · GW

Yvain covers the issues with privately owned prisons in his non-libertarian FAQ. In what respect do you think ruthlessly run private prisons are beneficial?

When it comes to weapons dealers, I concede that if you consider the country in which they are based, and not the countries to which they make their sales, to be "the society in which they operate," then increased ruthlessness is likely to result in increased enrichment of their society. If you count net gains by ignoring associated costs incurred elsewhere, then there are certainly "ruthless" ways to make businesses more productive. If your perspective deals exclusively with a single country, then you'll want to avoid companies applying this principle on a state level (extracting tax concessions from state governments to persuade them to move their operations from one state to another, for example,) but applying it on the country level would seem perfectly acceptable.

The way I look at social goods, I'm not inclined to regard such a thing as valuable, but naturally, national governments have reason to disagree.

comment by [deleted] · 2012-12-29T16:37:37.321Z · score: 0 (0 votes) · LW · GW

Yvain covers the issues with privately owned prisons in his non-libertarian FAQ. In what respect do you think ruthlessly run private prisons are beneficial?

Thank you for linking to this, I am finding it to be a good read!

comment by [deleted] · 2012-12-29T02:58:11.723Z · score: 0 (0 votes) · LW · GW

In what respect do you think ruthlessly run private prisons are beneficial?

Not the question you asked, but something I'll say up front: I am not in favor of private prisons, ruthless or ruthful.

There are no ruthful prisons. Prisons "increase the wealth and quality of life of society as a whole" (as thought-experimental evidence, mentally open all the prisons right this very moment and measure if society is improved, harmed or no change occurs). By "as a whole" I do not mean 'in every instance' but perhaps I have projected my meaning on your words. Prison is great for most people, and rotten for those in it. Private prisons should not exist, but they do, and as ruthless institutions they thrive. I specified private prisons because your question was about businesses and therefore would not include government prisons.

We agree weapons merchants thrive by ruthlessness, even if in the office they are all smiles and handshakes.

comment by TheOtherDave · 2012-12-29T03:58:58.713Z · score: 1 (1 votes) · LW · GW

It seems to me that the ruthless response to someone I consider (a) dangerous enough in principle to be worth worrying about and (b) currently powerless enough that I can dispose of them as I wish with impunity, is to kill rather than imprison them.

Which suggests that all prisons are ruthful.

(For the record: Not only am I not encouraging it, I actively assert that killing prisoners is a lousy idea. We should not kill prisoners. Especially not identifiable prisoners.)