Insider Trading

Andrew Ross Sorkin has a startling and rather depressing article in this morning’s New York Times, discussing the disturbing prevalence of insider trading. This prevalence was revealed in a study by three professors, Menachem Brenner and Marti G. Subrahmanyam at N.Y.U. and Patrick Augustin at McGill. The comments on the article make interesting reading: Almost to a person (actually to a man), they say: “What’s new? Everyone knows the stock market is crooked.” And that’s even more depressing.

The purpose of business

I noted in an earlier post that Judith Warner said that one could not fault the pharmaceutical companies from selling inappropriate drugs to children because they were in the business of “making money.” I bewailed that fact then — and do again. Surely the purpose of business is to serve their customers — and making money is the reward for doing that. Today George Akerlof & Rachel Kranton bring a nice riposte in the form of “identity economics,” claiming that “In organisations that work well, employees identify with their work and their organisations. People want to do a good job because they think they should and because it is the right thing to do. In organisations that function effectively, the goals of the workers and of the organisation are aligned. There is little conflict of interest and little need for performance pay.” In other words, a pharmaceutical company that is run well should be full of people who desire to do right by their customers. Their primary reward is personal satisfaction; their secondary satisfaction is pay for a job well done. As they note, Captain Sully Sullenberger performed heroics because he saw it as his job, not because he thought that it would lead to some oversized bonus or because he thought that he was in the flying business to make money. Sadly, I think that our business schools have focused far too much attention on the making money bit and far too little on the just doing one’s job bit.

Getting old productively

John Lloyd’s, “Boomers rage against the dying of the light” and Michael Skapinker’s “The purpose of business is to win respect” formed an interesting pair of columns in today’s Financial Times. Lloyd contrasted a picture of a vast number of smelly, senile people nodding off in restaurants while financially supported by a small number of young people with the possibility of those elderly still being productively employed. Skapinker pondered on the purpose of business and moved beyond the notion that it existed for the purpose of just making money and concluded that it should all be about “making profits and serving customers by doing something we can be proud of.” I would have put the profits at the end of that sentence or even left it out altogether. Profit, after all, is no different than wages and interest — it is the return that one gets from doing something — not an end in itself. So, a better version of the purpose of business is simply to serve customers by doing something we can be proud of.  My sense is that purpose ties back nicely to the continued involvement of the elderly. If we are to get through the autumnal passage of the large contingent of baby boomers, then it is essential that all hands be on deck and if everyone is doing something that they can be proud of in serving others, then this involvement could be meaningful for all involved. After writing this, I heard Judith Warner on NPR talking about the pharmaceuticals saying, “Well one can’t fault the drug companies — they’re in the business of making money.” Oh dear, how sad, I thought!