Friday, February 18, 2011

Should You Give a Damn About Your Reputation?

The last article in Issue 14 of The Voluntaryist is titled “Business Keeps Business Honest,” written by William Vandersteel, who at the time was an associate of the Institute for Humane Studies.

Mr. Vandersteel makes a very good case that our justice system interferes with one of the best ways we have of evaluating potential trade partners: reputation. He writes:

“Not only does our justice system serve little purpose in trade and commerce but its very presence is often counter productive, as is shown by the many businesses and industries that thrive as though our justice system did not exist.”

He shares examples in his article, one of which is the wholesale diamond industry and says mutual trust is often not really based on any real moral sense but on our own self-interest - people will be honest and desire a good reputation because it increases the chances of success.

Also, our justice system can keep people from being as vigilant as we should be in choosing business partners:

The fact is, business would thrive in the absence of our coercive justice system, but an enormous premium would be attached to the integrity of all participants. Before entering into any contract all parties would take great pains to ascertain the integrity of each participant, knowing full well that the performance of the contract rests solely on their reputation for honesty.

By the same token, individuals would strive always to act properly and with the highest integrity, knowing equally well that any blemish on their reputations would virtually bar them from participating in any future business ventures. All this leads to the inevitable conclusion that the very presence of a government
justice system, along with the coercive enforcement measures, invites fraud and crime and tempts individuals to substitute force for integrity.

So yeah we all want a good reputation. Well except for:

Wasn’t that fun? I was waiting for a post where I could listen to some Joan Jett! I love her attitude and style. Now, don’t think Joan doesn’t care about her reputation, I’m sure she’s really no different than the rest of us.

Heck, in rock and roll a “bad reputation” can actually be a good thing because that’s the way the marketing model is set up. But in the end it’s really all about selling music. If I didn’t like to bang my head and listen to the way she screams “ow,” I wouldn’t buy any of her stuff.

I also like how my husband plays out this reputation idea. He’s a self-employed computer consultant and sometimes businesses ask about contracts. He always tells them he doesn’t need one. “My contract is I’ll do the job and if you pay me, I’ll come back. If you don’t want me to come back, then don’t pay me. I’m willing to take responsibility for our first interaction and save all the hassles that go along with contracts.”

It’s all very informal and it works. (EDIT: I had a comment from Carl on this because he said it came across as if my husband didn't expect to get paid, unless the client wanted him to come back. Carl said he presumes my husband expects to get paid for his work - contract or not - but if there is disagreement or hassle, he simply concedes, doesn't worry about his loss, and moves on to the next client. To which my husband says, "exactly." Hope that clears up any confusion or misinterpretation.)

I really need to go now because I want to bang my head some more with Joan so let's end this post with Mr. Vandersteel's ending paragraph, which was great:

The United States Supreme Court once ruled in a sex-related case that behavior between consenting adults was none of the government's business. This ruling is correct in principle and should apply across the board. Trade is one form of behavior between consenting adults and, therefore, should also be none of the government's business.

1 comment:

Anonymous said...

A tangential comment: my grandmother said her dad (who died before I was born) complained that to go into business in the past all you needed was a pencial and the back of an envelope, now you had to be a #@%* Philadelphia lawyer with all the contracts and such.
From 1910 to about 1940 or so he built houses and barns with a handshake and on a cash only basis and paid his workers in silver dollars. BTW given the current silver spot price, each one of those silver dollars is worth over $25 in today's devalued currency.