23 April, 2015

Business was so much easier when your word was your bond

Melbourne Herald Sun, Thursday April 23, 2015

Walk through the City any day of the working week and you will notice how many of the countless little cafes have pairs or clusters of people with their laptops and smartphones, doing business. And funny enough, this takes us back to the very origins of modern business practice - to the turn of the 18th century when the newly-discovered drink was enjoyed in what became known as "coffee shops".

In these warm smoky shops, consignments of goods were sold and traded, ships laden with the output of the new manufacturing industries were insured against bad weather or pirates. Office and legal facilities were cramped so a standard of contract was agreed: "My word is my bond". In other words, when I make a promise I guarantee it.

For three centuries this oath was scrupulously kept. If only because, if it became known that a trader had shaken hands and then broken his promise, he would be so shamed and blackballed that his business would die.

So what happened to that simple form of business? These days, it feels, agreements have to be checked by teams of lawyers on each side, thick documents cover every possible contingency for error or duplicity. Lengthy contracts are signed and everyone looks for the flaws.

But basically a deal is, do you want to buy it or not? Do you want to pay this price or not? If the answer to both questions is 'yes', then shake hands and you have a deal. Who needs a lawyer?

The problem occurs in day to day dealings. We've all said "yes" when we should have said "maybe"; we've said "maybe" when we should have said "no".

"Can you get this to us by Tuesday?" "Yes." (Background thought: "This Tuesday - will it have left the factory yet...?") "So you've had experience with this type of engine?" "Oh yes." (Background: "Never seen one in my life, but they can't be that hard...") So a lie is born, not maliciously but because you want to please.

That of course is where so many politicians gather reputations for lying. They so desperately want to please, to win your approval and your vote - and they're pretty sure they can deliver on the promise, if something else doesn't get in the way. And it does.

Funny enough, the most honest place to look is in commercial advertising. Oh sure they have "puffery". Some product is "the best," "fastest," "tastiest," "freshest," all said with a sincere face. But you know you are not deceived, so do they. It's a puff of opinion, not a lie.

Real lies are tightly controlled by advertising ethics. There is a stack of regulations about what you can say about alcohol, medicines, cars, children, food and beverages, financial institutions. They are controlled by the Australian Association of National Advertisers, supervised by the Advertising Standards Board.

Any complaints are considered by the Board and rulings published. Most are trivial, a few are serious and widely publicised. But there is very little decline in ethics here.

The ethics that count, and can make a real difference in the way business is conducted, take us back to the beginning. The ability to do trade with another and feel totally confident that they will live up to the obligation they have taken on. That they will pay you on time, in full. That they will not recklessly squander the goods or money you have entrusted to them, so they come back to you saying, "Sorry I've gone bankrupt, your money is gone".

Worst still, then setting up a month later under a new name, with someone else's money, with never any attempt to pay you back yours. This seems to be a common event in business, some even think it's smart. I don't, it's dishonest. Good business should be able to take your hand and when you say "My word is my bond," you know it's the truth.


Winston Marsh said...

Well done Ray ole boy. Them’s my views exactly but you express them so much better.
Have a f-a-n-t-a-s-t-i-c day... Winno

Peter Bennett said...

Well said Ray, I wish there were more like you.
Regards, Peter Bennett

Yahya Abdal-Aziz said...

Honesty is good business. The only trouble is, that we fail to sanction dishonesty effectively. That's partly a structural problem, brought about because of the size of the population of potential business partners, which exceeds human capacity to relate to. That was bad enough in a big city, but now seems intractable in today's global village. What we need is a more effective reputation system: some resource we can access that tells us _impartially_ whether our potential partner is trust-worthy. And accepts input from established partners, weighting it according to their trustworthiness, which is of course subject to revision based on subsequent experience of other partners who have relied on such input. The trick would be to devise a fair, impartial rating system impervious to deliberate manipulation by the unethical ... Something, perhaps, like LinkedIn, but without the puffery. I find the ratings on eBay quite reliable for frequent traders. But not everybody rates their experience, particularly if it might reflect to their discredit. Any comments on this idea?