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Mrs. Groovy here. Today we welcome I Vigilante. IV is a millennial attorney who amassed a lot of debt but is now on a fast track to financial independence. He writes about money, investing, the virtue of unapologetic selfishness—and shares his philosophy on how to enjoy life. And one of his joys just so happens to be whiskey, as evidenced by his recent post on Stock Street Blog.
If you’re unfamiliar with IV’s blog I suggest you begin with his Basic Training, Volume 1: You’re Insignificant. Also check out a previous guest post he’s written for us about working out without paying a hefty price tag. Our audience connected so well with IV that we brought him back for round 2. Take it away IV!
In 1973, the Environmental and Safety Engineering division of Ford Motor Company drafted a notorious memo in response to proposed regulations that would famously impact its production of its oddly popular Ford Pinto. The proposed regulations would have required a change to the design of the Pinto—and other vehicles—adding an estimated $11 to the production costs of each individual car. The trade-off would be reduced risk of fire in the event of a flip, which could prevent serious injuries and save lives. In the memo, Ford compared the estimated aggregate cost to society of injury and death that would be prevented by the new measure to the estimated cost of complying with the new regulations. The verdict: The cost of compliance would be multiples the cost of injury and death, so we shouldn’t bother making the change.
Seriously.
Ford ended up being sued repeatedly in relation to accidents in which Pinto drivers and passengers were injured or killed, especially those in which this exact change might have made a difference to the outcome of the accident. Among the many lawsuits is Grimshaw v. Ford Motor Company, which resulted in one of the largest jury awards ever in a products liability case and forced the words “Pinto Memo” into the mouths of law students across the country for decades. Juries, it turns out, are easily offended by the idea that a company can put a dollar value to the expected cost of the loss of human life and limb.
This cold, corporate calculus may have—reasonably, it seems—offended your sense of decency, too. Did Ford just haphazardly place a value on human life and, moreover, value profit more highly? How could they do that? And how can we, as well-intentioned, educated, honorable citizens of the world choose to invest in the evil corporations that do this kind of thing?
Are big corporations too evil to invest in?
It’s easy to think of corporations as big, nameless, emotionless entities of oppression. But it’s only slightly more complex a thought to see how that is one hell of a Supernatural Source Fallacy, and that it’s too expensive for humanity not to cooperate through entities like this.
Take the Ford example. Yes, Ford chose to forgo a potentially life-saving measure for just a bit of profit. Yes, a life lost is a tragedy, and the ultimate tragedy to those whom the Pinto Memo directly affected. But before we react too harshly to Ford: What exactly is the standard that we are holding Ford to? Do they have to build the ultimate, 100% safe vehicle that would not cost any lives? If so, what would Ford have to do? Put a twelve-foot buffer of bumpers on all sides of the vehicle? Throttle its top speed to 25 miles per hour? (About 40 kilometers per hour, for the non-free.) Encase the entire body in a layer of diamond, surrounded by thick memory foam padding to ensure pedestrian safety?
Would you be able to afford—and would you even want—such a vehicle? Of course not! But that means you don’t believe a human life is worth that cost, either. Just like Ford, you draw the line somewhere.
It’s a matter of risk. You and Ford share the belief that assuming some risk in the purchase and use of your vehicle is ok, as long as the returns you expect to gain are better. In this case, you assume your vehicle will provide so much good in your life—getting to work, visiting loved ones, cruising and listening to Journey—that the small additional risk you take by driving a vehicle that is not “perfectly safe” is worth it. In effect, you’re doing a cost-benefit analysis and placing a dollar value on human life—just like the evil corporations! To paraphrase the immortal words of Jack Sparrow: We’ve established Ford’s proposal as sound in principle; now, we’re just haggling over the price.
This is where the Supernatural Source fallacy comes in: We assume we know where to draw that line better than Ford because we have some special human intuition that a heartless corporation doesn’t have. But that’s not necessarily true. Corporations are made of people: They can have heart, can make mistakes, and are trying to walk the exact tightrope of morality that we all walk every day. We’re making the same decisions every day: we just aren’t always recording them in detail in memos. It’s easy to fact-check and second-guess a corporation, but it’s hard to review your own risk assessments with the same ferocity.
You might feel that the line was drawn in the wrong place. And you might be right. But you can’t write off Ford and all corporations that easily as corrupt institutions without doing extensive homework and knowing where you can justify drawing the same line. To take that hard of a stance is to succumb to the Villainous Fallacies, and that kind of mental shortcut isn’t a very heroic (or groovy!) thing to do.
How can we invest in “evil corporations” without feeling guilty?
The realization that perfection is unattainable and undesirable is necessary for an understanding of why investing is not an immoral or amoral practice, but rather a clearly good thing for the world.
Investing works because companies can sell an imperfect product without fear that it will ruin their brand. Shaving little bits of perfection off the top—even when it’s safety related—in exchange for profit is a big incentive. But there are competing incentives pushing for more safety as well: Presumably, there would be more buyers for a safer vehicle, all other things equal. Public relations disasters from selling unsafe vehicles can severely damage a company’s reputation and its bottom line. A balance must be achieved. Sometimes it’s an imperfect one, but it’s an ever-improving one if a company wants to have continued success.
The profit motivator is not only the driving force behind new businesses, inventions, and innovations, but also the driving force behind markets for ownership of businesses. Without a corporation generating such profit and promising return to the shareholders, you and I wouldn’t want to own a little piece of Ford. Without your desire to own a little piece of Ford, we wouldn’t have stock markets. Without stock markets, it would be a lot harder for the young, upstart-with-a-plan to mass produce electric cars to compete with Ford, because the initial funding would require either selling your company stock directly to individuals, door-to-door, or amassing a gigantic fortune elsewhere (cough, Elon Musk, cough).
Stocks aren’t inherently evil evil. Corporations aren’t inherently evil evil. Business decisions based on supply, demand, and the bottom line are not inherently evil evil. It’s just the reduction to paper of a process that should occur in your mind every day. Invest happily, knowing that you are contributing to a mess—but the most efficient and most beneficial mess of human interaction that has ever been devised by man: capitalism. And there’s no shame in that.
Mr. Groovy here. Oh, man, did I get a CMLT reading this post. Thank you, IV. I love your analysis and couldn’t agree more. If anyone would like to explore this topic further, I strongly suggest you read Knowledge and Decisions by Thomas Sowell. You’ll discover a new-found appreciation for the decision-makers of all ranks and the tragic trade-offs they must make to advance the human condition.
Okay, groovy freedomist, I’m almost done. Before I go, I just want to alert you to my appearance on the Chain of Wealth podcast. Yes, the fabulous Denis and Katie were gracious enough to have me on their show and we had a rollicking good time. In fact, I was having such a good time with Denis and Katie, I let slip a very unsavory detail from my past. As the immortal Boon Schoenstein would say, “A new low. I’m so ashamed.” Anyway, here’s the link. Have a great weekend. Toodles.
Great point about how we can’t expect all businesses, especially huge corporations, can sell a perfect item. Business decisions has to be made. Some are difficult yes, but a decision for a huge corporation also affects hundreds of families of their employees.
“Presumably, there would be more buyers for a safer vehicle, all other things equal. Public relations disasters from selling unsafe vehicles can severely damage a company’s reputation and its bottom line. A balance must be achieved. Sometimes it’s an imperfect one, but it’s an ever-improving one if a company wants to have continued success.”
A well-written and argued point! I like to think that I vote not just every two years in the ballot box, but every time I pass through the checkout aisle, fill up on gas, or hit the “Check Out” button in my virtual shopping cart.
I’m a big believer in researching purchases thoroughly before making them, to the point that I probably spend TOO much time agonizing over reviews. The payoff is that we’ve been blessed with items, tools, and vehicles of quality that last.
Consumer Reports is an excellent source of information, although I’m not 100% behind their consumer advocacy lobbying efforts. I’d rather see educated consumers identify and select the quality products from the chaff of those that are inferior naturally without the need for invasive regulations. But as you say, a balance must be achieved.
This article overall reminds me a great deal of an article on socially responsible investing which was authored by Darrow Kirkpatrick over at Can I Retire Yet? back in 2015. I found the topic incredibly interesting, and Darrow did a great job hitting on the pros and cons of attempting to avoid investing (even indirectly) in products or services which one finds off-putting or in opposition to your stated values. I’ve linked it below if anyone is interested in giving it a read:
https://www.caniretireyet.com/socially-responsible-investing-worth-the-price/
Interesting article. I honestly don’t know where I would be in life with out investing. Investing has been very good to us and I guess I am a free market capitalist at heart for better or worse. Tom
Tom @ Dividends Diversify recently posted…Clean Up With Clorox
I feel the same, for better or worse. Although I wouldn’t go out of my way to invest in an individual company if I truly felt it was evil, I don’t examine every company within a mutual fund with a magnifying glass. One can always invest in “socially responsible” mutual funds if it makes a difference to them. Personally, I believe some of that (not all) is just a marketing ploy.
I clicked on this so hard when I saw it! Great post Vilgante. I think general consensus for Google (hubbys overlord) is a positive one but there are some people who think they’re evil. It’s all very silly to think of Google as “one entity” when it’s made up of tons of hardworking yous and mes.
I’m immoral in that I don’t believe in morality but I still try to do good/be a decent person. My husband had a fun call the social good index in Vanguard that came with Google’s retirement plan…we turned it into something else 2 weeks ago. No sleep lost.
It’s obvious you try to be a good person! But based on that first sentence, I now also think of you as the kind of person who probably hits the elevator door close button a thousand times in quick succession even though it doesn’t do anything 🙂
The Vigilante recently posted…How Can You Feel Good about Investing in Evil Corporations?
If you look at businesses on the spectrum of evil to good, just like in anything, some will fall into the evil category. In a case like the Ford Pinto (having lived through that era myself), we have a blatant pursuit of profit where reasonable attempts at safety applications would have helped significantly to prevent numerous injuries and deaths. They chose not to do that.
There will never be totally safe cars, primarily because of one single factor: the driver. But in all cases, cars or toothbrushes, consumers should feel like every effort is being made by business to provide “safe” products.
Profit isn’t evil, but hiding facts that would influence consumers when they buy is just that.
We have an obligation to check the facts when we buy, but when we aren’t privy to things like “Pinto memos” until tragedy occurs, we can’t really do that. I have posted my own take on business and the profit motive and how it applies to your own personal finance.
Whether you’re shopping or investing, if you are well-informed, you should always choose the “good” over the “evil” and if evil suffers, it deserves it and it will eventually cease to exist.
Gary @ Super Saving Tips recently posted…Is “Profit” a Dirty Word in Your Own Personal Finances?
You bring up a really good point about the information gap between the producer and consumer, and I agree it’s generally incumbent on the producer to make sure the consumer knows the reasonably-likely-but-not-totally-obvious risks of a product. But, again, there’s a line-drawing problem with that. I don’t see a problem with Ford not disclosing to every potential purchaser that they chose to forgo a particular potential safety feature that no consumer was expecting, anyway. I mean, to reference my own over-the-top example, would you expect Ford to disclose that the car is not encased in diamond and therefore could have been made more safe?
Hit the nail on the head though regarding that last statement. A great, honest philosophy for personal finance is: “Put your money where your mouth is.”
The Vigilante recently posted…How Can You Feel Good about Investing in Evil Corporations?
I love this post. It made me think. And I love the way you respectfully defended your analysis from some very smart detractors. We got to talk IV. It may be time to for us to start a splinter FI group. Dare I call it alt-FI?
AntiFi?
The Vigilante recently posted…How Can You Feel Good about Investing in Evil Corporations?
When I saw the author was a lawyer I expected a total hatchet job on corporations but was amazed that this was a reasoned and balanced piece. Almost as if someone, say an engineer, had written it. Now I feel like I’ve seen pigs fly and a unicorn out in the backyard, shocker! I hate when I have to reassess my opinion of a whole profession.
Steveark recently posted…I Made $2,000 Today!
You don’t – lawyers are THE WORST.
I remember being referred to as one of the three-member “conservative caucus” in my first year law school classes because, despite the fact that none of the three of us were or ever have been American conservatives – or really even interested in politics – the vast majority of our fellow lawyers-to-be simply could not wrap their heads around intellectual curiosity for it’s own sake. Everything had to be in it’s neat little pre-made, party-line box. It’s scary!
The Vigilante recently posted…How Can You Feel Good about Investing in Evil Corporations?
What about government policy. Who regulates the regulators. Sugar has gotten a free ride for the last 60 years. While fat and cholesterol have been, and still are, vilified thanks to institutions like the AHA. They have too much invested to admit that they’ve been wrong. So how does public policy that’s been wrong for decades and likely has lead to millions of deaths due to heart failure, diabetes, cancer and now the opioid crisis get fixed. If you want to call out evil corporations, call out almost all of the companies that make the s$%f that’s sold as food in the center aisles of every grocery store across the U.S. IMO these companies are “poisoning” the general population while also getting a feel good approval from the AHA’s Heart Healthy label. And I say this with an aunt who worked for Kellogg’s for 35 years and a SIL who’s a big wig at the AHA. I try to keep my mouth shut at Thanksgiving. Thanks to the Groovies for letting me rant here.
Perfect example of what I meant in my comment below where I said “The jump to regulate all too often leads to a bad solution, in a weird natural-selection sort of way.” Sure, we may need some food regulation, but when we jump the gun in a panic to regulate, we let these regulations serve the worst among us. Thanks for your comment!
The Vigilante recently posted…How Can You Feel Good about Investing in Evil Corporations?
We do often view a corporation as an entity onto itself, just like the government. The reality is all these really entail is a collection of people. There are both good and bad people and thus corporations are run by those that are both good and bad.
Either way though it doesn’t matter much. Purchasing a company stock usually , except an iPo, is a shift of funds from you to the previous owner. Not the company itself. As such your not even entirely promoting the companies position. Then again a company usually has multiple positions that may not even be congruent. See again about people.
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The main difference between large governments and large corporations – which are both powerful in influential groups of people – is that corporations try to curry your favor. Governments just point a gun (usually metaphorically) in your direction to make you comply. If a corporation does the same thing, it leads to either criminal charges or the imminent failure of the company. So there’s a bit more of a natural safeguard in place. But that’s why I’m much more comfortable with a large corporation than with a large government, and much more afraid when I see people commonly referring to corporations as “evil” and asking to give government more authority in response!
The Vigilante recently posted…How Can You Feel Good about Investing in Evil Corporations?
Over the years, I have bought “evil” individual stocks, for example, Philip Morris. Others in the FI community love the VTSAX. In this particular case, it adds yet another reason to buy the index. You don’t have to feel guilty about purchasing a cigarette company, even though you are getting rich on it just like me.
Oh, and my first car was a Pinto. People used to tease me about the possibility of an explosion, but it was a good reason to snatch up a really good buy on a cheap car. Yeah, I decided to take my chances, just like Ford!
haha, good on you for taking the risk!
Hopefully you didn’t buy Philip Morris in the last year or so. Isn’t it down like 25%? Rough time to be big tobacco (which is probably a good thing for most of us!)
The Vigilante recently posted…How Can You Feel Good about Investing in Evil Corporations?
I bought Philip Morris way back in 2000 when they lost their lawsuit in a judgement costing more than their entire market cap. The state of Florida protected them because they get their tax money from cigarettes and didn’t want to lose their cash cow. I saw this was a beautiful “evilness” and joined in. At that time, you got Altria and Kraft too. And a ton of dividends. If you check Jeremy Siegel, PM has been the most successful stock long term. After the split, it is now an International play.
In short, I agree, for other reasons.
Ayn Rand is rumored to say, “check your premises.” Your opening with the Ford memo leads me to think that the Ford memo’s great sin was incompleteness. When doing the cost-benefit analysis of the Pinto gas tank fix, the memo failed to include costs of litigation and bad press. (I still laugh at the gag in the movie Top Secret where a 2 ton truck runs a gauntlet of Nazi fire and ends up barely touching a Pinto which erupts in a fireball. Whereupon the truck then drives off.) This sort of black-swan expense cannot be anticipated in detail, but allowances can be made for known-unknowns (torts) and unknown-unknowns (media panics). Ford management wasn’t evil as much as blinkered and I drive a Ford today.
Good and evil are identified using tradition and reason. If Chick-fil-A went public tomorrow I’d want to own part of it because they are the best fast food restaurant chain. If you forego hate-chicken, that’s your choice, but the same criteria that half the market uses to call them evil, the other half the market cites for calling them good. Same goes for the NRA, Planned Parenthood and any controversial corporation.
Good & evil run through the heart of every man (Solzhenitsyn) and no securities analyst can delve that deeply. Thus we lack the knowledge to intelligently invest on that basis.
VTSAX for the win.
Hey, is it alright to take my Chick-fil-A into Starbucks and eat it in the bathroom?
Great quote, great advice. But I don’t recall enough about the Pinto Memo, to be honest, to know whether they factored in the risk of bad press. It’s entirely possible it was considered, but it’s also difficult to quantify.
“Hate-chicken” is a term I have not yet seen, but I will absolutely adopt.
The Vigilante recently posted…How Can You Feel Good about Investing in Evil Corporations?
I hadn’t heard of Knowledge and Decisions, but I’m familiar with and LOVE Thomas Sowell. Despite the occasional disagreement with his views, he’s a man clearly motivated by intellectual curiosity, and he has an incredible economic mind. Definitely added to the future reading list!
The Vigilante recently posted…Comment on Make Your Own Luck by mrspickypincher
You’ll love it, IV. I don’t know if it’s his first or second book (Blacks In Education might have been his first book). Anyway, Knowledge and Decisions is one of the few books I have left in my pared down physical library. I read it again every couple of years, and every time I re-read it, I come away with another profound insight. It’s a great workout for your brain.
Thanks for the post. A person is a person. A large group of people is a large group of people. And a (typically) huge group of people is…a huge group of people. Or, a corporation.
We have the ultimate power, not them. If we don’t want to buy a VW, or a Ford, or a (insert evil product of the month here), we don’t have to. They’re not perfect, just like you and me. And they make decisions based on money, morals and more. Just like you and me. Thanks for that reminder.
Similarly, we can decide if we want to own a piece of them. I don’t like Ford anymore (bad car problem), but if I own $12 worth in my IRA I’m not dumping that fund. But I -can-. Now I need to go spend possibly days binge-reading this I, Vigilante blog. I didn’t need outside sunshine today anyway…
Yeah, you can delete that second post :). Or duplicate it for a third. Your call.
You really don’t need to read it. I hear it’s all just alt-right talking point garbage.
The Vigilante recently posted…How Can You Feel Good about Investing in Evil Corporations?
I wanted to say something smart but leave this here instead…
“You cannot have power for good without having power for evil too. Even mother’s milk nourishes murderers as well as heroes.”
―George Bernard Shaw
[HCF] recently posted…Living debt free is a habit not a choice
Well said. Not sure if you intended to agree or disagree with the general sentiment of the post, but that was kind of my point 🙂
The Vigilante recently posted…Scotch Street: I, Vigilante on Caol Ila 12
Agree or disagree?
Yes 🙂
This question is so controversial that I cannot even clearly take a side on the debate. Let’s just aim for the balance and trust in constant improvement. 🙂
[HCF] recently posted…Living debt free is a habit not a choice
Close the comments, Groovys, perfection has been achieved!
The Vigilante recently posted…Scotch Street: I, Vigilante on Caol Ila 12
I can’t! All this diversity of thought is giving me a tremendous CMLT. I love it when powerful, honorable minds wage battle.
I disagree with you last paragraph wholeheartedly. There’s a TON of evil $hit levied by corporations, with full knowledge at the leadership level. Not enough space here to lay out exhibits A through Z, but a little dash of Enron, with a touch of GM, and big pharma, maybe VW, Phillip-Morris, Wall Street c. 2006-07, private online “colleges”, etc. etc. ad infinitum.
I would agree that most of us are guilty (including yours truly) of investing in many monsters unwittingly through our 401Ks, but don’t let our ability to profit overshadow the dirty deeds that many of these single minded entities partake over and over and over.
Maybe throw in a little more recognition of the bad actors and the necessity for better regulations to balance your argument?
With Volkswagon – I find it astounding how they’ve come back in America. It’s as if it never happened. Americans absolute infatuation for cars makes it that big car companies could probably just shit on people and burn their houses down and the people would shrug it off two years later and say “look at their cool new 400HP model this year!! me want!!!”
This is a great read
Let me amend that last paragraph now:
“Corporations aren’t INHERENTLY evil.”
There are bad actors, just as there are bad actors in any group. But those bad actors tend to fail, left to their own devices, or correct the problem. Prior Bad Actor Enron failed; Prior Bad Actor Ford righted the ship and continues to be a behemoth. Regulation is sometimes a reasonable response, but not always.
The jump to regulate all too often leads to a bad solution, in a weird natural-selection sort of way. This is because only the most interested parties – who tend to be competitors to that bad actor – participate in the creation of new regulation. So when we all cry out for new regulation, often the result is a barrier to entry that allows more subtle bad actors to use the weight of government to shut out potential competitors/good actors! I guess, in sum: Yeah, there are bad actors, but regulation is a powerful tool that has to be wielded with much more care than to be Solution #1.
The Vigilante recently posted…Scotch Street: I, Vigilante on Caol Ila 12
Hey, guys. Just wanted to chime and say 1) I love this lively and respectful debate, and 2) I’m going straight to hell. Why? I’m maintaining my neutrality for the moment. And we all know that “the hottest places in hell are reserved for those who in a time of great controversy maintain their neutrality.” Haha. I’ll really have something to say later today. But I’m wussing out now. Too much on my plate. I do after all have to dedicate much of my free time to writing, in the words of Mrs. Groovy, “the book that no one will read.” Until later, keep the lively but respectful debate going. Toodles.
Great post, well written. Every time I hear the term “evil corporations” I still have the image in my mind of those “occupy wall street” protesters years ago. Many were shouting angrily, with an iPhone in one hand and a Starbucks in the other. They were so vacuous they didn’t even see the irony….
They weren’t all like that, AF.
I hear ya, I know it wasn’t all or even most. But when you see stuff like that it’s just a “really?” type of thing…
I love the nonsensical personalization and polarization of corporations based on minute details irrelevant to the service you’re paying them for. I’m never sure if I’m allowed to have Starbucks or Chil-fil-A – someone should be keeping a database for this. Viable side hustle?
The Vigilante recently posted…Scotch Street: I, Vigilante on Caol Ila 12