William F. Buckley On Big Tobacco and Hypocrisy | The Conservative Income Investor

William F. Buckley On Big Tobacco and Hypocrisy



[

In a 1988 ABC special, columnist William F. Buckley debated Jesse Jackson on drugs (particularly cigarette smoking), and during the debate Buckley said this:

“If we get nothing else out of the hour tonight, I would hope that we emancipate ourselves from the superstition that that which is legal is necessarily honorable. . . It’s perfectly legal to contract syphilis but that does not mean that society is in favor of syphilis.” And then he goes on with the pointed jab: “As a matter of fact, it’s perfectly legal to vote for Jesse Jackson. That doesn’t make it reputable, does it?”

I receive a decent amount of comments from readers (some of it posted here, some of it posted on my Seeking Alpha writings, and some of it sent to me privately) responding to old articles that I have written analyzing the tobacco stocks (Altria, Lorillard, Reynolds American, and Philip Morris International) that react as if I’m “Tobacco Tim” encouraging cigarette consumption amongst our youngsters.

That is not how I feel about the topic at all, and here is where the misunderstanding occurs: just because I am in favor of something being legal, does not mean that I am advocating the use of the product. I think you should have the legal right to go to McDonalds and eat 1,000 Big Macs every day, but I don’t think that is something that we should necessarily consider desirable behavior. I think you should have the legal right to sit on the couch and stuff yourself with giant blocks of Kraft cheese all day (like George Costanza during his “Summer of George” run on Seinfeld. I think you should have the legal right to drink a case of Bud Light Platinum every night at your house, even though that won’t lead to optimal behavior in your own life. In short, I want all of you to have as much legal autonomy to conduct your life as you see fit as possible.

Consistent with that, I think that product manufacturers should have the right to give its customers what they want. The owners of Coca-Cola, Kraft, McDonalds, and Philip Morris International are delivering value to their customers, otherwise no one would take money from their paychecks (or dividend income, rental payments, or whatever) and buy those products if it did not deliver some value to them. I support your right to choose what you think delivers value to you, regardless of what the other 300 million people around you think (with only a few exceptions).

At an old Berkshire Hathaway shareholder meeting, Warren Buffett once said something to the effect of, “We now employ more than 100,000 people. Someone, somewhere that works for us is doing something that we don’t like.” If you take a good, hard look at companies, you will find that every company is doing something that you probably don’t like. U.S. multinationals have a very troubling record of employing folks living in third-world countries in very troubling living conditions, and American multinationals also have a long record of bribing officials in third-world countries to bypass regulations. McDonalds, Pepsi, Nestle, Kraft, Coca-Cola, and Dr. Pepper are probably selling something somewhere to someone right now that will lead to diabetes. If you want to interject morality into investing, you’ll find yourself sitting in a room with a wad of cash, unable to invest anywhere.



A much more practical solution is this: you find companies that have long records of giving their customers what they want and generate a healthy profit doing so, and then, when those profits reach your pocket in the form of dividends or capital gains (at the time you sell), use that money to do some good for others. Someone with 100,000 shares in Pepsi could use a couple years of dividend checks to open a free gym in his local community. Someone with 50,000 shares of Altria could use the dividend checks to open a soup kitchen. Complaining about the excesses of corporate America is usually a suboptimal use of your resources unless you spot something new and egregious and have the platform to reach a large audience. If you want to do the most good, the best thing you can do is to focus on the things you directly can control and change—the wealth you build, and how you choose to allocate it.

Be Sociable, Share!
5 comments
matthewriedle
matthewriedle

Excellent points Tim. Unfortunately, moralizing has become the western worlds favourite past time. Would that we had some more William F Buckley's today.

scchan_2009
scchan_2009

I can resonate on the last few lines of your article. Much things in modern life feels like a chapters of Catch-22 - crazy, hopeless to escape, but somehow within all that madness and hopeless, you can do achieve something (so much that Colonel Cathcart just wanted to send Yossarian back to America because he actually making an impact in the hopeless madness, laugh). To me the debate between Big Tobacco and the rest is that I feel more comfortable with the "rest" - it is not necessary a 100% morality call, but I think I can do just as well... say by buying IBM or P&G and not worry about the legal issues with Big Tobacco - it does gives me a peace of mind. However, I do admit, Tim, that you did get me interested in Big Tobacco stocks (laugh).

About excesses in "Anglo-Saxon capitalism" and corporate America: I think much of the folks around here are not too familiar with the "other capitalism" (the kind you may find in Europe and Far East). Corporate America and UK do features generally higher executive pays. Your typical German, Swedish, Japanese and Taiwan boss pays has a 1 or 2 zeros less than the American ones. In return, you typically see high insider and employee ownership; and it is even required by certain European nations to have employees and union leaders to sit in the board. This egalitarian style of governance does have serious drawbacks; firing and downsizing are much more difficult, and you often get indecision during critical moments; but in return, you get companies that generally less indebted and far less corporate raid dramas.

I guess the aggressive and greed style of "Anglo-Saxon capitalism" does have pros and cons. Just like the "other capitalism" - there are something that works and something that doesn't work.

Joe_G from Seeking Alpha
Joe_G from Seeking Alpha

"Complaining about the excesses of corporate America is usually a suboptimal use of your resources unless you spot something new and egregious and have the platform to reach a large audience."


Big change always begins with small complaints from unimportant people.  Every environmental, civil rights or health/safety reform that has ever happened started with little people complaining amongst themselves after seeing the flaws in the status quo.  Of course, that's the macro view of social change while as investors we're forced to deal with the here and now.  And right now people want cigarettes and somebody will sell the public what it wants.  Personally, I don't invest in tobacco companies but there are plenty of companies I do own that are probably causing even more harm to the world (cough*ExxonMobil*cough!) so I'm in no position to lecture anybody who owns tobacco stocks.

Joe_G from Seeking Alpha
Joe_G from Seeking Alpha

@scchan_2009 The irony of the European/Japanese version of capitalism is that that model of capitalism was actually an American export.  Following WWII the reconstruction of the German and Japanese economies Eisenhower sent over  economists and industrial policy makers who helped design Germany industrial and labor policies along the lines of New Deal era labor laws.  German work councils consisting of labor leaders on corporate boards in today's German corporations are actually an idea from America.  Thomas Geoghegan wrote an interesting book on the subject if you're interested.

scchan_2009
scchan_2009

@Joe_G from Seeking Alpha @scchan_2009While the Marshall Plan played a huge role in post WWII reconstruction, the more egalitarian style of governance comes has different origins for Europe and Asia.

Europe has long more exposed to social democracy values with much stronger left wing (Democrats  will be considered right wing in Europe) and labour union power. I guess the Calvinist and Lutheran tradition also matters.

A lot of Asian business is still essentially family run (that is where that big insider ownership come from) including some of the most famous names (such as Samsung - akin to Apple; Chueng Kong Holding - akin to Berkshire Hathaway). I guess, if there something parallel John Calvin and Martin Luther, that will be Confucius. Both the Confucius and Protestant tradition favour egalitarian governance - you are supposed to look after employees as your family and brothers/sisters; that is in contrast with Anglo-Saxon highly aggressive and competitive style.


A somewhat humorous article about Anglo-Saxon style vs Lutheran-Confucian style goverance:

http://tech.fortune.cnn.com/2012/08/02/destroy-amazon/