I came across this op-ed in today’s Business Day so fraught with fallacy it’s frightening. It serves as a great base from which to discuss how to fundamentally not think about capitalism. It is always interesting to learn from others’ stupidity, as no doubt, many have learned from my own.
The article relates to Brait’s coming to market for R5.25b equity raise, but it makes a few meta claims that are quite striking. Take these paragraphs for instance:
“You would think, given that amount of destruction, there might be talk of legal action and the reclaiming of generous fees paid. At the very least you might expect the Brait advisory team who directed and oversaw that destruction to sneak off into the night and hope to be forgotten. But it turns out that is not how things are done in SA; not by our political leaders or by our business leaders.
At Brait there seems to be no accountability, no sense of embarrassment. Far from it. The circular contains evidence of the hubris and greed that is undermining so much of 21st-century shareholder capitalism across the globe.“
So much to unpack.
First and foremost is the classic equivalence, so prevalent in South African journalism today, of our private sector to our public sector, forgetting at once a fundamental difference so big that one has to immediately question the motives of the author writing it. Capitalism (private sector) is non-coercive, the public sector is.
It’s an equivalence that journalists like to make in order to say something to the effect of “Yes our public sector is shit, but look over here, our private sector is just as shit” forgetting an important factor – that most of it is shit most of the time. But they always seem forget to mention that in the one we get to participate in willingly, whereas the other one is forced on us through the threat of violence.
It’s an equivalence that irks me because they claim things like “The circular contains evidence of the hubris and greed that is undermining so much of 21st-century shareholder capitalism across the globe” as if fraud and corruption in the private sector is the same as fraud and corruption in the public sector. It’s not, for the simple reason of non-coercion.
Investors who invested in Brait did so of their own volition and paid a dear price for a very bad decision. I, on the other hand, who avoided the share, now have the beautiful pleasure of looking at this burning wreck of an investment holding company and saying things like “I told you so.”
It’s a little bit different with the public sector. My ex-president, who I most certainly didn’t vote for, but found myself having to live under, built himself a house worth R250m looted straight from the public coffers, and I have no choice but to keep paying half of my earnings away in the form of taxes so that the looting can continue. I still get to say things like “I told you so,” but for some reason it’s less satisfying when I say it while handing the same people half of what I work pretty hard to get. Being right rings hollow when you aren’t rewarded for it (another perk of capitalism).
The author argues that “there seems to be no accountability, no sense of embarrassment” but earlier on in the article he notes that the share price has fallen from R174 to R8 in less than two years. Christo Wiese, the BSD behind the investment vehicle, will probably disagree with our misdirected author. He’s lost quite a lot of money on this Brait bet. Sure, he’s still filthy rich, but I for one believe that he deserves to be for creating one of the best retailers in the country, where people go shop on a daily basis by their own choice. But then again, I’m such a radical capitalist!
Has Christo Wiese screwed over people he has worked with before? I don’t know for sure, but I for one would think very hard if I ever had the opportunity to invest money with him. And that’s the whole point. I get to choose myself where and with whom I invest my money with. And if I end up losing it, I do something most journalist never ever do – look into the mirror.
Brait is now coming to market asking for a R5.25b equity injection through a rights issue and all I can say is “no thank you” but again I can say no thank you. On the other side of the accountability spectrum is SAA getting another R8b bailout from the ANC that comes directly from the pockets of unwilling taxpayers. I want to say “no thank you” but I can’t. See the difference?
Capitalism as a system of voluntary exchange between individuals punishes dishonesty through things like declining share prices and unwilling investors, thus more costly capital. The smart capitalists the world over understand that honesty is rewarded over the long term and act that way whenever they are able to (we are but fallible creatures), but the public sector has no such consequences. Equating the two is pure nonsense.
If it bothers you so much that the directors or advisors of Brait have gotten so much money, blame the shareholders who were dumb enough to fall for it, don’t blame the system that allows for the consequences to be carried by those who make the choices.
“Why do you care what some journalist says about the private sector?” Well, dear reader, the idea that capitalism is non-coercive, an idea I’m trying to explain here, is as uninsightful as it is well trodden, but yet a journalist at a paper called BUSINESS Day doesn’t seem to grasp it. For some reason that just irks me.
Capitalism neither is, nor does it pretend to be, just. Does the CEO deserve to go to prison for the recent 737 Max tragedy? In my opinion absolutely yes. But that is a question capitalism doesn’t pretend to even ask, never mind answer. This is why we have courts and laws. The only question I as an investor need to ask myself is whether or not I would invest (or continue to invest) in Boeing. The capitalist in me thinks that a company that can kill hundreds of people and still maintain their order book for the product that killed those people, probably has a pretty good business. The human being in me never wants to go close to that business. So, in a sense the market price of a Boeing share is probably a fair reflection to what extent people choose ethics above profits. It’s not a pretty picture, but it’s not unjust.
Capitalism can be a very gross game, but you don’t have to play it if you don’t want to (well, you do, because your government is inflating away the purchasing power of your money, but again, not capitalism’s fault).
On the other side of the coercion conundrum is the probable VAT increase that I will now have to pay as a citizen to fund the literal corruption and ineptitude of a government I didn’t elect. That, according to my definition of justice (I’m no Plato), is unjust because it’s coercive and forced on me.
So, all I ask of you if you’re going to be an old man yelling at clouds (I am one of you) is that you please yell at the right clouds.
Is this good for bitcoin? Yes.