Category: Journal ISSN 1078-1935

Nov. 29 2010

Fascinating article, including leaks in the pipeline (banks), whistleblowers, censorship, his story, trying to stop leaks, spying, untrustful competitors, secrecy, war, field of intelligence, etc.  … “our primary defense isn’t law, but technology…courage is contagious” (p.8) —  JAS

Forbes Cover Story . . . Forbes Transcript

Following is an excerpt from page 5 regarding moving in the direction of ethical business — JAS

What do you think WikiLeaks mean for business? How do businesses need to adjust to a world where WikiLeaks exists?

WikiLeaks means it’s easier to run a good business and harder to run a bad business, and all CEOs should be encouraged by this. I think about the case in China where milk powder companies started cutting the protein in milk powder with plastics. That happened at a number of separate manufacturers.

Let’s say you want to run a good company. It’s nice to have an ethical workplace. Your employees are much less likely to screw you over if they’re not screwing other people over.

Then one company starts cutting their milk powder with melamine, and becomes more profitable. You can follow suit, or slowly go bankrupt and the one that’s cutting its milk powder will take you over. That’s the worst of all possible outcomes.

The other possibility is that the first one to cut its milk powder is exposed. Then you don’t have to cut your milk powder. There’s a threat of regulation that produces self-regulation.

It just means that it’s easier for honest CEOs to run an honest business, if the dishonest businesses are more effected negatively by leaks than honest businesses. That’s the whole idea. In the struggle between open and honest companies and dishonest and closed companies, we’re creating a tremendous reputational tax on the unethical companies.

No one wants to have their own things leaked. It pains us when we have internal leaks. But across any given industry, it is both good for the whole industry to have those leaks and it’s especially good for the good players.

But aside from the market as a whole, how should companies change their behavior understanding that leaks will increase?

Do things to encourage leaks from dishonest competitors. Be as open and honest as possible. Treat your employees well.

I think it’s extremely positive. You end up with a situation where honest companies producing quality products are more competitive than dishonest companies producing bad products. And companies that treat their employees well do better than those that treat them badly.

Would you call yourself a free market proponent?

Absolutely. I have mixed attitudes towards capitalism, but I love markets. Having lived and worked in many countries, I can see the tremendous vibrancy in, say, the Malaysian telecom sector compared to U.S. sector. In the U.S. everything is vertically integrated and sewn up, so you don’t have a free market. In Malaysia, you have a broad spectrum of players, and you can see the benefits for all as a result.

How do your leaks fit into that?

To put it simply, in order for there to be a market, there has to be information. A perfect market requires perfect information.

There’s the famous lemon example in the used car market. It’s hard for buyers to tell lemons from good cars, and sellers can’t get a good price, even when they have a good car.

By making it easier to see where the problems are inside of companies, we identify the lemons. That means there’s a better market for good companies. For a market to be free, people have to know who they’re dealing with.

You’ve developed a reputation as anti-establishment and anti-institution.

Not at all. Creating a well-run establishment is a difficult thing to do, and I’ve been in countries where institutions are in a state of collapse, so I understand the difficulty of running a company. Institutions don’t come from nowhere.

It’s not correct to put me in any one philosophical or economic camp, because I’ve learned from many. But one is American libertarianism, market libertarianism. So as far as markets are concerned I’m a libertarian, but I have enough expertise in politics and history to understand that a free market ends up as monopoly unless you force them to be free.

WikiLeaks is designed to make capitalism more free and ethical.

But in the meantime, there could be a lot of pain from these scandals, obviously.

Pain for the guilty.

Do you derive pleasure from these scandals that you expose and the companies you shame?

It’s tremendously satisfying work to see reforms being engaged in and stimulating those reforms. To see opportunists and abusers brought to account.

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Thanks to: Dan Drasin via John Steiner.