Atlas Shrugged | Setting Matters Straight (part II): “Atlas Shrugged” revisited

Atlas Shrugged | Setting Matters Straight (part II): “Atlas Shrugged” revisited

(A version of this article was published in Typepad on October, 2008)

Atlas Shrugged

I

It is not from the benevolence of the butcher, the brewer (like Atlas Shrugged), or the baker that we expect our dinner, but from their regard to their own interest. We address ourselves, not to their humanity but to their self-love, and never talk to them of our own necessities but of their advantages.

II

This oft-cited passage from The Wealth of Nations may well serve as the underlying premise of the free-market system. It was to Adam Smith’s credit to admit greed and self-interest as an integral part of human motivation, and since there was no changing human nature, you might as well work with it rather than against it.

What was the counterbalance, then? Atlas Shrugged

It was the invisible hand – the idea that “the competition in the free market would tend to benefit society as a whole by keeping prices low, while still building in an incentive for a wide variety of goods and services.”

The whole body of thought was underpinned by Smith’s relatively obscure notion of “moral sentiment,” which took for granted man’s basic morality despite his or her natural inclinations.

III

The founder of laissez-faire economics wasn’t unaware thus of the pitfalls of capitalism rampant and unchecked. He was wary of businessmen, for instance, and argued against the formation of monopolies, corporations, and joint-stock companies.

Some argue he would have justified today’s many regulatory agencies and concepts such as the Food & Drug Administration, The Consumer Product Safety Commission, mandatory employer health benefits, environmentalism, and discriminatory taxation to deter improper or luxurious behavior. (See, for example, “Adam Smith did not wear an Adam Smith necktie,“ Herbert Stein, Wall Street Journal, Apr 6, 1994).

Smith also concluded that excessive division of labor would lead man to his most ignorant state possible.  And generally speaking, his notion of “the invisible hand of the market [was], at some level, contingent upon the ability of humans to sympathize — in consonance with the notion of sympathy” (see link below).

IV

But these aren’t very well-known facts. The spiritual father of capitalism would have turned in his grave at the sight of a run-away system fueled by pure greed. And such, I submit, is our present condition.

Indeed, the very debate surrounding the question of bailouts, whether you’re for or against it, demonstrates the point abundantly. Those who favor it are pushing the panic button, convinced that doing something is better than doing nothing; those who oppose it rely on blind faith that the system will somehow right itself. Atlas Shrugged

Both are emotional responses grounded in ignorance rather than knowledge. The truth of the matter is – no one knows what lies ahead, bailout or no bailout

V

I began the opening segment of this two-part series with a comment from an old-time friend accusing me of irrelevancy.

 “What was I doing writing about film, music, and software when the eyes of everyone ought to be fixed on the crisis before us?” he complained.

Well, I got other responses as well – two in particular from the company’s CEO – and it’s from this that I derive a sense of optimism and reason for hope. The first was rather conventional, simply thanking me on behalf of his staff; the second one, however, nearly blew my mind, and with his kind permission, I’m reproducing it below: Atlas Shrugged

VI

I usually don’t blog back on any reviews of our products, but It’s My Take had a nice personal touch I couldn’t resist mentioning.

The money quote:

We should all be grateful to companies like Applian for bringing technology and culture to our doorsteps. These are truly creative and innovative people who still produce a real product, the kind of people who had made this country great. Compared to the parasites on Wall Street, whose only motivation seems to be greed and who are quickly bringing us to our destruction, they’re like a beacon of light. We’re powerless, I’m afraid, when it comes to repairing our economic foundations. Thanks to Applian Technologies, however – and all such – there is a means of escape. Atlas Shrugged
May they all survive!

 Posted on Applian Technologies Blog, Sept 22, 2008

VII

So what’s the big deal? – you say. It’s a simple quid pro quo, nothing more. I have done something nice for them, and they’re reciprocating – not monetarily, of course, but in other terms such as thanking me, making a mention, etc. So even if you discount the usually-attendant notion of self-interest, you’re still stuck with such conventional ideas as politeness, common courtesy, and form.

VIII

I beg to disagree. At the risk of sounding self-serving, I believe there is more, much more to Mr. Dettering’s comment than meets the eye. What I find in it – and that’s what I find particularly encouraging! – is an expression of a particular philosophy.

Let me explain.

IX

There once was a time – in the fictional universe of Ayn Rand – when America was peopled with heroes – not many of them, to be sure, but enough to make a difference: Atlas Shrugged

Howard Roark and Dominique Francon, for one (The Fountainhead); Hank Rearden, John Galt, and Dagny Taggart (Atlas Shrugged).   

These weren’t the captains of industry in the usual, historical sense of the word. Some, like Rearden, were industrialists and commanded great human and material resources; others were brilliant inventors like John Galt, the engineer; others yet, like the architect Roark, were creative

X

All were entrepreneurs. And they all shared in common a certain sense of self-worth that was defined by – alas, inseparable from – their industrial, intellectual or creative endeavors.

In no time, however, they all discovered that

  • they couldn’t be in total control of the production process; and that
  • they had to compromise their product and therefore cheapen it to make it conform to society’s specifications.

Indeed, once they’ve found their property- and intellectual rights to their life’s work were either violated or infringed upon, every one of them had decided to go on strike and withdraw from society rather than function as they were and keep on creating under such unthinkable conditions.

Their sense of integrity and identification with their creative, commercial, or intellectual product – the source and the meaning of their life’s worth – demanded nothing less. Atlas Shrugged

XI

The timeline of Ayn Rand’s novels is also a matter of interest. 

The Fountainhead came out in 1943; Atlas Shrugged, her magnum opus, in 1957.

Conservatism was the tenor of the times, and the business climate congenial. American corporations had pretty much their way, both at home and abroad, and their reputation was unstained.  Except for labor contracts they felt obliged to honor, they were by and large unregulated.  To sweeten the pot, many had considered it to be in their best interest to count among “good corporate citizens.”

Consequently, the kind of concerns raised by Ayn Rand in her novels — about “collectivism,” for instance – and here, Hannah Arendt comes to mind — are best understood as a reaction to totalitarian regimes worldwide.

The just-repelled Nazi menace and the rising power & influence of the Soviet Union, the country of her birth – rather than the conditions at home, are predominant. 

The John Birch Society, the most extreme wing of the conservative movement, had soon adopted her many positions as a kind of unofficial platform. Still, those positions were primarily ideological rather than having a basis in any real or perceived threat. Atlas Shrugged

XII

Much has changed, of course, on the American landscape to make Ayn Rand the visionary she may or may not have been; in any case, it would have been much easier to write an Ayn Rand kind of book today than it was then.

Globalization, the mounting of corporate abuses and scandals in the wake of Reagan brand of deregulation, the ever-growing importance of the bottom line and stockholders’ welfare at the expense of the product, the astronomical salaries, perks, and golden parachutes awarded to company executives on the strength of financial statements alone, the recent money-making schemes on Wall Street and the subsequent fallout – each of these makes the kind of values espoused by Ayn Rand all the more attractive if for no other reason than they’re quickly disappearing.

Also gone are the American corporate prowess, scope, and expertise.

Our manufacturing base is down to ten percent of what it once was. Hardly anything is produced in America anymore – while our service industry is growing. Only in computer technologies do we still hold a commanding lead, and it’s a good thing because the full effects of the technological, computer-based revolution are still far from having been realized, let alone understood.

When all is said and done, it promises to be the nerve center of all future economies.

XIII

In one of their rare moments, the editors of The Economist have treated us to a superb portrait of a modern-day entrepreneur.

Yes, it’s Bill Gates; and it’s in honor of Mr. Gates’s departure from Microsoft for the world of philanthropy. But for all Mr. Gates’s faults – including the undeniable monopolistic bent – no example could serve better. I’m quoting here rather extensively from “The meaning of Bill Gates,” Jun 26 edition:

As with many great innovations, Mr Gates’s vision has come to seem so obvious that it is hard to imagine the world any other way. Yet, early on, he grasped two things that were far from obvious at the time, and he grasped them more clearly and pursued them more fiercely than his rivals did at Commodore, MITS or even Apple.

The first was that computing could be a high-volume, low-margin business. Until Microsoft came along, the big money was in maintaining a select family of very grand mainframes. Mr Gates realised that falling hardware costs, combined with the negligible expense of making extra copies of standard software, would turn the computer business on its head. Personal computers could be “on every desk and in every home.” Profit would come from selling a lot of them cheaply, not servicing a few at a great price. And the company that won a large market share at the start would prevail later on.

Mr Gates also realised that making hardware and writing software could be stronger as separate businesses. Even as firms like Apple clung on to both the computer operating system and the hardware – just as mainframe companies had – Microsoft and Intel, which designed the PC’s microprocessors, blew computing’s business model apart. Hardware and software companies innovated in an ecosystem that the Wintel duopoly tightly controlled and – in spite of the bugs and crashes – used to reap vast economies of scale and profits. When mighty IBM unwittingly granted Microsoft the right to set its PC operating system to other hardware firms, it did not see that it was creating legions of rivals for itself. Mr Gates did. Atlas Shrugged

The technology industry likes to sneer at Microsoft as a follower. And it is true that the company has time and again bought in or imitated the technology of others. That very first PC operating system was based on someone else’s code. But Mr Gates’s invention was as a businessman. His genius was to understand what he needed and work out how to obtain it, however long it took. In an industry in which visionaries are often sniffy about anyone else’s ideas, the readiness to go elsewhere proved a devastating advantage.

Inevitability and temperament are two hallmarks of Gates the innovator. The third is the transience of all pioneers. The argument was brilliantly laid out by Clayton Christensen, of Harvard Business School. The perfecting of a technology by a well managed company catering to its best customers leaves it vulnerable to “disruption” by a cheaper, scrappier alternative that is good enough for everyone else. That could be a description of Microsoft’s Office, which now does more than almost anybody could wish for – even as Google and others are offering free basic word-processors and spreadsheets online.

XIV

Enough said.

Some may argue, of course, that Mr. Gates’s genius was primarily in the area of business and marketing. It may be news to them that he was also technically competent: “there was a company rule [once at Microsoft] that no employees should work for a boss who wrote worse computer code than they did.”

Be that as it may, Bill Gates comes closest, I think, to approximating the kind of characters and values which had populated Ayn Rand’s novels. And so is Bill Dettering, the CEO of Applian, and many other industry leaders, no doubt, who place a far greater value on the quality and reliability of their product than on the bottom line. Atlas Shrugged

XV

It may be true that Howard Roark, Hank Rearden — every one of them! — would measure their worth in terms of the almighty dollar.  Ultimately, however, it was their product – artistic, intellectual, or otherwise – that was the source of all value and the only true measure of their worth!

The money part was just a yardstick for them – coextensive and commensurate with their efforts – the best available yardstick, perhaps, but still, only a yardstick. It was but a by-product of their life’s work and their just reward, nothing more. And it was never sought as an end in itself.

A far cry, I’d say, from the present climate that pervades Wall Street and defines the ethos of our financial institutions.

And so, my final point, I suppose, is – as long as there are people like Mr. Dettering, we have nothing to fear! Atlas Shrugged

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