morality of business

I have always maintained that one should carry out in a way that is within the legal boundaries set by the regulation and the moral boundaries set by the society. It applies to both personal life in terms of behavior and professional life. While it is easy to know the legal boundaries, checking out morality is not so easy. What is moral to one, might as well appear to be immoral to another. So, where do we stand here?

Is advocating Coke consumption immoral or is it tobacco that is bad? What about fried, packaged and canned food? What about environmentally unfriendly business? I can give more, but the line is blur. Yet, people always like to talk, or preach is the right word. Do as what I say, not as what I do, seems to be the cliche. 

I have not been a fan of Coke, and although I have said in the past that I won't buy Coca-Cola stock, I might buy it if the price is right, but not tobacco. When you attach big names to stories, they become more interesting; and that's what is happening at the moment. Wall Street likes to make it interesting. Someone says buying Valeant stock is immoral and some other says buying Coke stock is immoral. I liked the thud of that counter attack. 

I don't think any of these accusations are new stuff though. When it is never easy to draw the line of morality, opinions become personal not pervasive. If image-bashing is what attracts attention, people think so be it, and more. Now, is that moral? 

I don't think Warren Buffett has crossed any legal boundaries; I also find him to be very honest and ethical. His advice on investment management is the best one can take. No one has ever let out secrets of investment as openly as he has, and it is all free of cost. Probably, that's why they are not taken sincerely by people. Perhaps he should have priced his advice appropriately for its value to appear. As a matter of fact, I thoroughly enjoy his mocking Wall Street and the academia. Why not, when they fail to understand the difference between price and value, responsibility towards owners and are obsessed with personal gain? Yet, it does not mean that he is free of faults. He is a businessman and an investor. When he deals with other people's cash, he has the responsibility to maximize their (and his) returns. His actions are always within law, and what he considers to be within morality is up to him.

The accusations have been: He does not advocate use of derivatives, yet, he uses himself. He is an activist investor and uses his connections for profit. He advocates higher taxes, but pays the lowest tax rate. There are more. 

If he knows what he is doing, and his doing profits him, why not use derivatives? He is a businessman looking for profitable projects for his shareholders. His advice has been to avoid doing what you don't understand especially when it involves cash. Derivatives can be so complex that most don't understand the game, yet, play it, whereas, he is smart and plays it to his advantage; is that wrong? 

Activism and connections is a severe charge because it amounts to insider trading, which is illegal. Well, it is not proven as such. So people should be careful about what they talk. This one is ridiculous. If he found opportunities during the financial crisis when irresponsible firms were in trouble, why not profit from their folly? Did these reporters want him to look around and just feel sorry? It does not happen in business. 

He would be a bad businessman if he does not use prevailing tax laws to his advantage. He is in charge of shareholders' money where he has a fiduciary duty to make its best use. Did these characters want him to pay tax at say, 40% when as per rules it was only say, 20%? That math is crazy.

He is human too, and has his own shortcomings. Some may not find him to be the most adorable person due to stories regarding his family relationships. I too might have liked to advice him on a thing or two. We are all entitled to our opinions.

I would like to look at his positive side: He has taught people how they can lead a fulfilling life with lots of fun, and also make money by being honest, ethical and law abiding. Isn't that wonderful? 

His personal story may have been interesting for his biographer and others who enjoyed it, but I don't attach too much importance to it. I admire his simplicity, wit and wisdom. The guy is giving away almost all of his wealth. 

Charlie Munger can be the smartest guy we can find, and he is entitled to his views on morality of Valeant's business model. And so is Bill Ackman on Coke.

It is those storytellers who tend to attract attention with their so-called insights. They probably fail to look at the purpose of a business and decisions that maximize its value. To generate cash flows and growth, managers have to take good projects, finance them well and deal with excess cash appropriately. For personal charity, there is another platform.