By Jonah Goldberg
Friday, October 18, 2019
‘Integrity lowers the price of capital.”
An extremely successful investor once told me that. The
context at the time was Donald Trump’s impending takeover of the GOP. This
person meant it as an investment rule, an insight into Trump, and a life
lesson.
The investment-rule part is easy. Say you run a bank. Two
people each want a loan. The first person is a pillar of the community. You’ve
worked with him a dozen times before and he’s always been a straight shooter,
even when he legally didn’t have to be. The times he had trouble making a
payment, he called you well in advance, explained the situation honestly, and
went to extraordinary lengths to honor his commitments.
You know the second applicant only by reputation. He’s
known around town as sharp but also a bit shady. He’s successful, but he’s
weaseled out of commitments. He’s the kind of guy who says the check’s in the
mail when it isn’t and cuts corners when he can. He’s left a trail of partners
holding the bag because, hell, “It’s just business.”
All else being equal, whom are you more inclined to lend
money or charge a lower interest rate? The man with integrity, because
integrity mitigates risk. And risk is what determines the cost of capital. It’s
why government-backed bonds pay a lower interest rate than high-risk “junk”
bonds.
This same principle applies to hiring and promoting
people. Whether babysitters or top executives, employees who’ve showed up,
worked hard, and earned trust are a less risky bet. It’s not just boilerplate
when employers talk about “investing” in their workers.
As my friend explained, there was a reason Trump had so
much difficulty raising money from traditional sources. He had a record of
using bankruptcy laws to get out of debts. He broke promises as a business strategy. He left lenders
and contractors alike holding the bag. After all, “It’s just business.”
Which brings me to the life lesson. This same basic
principle is a good one in all the parts of life that can’t easily or obviously
be reduced to financial transactions. If you treat others fairly, honor
commitments, and do kindnesses — call them favors — when you can, it’s more
likely that people will treat you the same way. One good turn deserves another.
This sort of reciprocity is what makes friendships and
communities healthy, because it increases what social scientists call “social
trust” and “social capital.” Healthy communities are places where people show
up for the potluck dinners and donate to the food drives, even when they may
not want to.
It’s dangerous to apply local or personal principles to
the national. Such thinking is at the core of ideologies like socialism and
nationalism, which hold that countries should behave like a family or small
group of neighbors. It’s even worse when you try to extrapolate to the whole
planet. The rules of the international order are not the same as the rules of
the nation, never mind the family.
Still, there’s some relevance. Oscar Wilde famously said
that a cynic is someone who knows the price of everything but the value of
nothing. President Trump talks a lot about the price of our relationships and
commitments around the world. (They’re playing us for suckers!) He’s often
wrong on the facts, though sometimes he has a point. But he never talks about,
or even acknowledges, the value of these things.
In Hong Kong, protesters risk death or prison by waving
American flags on the assumption that America actually meant it when we said we
were friends to those seeking freedom. Syrian Kurds fought by our side in the
battle against ISIS at least in part because they took American integrity
seriously. Our allies have sent troops to fight in our battles even when it
wasn’t in their narrow self-interest to do so. For instance, Australia hasn’t
fought by our side in every major military engagement since World War I out of
a philosophy of “Australia First.” The Australians did it because they value
our friendship and believe that national honor — ours and theirs — requires
more than a mere cost–benefit analysis.
Trump heaps praise on nations that reject our values
while disparaging those that share them. His definition of national honor, or
“greatness,” puts no value in our commitments — to other nations or to American
ideals — while putting a price on everything. Promises are just things you say
to maximize profit. After all, it’s just business, and integrity’s got nothing
to do with it.
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