Sales, Surgeons and Profits

iStock_000002256780XSmallThe NYTimes recently published Salesmen in the Surgical Suite, a look at some questionable sales practices in the US surrounding a robotic surgical technology called the da Vinci Surgical System, a product of Intuitive Surgical Inc. The article cites a case of severe damage to a patient due to inadequate training of surgeons, and a variety of documented practices by Intuitive pushing the limits of proper training and supervision.

My point is not to argue the case for or against the company; that’s being done already in a case filed against them. What I do want to touch on is how we should think about issues like this. In other words – just what kind of a problem do we have here?

Profit vs. Patients?

The ultimate issue, I suggest, is the relationship between a for-profit business and the well-being of the end-user customers. Health care is an extreme case, because of the direct link between the two; but in a sense, this is the same issue we face in a capitalist society for any good or service. Healthcare, and surgery in particular, are extreme cases, thus useful for clarifying issues.

There are three commonly heard points of view:

1. There is an innate conflict between the interests of the profit-seeking business sector and the ultimate good of the patients; this conflict must be regulated by a third party of some sort.

2. There is no innate conflict between business and patients, except insofar as business is regulated by governmental and other third parties, who inevitably just distort the ideal workings of pure markets.

3. There is no innate conflict between business and patients, except insofar as business misreads its own long-term self interest by being addicted to short-term fixes, leading to regulation – a self-inflicted shooting in the foot.

The first two arguments are endlessly hashed over, with much heat and little light, in all the various venues of the day: from Congress to HuffPost to talk radio to coffee shops. (I suspect this debate is largely a US debate, as most other developed economies have tilted toward the first viewpoint, far away from the second). I’m not going to change anyone’s mind about the relative merits of one and two.

But number three is interesting: it suggests that the business-society conflict is unnecessary, and that the solution lies largely within the hands of business itself. All that right vs. left, redneck vs. socialist shouting is nothing more than noise.

Is this a utopian, pollyana-ish view? Or is it very real?

The Best Interests of Business

We can reframe the issue as simply, “Is there or is there not a long-term fit between the interests of business and consumers?” Karl Marx answered in the negative, and claimed that the tension would ultimately result in revolution. I suggest that any right-thinking capitalist must answer in the affirmative – there must be a commonality of interest, else the doctrine of capitalism is of little use or interest.

But if that’s the case in the long run – why then isn’t it in the short run? Why do we see salespeople play with endangering people’s lives in order to get the order in before the end of the quarter? Why do companies fight for less regulation, commit economically foolish acts in order to smooth quarterly earnings, and prefer the net present monetized value of almost anything, rather than the longer-term asset that comes from brand, history and culture?

We live in a very imperfect business world, I suggest. We do not do a good job of assessing economic good, or even of assessing business value. We rely on definitions of value which are narrow, solely financial in nature, and short-term. The tyranny of the discount rate leads us to forego thinking about the next generation – it’s just un-economic to worry about something 40 years out, there’s not enough present value in it to justify it.  The Chinese have a history of looking at hundred-year timeframes; the US struggles to get past quarterly, and three years might as well be a lifetime.

The poverty of our financial calculus can be described several ways. Economists would say we do not take into account externalities, so we delude ourselves about the costs of degrading the environment. Social scientists describe it as resulting in a poverty of the spirit (a tone we hear echoed by those who preach ‘the final days of the empire’).

This poverty of calculus is supported by impoverished thinking. Adam Smith was brilliant; the caricatures of him that came down through Ayn Rand and the Chamber of Commerce retain nothing of his focus on the good of society, much less his work on the moral sentiments. Even business theory is impoverished – NPS and Five Forces just don’t have the sweep that we saw from Peter Drucker or even Sun Tsu.

What I’m suggesting is that business needs to radically re-think itself, across the board, into a long-term partnership with the rest of society. The commercial instinct of mankind ought to be a driver of value and wealth creation for all of society, and not hostage to an ongoing battle between haves and have-nots. Whether we need more or less government, more or less regulation, should not be the issue.  The issue should be how can business and society line up on the same team?

We really should be able to do better.