In defense of self-interest and profits

by Russ Roberts on May 7, 2007

John Allison, CEO of BB&T (a bank with $121 billion in assets) defends self-interest and profit in the latest episode of EconTalk. It’s clear that Atlas Shrugged is a huge influence on his business philosophy and how he trains his executives and employees. Is he for real or is it just talk? I Listen in and let me know what you think. I’m also interested in whether you find this kind of podcast valuable—it’s a little different from our usual fare.

My favorite moment is when he mentions "justice" as one of the core values of the bank that they use to train employees in the company’s culture. I’m always skeptical of these kind of platitudes so I asked him to define justice. His answer is something like "those who produce more, get more." Not exactly the standard definition.

Next week: Cass Sunstein on his latest book, Infotopia.

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Running Dog

"What does a banker contribute to productivity? How did they earn most of their billions? Is he not dependent on government and proper legislation to allow his business to prosper?"

I am in fact a banker. As much as it dismays me, the accumulation of my first billion is entirely dependent on there being hyperinflation such as that experienced in Germany around 1923.

Access to financing contributes to productivity. A banker is first and foremost an intermediary who directs funds from savers to borrowers while (at least theoretically) ensuring that the borrower's cost of capital (and the lender's rate of return) correlate inversely with credit and interest rate risk. Individuals and companies would have to access savers individually if not for the existence of an intermediary. Savers would have to incur risks that would otherwise be dispersed throughout a bank's loan portfolio through diversification. Prosper.com notwithstanding, disintermediation would not be a good thing.

muirgeo

I quite agree these podcast are great! Thanks. Being the liberally minded person I am I was going into this one with my hackles up but found Mr Allison quite sincere and convincing. But I'm not quite though it yet. Questions I hope that are answered.

What does a banker contribute to productivity? How did they earn most of their billions? Is he not dependent on government and proper legislation to allow his business to prosper?

Likewise Ben I agree the flat tax talk was impressive and I'm not so sure the incoming Democratic rulers shouldn't take up the issue. Likewise the Republicans have not touched it in my opinion because their biggest donors profit off the current system more then anyone.

Brad

I love the podcasts too! The exchange about justice was quite interesting, especially with last week's interview with Taleb in mind. Achieving true justice in Allison's sense is obviously an ambitious undertaking, but I dislike the word "random" used to characterize the noise that can't always be taken into account. Instead, I'd call it "incomplete information". I'm optimistic that given enough information about all the players in a system, we could recreate a sequence of events and assign fault or credit with laser guided precision. But it is usually prohibitively costly to do so. And so we settle for surrogate measurements and all the baggage they bring to the game. We strive for a fair approximation of justice in each instance, hoping that over the long haul, aggregate justice will be about the same using approximations as it would be given perfect knowledge.

The short discussion of justice got me thinking a lot about that old saying about luck being the nexus of preparation and opportunity. Positive or negative outcomes may not be things we can ever fully account for cost-effectively, but they are not just rolls of the dice either.

Andrew Johnson

I enjoyed the podcast. I think it is nice to have some different discussions. I enjoyed seeing those principals playing out in the business world. Definately does not fit my expectations of how it would be, which is refreshing.

ben

David, surely you meant "we'd far prefer..." Just kidding :-)

I have only recently started putting these podcasts onto my, err, ipod and have absolutely enjoyed them. My favourite so far is the flat tax discussion with Alvin Rabushka, he was utterly persuasive and I am inspired to join or start an advocacy campaign for it down here in NZ.

T Sowell fan

Different strokes for different folks. The podcasts add tremendously to my quality of life. I can walk the dog or do yard work while listening to bright peoples' ideas. Learning-on-the-go suits me fine.

David P. Graf

The problem with podcasts is the time it takes to listen to them. I'd far prefer to read a transcript. That way, too, I can make sure that I didn't mishear something said by the speaker.

Randall McElroy III

John Allison is a known Objectivist. From BB&T's website:

Our Philosophy

In a rapidly changing and unpredictable world, individuals and organizations need a clear set of fundamental principles to guide their actions. At BB&T we know the content of our business will, and should, experience constant change. Change is necessary for progress. However, the context, our fundamental principles, is unchanging because these principles are based on basic truths.

BB&T is a mission-driven organization with a clearly defined set of values. We encourage our employees to have a strong sense of purpose, a high level of self-esteem and the capacity to think clearly and logically.

We believe that competitive advantage is largely in the minds of our employees as represented by their capacity to turn rational ideas into action towards the accomplishment of our mission.

John A. Allison

Chairman and Chief Executive Officer

BB&T Corporation