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When I was 10, I bought some gizmo that turned out to be a piece of junk.
"Caveat emptor!" my mom told me when I showed her the busted toy I'd just spent my hard-earned allowance on.
"What does that mean?" I asked.
"Let the buyer beware," she said. "You can't believe everything people tell you when they want to sell you something."
I know I'm not the only one who has thrown away cash because of inaccurate advertising. The list of false or deceptive claims made about goods and services is as long as 40 miles of bad road and just as perilous. Thus it has made sense for consumers to do their due diligence before buying something even as relatively inexpensive as a microwave oven or dinner for two at a local restaurant.
But caveat emptor is a lousy way to do business, and it's time to put it to rest.
Traditionally, the business/customer relationship was distinguished from the one between physicians and patients or that between lawyers and clients, in that customers were assumed to have the wherewithal to assess the claims that businesses made about their products and services. The burden of proof for assessing the validity of these claims therefore sat on the shoulders of consumers. Even before reviews became readily available on the Internet, buyers were theoretically in a position to decide whether a vacuum cleaner, a piece of furniture, or a stereo was all that its seller said it was.
This sort of detective work was not (and, to some degree, still is not) considered possible in health care or law. How can patients reasonably decide whether the antibiotic or antidepressant their doctor recommends is safe and effective? If you need to understand a complex contract, how can you expect to do this effectively if you haven't had specialized training in the relevant law? We trust health-care providers, attorneys, and other professionals not only to possess expertise that we don't, but also to be concerned primarily with our best interests, not their own. As long as they honor this trust, it makes sense for professions to be less regulated than business is. After all, the main objective of business is to make a profit, not to benefit the public, right?
This question presumes that there is an inherent conflict between making money and helping others. But it doesn't require an MBA to see that the current economic crisis grew out of the false belief that not only does prosperity involve placing profits ahead of people—it requires this. For example, lenders who gave subprime mortgages to people at a high risk of default didn't care that the loans wouldn't be repaid. They knew they would make a nice profit when these loans were packaged and sold to Wall Street right after closing, and that's exactly what happened. Their short-term gains resulted in long-term losses for you and me, and many of the businesses involved in this shell game have tanked. Making money without regard to how the money was made turned out to be not merely unethical; it was bad for business, plain and simple.
In a postrecession world, successful managers and entrepreneurs will be men and women of conscience who understand that profitability depends upon building and maintaining trust with the public. The secret to reclaiming this trust lies in something that hasn't been a staple of business practice: telling consumers the truth. Let's look at a recent example of how false, misleading, or unsubstantiated claims have hurt one important business sector and why it no longer makes financial sense to regard the truth—and, by implication, the well-being of the public—in such a cavalier fashion.
The Wall Street Journal recently reported that the U.S. Food & Drug Administration warned several companies against making false or misleading claims about their products. A juice manufacturer stated on its Web site that its product could work wonders for high blood pressure, clogged arteries, and even prostate cancer. Such claims, if true, would certainly qualify the beverage as a miracle drug, but there is no evidence that such a cause-and-effect relationship exists. Another company, on the packaging for one of its ice cream confections, stated that its product had zero grams of trans fat per serving. That statement is true, but the confection also has 20 grams of saturated fat per serving. No one would rationally consider ice cream to be a health food, but this company's partial truth could mislead people into thinking that this treat is healthier than it is.
The full, unvarnished truth has been treated with such indifference by many in the business community for so long that taking advertisements at face value is ridiculous. But this is why it's no longer feasible for businesses, whatever sector they're in, to trade in less than the truth. Treating consumers with respect, which means, in part, telling them the truth, is the only way companies can hope to turn a cynical public around and restore their faith in commerce. Remember Warren Beatty's film Bulworth? It suggested that telling the truth in politics was the stuff of comedy and satire. But honesty is no laughing matter in government or business.
On the Bad Company album Run with the Pack, there's a song with the following chorus:
Do right by your woman
She'll do right by you
Songwriter Paul Rodgers is onto something: Just substitute "customers" for "woman" and "they" for "she," and you have the only principle you need to succeed in business today.
Doing right by your customers is the best way for you to do right by your business and its stakeholders. Doing the opposite is the best way to stay mired in muck. Take a look at the latest Gallup poll of the most and least trusted professions in the country. Why are business executives, advertising practitioners, and car salespeople consistently at or near the bottom of this annual survey? It's not because business is an inherently ignoble calling; it's because too many people in its ranks consider ethics and integrity to be unnecessary or even liabilities.
The smart manager, however, can no longer afford to think this way. The companies that prosper in our postrecession economy will be the ones committed to being forthright about what they sell. They will view honesty not as a burden that must be accepted reluctantly, but as the key to building and maintaining relationships with customers and ultimately enriching the bottom line.
It's time to retire Caveat Emptor—Let the Buyer Beware. The new motto in business should be Vincit Omnia Veritas—Truth Conquers All.