If Tim Wu Has Evidence Supporting His Claims, He Should Release It

If Tim Wu Has Evidence Supporting His Claims, He Should Release It
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Craig McCaw is the visionary founder of McCaw Cellular, which was acquired by AT&T in 1993 for $11.5 billion. McCaw saw early on the potential for mobile communications that would free individuals to “roam” as it were, and it can be easily said that his genius forever changed how we live and work for the much, much better.

A few years before the AT&T acquisition McCaw distributed to his employees a list titled “What We Stand For.” The aphorisms included “Keep It Simple,” “Be Humble,” “Pursue Excellence,” but most notable for the purposes of this piece was his concluding message: “Hire Great People: If you don’t surround yourself with great people, you’re a turkey.”

McCaw’s desire to work with the good and talented so that his eponymous corporation could thrive came to mind while reading the latest New York Times opinion piece by Columbia law professor Tim Wu. Titled “Corporations Can Do Better,” in it Wu calls for a commitment from companies to “operate in the interests not just of stock owners but also of employees, suppliers, customers and the communities to which they belong.” When it comes to flashy displays of ignorance, Wu has few peers.

To read Wu’s droolings is to always be taken by how little they square with reality. One supposes this is the greatest benefit for those coddled by tenure: they no longer need to worry about making any sense. And the less they do, the greater the odds that editorial page editors at the New York Times (still the world’s greatest newspaper despite) will rush to them, contributor contracts in hand.

Implicit in Wu’s commentary is that businesses become great by chiseling their employees at every turn, always aiming to get more out of them in return for less pay. Not so McCaw. He recognized long ago that people drive success, and so he went out of his way to find the best people. And then he paid up to keep them around.

There are many examples of the above, but arguably the best took place at Denver’s old Stapleton Airport. McCaw piloted his own airplanes, and in this case he landed at Stapleton to interview a potential hire for his company’s finance department. McCaw spent six hours with the candidate, only to tell one of his top executives that in order to secure his services, he would hand over some of his personal stock options assuming the corporation itself didn’t have enough available.

And while anecdote should never be confused with fact, McCaw’s opening of the proverbial checkbook in order to lure the best employees possible rates mention if only as another uplifting example of what is so common among successful U.S. corporations. They pay up to get the best workers. What choice do they have? It's too expensive to stiff the talent when so many other enlightened businesses are standing by, checkbook in hand with designs on luring the excellent away. Precisely because the world’s most valuable businesses are headquartered stateside, any policy meant to exploit workers will lead to the departure of the human capital without which companies cannot grow.

Furthermore, the best CEOs want to pay up. It's the people. Always. Plant and equipment quite simply don’t make for surging stock prices. Only individuals can lead companies to dizzying heights. One would be hard-pressed to find a brilliant CEO who got that way without exceedingly well-compensated people around him. 

Wu amazingly observes that “laws are only partly effective in changing conduct,” and the poor conduct he alludes to comes care of “[L]arge and medium-size corporations” that “collectively employ a majority of Americans.” Apparently laws demanding better treatment of employees by corporations aren’t enough, according to Wu “real change" that would end corporate exploitation of workers et al "comes from within,” but can he name all the thriving U.S. businesses (now and 100 years ago) that got that way with the figurative whip? Wu’s assertions about U.S. corporations wholly focused on profit without regard to “employees, suppliers, customers, and the communities to which they belong” would have meaning if he could produce evidence that the best get that way while running roughshod over the aforementioned. Lots of luck to Wu. 

Thinking about McCaw more, it’s not just that he paid up to win the services of the best and brightest. He wanted even more than high pay; he wanted a happy environment. As he once put it in an interview, “If you want to send my blood pressure through the roof, [try] making fun of people.” McCaw felt the latter destroyed corporate cultures, because it led to all manner of backstabbing.

Maniacally focused on offering the best service possible in an industry that all too many felt would die of endless dropped calls, McCaw told his employees to “Stay Close To The Customer,” but then what thriving business stays on top for the long-haul by remaining aloof? Wu indicates corporations don't much care about customers, but can he offer up some examples of successful ones that got that way while treating those who vote with their dollars poorly? Taking nothing away from McCaw’s brilliance, his focus on the customer was a statement of the obvious. That’s how businesses achieve greatness.

Community? Wu might walk the Stanford campus to get a better sense of just how much McCaw’s achievements have meant for all too many who will never know the great man. If Stanford is too elite, Wu might ask around Seattle to get a better sense of just how much the McCaws have “given back” to the Emerald City. Crucial yet again is just how common this is among the great capitalist achievers. All of us invariably benefit from the business achievements of people like McCaw. This includes Wu. Though he talks a good game about miserly corporations and their executives, he seems to forget that he’s the “Julius Silver Professor of Law, Science and Technology” at Columbia; Silver, according to his bio, was "a leading attorney, corporate executive and philanthropist.” Silver died in 2002. Apparently he didn't need a law forcing him to "give back" either. 

In his typically weak attempt to besmirch U.S. corporations, Wu oh-so-naturally added the laugh line about how “American corporate leadership, cheered on by Wall Street, has been steeped for several decades in a culture of profit-squeezing….” Once again, can Wu offer evidence? In the case of McCaw Cellular, it floated its shares in record fashion to the public despite the company facing years of losses. That McCaw went public sans profits is yet again the common rule in modern times. Though it's popular among the deep-in-thought to lament Wall Street and its “quarterly capitalists,” the reality is that the investor class Wu claims fosters a culture of “profit-squeezing” is in truth wildly patient. Does anyone remember Amazon.org? If you don’t, look it up.

As for Wu, it’s time that he back his broad-based assertions with evidence. It’s important because what he imagines to be true quite simply isn’t. 

John Tamny is editor of RealClearMarkets, Director of the Center for Economic Freedom at FreedomWorks, and a senior economic adviser to Toreador Research and Trading (www.trtadvisors.com). His new book is titled They're Both Wrong: A Policy Guide for America's Frustrated Independent Thinkers. Other books by Tamny include The End of Work, about the exciting growth of jobs more and more of us love, Who Needs the Fed? and Popular Economics. He can be reached at jtamny@realclearmarkets.com.  

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