Philip Morris - Right or
Wrong?
Con Philip
Morris
From Howard J. Grooters
- Uncensored!
Dear David and Fools,
I have to respond to your May
19 column, and its fatally flawed arguments in favor of the investment
quality of Philip Morris, as it seems there is never an end to the possibility
of pseudo-intellectual rationalizations regarding this company.
There were several flaws in the arguments presented:
1) The typically American "black and white" approach to analysis.
2) A basic misunderstanding of products and their neccessary consequences.
3) Inconsistency in drawing conclusions.
A simple analysis of whether or not there exists any company which is above
all levels of ethical reproach, and, if not, that ethical criteria in investing
is irrelevant, is an excessively black and white approach. It is also a bit
naive, and certainly not Foolish, as it ignores important information
differentiating the ethical performance of companies.
Yet your column implies that this is sufficient for a determination of ethically
acceptable investing, and that any further analysis to determine the degree
of ethical reproach to which a company is subject is rather foolish -- with
a little 'f'. Where else in Fooldom do you ever claim that such a cursory
analysis is sufficient for an investor? I hold that the degree to which a
company is subject to moral reproach is certainly relevant, and drawing a
line somewhere, above which an investor finds a company morally acceptable,
and below which he does not (I purposefully use the masculine pronoun to
help offset your overuse of the feminine - I hope you're not offended) is
an appropriate and Foolish thing to do. Your argument relies rather heavily
on the black and white approach.
LuxSit, whoever that is -- presumably this individual is afraid to use their
real name on AOL -- compares Philip Morris with International Paper, General
Motors, and Exxon. Okay, let's take a closer look.
First the products, in turn: Various tobacco products -- versus various paper
products, motor vehicles, and hydrocarbon based fuels. The purpose of the
products: To bring into the bloodstream, in one fashion or another, nicotine
-- versus communications through printed medium, transportation, and
transportation as well as heating and cooling. Principal hazards created:
Poisoning of one's body, as well as the bodies of others in one's proximity,
with tars, nicotine, and hundreds of other potentially hazardous chemicals
(I say "potentially," because I don't know what most of these chemicals are,
as the industry keeps their recipes secret, as if it were Kentucky Fried
Chicken we were talking about) as a direct result of the intended use and
purpose of the product -- versus environmentally hazardous waste chemicals
as a result of production of the product; ditto as well as crash related
deaths incidental to the intended use of the product and depletion of
non-renewable resources, and ditto -- all sources of poisons to one's body.
This is something to be taken very seriously, but the differences are in
the matter of degree, and the benefits the products provide to modern society.
The last time I checked, the products and incidental hazards of these three
other companies, taken seperately or together, did not constitute the single
largest preventable cause of death in America. The use of tobacco is, and
has been for a long time, the single largest preventable cause of death.
The hazards related to the products of these three other companies are all
incidental to the purpose of their products.
The hazards related to tobacco are directly related to the intended purpose
of the products -- the uptake of nicotine. The products of the three other
companies all provide significant benefits to modern society -- related to
communication, transportation, and standard of living. The use of tobacco
provides no tangible benefit to society, with the possible artificial and
tenuous exception of keeping tobacco farmers off of public assistance.
Furthermore, the consumers of the three other companies's products use them
through an essentially unencumbered free choice process. The consumers of
nicotine are by and large effectively enslaved to the products through a
powerful addiction. Any Fool who pretends otherwise is a fool.
This last point is especially relevant, as the product's principle effect
is to make near hopeless addicts out of vast numbers of otherwise sensible
individuals in our society. As a result they become less productive members
in the other companies we invest in, hurting those companies' bottom lines,
and they become a greater burden on society than they otherwise would through
significantly higher medicare/medicaid payments and health insurance premiums;
and they spend vast sums of capital on a zero benefit commodity which immediately
loses all of its intrinsic value, literally "up in smoke," capital which
might otherwise be invested in the community of companies which are striving
to provide beneficial products to society. An investor furthers this last
offense of wasting capital which might otherwise lead to societal benefits.
Your conglomerate dilemma is a factor to consider in one's lifestyle, but
not the insoluble dilemma you make it out to be. Certainly one might well
consider whether, and how, to patronize the other business arms of Philip
Morris. But broad, general boycotts can be shown to be counterproductive
in light of the basic assumptions underpining a free society. And Kraft Foods,
et al, have their origins in different branches of the Philip Morris tree
than the Tobacco division. Perhaps these other business arms are a reason
to discount, to a certain degree, the moral reproachability of Philip Morris.
One can certainly make the argument that that is part of why they were aquired
-- to offset moral reproachability, and therefore mitigate litigation risk
for the Corporation as a single entity. All that aside, if I choose to eat
some Kraft cheese, that action does not dilute my right, or obligation, to
judge the investment suitability of the Tobacco division on the ethical basis
of the tobacco business alone -- while discounting it by a measure appropriate
to the other arms of the business enterprise.
Your assertion that this is a fundamental contradiction is overly simplistic.
You then go on to commit the same sin you've condemned by suggesting it is
not the same contradiction to invest capital into the company, but then relieve
one's conscience by donating the profits to "fight tobacco." I would suggest
that this later scenario is the real contradiction, and that an investor
should never supply capital toward the furtherance of a company which he
finds morally or ethically unredeemable. I find it curious, some of you Fools,
that you are sensitive to issues such as gender in writing -- to the politically
correct point of heavily weighting your pronouns toward the feminine -- but
you are so insensitive to the issue of the moral reproachability of a company
which is directly responsible for its share of its industry in systematically
causing the addiction and subsequent death of its customers with its products.
"If you can't beat 'em, join 'em"? You should be ashamed.
It is not unreasonable for an individual investor to conclude that Philip
Morris falls below the line of moral or ethical acceptability, while
International Paper, General Motors, and Exxon do not. Or perhaps some individual
will determine that Exxon falls below the line as well. Or that all of the
big industrial companies do. Or perhaps a company like Iomega falls below
the line for a different reason -- for abandoning their worker/partners who
were, at the least, largely responsible for their success. Or perhaps yet
another individual -- you? -- will determine that none of them fall below
the line, including the "death star" Philip Morris. If you can live with
yourself as an owner of a company -- that's right, the owner -- whose principal
product's principal effects are pain and misery, well, the shares are there
for the buying, aren't they?
Being a free society, you are free to reach this conclusion. To suggest,
however, that this kind of deeper analysis is irrelevant and should not be
undertaken, and taken seriously, does your readers no service whatsoever,
and is irresponsible for someone in your position. Please respect the rest
of us who draw a line somewhere that allows us to invest in something other
than just a Sierra Club membership, but well before arriving at the premise
"absolute maximum profits at absolutely any price (that others pay, that
is)."
Oh -- and one other thing. I'm not afraid to use my real name on AOL -- it's
HJGrooters, as in Howard J. Grooters, which I would spell out completely
as my screen name if it could be that long. I'm also not afraid to have my
real name splashed across your column. I dare you, Fools, to give me the
same bandwidth tonight that you gave to the anonymous "LuxSit" last night.
Of course, I won't be surprised to discover that talk of the FOMC meeting
- something which you yourself have said many times is largely irrelevant
to the long term investor -- precludes giving me any space. But on the off
chance, you have my unequivical permission to associate my real name with
my writing (if you feel the need to dramatically chop the meat of it, not
just the fat around the edges, please don't - send me a note with a word
# limit and let me do the chopping), while I remain
Skeptically,
Howard J. Grooters |