St. Phineas

How P.T. Barnum helped invent business ethics.

(Page 2 of 2)

Before Barnum, circuses were very often run by fly-by-night cheats: ticket takers would regularly short-change customers; pickpockets, working on a commission arrangement with the owners, would roam the grounds; "Monday men" would steal the wash from clotheslines or burglarize homes when townsfolk were at the performance or watching the circus parade; and games of chance would be fixed.

Operators made quick profits this way, but soon the entire industry was on the verge of extinction because its customers, through experience, were no longer foolish enough to attend. Barnum was one of the circus innovators who changed all that. He used honest ticket takers, hired private detectives to police pickpockets, and spent a lot of time and money creating what he modestly billed as "The Greatest Show on Earth." Whether customers always fully agreed with that representation, they did find the show, and the whole experience of attending the circus, enjoyable, and they were happy to come back year after year. Accordingly, Barnum and such like-minded circus managers as the Ringling Brothers, applying their own "Sunday School" approach to the enterprise, soon became far richer than the cheats that had preceded them.

One of Barnum’s biographers, Neil Harris, dismisses "The Art of Money- Getting" as "a collection of platitudes" that merely repeat "the conventional wisdom of [the] era." (He also overlooks Barnum’s repeated insistence on the profitability of honesty.) But the examples of the circus and of Barnum’s early business experience suggest that these principles were by no means obvious at the time. Moralists have routinely prescribed virtue, but the notion that the application of virtue to the business arena is profitable seems to have been something of a new idea -- an innovation. Although one can find earlier glimmerings of Barnum’s business principles -- in writings by Benjamin Franklin, for example -- "The Art of Money-Getting" is the earliest publication I have been able to find in which the profitability (as opposed to the simple moral value) of virtuous business behavior is clearly, specifically, and extensively laid out.

The importance to economic development of this discovery is suggested by one of Barnum’s observations: "The public very properly shun all whose integrity is doubted." It follows that when business practices are routinely sharp, uncivil, grasping, and deceitful -- as they often were in Barnum’s hometown of Bethel -- people will tend to avoid doing business because, essentially, transaction costs are high. And economic growth will accordingly suffer. By contrast, when business is conducted virtuously, economies will, all other things being equal, flourish.

By the end of Barnum’s life, business in the areas of the world that were rapidly developing was increasingly conducted according to his principles -- something that no doubt contributed to that very development. As sociologist Max Weber observed at the time, "Absolute unscrupulousness in the pursuit of selfish interests" was characteristic of "precisely those countries whose bourgeois-capitalistic development...has remained backward." And economist Alfred Marshall noted that although the modern economy had "undoubtedly given new openings for dishonesty in trade," it was nonetheless being carried out with "habits of trustfulness" and honesty "which do exist among a backward people," where, as in the Bethel of Barnum’s youth, business continued to be conducted with "an evil sagacity in driving a hard bargain."

However, Barnum will doubtless continue to be remembered chiefly for his occasional, and mostly youthful, scams and humbugs, not for his discovery of the profitability of virtue in business. Terence Whalen’s introductory essay certainly seeks to perpetuate the "soft con" image. He calls Barnum a "serial-hoaxer" in whose hands "poetic license was often a license to steal"; he stresses the showman’s "profitable deceptions and schemes," his "knack for making capital out of falsehood," and his "habitual dissembling."

But Whalen’s ultimate target is broader. He asserts that Barnum’s biography "exposes the illusory or arbitrary nature of an entire economic system" in which the public becomes "victim." Although he acknowledges that Barnum’s revenues were substantially derived from repeat customers, he insists that Barnum only "occasionally" gave the public its money’s worth. Endlessly, if creatively, duped, Whalen suggests, paying spectators became "the unwitting progenitors of modern consumer society." Clearly, it is Whalen, not Barnum, who imagines the public to be a self-perpetuating confederation of suckers.

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