Reason Versus Retaliation: The Problem With the Growing Contentiousness in Business

Historically, business people have erred on the side of quietly working things out. The theory is that this approach takes less time, requires fewer extraneous resources, assures that a mutually agreeable deal gets done and is therefore likely to be more profitable.

But we have become more of an in-your-face society. There is more limelight to be had and lots of people are drawn to its glare.Politics has become nastier the world over as a reflection of this trend. And there is also a sense that with the relative decline in government and regulatory authority, there is less downside to becoming more emotional and demonstrative because it intimidates opponents and thus assures a greater chance of winning, whatever that means these days.

The problem is that there is little evidence to support this new paradigm. Bringing in the lawyers, bankers and PR specialists is unlikely to produce a greater chance of achieving one's goals, let alone doing so more profitably. The perfect remains the enemy of the good. A deal is generally better than no deal and compromise is more likely to achieve some goals, even if total victory is unachievable.

Whether this attitudinal enmity is a secular trend or passing moment is a function of relative scarcity and cost/benefit analyses. But it does not increase the likelihood that anyone will be richer as a result. JL

Sarah Gordon reports in the Financial Times:

Slinging insults does not just reflect badly on those doing the slinging, but short-changes investors and others who seek a more reasoned conclusion.
We have seen an outbreak of bile in the business world. A disagreement between Amazon, the online retailer, and publishing conglomerate Hachette over the terms on which ebooks are sold has become a public slanging match. Amazon wants publishers to reduce most US ebook prices to $9.99 or less. Hachette refused so Amazon retaliated by charging more for some books, taking longer to dispatch them and removing buttons allowing forthcoming titles to be purchased before publication.Amazon’s first remarks on the spat were calm, if condescending. “Unfortunately . . . we have been unable to reach mutually acceptable agreement on terms,” it said. “Hachette has operated in good faith and we admire the company and its executives.”

The emotional temperature increased, however, when Michael Pietsch, chief executive of Hachette, stoked the flames. “This dispute started because Amazon is seeking a lot more profit and even more market share, at the expense of authors, bricks and mortar bookstores, and ourselves,” he grumbled in an email.

Things soon took an ugly turn. The New York Times ran a two-page advert in which more than 900 authors, including Donna Tartt and Stephen King, signed a letter objecting to Amazon’s tactics. Amazon’s riposte was intemperate. Executives accused Hachette of using its authors as “human shields” and taxed Douglas Preston, who spearheads the authors’ campaign, with being “rich and already successful”, as if that disqualified him from having an opinion.

Amazon has a good case; the rights and wrongs of the disagreement are finely balanced. But losing your cool in public tends to shake observers’ faith in the justice of your argument. The escalating dispute between Hewlett-Packard, the US technology giant, and the former bosses of Autonomy, which it bought in 2011, is a case in point. HP paid $11bn for the UK software company and took a $8.8bn writedown on the deal just a year later, $5bn of it relating to alleged accounting improprieties.

Mike Lynch, Autonomy’s founder, responded to the writedown by saying its real causes were internal infighting at HP and poor integration of Autonomy. But the war of words has intensified since then. This month HP accused Mr Lynch and Sushovan Hussain, Autonomy’s former chief financial officer, of deceit amounting to fraud, prompting accusations from Mr Lynch’s camp of “breathless ranting” and “personal smear[s]”. Speaking to the Financial Times last week, Mr Lynch then accused Meg Whitman, HP’s chief executive, of incompetence and of misleading the market in her public statements on Autonomy.

There is nothing like a bit of guilt to fuel self-righteous ire. Whichever party has right on its side, HP must deeply regret ignoring the criticisms that were already being levelled against Autonomy’s accounting practices before the deal, not to mention the hugely inflated price it paid.

The insult trading between HP and Mr Lynch, though, pales in comparison to the personal abuse that has characterised the battle over Herbalife . Bill Ackman, the hedge fund investor, kicked off the row in late 2012 by accusing the nutrition company, against which he made a billion-dollar bet, of being an illegal pyramid scheme. Daniel Loeb, of Third Point, described Mr Ackman’s accusations as “preposterous”, and activist investor Carl Icahn weighed in, calling Mr Ackman a “crybaby”.

Mr Ackman’s accusations, although eliciting such insults in return, appear to have spurred the authorities into action; US agencies including the Department of Justice and the Federal Trade Commission have opened investigations into whether Herbalife is a fraud.
Even if a public spat sometimes results in effective action, a war of words rarely helps investors find answers. “As the emotional outbursts go up, the access to facts seems to go down,” a representative of Mr Lynch said this month, with a fair degree of cheek given Mr Lynch’s own “emotional outbursts”.
But the point is well made. Slinging insults does not just
reflect badly on those doing the slinging, but short-changes investors and others who seek a more reasoned conclusion. Sometimes – as business people, not to mention journalists, should remember – silence speaks louder than words.