An address by Charles S. Sanford, Jr.

Preamble

Modern culture has a low regard for business, especially "big business." Through movies, television, literature, the arts, and the news media, many people have been persuaded that business is a greedy and parasitic activity. As a result, businessmen are often regarded as unsavory people, as "barbarians at the gate" of modern society.

The financial industry, in particular, has been a favorite target of business critics in recent years, aided and abetted by some real problems both in the U.S. and abroad–including insider trading scandals, the savings and loan debacle, huge loan losses in lesser developed countries (LDCs) and commercial real estate, the BCCI scandal, and financial fraud in Japan.

Given this background, it is not surprising that the general public and even some finance people have come to question the social value of the financial services business. And partly as a result, it has become politically correct to forsake finance in favor of other careers that are said to "serve the public" or "contribute to society."

But is this really a socially responsible conclusion?

A Brief Response

At Bankers Trust, we say "no." Careers in the financial sector, indeed in the entire private sector, do have social value. The true measure of social value is what a person accomplishes for society, not the label attached to one's career. If our goal is a civilized society, we must create the wealth needed to pay for it. And the best engine that we have for wealth creation is a freely competitive private sector, fueled by self–interest and the drive for personal fulfillment. The private sector is the best wealth creator because it makes the highest use of both human and financial capital and is guided by market prices rather than centralized bureaucratic decisions. The financial sector is the nerve center of the pricing system that makes the private sector the effective wealth creator that it is. In the final analysis, many of those who truly want to contribute to society can choose wealth–creating careers in the financial sector.

Our Goal Is a Global Civilized Society

The question of social responsibility is of fundamental importance to society. To answer it, however, we need to consider what social responsibility actually entails and how it contributes to our ultimate goal of a civilized society. And that depends on an understanding of what we know about the proper ordering of society itself.

Many thinkers have devoted their best efforts to this issue, ever since Plato wrote his Republic. Drawing on their insights, it is possible to summarize the essential principles for a civilized society.

First, a civilized society must be consistent with human nature. That means it should begin with human beings — as they are, not as they ought to be — real people, not ideal people.

Since in this world people are and always will be imperfect, it is foolish to adopt a social system that is overly dependent on selfless human behavior. Systems that are ideal in theory can be awful in practice if they fail to account for the way people are likely to behave.

Of course, individuals should strive for true grace in their lives. But that is a difficult, if not impossible, goal for an individual, and it is even more difficult for society as a whole. It isn't that people are bad on balance; they are simply not full of grace. They want paradise, but they can't adopt the saintly behavior necessary. As a wise man once said, "The spirit is willing, but the flesh is weak."

In a famous passage, Karl Marx described his idea of the ideal society as one in which each person contributes according to his ability and benefits according to his need. Few would quarrel with Marx's formula as an abstraction. All people of goodwill would like a world in which conflicts disappear in a spirit of self–sacrifice and devotion to the common good. Unfortunately, human nature is not consistent with such a world. And where people have insisted on trying to implement utopian schemes, the results have been dismal.

History is full of idealists who have spent their lives believing in perfectibility–through various social engineering schemes and other nostrums. Most of them ended up disillusioned and embittered and some as misanthropes or tyrants. From New Harmony to Moscow, their best efforts have foundered on the fallacy that people are perfectible, that individuals would consistently work for the common good even if their rewards were meager and unrelated to their efforts. The Soviet Union itself quickly became a cruel parody of the "ideal socialist state."

In sum, a workable civilized society must be consistent with human nature.

Second, by the same token, a civilized society also will allow full expression to the better side of human nature. It is not to be a winner-take-all jungle. The civilized society will provide a safety net for citizens who are unlucky or who cannot — or even will not — work, ensuring everyone of access to the essentials, including adequate food, decent shelter, essential health care, and basic education. But it would be self–defeating for society to make these benefits so attractive that they destroy incentives for creating the very wealth that is necessary for sustaining the civilized society and its safety net.

Third, a civilized society will recognize that people are not automatons; they have souls. Life needs to be more than a constant struggle for existence; it ought to be fun. The highest refinement of thought, manners, taste, culture, and the arts should be encouraged. These are not fripperies or pursuits of the idle rich, but the essence of civilization and the joie de vivre that make life worthwhile.

Few people would choose to live an austere, Spartan kind of life. The more humane model is that of Athens, in which the life of the mind and the spirit is emphasized.

Consequently, society must allow freedom for each person to realize his or her full potential. It must guarantee basic human rights–what Thomas Jefferson summarized as "life, liberty and the pursuit of happiness." It must place the highest value on the creative human spirit. Unleashing that spirit — allowing people to focus on developing and using their best talents–is the highest goal of a civilized society.

Fourth, society cannot exist apart from basic agreement concerning right and wrong–including the Golden Rule, the importance of moderation, and acceptance of inequality of results.

The Golden Rule — "Do unto others as you would have them do unto you" — is a good starting point, because it is a value common to all of the great religious and ethical traditions, and it applies to all people regardless of their station in life.

Aristotle recognized that a moral standard must also include the quality of moderation. The pursuit of one single good to the exclusion of others will produce an inherently unstable and unworkable society. A balance must be found between the needs of the community and those of perfect efficiency, and between the extremes of total freedom on the one hand and absolute equality on the other.

This last is of utmost importance. Inequality of results–of either income or status–is the fundamental incentive for creating the wealth that is necessary for civilized society. There should be no ifs, ands, or buts about this.

On the other hand, absolute freedom is moderated by insistence on equality of opportunity, a safety net for all, and the expectation that those who are abundantly talented will produce abundantly. Failure to use one's best talents fully is not socially responsible.

Of course, we must also recognize the role of chance. Personal wealth creation is not an infallible indicator of social contribution. A few people will have more luck than skill. Some who are skilled will have bad luck. But uncertainty and risk are part of life–we all have to take our chances. Whatever the outcome for an individual, he or she must be assured of a minimum standard of living that is worthy of a civilized society.

Maintaining that safety net is a key role for government. Likewise, the government must prevent any group or guild–be it religious, racial, labor, ethnic, or what have you–from controlling the labor markets to favor its own members. Without trying to guarantee equality of results, the government must ensure that all citizens have an opportunity to go as far as their talents will take them.

Fifth, a truly civilized society must be universal or global in its perspective, not provincial, tribal, or racial. As Jefferson wrote in the Declaration of Independence, the founding document of the American republic, "all men are created equal ... they are endowed by their Creator with certain unalienable rights." This applies not only to Americans, but to all people, in all places, at all times.

Even as a global economy emerges, there will continue to be disparities between capital providers and users, compounded by geography, language, or cultural differences. But if capital doesn't flow to the best use, global wealth isn't being maximized. If anyone solely pursues national or tribal benefits, we all lose.

In sum, this "universal perspective" should induce nations to support a thriving global economy, creating wealth to sustain civilized societies all over the world.

Lastly, a subsistence economy cannot support a civilized society. It is apparent that without wealth there can be no formal education, advanced medical care, or other benefits of civilized life. Even more important, the generous side of human nature can be better realized in a wealthy society than in a poor one. Material well–being seems to awaken greater generosity to those in need, heightened respect for human rights, and expanded participation in community and political affairs. Unfortunately, material well–being also makes a lot of less–attractive things possible, like conspicuous consumption. But on balance, wealth creation greatly improves the chance of achieving a civilized society.

Creating Capital Is a Positive Social Value

Since wealth is essential for a civilized society, we need to make certain that we understand what is meant by "wealth," both human and financial. We do not mean trivial consumption. Nor do we mean only that value that can be measured with Generally Accepted Accounting Principles. We must also capture the costs of externalities, such as pollution. As the New Oxford Dictionary puts it, wealth involves everything that can be defined as useful or agreeable in serving a human purpose, including well–being, happiness, and prosperity.

Wealth Creation Is the Primary Concern of Society

"Do we already have enough material wealth to meet the needs of a civilized society now or in the foreseeable future? The answer is clearly no. We cannot say the world is already rich enough to preoccupy itself with wealth distribution and to neglect the imperatives of wealth creation. Even with optimistic assumptions, scarcity will continue to plague hundreds of millions of people for the foreseeable future.

As reported in The Washington Post recently, the United Nations estimates that 700 million people around the world are malnourished today. This year alone, 15 million people are expected to die "as a result of diseases brought on by malnutrition or outright starvation." Yet global population will increase by 70 percent by the year 2025. Therefore, just to maintain the current level of hunger, food production must increase by 70 percent.

And this says nothing about the crying need for shelter or for basic health care or education. Millions are living in squalor. Even within the more developed countries, including the United States, pockets of immense need continue to exist, particularly in the inner cities. And everywhere in the world, there are unsatisfied environmental needs affecting public and private health and the ability of the planet to sustain life.

Wealth is also needed to ensure security, both against lawless elements within communities and against external enemies. It should never be forgotten that in World War II, the U.S. was able to serve as "the arsenal of democracy" because of its wealth–creating capacity. Likewise, the Cold War was brought to an end largely because the West's wealth–producing capacity so far surpassed that of the Communist world.

Human wealth — in the form of personal well–being, happiness, and prosperity, not just financial wealth — is also essential for a civilized life. And yet, as the most cursory glance at the headlines of any newspaper will attest, the world is suffering from an enormous deficit of psychic well–being.

Redistribution of Existing Wealth Cannot Support a Civilized Society

Could these immense social needs be satisfied by redistribution of existing or even foreseeable wealth? The answer is no. To totally redistribute all that we have now would simply result in poverty for all.

In the United States, for example, arguably the richest country in the world, added taxes on the wealthy (defined here as the 4 percent of households with incomes of over $100,000 per year) will not make a dent in the nation's budget deficit, much less satisfy society's crumbling infrastructure and current needs. Redistribution cannot solve the problems Americans face.

In poorer parts of the world, redistribution is even less promising — proving that you cannot distribute what you don't have. Obviously, policies that thwart the free market's development of financial and human capital, such as the politically enforced concentration of land or other resources, or the failure to protect property rights, should not be tolerated.

Worst of all, a preoccupation with distribution threatens to destroy the incentives for wealth creation, which will lead to the stifling of enterprise and the creation of less wealth. Those who seek to redistribute wealth without regard for how wealth is created are either naive or cynically selfish. Their prescription for society, equality of results, is actually a recipe for increasing equality of poverty over the long run.

They would kill the "golden goose" for a few pennies, and in the process they would do serious harm to the very people they claim to represent.

In short, no one can rationally dispute the world's need for wealth creation — now or for the foreseeable future. Even if we have enough for ourselves, we have a moral obligation to increase society's wealth so the needs of others can be met around the globe, including the needs of future generations.

Creating Wealth

Capitalism is the most effective way to create wealth. Even Marx and Lenin came to this conclusion. It certainly is not a perfect system, but it is far and away the best of the available alternatives. Capitalism is superior for three reasons: (1) It makes the best use of human capital. (2) It makes the best use of financial capital. (3) It relies on the pricing system.

(1) The private sector recognizes that human beings are best motivated to create wealth by self–interest. People are encouraged to work by the promises of financial benefits and other nonmaterial rewards, including prestige, honor, and the satisfaction of a job well done.

Innovation is the most productive avenue for the individual to maximize these rewards. It is an — if not the — essential ingredient for economic growth. Joseph Schumpeter, the noted twentieth–century economist, went so far as to say that innovation is the principal contributor to wealth creation.

It is often thought that innovators are found only among the "brass" at the top of an organization. Not so. Everyone can and should be an innovator, contributing to wealth creation and applying his or her best talents to the task at hand. The contributions of everyone are needed and deserve respect, not just those of an elite few.

When people recognize that their work contributes to society and to progress for all humanity, they achieve a sense of individual fulfillment. That in turn contributes to more wealth creation.

In fact, without personal fulfillment, creation of wealth will not be maximized. Why? Because people do their best work when they find what they do engaging and worthwhile. People who are having fun are much more productive than slaves or automatons. Drudgery does not create much wealth for society. True value is created by the human mind in all its amazing complexity and subtlety, not the rote machinations of lobotomized workers. Hard work that is rewarding and satisfying is an essential part of a balanced life. That's one reason why it is said that the highest form of charity is to give a person the ability to earn a living — not to give him fish, but a fishing pole.

The personal fulfillment that comes from work is itself a form of wealth. It's a reason to live, not just the means to survive. This fulfillment comes not so much from winning but from striving toward an ambitious and worthwhile goal. True satisfaction comes from "fighting the good fight."

Perhaps the key word for personal fulfillment is "hope." Dante recognized this when he marked the entrance to hell with the words, "All hope abandon, ye who enter here!" With hope we look forward, not backward, and we restrain the negative aspects of human nature that come from a zero–sum game or beggar–thy–neighbor attitude.

Our goals of economic wealth creation and human capital development thus coincide. The process is a virtuous circle. Work is sanctified by its contribution to the well–being of others, especially the less fortunate. It helps the worker to achieve fulfillment. And fulfillment increases the wealth of all. That is why free societies have always out-produced other systems. And that is why wealth creation becomes even more dynamic when we invest in the development of human capital.

(2) The private sector also makes the most of financial capital, by encouraging savings and by directing those savings to productive investments that create even more wealth for society in the future. Reinvestment typically multiplies growth in the overall economy and recreates itself several times over. The private sector employs the regenerative aspect of financial capital, taking its cues from Ben Franklin's insight on compound interest and today's investors who literally watch minute–by–minute to determine which companies are most effectively regenerating capital — and invest accordingly. The returns on investments should not be considered "unearned income." They are worked for and well deserved for their social value. Investors are sacrificing current consumption to finance projects that fuel the growth of the economy that underpins our civilized society.

(3) The private sector is dependent upon, as well as blessed with, the market–based pricing system, which provides information to direct labor and capital to their most productive uses. The pricing system responds directly to the demands of the consumer, who — as Adam Smith put it in Wealth of Nations — is king in a market economy.

Without a pricing system to tell us about the relative scarcity of these different inputs and outputs, one can't begin to act rationally. The pricing system incorporates the dispersed knowledge of millions of people, which is fed into the economic system via prices that they are prepared to pay for different resources and products. A centrally directed economy lacks this data altogether or makes no use of it. It is a fatal flaw in the socialist or Communist systems. Mikhail Gorbachev, apparently coming to the same conclusion, said, "The market is not an invention of capitalism. It has existed for centuries. It is an invention of civilization."

A competitive financial market is essential to an effective pricing system. It is the nerve center of the economy, the point where information about all investment alternatives comes together and where decisions are made to put resources into some activities and to deny resources to others. If these decisions are rational and objective, society will be wealthier. And with that additional wealth, it will be better equipped to meet social needs. Likewise, if these decisions are poor, capital will be lost. Less capital will be available to invest in the things that make society civilized.

Finance people make the capital markets work by creating and applying valuable information. All things of value contain information — both in their production and in their use. Productive, useful people either create or use information as the essence of what they do — whether they make airplanes or investment decisions.

By "information" I do not mean just data, but data and judgment together that produce better decisions, channeling society's scarce resources to the most productive uses, producing more or better output for the same input. These better decisions create more wealth for society in the form of new, better, or less–costly products and services that address real human needs. In carrying out their function, the finance markets actually add information, new value, and economic growth.

The contribution of finance people is essentially similar to that of other builders in a productive economy — including doctors, inventors, designers, engineers, research scientists, production managers, teachers, general managers, and others — creating and using information to make important decisions that create new wealth. The finance role requires skill and creativity, and it is an absolutely necessary precursor to the production of goods and services. Finance people are specialists in knowing where investable capital can be found, knowing how much it costs, and evaluating the risks of prospective investments.

This is vital information, since it provides an objective standard that effectively compares all prospective investments in the economy to each other and identifies which should be undertaken and which should not.

Equally important, finance people can lower the hurdle rates for investments, allowing more worthwhile projects to be undertaken. They do this by actively making markets in financial assets; by efficiently diversifying and transforming risks for issuers and investors; by efficiently finding and matching suppliers and users of funds; by giving expert advice on financial alternatives; and by lowering transaction costs, or "frictions," in the financial system.

By performing these functions well, finance people can produce more investable capital at lower cost. Investors have higher confidence that risks are objectively evaluated and fairly priced and that there is sufficient market liquidity to allow them to sell their investments if the situation demands it. Higher investor confidence translates into more capital supplied at lower cost. More capital supplied at lower cost means more projects can be financed and more wealth created over time.

In the process, finance people are sometimes resented because they have to say "no" to ill–conceived or less–productive investments. But saying "no" is a valuable public service, requiring independence, fortitude, and intelligence for which there are often no thanks. These character traits may not bring popularity, but they command respect by preventing the loss of capital, the fuel for wealth creation.

As in any other private sector activity, finance people who make too many poor decisions are eventually weeded out, and those who usually make good decisions find there is more demand for their services. Wisdom, foresight, and skill are essential. These are human attributes that are irreplaceable.

To summarize: The private sector is the engine of wealth creation essential to a civilized society because it employs three essential factors: (1) The private sector relies on human nature as it actually exists, not as it might be. In the process, human capital is developed. (2) The private sector employs financial capital (wealth) because their approach that has the capacity to recreate itself. (3) The private sector relies on the pricing system as the determinant of relative value.

In contrast, socialist systems, or economies that emphasize redistribution of wealth, "equality of results," or "security," don't create much wealth, if any at all — because their approach is fundamentally flawed. They take wealth creation for granted. They assume that financial wealth will be created at the same rate regardless of incentives. They assume that people will produce out of habit or idealism.

On each of the necessary ingredients for wealth creation, these systems differ from the successful model of market economies:

  • They are contrary to human nature. Eventually public attitudes follow their leadership.
    • A recent survey of Venezuelan public attitudes by the Fundacion Libertas is a case in point. It concluded: "Wealth is not something that has to be produced, but something simply given. In the popular mind, work and wealth have nothing to do with each other. Individual wealth is seen as the result of proximity to the distribution process, not of proximity to the production process."
    • As this sentiment takes over, redistributionist systems turn to laws and regulations to force behavior to the patterns desired by a centralized decision–making apparatus. The leaders may seek to redistribute money but not power. In fact, the redistribution of money concentrates power in the hands of the leaders. Ironically, the redistributionist system that begins with extreme altruistic arguments must, in the end, rely on coercion to make it work.
  • This process short–circuits the pricing system, which means the centralized decision–making apparatus is acting without a guide to relative values. This degrades investment decisions, as well as production and distribution decisions.
  • Most importantly, the redistributionist system stifles human innovation and creativity, and poisons the human psyche. Redistribution promotes extreme equality and stimulates envy, which brings out the worst in people instead of the best. Forced to rationalize the justice of taking from a neighbor who may be less well–off absolutely, they feel like losers. They become distrustful and alienated. They turn inward. Perhaps worst of all, they lose hope in their own ability to improve their lot in life.

For many of these same reasons, even non-socialist governments are poor wealth creators, being more interested in redistribution and equality of results than they are in wealth creation. They therefore move beyond the idea of an acceptable safety net, which is necessary for a civilized society, and stress distribution over creation of wealth.

To do so, government interferes with the working of enlightened self-interest and the pricing system. Efficient, cost–effective, quality services are taxed or appropriated to promote equality of results. This eventually leads to low–quality, high–cost products and services and reduced wealth creation. The larger and more intrusive the state, the less wealth that is produced. The ancient Greeks, developers of the concept of liberty, discovered that excessive taxation bred tyrants. Thus, the deprivation of economic freedom leads to the loss of other freedoms as well.

Moreover, government has little if any incentive to adapt over time and thus becomes progressively less efficient.

Unfortunately, politics — the soul of government — has become a fulltime job, with the focus on getting elected rather than creating wealth. And to get elected, politicians cater to special interests at the expense of the common good. As The Economist recently put it, "The foundation of American political life is the urge to send Congressmen to Washington to make, or maintain, laws that will protect local interests, shelter men from market forces, or save them from themselves; in other words, the urge for ever bigger helpings of government." The implication is to sell the future for the present, investment for consumption.

So long as there are no limits on the power of politicians to redistribute wealth from producers to other members of society, politicians will continue to push "entitlements" while promising something for nothing and a "no-fault" life. Montesquieu wrote, "The real wants of the people ought never to give way to the imaginary wants of the state."

And the results are all around us. The phrase "I'm from the government, I'm here to help you" is a popular joke. The inability of governments at every level to perform their most basic assigned tasks, crime prevention for example, is commonplace. As citizens, we expect less and less, while paying more and more. Each administration seems to begin by telling us that they will make government more efficient and responsive. It doesn't happen because governments concentrate on the politics of the tasks — not the tasks themselves — and governments are not held to the same standards as business.

Governments also are poor developers of human capital. Even if governments tried, it would be an uphill battle, because the overprofessionalized political process and the bureaucratization of governance are most often corrosive to human personality. With no objective performance measurements, innovation takes a backseat to the need for "playing it safe."

Paradoxically, government does have a role to play because of the imperfectability of human nature. As James Madison wrote in The Federalist (No. 51), "What is government itself but the greatest of all reflections on human nature? If men were angels, no government would be necessary."

In fact, only government can carry out some of the essential tasks that support wealth creation: maintaining public order and a common defense; enforcing contracts and punishing fraud and negligence; providing for a stable currency that is a reliable store of value; operating the safety net that, as noted earlier, is a requirement for a civilized society; ensuring a competitive free market system and equality of opportunity for all citizens, which means social and economic mobility; and guaranteeing a superior education system, accessible to all, which is essential for a civilized society to maximize wealth creation and to provide everyone with equality of opportunity.

These and numerous other functions of government furnish the essential underpinnings for wealth creation. They make wealth creation possible, but they are not wealth creation itself. That, as experience demonstrates, remains the proper domain of the private sector.

The "Politically Correct" Critique of Business Culture

Despite all the evidence to the contrary, there are people who persist in condemning the role of business in society, rejecting its methods, its results, and even the homely virtues on which it depends — such as self–discipline, delayed gratification, and a willingness to work hard. The most extreme of these critics argue that wealth creation itself is wrong. Others concede the need for wealth creation, but they insist that the state is the ultimate wealth creator. For many, the redistributionist model has never lost its appeal, despite its obvious failure in the real world.

Interestingly, those who hold these views tend to be prosperous, and they are often associated with what has been described as a "new class" in American life — a self–anointed elite.

In part, their hostility toward business stems from an old aristocratic tradition in Western culture that has never come to terms with the development of capitalism, its less–rigid class structure, or the unsettling process of what Schumpeter called the process of creative destruction. Their bête noire is the pricing system, the ultimate economic "town hall" that displaces the centralized power of the elite. They simply cannot believe that people can know what is best for themselves.

To an even greater extent, hostility toward business also reflects the self–interested motives of a class of people who very much want to exercise power in and over our society, not so much for the sake of the common good, but to fulfill their skewed concept of the common good that presumes their moral superiority. Results themselves are less important than their good intentions. Consequently, to cite one example among many, it doesn't matter if redistribution is effective or not; social engineers mean well, even if they ruin their society. (Some would say the issue is job security for bureaucrats, not redistribution. If it were, they would not object to the so–called negative income tax.)

The use of the proper and legitimate institutions of government to serve purposes they were never intended to serve is a terrible distortion of our public life, with serious consequences for the well–being of our society. Perhaps even worse is the way this group has succeeded in persuading so many people that the private sector does not really contribute to society. Even normally thoughtful people get caught up in the sentimentality of thinking that their lives have no purpose unless they too forsake wealth creation and join the public or nonprofit sectors. This turns reality on its head.

Vocational Choice As It Pertains to Social Responsibility

As people currently in the business world wrestle with this issue themselves or as students think about the course they will follow after graduation, they need to think clearly and hard about what is at stake.

The critical decision is: How can they best use their talents? Society is best served when an individual makes the best use of his or her highest value gifts and does not squander that talent by doing something that is of lesser value or that can be done better by someone else. That is really what is involved when we make responsible vocational choices. After careful consideration, some will rightfully conclude that they should be teachers, youth counselors, scientific researchers, or law enforcement officers. Well and good — a civilized society needs them all. After equally careful consideration, many more will rightly conclude that they should be in the private sector.

In considering whether or not to work in the private sector yourselves, do not he misled by those who are critical of private corporations for being greedy. A corporation cannot be greedy in the sense of loving money above all else. It is a fictional person, an organization established specifically to use money to maximize the productivity of certain resources — that is, an organization designed to create wealth, not to make socially motivated distribution decisions.

All of the corporation's revenue is distributed to individuals with a claim on that revenue — stockholders, creditors, vendors, employees — and, of course, as taxes to various governments. The individuals who receive it are solely responsible for using that wealth as they see fit spending it on their own needs, giving it to their children or to charity, and/or reinvesting it in new enterprises. What we as individuals do with our financial capital is an important social value decision. This is our decision, and we are responsible for it, not the corporations from which we may have received our personal wealth.

So when judging the corporation or the private sector as a whole, the focus should be on the wealth — creating and human — capital functions only. Unfortunately, there are companies — and some individuals within socially responsible companies — that do not create wealth. Some do a better job of creating wealth and developing human capital than others.

In considering a company, you need to ask whether that organization is a wealth creator: How does it create wealth? Does it innovate or does it live in the past, changing only after it is safe and comfortable to do so? Does it add value? Or does it try to profit by reducing competition via government regulation, legal action, quotas, and subsidies? Does it develop human capital? Does it view people as an investment or a cost? Does it encourage innovators, the willingness to be different? Above all, is it more than ethical: Is it intellectually honest?

In our drive for wealth creation and capital development, we should not forget that a civilized society relies on the time and experience of many of its private sector wealth creators for eleemosynary work — whether as a volunteer, adviser, or trustee. In fact, more often than not, when it comes to the quality of, say, education or health care, one can exert even greater positive influence from the outside rather than from the inside. This work adds to one's personal fulfillment as it contributes to the well–being of others.

Conclusion

When I am asked by successful employees, people who have been very successful financially or otherwise, whether they should leave Bankers Trust for "public service" work — in government, teaching, or other nonprofit jobs — someplace where they can, as they put it, "make a difference" for society, my answer goes as follows: In a market economy, Bankers Trust's interest should coincide with the public's interest. If we are running the company right, we are creating wealth for society and our work has social value. No one should leave Bankers Trust for "social value" reasons unless he or she can create more financial or human wealth for society by doing so. And most often, they will not be able to. The same may be said for careers at many other private companies.

If the true abilities of those people are in finance, they will not be doing society a favor by giving up a very valuable role for another career, whether in the public or private sector, if that new career derives less value from their particular talents. They will create relatively more value for society by staying where they are. That is what should be meant by "serving the public" or "contributing to society." Making a career choice that creates the most wealth for society is the real badge of social responsibility.

Unfortunately, in making their decisions, people are often tempted to ignore rational thought in favor of trendy "political correctness." Therefore, before making a decision, we should ask ourselves some tough questions — and we need to answer them candidly:

  • Are we truly using our talents fully and therefore maximizing our social contribution by choosing public and not–for–profit service as an alternative?
  • Will we be depriving society to satisfy our own vanity?
  • Are we really seeking the approval of others by choosing an obvious, but less valuable, "public" career over a more valuable, but less obvious, private–sector career?
  • Are we really indulging in self–gratification by choosing the immediate and personal glory of that "public service" career rather than the more abstract and indirect feedback of a private–sector career?
  • Are we being attracted to symbols and gestures more than results?

These are difficult questions that must be answered.

If after answering these questions you choose public service, do so not because it is an inherently higher calling. It is not. Do so because you believe that you are best suited for one of the proper functions of government that truly contribute to a civilized society.

Those of you who believe your best contribution is in the private sector — perhaps in finance — can do so with pride, with satisfaction, and with the knowledge that you are also doing what is best for society.

Charles S. Sanford, Jr., a 1958 graduate of the University of Georgia, is the retired chairman and chief executive officer of Bankers Trust Corporation. In 1997, the Terry College of Business dedicated Sanford Hall in recognition of the significant contributions made to the Terry College and the University of Georgia by Charles and Mary Sanford. He has served as a trustee of the University of Georgia Foundation since 1986, and his family's association with the University spans many generations, dating as far back as 1835.

Other speeches by Mr. Sanford are available at the Hargrett Rare Book & Manuscript Library (special software needed) and at the Terry College of Business.