Yesterday, a client asked me whether companies bowing to the ‘court of public opinion’ would eventually have a negative impact on the economy. I suppose this was in response to Costco announcing it was increasing its minimum wage to $16/hour and Hasbro doing away with separate Mr. and Mrs. Potato Head toys, choosing to market only Potato Head moving forward.
In an article by Elizabeth Segran on fastcompany.com, Hasbro SVP Kimberly Boyd said the reason for this rebranding was: “Kids want to be able to represent their own experiences. The way the brand currently exists – with the ‘Mr. and Mrs.’ – is limiting when it comes to both gender identity and family structure.”
He wasn’t aware the gender of the toys was such a sensitive topic, and neither did I. When I was a kid, I thought Mr. Potato Head was more fun in theory than reality. Everyone seemed to have one, as almost a rite of passage, but I don’t really remember anyone playing with them, let alone caring about their sexuality.
In any event, I told them something along the lines of:
“The end goal for any company is to generate a profit for its investors/owners. That hasn’t changed. Sure, Costco might have a minimum wage of $16/hour, but it isn’t going to hire workers whose productivity isn’t worth that much. In fact, I could say Costco’s actions actually hurt truly unskilled and inexperienced workers, as the company will hire fewer and more productive associates moving forward.
As for Hasbro, when was the last time you thought about Mr. Potato Head? Talked about it in a business meeting? The toy is a blip on its overall income statement, but guess what? Folks are going to gobble up the remaining Mr. and Mrs. Potato Head toys, and by the time the gender-neutral Potato Head hits the stores, this will be old news and no one will care. As a result, this is free publicity for the company.
However, both stories ‘play well’ in this so-called ‘woke’ environment, and I assure you companies aren’t going to do anything which would negatively impact their overreaching business model or ability to turn a profit. Costco still runs consumer warehouses and Hasbro still makes toys, board games, etc. So, isn’t time to worry, at least not yet.”
Seemingly shifting gears, I listen to a podcast called the ‘China History Project’ by a guy named Laszlo Montgomery out in California. He does his homework and is a gifted storyteller. They typically last 30-45 minutes, and he has covered a wide swath of Chinese history. I can usually knock out a couple whenever I am on the interstate, and normally do. I am almost done.
Back in 2012, in episodes 83-90, he covered the Great Proletarian Cultural Revolution. While I learned a great deal, one thing that stuck out to me was the concept of the “Four Olds.” In a communique in August, 1966, the Central Committee of the CCP said the following:
“Although the bourgeoisie has been overthrown, it is still trying to use the old ideas, culture, customs, and habits of the exploiting classes to corrupt the masses, capture their minds, and stage a comeback. The proletariat must do just the opposite: It must meet head-on every challenge of the bourgeoisie…to change the outlook of society. Currently, our objective is to struggle against and crush those people in authority who are taking the capitalist road, to criticize and repudiate the reactionary bourgeois academic “authorities” and the ideology of the bourgeoisie and all other exploiting classes and to transform education, literature and art, and all other parts of the superstructure that do not correspond to the socialist economic base, so as to facilitate the consolidation and development of the socialist system.”
At first, city officials renamed city streets, parks, and buildings. Parents named their newborns with revolutionary sounding names, as opposed to more traditional ones. However, as the campaign to destroy the Four Olds gained momentum, Red Guards smashed priceless works of art, destroyed libraries, closed schools, burned ancient manuscripts, defiled graves (including Confucius’), burned places of worship, struggled against remaining wealthy and intelligentsia, and generally browbeat everyone into submission. It was a classic “don’t stick your neck out too far, someone might chop it off” situation, as people participated in the madness to keep from being beaten, literally, and/or having their property destroyed.
There was one school of thought, Mao Zedong thought, and everything else was heresy. This despite Mao’s previous disastrous economic policies and willingness to sacrifice tens of millions of lives in the name of class struggle and pure communist thought. In other words, lives forfeited because people were too cowed by Mao Zedong, his fanatical followers, and his morally and economically bankrupt theories.
While I am not suggesting the United States is going through anything like The Great Proletarian Cultural Revolution, we are suffering through a strange period where people are incredibly quick to condemn others who are, in turn, equally as quick to apologize profusely. Folks have lost jobs, friends, and status over long-ago transgressions, tweets, and, really, anything which isn’t in keeping with the current zeitgeist. So much so, the path of least resistance for much of corporate America is to make grand, if hollow, gestures to curry favor or deflect blame in the court of public opinion.
I can see it now at Hasbro HQ: “If we get rid of Mr. and Mrs. Potato Head and only have Potato Head, maybe no one will notice we are still selling Lincoln Logs and G.I. Joe.”
However, as I mentioned previously: “I assure you companies aren’t going to do anything which would negatively impact their overreaching business model or ability to turn a profit.” The management team who willingly made such decisions would soon be out of work. Or as a Dickensian character might say: “they would find themselves without a situation.” Investors won’t care if you mess around with the packaging of some toy in order to appear ‘woke’ or ‘inoffensive.’ However, they will care if profits start to fall because of it.
That is what makes capitalism wonderful: it is transparent. The end goal is to turn a profit, period. Why? Because you will eventually go out of business if you don’t. Therefore, you can argue capitalism and the desire to turn a profit are significant obstacles to something like The Great Proletarian Cultural Revolution truly happening here in the United States.
So, I don’t sweat it if Hasbro wants to just make Potato Head or if Costco wants to pay a minimum wage of $16/hour. I know what the ultimate definition of success is: profit. Besides, I was never a big fan of Mr. Potato Head, I don’t work at Costco, and, well, Mao Zedong is dead.
Take care, and have a great weekend.
John Norris
Chief Economist
As always, nothing in this newsletter should be considered or otherwise construed as an offer to buy or sell investment services or securities of any type. Any individual action you might take from reading this newsletter is at your own risk. My opinion, as those of our investment committee, are subject to change without notice. Finally, the opinions expressed herein are not necessarily those of the reset of the associates and/or shareholders of Oakworth Capital Bank or the official position of the company itself.