The Secrets of Pirate Management

From The Invisible Hook: The Hidden Economics of Pirates

Peter Leeson

• Publisher: Princeton University Press
• Year: 2012
• eBook ISBN: 9781400843169
• Topic: Economics
• Subtopic: Economic History
• Index: Economics

What can today's corporate raiders learn from the scourge of the high seas? A lot, as it turns out! Pirates have a surprising amount to teach about building better organizations, promoting diversity in the workplace, and creating powerful brands, among many other business lessons. Curious to hear more? Then sign up for Professor Blackbeard's Management 101 class. And don't be late. He's got a hell of a temper.


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THE SECRETS OF PIRATE MANAGEMENT

Piracy’s peak in the eighteenth century lasted little more than a decade. But pirates’ swan song in the 1720s isn’t a reflection on their ineffectiveness. On the contrary, as previously mentioned, pirates ingeniously extended their presence as the odds mounted against them. And while they lasted, pirates were incredibly successful, sometimes earning in only a few months what it might have taken forty years to earn in legitimate maritime employment. Pirates’ demise had little to do with their defects and much to do with a stronger government determined to exterminate them. That pirates lasted as long as they did without a government to maintain peace, or facilitate cooperation, among them is a testament to their effectiveness, not a strike against it. How many other rag-tag bands of miscreants succeeded in causing so much trouble for the world’s greatest superpower in so little time? Not many. So, what was the secret to pirates’ success? For the answer to that question you’ll have to enroll in Professor Blackbeard’s Management 101 class. And don’t be late. I hear he’s got a hell of a temper.

MANAGEMENT 101, PROF. BLACKBEARD, T AND TH, 1:00–2:15, QUEEN ANNE’S REVENGE

There would be a lengthy waitlist for a management course taught by a pirate captain. And students wouldn’t (or at least shouldn’t) scurry to enroll in the course only to hear their pirate professor’s lectures recounting adventurous tales of his criminal life at sea. They would also hope for a seat in the class because of what they could learn from their pirate professor about successful management. Let’s take a look at the course syllabus.

WEEKS 1–2. FOLLOW THE BOOTY

Readings: Adam Smith, Wealth of Nations; Bernard Mandeville, The Fable of the Bees

Central Lesson: Greed is good.

The idea of allowing the lure of money to drive people’s behavior conjures up images of corporate mismanagement—embezzlement, fraud, and others kinds of self-dealing that benefit those at the top and harm pretty much everyone else. In no small part, this is because of the unfortunate misbehavior of a few. But what’s overlooked in focusing on this small handful of exceptions is the regular, even routine, profit-driven behavior that results in socially desirable outcomes and makes everyone better off. In the words of Wall Street’s Gordon Gekko, a modern-day pirate if there ever was one, “Greed is good.”

It’s common to associate the “goodness” or “badness” of behavior with the “goodness” or “badness” of the motivations that drive it. But the nobility or ignobility of individuals’ motivations often bears no relationship, and in some cases even exhibits an inverse relationship, to the nobility or ignobility of the outcomes these motivations create. Sometimes the basest of intentions can produce the best of outcomes. The milk producer example used in chapter 1 to illustrate Adam Smith’s invisible hand principle is one case of this. Your milk producer’s motives aren’t necessarily “good.” He’s not trying to help you. He doesn’t care about you and doesn’t even know you. The milk producer is just a businessman; he’s in it for the money. But his ignoble motives don’t prevent “good” outcomes. They don’t, for instance, prevent you from getting the milk you want at a price you can afford. On the contrary, the milk producer’s ignoble motives are precisely the reason you do get milk. As Adam Smith put it, “It is not from the benevolence of the butcher, the brewer, or the baker that we expect our dinner, but from their regard to their own interest.” The milk producer’s greed compels him to serve you. As a result, you get the milk you desire at the best possible price.

The profit motive is the most reliable way to make sure your needs get met. Without the grocer’s greed, you’d be scratching for turnips in your backyard. Without your landlord’s greed, you’d be living in a tree house somewhere. And without your employer’s greed, you wouldn’t have a job. The beauty of markets is that they harness individuals’ greed and make it service other people’s desires. Remove the lure of riches and you remove your best shot at living a materially enriched life.

The important difference between the nobility of individuals’ motivations and the actual outcomes their behavior produces sheds important light on how we should go about evaluating pirates. Pirates may have been “bad” men, motivated by ignoble desires, and even willing to use violent means to satisfy these desires. But the outcomes of their profit-motivated behavior were sometimes laudable. For example, profit seeking is what led pirates to avoid blasting their prizes to pieces. It also prevented them from wantonly brutalizing their captives. And it limited their reliance on conscripts. Of course, in each of these cases, piratical greed didn’t lead to genuine public “benefits.” Pirates’ victims would have always been better off if they hadn’t faced the threat pirates posed in the first place. But conditional on pirates’ presence, pirates’ ignoble motives—self-interested greed—softened the harms pirate victims suffered.

Even more significantly, pirate greed is what motivated pirates to pioneer progressive institutions and practices. For example, this greed is responsible for pirates’ system of constitutional democracy—a system virtually unknown in the legitimate seventeenth- and eighteenth-century world. It’s responsible for pirates’ system of social insurance. Pirate greed is also responsible for some sea rogues’ superior treatment of blacks. In each of these cases, ignoble pirate motives—indeed, as greedy criminals, ignobility in the extreme—generated “enlightened” outcomes consistent with some of the modern world’s most heralded values, such as democracy, equality, and social safety.

Pirates didn’t embrace “enlightened” values as ends in and of themselves. They embraced money. But their tireless pursuit of the latter gave way to the desirable outcomes associated with the former and did so before their legitimate contemporaries achieved anything like the same. As examined in chapter 3, for instance, piratical institutions reflected the brilliance of Madison’s arguments for democratically divided power more than half a century before Madison wrote them down. In this sense pirates were harbingers of our most sacred ideas about social organization. America’s Founding Fathers, to borrow the slogan of a popular pirate-inspired rum, “had a little Captain in them.” This is why I say pirates deserve more of our respect rather than less of it. In these ways pirates were truly pioneers, or at least provided early testimony of the workability of a society that embraced these values. And in this sense we should be decidedly, and unabashedly, “propirate.” “Greed,” as Gordon Gekko put it, “is right. Greed works…. Greed, in all of its forms … has marked the upward surge of mankind.” A real pirate couldn’t have said it better himself.

WEEKS 3–4. LEAVE YER UTOPIA BUILDIN’ AT MADAGASCAR

Readings: Ludwig von Mises, Socialism; F. A. Hayek, “The Use of Knowledge in Society,” American Economic Review

Central Lesson: Let your business drive your thinking about managerial organization, not the other way around.

Pirate ships confronted many of the problems legitimate businesses face in attempting to maximize profits. Foremost among these are preventing...

Table of contents

• Cover
• Title Page
• Copyright Page
• Contents
• The Secrets of Pirate Management
• About the Author
• Related Titles