Business and industry—Veblen validated by 60 Minutes

Thorstein Veblen is best known for coining the expression “conspicuous consumption.” But a very good argument could be made that his biggest contribution towards understanding modern societies is his lesser-known distinction between business and industry. (See a graphic representation of this class analysis.)

According to Veblen, business is a manifestation of the Leisure Classes who employ the strategies of force and fraud to obtain wealth from their targets. Industry is the strategy of becoming prosperous by trying to market something extremely difficult to make and doing it very well.

Not surprisingly, this formulation has horrified a wide assortment of social observers. The Marxists hate it because it suggests that there is a whole stratum of useful and highly productive “capitalists.” The right wing hates it because it points out that many who call themselves capitalists are nothing more than a bunch of thieves. Because it has become so controversial over the years, Veblen’s distinction between business and industry has disappeared even in academic courses devoted to his writings.

And yet, the idea does not die because every so often it is displayed in all its magnificent glory. Last Sunday night was such an occasion. The first segment of 60 Minutes was devoted to Michael Lewis discussing his new book on the practice of ultra high-speed flash trading. This is a perfect example of business as fraud because while it enriches a few people who have figured out how to front-run trades in the markets, it adds absolutely nothing to the functioning of the real economy but rather harms it by diverting capital into piles of utter uselessness.

After this segment on capitalism as sociopathic behavior, 60 Minutes sought to balance that gruesome business tale with something more uplifting.  And so we were treated to a profile of the brilliant young industrialist named Elon Musk. His credentials are amply demonstrated because he started a car company that builds a stunningly beautiful, insanely fast, remarkably quiet, and fastidiously crafted all-electric model called the Tesla S. In doing so, Musk has accomplished the seemingly impossible—he has made at least one electric car that is very cool.

Because USA has spent the last 35 years de-industrializing, a mainstream media company like CBS has lost its ability to tell an industrial story correctly. And so because their segment makers believe that all cars go vroom, vroom, they inserted an audio track from an internal combustion engine into a story about an all-electric car.

But even when CBS gets the story wrong and social scholars dismiss the idea that there really is a difference between business and industry, the public gets it. You could see how well when Steve Jobs died. Jobs was known to be very difficult to work for, was pretty ruthless, and was richer than God, yet his death was greeted with an outpouring of grief that included spontaneous shrines surrounded with piles of flowers. This at a time when the criminals on Wall Street were being subjected to angry protests.

Business and Industry. There are few ideas that explain more.