29 Aug The Coming Corporate Preference Cascade
The following commentary/analysis is one I wrote in my capacity as a senior fellow at “the nation’s oldest consumer protection agency,” Consumers Research, where, among other things, I compile a weekly letter for public pension-fund managers. I am sharing it here today because I thought it might be useful to some of you.
The HRC and the GDR
Starting about 40 years ago, the Turkish-American economist Timur Kuran penned a series of articles that dramatically changed the way we, as a society, understand social conditions and social change. Kuran’s work dealt primarily with the twin concepts of knowledge falsification and preference falsification, which explain the rise and persistence of certain social conditions, and the related idea of a preference cascade, which explains the process of social change.
In brief, knowledge and preference falsification are what Kuran calls “special forms of lying,” i.e. “misrepresenting what you know and what you prefer” in order to maintain a specific social order and one’s place in it. These forms of lying constitute “an innate human response to the dangers of being ostracized, to being cut off from friendships and privileges that are critical to survival,” necessary because “We are born with a need for social acceptance.”
Translating that into a less complicated vernacular: people tend to lie about what they believe in public to avoid offending others or drawing unwanted scrutiny to themselves. People do this all the time, in great matters of supreme importance, as well as smaller matters that are seemingly irrelevant but that are, nevertheless, critical to the maintenance of social order. Kuran describes the latter as follows:
Imagine that a person in a position to alter your career invites you to a party at his home. When you arrive at the party, the talk of the moment seems to be about the living room’s pale neutral colors, the latest trend in interior decoration. The look does not appeal to you, but you would rather not say so, lest your host be hurt. Feeling pressured to say something, you compliment his “sophisticated taste.” A while later you find yourself in a conversation on wasteful development projects in Latin America. Someone pompously asserts that under socialism there would be no waste. Although you find the claim preposterous, you let it go un- unchallenged, to avoid sparking a divisive debate.
With the advancing hour, you get bored and start itching to leave. A voice inside objects that it would be imprudent to be the first to make a move. So, you stay on, hoping that somebody else will comment on the late hour and signal a readiness to depart, giving you an opportunity to slip out without becoming the focus of attention. At long last someone stands up to leave, and to your secret delight, the party unravels. Thanking your host for a “marvelous evening,” you head for the door, grateful that it was not you who initiated the exodus.
Your evening contained several instances of preference falsification, the act of misrepresenting one’s genuine wants under perceived social pressures. In admiring the bland decor, remaining silent on Latin America, delaying your departure, and stating that you had a delightful time, you conveyed impressions at odds with your private thoughts and desires, at least partly to avoid disapproval. On each occasion, you faced a choice between openness and concealment, between self-assertion and social accommodation, between maintaining your integrity and protecting your image. There were always good reasons to opt for insincerity, advantages that outweighed the benefits of being uncompromisingly and assertively truthful.
In 1995, Kuran collected the thoughts from his series of articles and wrote an incredibly important and influential book called Private Truths, Public Lies: The Social Consequences of Preference Falsification. In it, he detailed three examples of how preference falsification enabled/enables the perpetuation of seriously distorted social conditions: the Indian caste system, American unanimity on the merit of affirmative action, and Communism in Eastern Europe.
By far, the most famous of these three is the persistence and then sudden collapse of Communism. For decades, the people of Eastern Europe falsified their public preferences about their governments, largely because they rightly feared the potential repercussions of doing otherwise. They put on brave, regime-supporting faces when around others, while privately detesting the regime. The “distortion” created was the ensuing perception that the Communist governments were stable and popular, that everyone loved them – because that’s what everyone said in public. The regime did part of the work of maintaining public order and obedience, but the people themselves did the lion’s share, convincing one another that they supported the regime, even as they secretly loathed it and even as it enjoyed practically no legitimacy at all.
Eventually, however, preference falsification gives way to reality. Something unexpected happens that shatters the false public façade. Something sparks the recognition among the general population that they are not alone, that others feel the same way they do, and that the consequences for acknowledging their feelings and preferences are nowhere near as severe as they had previously thought. This is the “preference cascade.” Once the spark signals to the masses that the false social support is teetering; once one person, then two people, then three people express publicly what they have long felt privately, the entire social structure collapses upon itself. One leads to two, which leads to three, which leads to a “cascade” of thousands upon thousands.
Ironically enough, the spark that undermined Soviet Communism may well have been the rise and reforms of Mikhail Gorbachev. He told the people of the Warsaw Pact that their governments weren’t working. He made clear that even he didn’t believe the false public preference. And eventually, the people gained enough confidence to agree with him.
I mention all of this today because the American business world appears poised on the precipice of a preference cascade. Unsurprisingly, the dynamics at work here very much mirror those at work in the collapse of Communism.
As you likely know, for years now, an organization called the Human Rights Campaign has dictated social behavior to large swaths of American business. Through its Corporate Equality Index, HRC has kept tabs on companies’ behavior toward, treatment of, and support for LGBTQ individuals. Or at least that’s what HRC said it was doing. In truth, it was forcing corporations to adopt its social agenda and to jump through the arbitrary hoops it created and unilaterally updated every year. As I note in my book The Dictatorship of Woke Capital:
In 2019, HRC had more than $45 million in revenue, the overwhelming majority of which came from corporate and nonprofit donations. HRC’s corporate sponsor list is a veritable Who’s Who of American business, including: Accenture, Alaska Airlines, Amazon, American Airlines, Ameriprise Financial, Apple, Boston Scientific, BP, Capital One, Cargill, Carnival Cruise Lines, CenturyLink, Chevron, Citibank, Coca-Cola, Cox Cable, Danaher, Dell, Deloitte, Diageo, Ecolab, Ernst & Young, Goldman Sachs, Google, Guardian, Hershey, Hyatt, IBM, Intel, J. Crew, Lexus, Lincoln Financial, Lyft, Macy’s, Mastercard Microsoft, Mitchell Gold + Bob Williams, MGM Resorts, Morgan Stanley, Nationwide Insurance, Nike, Nordstrom, Northrop Grumman, Pepsi, Pfizer, PNC, Shell, Symantec, Target, West Elm (Williams Sonoma & Pottery Barn), UBS, UPS, US Bank, and Whirlpool. Household names, one and all.
The power that HRC wields comes from two sources. First (again from the book), “The Corporate Equality Index has become an enormous concern for companies that desperately want to avoid the label ‘homophobic’ and thus do everything they can to appease and ally with HRC.” Second, some ESG ratings services openly admit using the HRC’s index as a key measure for “social sustainability.”
In other words, companies have always complied with HRC’s demands because they feared (ironically) being called names, feared being singled out for not supporting the social status quo, and believed that every other company in the world supported that status quo, even as they had private concerns. The HRC’s dominance in setting the social agenda for corporate America is the product of preference falsification.
Or at least it was.
Recently, filmmaker-turned-political-activist Robby Starbuck has been pressuring companies with right-leaning customer bases to start paying less attention to Diversity, Equity, and Inclusion (DEI) and ESG and more attention to its customers’ needs and wants. This is hardly a secret, of course, I’ve written about this effort myself twice recently.
What has largely gone unremarked until recently, however, is that ALL of the companies challenged by Starbuck have agreed to comply with all his demands, including discontinuing their participation with the Human Rights Campaign and its onerous Corporate Equality Index. ALL of them – including, most recently, the Ford Motor Company – have come to the conclusion that the HRC is nowhere near as powerful as it would have them believe, making compliance with its demands entirely unnecessary. It started with Tractor Supply Co. It moved from there to John Deere and then to Harley. Now Lowe’s and Ford are cutting ties with HRC. And all of this has taken place over the course of just a couple of weeks. As I say, we are on the verge of a preference cascade that may well depose the despotic current arbiters of corporate social behavior.
One wonders, given this, what other business-related social “truths” are really just the product of preference falsification.
Fortunately, time will all but certainly tell.
