Preferring a comfortable fallacy to an uncomfortable truth

This is nicely put.  It’s too easy to graduate from J-school and still be illiterate in economics, statistics, accounting, business, etc.  Many of those same grads, marinated in lefty nonsense about evil capitalism (and capitalists), can’t “punch their way through an obvious fallacy.”  Holman Jenkins really nails it in The Media Choke on a Twinkie, pining for a “media that not only gets its facts right but can reason carefully too.”

Our most fervent wish for the journalism profession for a long while has been that a new generation would come along trained to think. The world is adequately stocked with journalists who can write, who are careful and accurate reporters, and yet are helpless as babies when asked to punch their way through an obvious fallacy.

All a reporter would have had to do to get the story right is read the filings by the bakers union and by Hostess management:

Hostess’s problem, as the bakers point out in bankruptcy filings printed in legible English, and as Hostess management has pointed out in its own equally readable filings, is that Hostess’s valuable parts are held back by Hostess’s high-cost, Teamster-staffed system for moving Twinkies and other delights from production facility to store shelf.

This high-cost distribution system means the company doesn’t make money on many of its existing sales. It means it can’t profitably extend sales to new customers and new geographical markets that might keep Hostess factories busier than ever…  Sadly, Hostess’s outdated distribution business has all the entrepreneurial appeal these days of a tube-TV factory.  It’s even possible that management is right too, though some executives may wear suits, which makes them baddies: To invest more money in Hostess as currently structured would be to throw good money after bad.

Here’s the good news:  someone else will buy “the valuable parts” out of bankruptcy.  It’s that wonderful creative destruction that makes our economy the miracle of prosperity that it is.  Someone might by the Hostess bakeries themselves, which were reasonably profitable and efficient.  More likely, imho, is that some other bakery will buy the brands and produce the products in their own factories and store them in their own distribution warehouses.

The profit motive can be a wonderful thing for getting people to act rationally, and allocate resources to their best use.  What’s bad news for workers in the bakeries that close is good news for the employees of the bakeries that purchase the brands, and it’s great news for more people to get more Hostess products whenever and wherever they like.  (I leave it to the reader to decide whether that’s a good thing or not…)

Hostess has been enveloped in arguments about whether management or labor is to blame for the company’s downfall. You can guess where most treatments come down. Management did not invest enough in new products or upgraded software or new trucks. Begged by these indictments is the question of whether managers stupidly refused to make profitable investments or were somehow incentivized to prefer losing money. If not, one might have to entertain the possibility that management was doing the job of management, withholding investment in a business model that would not return that investment with a profit.

Where wealth and livelihood are entailed, where teams act together and have time and incentive to think carefully, a good assumption is that people—management, labor—act rationally. Unfortunately, journalists who might be prepared to brave bullets in a war zone nonetheless lack simple courage to see what’s in front of their eyes in a matter like the Twinkies bankruptcy. The reason is endemic: Not enough is at stake for the media itself to cause the media to prefer an uncomfortable truth when a comfortable fallacy is at hand.

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One Response to Preferring a comfortable fallacy to an uncomfortable truth

  1. Paul Marks says:

    Agreed – to invest in such a union dominated company would be insanity. A waste of one’s own money – and the cheating of any other person whose savings one was entrusted to invest for them.

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