Learning business from the past: When making a profit was immoral

Take the system of beliefs we commonly associate with capitalism. However familiar they might seem to us, if we date capitalism’s founding moment to the publication of Adam Smith’s The Wealth of Nations in 1776, the free-market nostrums that shape our views of business today are not even 250 years old. To put that in perspective, if the time between the present moment and the dawn of man 200,000 years ago were translated into the distance from the Empire State Building to the Golden Gate Bridge, to reach an era when the convictions that guide contemporary commerce were entirely alien, you’d only have to travel about as far as the Lincoln Tunnel.

To get a sense of that age and how decisively the moral orientation of commerce has changed in such a relatively short period of time, consider the small tragedy of a Puritan tradesman, Robert Keayne, in whose business experience, the celebrated historian Bernard Bailyn has written, we find “one of the forces that pointed to the future.” If the past is prologue, it also figures as a warning to the present.

Keayne was born in 1595 in Berkshire, England, not far from Windsor Castle. A humble butcher’s son, he would later note that he had received “no portion from my parents or friends to begin the world withal.” Accordingly, he obtained little in the way of formal education and was apprenticed at 10 years old to John Heyfield, a merchant-tailor in London.

Resisting the familiar impulse of indentured servants to steal away for an adventure on the high seas or in the seedier precincts of the city, Keayne successfully completed his eight-year contract before striking out on his own. He proved adept at his trade, a blessing that was compounded by marrying well in his early 20s. By 1634, Keayne was prosperous enough to wager £100 on the Massachusetts Bay Company. It was an enormous sum, more than double the yearly income of the average wageworker in Victorian England 250 years later. The risk, however, was in keeping with Keayne’s conscience, which had been inflamed and enlightened by Puritan evangelists, while also being a considered bet by a savvy merchant on the bounty of a brave new world just across the ocean.

Along with Anne, his wife, and beloved Ben, the only one of his four children to survive infancy, Keayne voyaged to Boston in 1635, swiftly becoming one of the city’s most distinguished and widely despised merchants. In fact, we only know so much about him because of the 50,000-word will that he began writing in 1653, three years before his death, to provide a full account of his life and the probity of his business affairs in order to “clear myself in all material things.”

To men of Keayne’s day, the idea that a stable economic system could indeed be organized along the lines of self-interest would have seemed absurd.

To the settlers of the Massachusetts Bay Colony, the record spoke for itself. Keayne’s two decades in Boston encompassed three public scandals. One was deeply embarrassing (in 1652, Keayne was found guilty of public drunkenness); one was surely annoying (a decade before, one Goody Sherman had failed to successfully prosecute him for stealing her sow); but the final scandal, and the earliest of the three, gave the merchant the greatest anguish, for it seemed to encapsulate the impossible quandaries of his trade.

In 1639, only four years after he had arrived in town, Keayne was accused of “oppression” in his dealings, a catch-all term that covered any instance of buyers or sellers taking advantage of the ignorance or necessity of one another in a business transaction. The specific charge was that he had sold sixpenny nails for 10 pence a pound, reaping a healthy profit off his neighbour. Too healthy, it seemed, for the customary profit margin on basic goods in the colony was between 10 and 30 percent.

Keayne argued that the matter was a simple misunderstanding, willful on the part of his accuser. He said that the man had originally purchased sixpenny nails on credit for 8 pence a pound and later exchanged them for eight penny nails at 10 pence a pound, a profit margin of only 20 percent (hardly a “heinous sine,” Keayne observed in his will). It was only when Keayne asked him to pay off his balance, after giving him ample time to do so, that the man brought his suit to the authorities, with the accusation of oppressive pricing.

Early on during the trial, Keayne made a strong show of defending himself, with the messenger who delivered the second bag of nails testifying on his behalf, but then a raft of townspeople came forward to levy similar charges against him. As John Winthrop, the governor of the settlement and perhaps the most esteemed man in Boston, wrote in his diary, Keayne was widely known for being “notoriously above others observed and complained of” for the prices he charged and had been “admonished, both by private friends and also by some of the magistrates and elders”—all, it seemed, to no effect. He was convicted by the General Court of the offence, which had broadened beyond a single transaction to encompass a general way of doing business, and fined £200, a sum that was later reduced to £80.

Had the matter rested there, one suspects that Keayne would still have complained in his will of the “deep and sharp censure that was laid upon me,” but the incident would not have been the defining moment of his professional career and, perhaps, his life. But then the elders of the First Church of Boston took up the matter to determine whether an ecclesiastical reproach was also warranted.

Keayne was fortunate to escape the most serious punishment, excommunication. That sentence was passed on eight offences related to economic matters between 1630 and 1654, a period when only 40 such sentences were given, tantamount, as they were, to consigning one to eternal damnation. Instead, Keayne was formally admonished, according to the records of the First Church, “for selling his wares at excessive Rates, to the Dishonor of Gods name, the Offense of the General Cort, and the Publique scandal of the Country,” a censure he lived under until the following May, when he became “Reconciled to the Church.”

Keayne continued to attend services, and the day after the rebuke was handed down, the Reverend John Cotton, the city’s foremost theologian, delivered a sermon that was obviously inspired by the wayward merchant. The subject, Winthrop wrote in his diary, was the “false principles” of trade that so many merchants seemed to abide by. They were recorded by Winthrop as follows:

• That a man might sell as dear as he can, and buy as cheap as he can.
• If a man loses by casualty of the sea, etc., in some of his commodities, he may raise the price of the rest.
• That he may sell as he bought, though he paid too dear, etc., and though the commodity be fallen, etc.
• That as a man may take advantage of his own skill or ability, so he may of another’s ignorance or necessity.
• Where one gives time for payment, he is to take like recompense of one as of another.

For the sake of modern ears, let me paraphrase these “false principles:”

• Buy low, sell high.
• If supply falls, raise prices.
• Pass along losses.
• Buyer and seller beware.
• Charge interest.

If it seems preposterous that anyone might successfully pursue business by the photographic negative of these principles, that underscores how completely our views have changed since the 17th century. In Religion and the Rise of Capitalism, a magnificent book that deserves to be better remembered, the English social critic and economic historian R. H. Tawney describes how the work of Catholic theologians in the late Middle Ages provided the “fundamental assumptions” that shaped Robert Keayne’s world and that capitalism’s proponents would later have to reinterpret, if not displace outright. Tawney said there were two central precepts that guided commercial activity: “that economic interests are subordinate to the real business of life, which is salvation, and that economic conduct is one aspect of personal conduct upon which, as on other parts of it, the rules of morality are binding.”

Taken together, these precepts are directly at odds with the central organizational assumption of capitalism, namely, that we should be guided by self-interest in commercial pursuits. To men of Keayne’s day, the idea that a stable economic system could indeed be organized along the lines of self-interest would have seemed absurd, but it would have also made for a technical dispute that they would never have countenanced, not at least before they had disposed of some pretty serious moral objections.

As a coldly scientific matter, we comfort ourselves with the belief that, practically speaking, it couldn’t be any other way.

The most serious objection would have involved the proper orientation of a tradesman to his customer. “A man in dealing should as really design his neighbour’s good, profit and advantage, as his own,” the Puritan divine John Bunyan wrote not long after Keayne’s passing. The businessman, no less than anyone else, should have the community’s interests at heart when he conducted his affairs, and consequently, one could not be motivated exclusively by self-interest when he engaged his customers. The man “who sells his commodity as dear or for as much money always as he can seek himself, and himself only,” Bunyan said. He is always looking after his own interests, not his neighbour’s, and therefore not God’s.

For the Puritans, and more or less anyone else in the West until the 19th century, the pursuit of divine intention on earth involved consistently looking after the interests of others as part of a complex and mutually dependent community. “For this end, we must be knit together, in this work, as one man,” Winthrop declared to his fellow pilgrims in 1630 in what is now popularly known as the “City upon a Hill” speech:

We must entertain each other in brotherly affection. We must be willing to abridge ourselves of our superfluities, for the supply of others’ necessities. We must uphold a familiar commerce together in all meekness, gentleness, patience, and liberality.

Such a moral orientation toward others inevitably put the tradesman in an awkward position. Having no recourse to the “business is business” mantra commonly invoked nowadays to exempt the commercial sphere from conscientious behaviour, a man such as Keayne was left to conduct his business according to a slightly different credo: do unto others as you would have them do unto you.

If nothing else, the study of history imparts one simple lesson: things change. Today, we broadly accept that the conduct of business should be oriented inward, rather than outward, toward one’s self-interests rather than the interests of any other person, much less the community at large. As a coldly scientific matter, we comfort ourselves with the belief that, practically speaking, it couldn’t be any other way, not if we want to enjoy the creature comforts the contemporary world affords. That may be so, but the conviction is also consistent with a radical change in the way we look at each other and the broader human world. Moreover, one needn’t go so far as the 20th-century philosopher Theodor Adorno in his belief that “[t]he eye for possible advantages is the enemy of all human relationships” to share the concern that orienting commercial conduct exclusively toward self-interested ends can imperil a community and the integrity of one’s conscience.

Robert Keayne never went so far, but his conduct as a tradesman in the Massachusetts Bay Colony portended one of the most significant shifts in commercial conduct brought about by capitalism, a change that went hand-in-hand with, and indeed relied on, a revolution in moral sentiments. When Keayne was asked to defend his actions, he could not say, “I’m a businessman. I was looking after my own interests. That’s what we do, and you’re all better off for it.” Such an argument might prevail in the court of public opinion today, but before a jury of peers in 1639, it would have been nothing less than a confirmation of what they had always suspected about a life devoted to business.

John Paul Rollert is an adjunct assistant professor of behavioural science at Chicago Booth.

This article has been previously published in Chicago Booth Review.

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