Eight Reasons Not to Hire an M&A Advisor. And One Reason to Do So

It's always fun to read reactions in the press and blogosphere to big M&A deals. So much of what passes for informed opinion is ignorant twaddle, tendentious, misinformed bullshit, or thinly-veiled axe-grinding. Even people who actually know how the M&A sausage factory works can rapidly overshoot their skis if they start to speculate on dynamics which took place behind closed doors and over the phone over the course of the months or even years that a typical large transaction takes to close.

But your Humble Correspondent was struck by one fact which emerged from the brouhaha surrounding Microsoft's recently announced purchase of Skype: Microsoft did not use an advisor in the deal. It occurred to me that some among my Dedicated Readership might be interested in my unbiased opinion as to whether this was a good idea, and, to boot, whether I think that doing without an advisor on a large M&A deal is ever advisable. So, notwithstanding the paradox of a professional advisor giving advice on the advisability of professional advice, I thought I would share with you lovely people what I perceive to be the pros and cons of the matter.

Somewhat surprisingly, I have found it easier to itemize reasons why it makes sense to not hire an investment bank to advise on an M&A deal. (Never let it be said I am not subtle in advancing my own interests.) So, without further ado, here they are:

* * *

EIGHT REASONS NOT TO HIRE A BUY-SIDE M&A ADVISOR: ¹

1) You are a serial acquirer or dealmaker. This deal is not your first rodeo. In fact, it is simply one in a long series of deals. Your firm is an M&A machine, with experienced deal professionals, established procedures, disciplined processes, and the full support and backing of your firm's senior decisionmakers. Your firm's M&A strategy is crystal clear. You have done enough deals to have seen—if not it all—at least a hell of a lot. You have spent time, energy, and money on deals which never closed, where you were outbid, which you withdrew from. You know how and why the previous deals you did do succeeded or failed, and you can document this exhaustively. Your dealmaking system is so well-oiled that you can execute transactions in your sleep, but you don't, because you make it a practice to learn something new from every process. You may have more deal professionals working for you that most investment banks. You are Cisco Systems or General Electric.

Companies like this conduct mergers and acquisitions just like any other business line, and they get very good at it. Like many things, practice in M&A makes perfect—or at least really, really good—in part because every deal is different, and experience counts for a lot. There is another group of potential clients who do deals for a living, too: private equity firms, or "financial sponsors." Like experienced corporates, PE firms normally do not need help with tactical issues like process, negotiation, or valuation where investment banks commonly add value. With rare exceptions, when clients like these hire investment banks as advisors, they are really just renting our balance sheet to help finance the deal. Most of them won't even meet an M&A banker like me during the process, because they just don't need what I'm selling.

(Which is fine with me, by the way, because I really don't like most of those assholes anyway.)

2) Your target is not a big, unusual, or risky deal. The company you are acquiring is small relative to your own firm, it is in a business line you understand well, and integrating it into your own business should present no difficulties. In other words, the deal you are contemplating is not a bet-the-company transaction, or one that will dramatically transform your firm's current operations and future prospects.

3) The seller and/or its advisor is a sophisticated and experienced deal-doer. You might think that having a skilled counterparty across the negotiating table would necessitate bringing your own hired gun to the party, and normally you would be right. But often an unsophisticated counterparty can create a nightmare of a process, simply because they don't know how to behave or even how one goes about executing an M&A deal. Having an experienced M&A advisor at your side can ameliorate such situations by gently steering the doofuses you are dealing with onto the right path and running interference for their most egregious misbehavior before it ever interrupts your peaceful slumber. Never underestimate how clueless and irrational the members of a family-owned business can become when they decide to sell their company.

4) You want ideas as to which companies to buy and why. No. No, no, no, no, NO. If you are a Chief Executive Officer of a company who wants me to tell you which companies in your industry you should buy and why, you don't need an investment banker; you need a new job. And your Board of Directors needs a new CEO. Are you fucking kidding me? That is your day job, buddy; you're supposed to know this shit better than anyone. We investment bankers don't tell you Who and Why; we tell you How and When. That's our value add.

Now, if you have decided for whatever reason to diversify into a business line or industry with which you have little familiarity—or you are a private equity firm which wants to invest in an unfamiliar sector—it might make sense to hire someone like me to hold your pee-pee for you while you figure out how to urinate. But this is and should be a relatively rare occurrence in M&A. The throes of a hotly contested acquisition should not be the place where you decide what you want to be when you grow up.

5) You know you are the "natural buyer" of the property in question. In other words, you understand the competitive M&A landscape extremely well, and you do not reasonably anticipate being surprised by another bidder coming out of left field to gum up the process or beat you with a topping bid. This condition is pretty rare, however, especially in hot industries or when M&A is very active. You might think that a participant in a particular industry should know the strategic intentions and capabilities of its direct competitors well, but normally you would be wrong. Competitors do not talk to each other directly about strategy because—wait for it—they are competitors. On the other hand, it is the job and practice of any good investment banker not only to develop an informed opinion about how each significant competitor in a space thinks about strategy but also to have done so by talking directly with them, frequently if possible. This is simply not practical for most corporations. Investment bankers are normally far better informed about the strategic landscape of an industry than any one of its participants. This is a critical component of the network knowledge which investment bankers bring to the table for their clients.

6) You need someone to tell you when to stop bidding. If you need an advisor to tell you when to walk away from a deal—because it has become too expensive or the value you expected is no longer there—you do not need an investment banker, my friend; you need a testicle transplant. Investment bankers are trained, incentivized, and paid to close deals. If you're not completely sure that you want to close a transaction, don't hire an investment banker, because we will use all the honey-tongued blandishments at our disposal to persuade you, your counterparty, and anyone else who will listen that this deal here is a really, really good deal, and you should close directly. Ninety-eight percent of the time, we only get paid when a deal closes. How do you think that affects our ability to pull you aside and whisper in your ear that you should let this particular opportunity go?

Never forget, my friend: you are the ultimate decisionmaker in a deal. If you can't say no, you shouldn't expect to hire it done, either.

7.) You are supremely confident this will be an entirely "friendly" deal. In other words, you know the seller/buyer well, you judge that your interests are well-aligned, and you anticipate that your negotiating positions will not be that far apart. This means that, if all goes well, you will not find yourself at 3:00 am in some dingy conference room in Wichita, Kansas, screaming obscenities at your erstwhile friend and golfing buddy of 30 years because he will not budge from his demands for 18 months severance in case of termination without cause, whereas you only want to give 12. Good luck.

M&A deals are high stress affairs, because they are time-pressured, overrun by multiple third parties and advisors (e.g., lawyers) with multiple conflicting (yet eminently sensible) interests and demands, and put a great deal at stake. Even the strongest and oldest of friendships and business relationships can become frayed beyond repair in the negotiating room. That is often why otherwise sophisticated and competent dealdoers in their own right hire third party advisors to do their mud wrestling for them. That way, the investment bankers and lawyers can scream at each other as proxies for the principals, while the principals can walk away arm-in-arm after the fact with no hard feelings. Do not underestimate the value of this, especially if you intend to live and work with the person(s) you have negotiated against so hard for several years after the fact.

8.) You want some sort of guarantee that this deal will work out. Sorry, buddy. Investment bankers are agents. You hire us to help you do a deal. Whether that deal is a good one, or works out for you and your shareholders in the end, is your responsibility. We don't integrate your acquisition, we don't run your merged company, and we don't devise your business plan or operational strategy. All that stuff is your responsibility, and that is the stuff—in addition to exogenous factors like the general performance of the economy and your industry which are largely out of anyone's control, plus a healthy dose of sheer luck—which determines whether your acquisition or divestiture will turn out to be a good deal in the end. The terms of the deal you struck—price among them—are relatively minor factors in the ultimate success or failure of an acquisition.²

M&A is simply an accelerated, concentrated version of investment in your business by other means. It is capital expenditure. It's your plan. We investment bankers are just there to help you execute it. If it doesn't work out, don't blame the bat.

On the other hand, there is...

* * *

ONE REASON TO HIRE A BUY-SIDE M&A ADVISOR:

1.) At least one of reasons 1, 2, 3, 5, or 7 listed above is not true.

Any questions?

* * *

In conclusion, I will let you clever readers decide which, if any, of these conditions Microsoft violated when it chose to go solo on Skype. Heck, this could even become a parlor game.


¹ NOTE: These recommendations and remarks pertain primarily to the decision whether a client should hire a "buy-side" advisor to help him or her acquire another company. "Sell-side" advisory is an entirely different kettle of fish, in which an advisor runs a process for a client who wishes to sell an asset or business. The arguments against using a sell-side advisor are much fewer and weaker. As a matter of fact, most clients do tend to use sell-side advisors when they transact, and the percentage of deals with sell-side advisors is much higher than those with buy-side advisors. (Skype used sell-side advisors when it sold to Microsoft.) If you people are really, really nice to me, perhaps one day I will elaborate further on this.
² Please, please, please don't talk to me about whether or not a deal is "fair" to shareholders. I have eviscerated that legalistic canard quite definitively in the past.

UPDATE: This post is a replacement for the original item posted earlier in the week which Blogger.com vanished into the ether. (Just in case you were keeping track.) The folks at Blogger.com have been permanently removed from my Christmas card list. Fuckers.

© 2011 The Epicurean Dealmaker. All rights reserved.

Patience

Delay is natural to a writer. He is like a surfer—he bides his time, waits for the perfect wave on which to ride in. Delay is instinctive with him. He waits for the surge (of emotion? of strength? of courage?) that will carry him along. I have no warm-up exercises, other than to take an occasional drink. I am apt to let something simmer for a while in my mind before trying to put it into words. I walk around, straightening pictures on the wall, rugs on the floor—as though not until everything in the world was lined up and perfectly true could anybody reasonably expect me to set a word down on paper.

— E.B. White, "The Art of the Essay" (Interview), The Paris Review¹

Me, I tend to walk in circles, like a predator circling its prey, or a burglar casing a building. The metaphors and the methods differ, but the purpose is the same: it is not procrastination, but rather preparation. Each of us has his or her own little rituals and techniques to concentrate the mind.

The drinking sounds about right, however.


¹ The Paris Review Interviews, IV. New York: 2009, p. 138.

© 2011 The Epicurean Dealmaker. All rights reserved.

Twilight of the Übermenschen

This is the true joy in life, the being used for a purpose recognized by yourself as a mighty one; the being thoroughly worn out before you are thrown on the scrap heap; the being a force of Nature instead of a feverish selfish little clod of ailments and grievances complaining that the world will not devote itself to making you happy.

...

Beware of the pursuit of the Superhuman: it leads to an indiscriminate contempt for the Human.

— George Bernard Shaw, Man and Superman

* * *

Steven Davidoff opens a recent piece at The New York Times DealBook blog with the following words:

Reputation is dead on Wall Street.

This is powerful language. What does he mean?

Well, for one thing he means that the reputations of individual investment banks are no longer coterminous with the reputations of their executives and employees. He ascribes this to the tremendous growth in scale and complexity of financial markets over the past three decades:

Today’s Wall Street is not the Wall Street of 1907 when J.P. Morgan single-handedly used his reputation and wallet to stem a running financial panic.

Until the 1980s,... Wall Street was made up of traditional partnerships. These were small groups of investment bankers who represented companies in offering and selling securities and occasionally acquisitions. These bankers put their individual reputations on the line, because there were so few of them. Morgan Stanley, for example, had only 31 partners in 1970 and fewer than 1,000 employees.

But this began to change in the 1980s. Trading markets became much more sophisticated, and trading and brokerage became the investment banks’ primary business. This is a technology game. The better the technology, the better the trading and brokerage operation. Individuals became less important.

The growth of more complex capital markets and a global economy also created much larger financial institutions. Morgan Stanley now has more than 62,000 employees. These banks could use their assets and position to compete in the market for finance and trading. Again, individuals were less important as size dominated. A client now trades or does business with a bank based on its positions or ability to make a market or loan. The executive at the bank executing the transaction is unimportant.

In one respect, this is true. Lazard is no longer Felix Rohatyn. Goldman Sachs is no longer Sidney Weinberg. The First Boston Corporation is no longer Bruce Wasserstein and Joseph Perella. But this is old news. All those investment banks (or their successors) have become institutions in the sense that no one larger-than-life personality defines its image, its reputation, or its capabilities.

Professor Davidoff also points out the inverse: that an individual's reputation is no longer irrevocably tied to that of his or her current or previous employers. Both of these observations make intuitive sense. The tremendous scale of large global investment banks normally renders one individual too small and insignificant to make much of a difference. Rarely does a customer deal with one person when they transact with an investment bank nowadays; there are teams and teams of faced and faceless individuals who do a client's bidding. Even in the case of senior executives, who arguably should make a difference and presumably direct and/or set the tone of their firm's operations, the organization is too large and diverse to imbue most individual transactions with significant impact on those executives' reputation. Most customers nowadays are smart enough not to lay the blame for every botched JP Morgan mortgage at Jamie Dimon's feet.

In fact, investment banks have followed the lead of the rest of Corporate America and become brands. This is simply a natural evolution of the economy, in which people no longer purchase goods and services based on the local, individual reputation of a merchant known directly to them. Brands separate reputation from individuals and make it portable across geography, time, and whoever happens to be preparing your Jamba Juice across the counter. Some investment banks—notably Goldman Sachs in the 1980s and 90s—used to make a concerted effort to sublimate individual bankers' reputations and even identities to that of the mothership. Others cultivated the star culture, to greater or lesser success. But now, even a well-educated insider would be hard pressed to identify a material number of individual superstars on Wall Street. Every bank has become a brand first. In my business nowadays, the name on your business card that matters most is not yours; it's the name of your employer.

* * *

But the Professor's description of investment banking is incomplete. If superior technology and gobs of capital were all it took to compete, my industry would have been taken over years ago by the lumbering behemoths of commercial banking. They have always been bigger than investment banks, have much more capital, and have plenty of money to spend on technology and plenty of experience automating financial transactions. And yet the past few decades are littered with examples of huge commercial banks—mostly foreigners—spending lavishly to buy their way into investment banking, only to trip over their own genitals and transfer billions of shareholder euros or yen into the pockets of footloose investment bankers (and thence to their wives, mistresses, and Maserati dealers). Where investment banks and commercial banks have successfully merged, it has almost always been the case that the investment bankers came out on top.

Furthermore, if automation and capital were the only factors which mattered, we should expect to see much more price competition among investment banks than we do. For, as I have mentioned in these pages many times, virtually everything investment banks do is highly commodified. There is almost no transaction, product, or service that Goldman Sachs can deliver to their customers which Morgan Stanley, JP Morgan, or any number of competitors all over the globe cannot deliver that is indistinguishable in terms of perceived quality and actual price. This is particularly true in the areas which Professor Davidoff focuses on for his examples: capital markets lending, underwriting, and trading. We can't even distinguish our product offerings by flavor, like Coke and Pepsi can.

Finally, Professor Davidoff's image of global investment banks as well-funded, highly automated factories staffed by faceless automatons fails to answer a nagging question: Why do investment bankers make so much money? If labor is so interchangeable and replaceable, how come 50% or more of revenues in my industry has historically gone and continues to go toward compensation? If we bankers are so meaningless to our customers, how are we able to skim so much cream off the top? Do not forget that the average Goldman Sachs employee makes roughly ten times the median income of a family of four in this country. And there are plenty of clerks, washroom attendants, and janitors in that average. The average investment banking professional—supposed faceless cog in a vast financial factory—brings home pay which would make the average pasha blush.

If superior technology and vast capital were all that mattered, the Gucci-clad wage slaves would not be bringing home so much of the bacon. If something else wasn't at work, investment bankers who sell non-proprietary, commodified financial services like leveraged loans, equity underwriting, and, yes, even mergers & acquisitions advice would get paid like glorified bank tellers; that is, like corporate lending officers. The only ones who would make any serious money in such a firm would be the topmost executives and the shareholders, just like most of the rest of Corporate America.

Why isn't that the case? Because Professor Davidoff has missed the key, defining feature of investment banking which differentiates it from other financial activities, which provides the "value add" that our customers are so willing to pay so much for, and which explains why labor captures so much of the firm's value. He has missed the fact that investment banks are not factories.

Investment banks are networks.

* * *

I have made this point many times before.

Notwithstanding what they like to tell you, investment bankers don't really sell "ideas." They sell connection, and access, and they are successful to the very extent they can maintain themselves in the flow of market information. Investment banks derive their market power and importance by maintaining dense and robust information networks across the numerous markets they participate in. This makes them better traders, better investors, and better advisors.

When our clients ask us to underwrite a debt or equity offering, they want access to our network of contacts among buy side investors and our network knowledge of the capital markets. When counterparties trade financial instruments like securities and derivatives with us, they want access to the breadth and depth of our trading network and the capital of our trading counterparties and our own proprietary books. When a client asks us to advise them on a merger or acquisition, they want access to our network of potential buyers and sellers and our network knowledge of the M&A markets in their industry. Networks are absolutely central to the power and value which investment banks bring to their clientele. It's what we're selling.

And networks lie at the nexus of the conundrum we have been considering. For having a differentiated network in a particular area can enable a bank to distinguish itself from its competitors. While any bank can underwrite an initial public offering, a bank which develops a reputation for being the best at, say, health care IPOs can attract new business and maintain market leadership in that area. The peculiar power of networks is well known: they derive their power and effectiveness from their completeness, breadth, and depth. And these features make it easier to attract new connections into the network to make it stronger. Network strength builds upon itself.

The other particular feature of networks is that they consist of interconnections made among nodes. A moment's thought will convince you that, in the case of networks comprised of constantly changing information and personal relationships, the nodes of an investment banking network are its people. Investment bankers are powerful—and get paid a lot of money—because they are custodians of their firm's power: its networks. You simply cannot automate the most interesting market knowledge or access to external aggregations of people and capital which are constantly forming and reforming, much less the personal relationships and insights which most of these are based on. Furthermore, that knowledge is portable. If a banker ups and leaves, he or she takes his or her network of contacts, knowledge, and relationships with him or her, usually to a competitor.

This is the source of the peculiar tension between individual investment bankers and the "platforms" from which they operate. Clearly, a proprietary trader or an M&A banker is more powerful and effective if he or she works at a great platform with outstanding network resources, like Goldman Sachs. He or she can do more, bigger, and more profitable deals because of it. But Goldman Sachs itself is more powerful and more valuable to its clients because they have that person (and his or her network(s)) in place. To the question, "Who is more valuable, the banker or the platform?," the answer is always "Both." Take one away from the other, and both are diminished.

* * *

So discussions like this one, where an individual who arranged a massively profitable trade for his bank expects far more compensation than the bank wants or is likely to give him, are an annual staple of my industry. Clearly the trader could not have done such a trade without the capital and resources of his employer, so a huge bonus is not merited. But the bank has incentives to make him happy, too, lest he leave with the special knowledge or relationships he employed or developed in that trade to replicate it—and the accompanying profits—at a competitor. Investment banker compensation is always comprised of some portion of reward for business won and profits made plus an option on potential future business and profits from that same banker. This insight helps explain the fact, puzzling to most outside the industry, that investment bankers can get paid tons of money even when they or their firms lose it: they are being paid for future potential results.

One last thing is worthy of note. The network of relationships and market knowledge which each investment banker carries is a local one; that is, it is limited in scope and power to the industries or markets he or she participates in. My knowledge of M&A, capital markets, and the participants and dynamics of Industry X is valuable to my clients in that industry, but it is largely meaningless to a proprietary trader on my firm's govvie desk or a structured products banker packaging and selling mortgage derivatives, much less to their clients or customers. This has always been true. What has changed is that banks have gotten so big, global, and interconnected that the network of any individual employee—no matter how prominent—has become incrementally less important to the overall picture.

Which is only to say that, were he to work at a big global investment bank today, living legend and networker extraordinaire Felix Rohatyn would probably be just another schmuck with a corner office.

Of course, he'd probably be paid a lot more, too.


© 2011 The Epicurean Dealmaker. All rights reserved.

Quo Vadis?

In honor of the Easter holiday, I thought I would share some thoughts from the poet and classics scholar Anne Carson on Catholicism, spirituality, and God, which she gave in an interview with The Paris Review in 2002. As is the case with all such thoughts, hers are deeply personal, but I find them thought-provoking and interesting, as I do all of Ms Carson's work. I have rarely encountered someone treating the subject of spiritual doubt quite so faithfully.

Read it and judge for yourself:

INTERVIEWER

Is Catholicism a way out of self for you?

CARSON

No, quite the reverse. I don’t think I’m ever so resigned to myself as when I’m in church trying to understand why I’m in church. Sitting there thinking about my mother and all the times we sat together in church. The only good memory I have of it is leaning up against her fake fur coat during Mass. I remember the smell of that coat, how comforting that was on a cold winter day. But, no, it’s not a way out of self at all, it’s a way back into some self that I’m not sure is a good version, but which seems to be embedded or necessary.

INTERVIEWER

Do you think of yourself as being particularly devout?

CARSON

No. I think of myself as being particularly baffled on the one hand, by the whole question of God and the relation of humans to God, but also, possibly because of lots of empty spaces in my life, open to exploring what that might mean. I have open spaces where I put that question and just see what happens. Going to church is one such space, though I don’t go with any expectation of fulfillment or illumination. I just go because I have gone, and my mother went and her mother went and there’s something there that happens to all of us. A kind of thinking takes place there that doesn’t take place anywhere else. No matter how unattractive the service—and nowadays the mass is rather unattractive in its modern translation—no matter how brainless the sermon, there is a space in which nothing else is happening so that thinking about God or about the question of God can happen. So I go there and let it happen. Nothing changes, I don’t become wise about this, I don’t become ethically better or more interesting. I’m just the same person, I’m that person with this space open and I do think that for me, in this life, that’s as far as I’m going to get with spirituality.

INTERVIEWER

So there’s not really a doctrinaire side to it.

CARSON

I wouldn’t say the doctrinaire side of Catholicism, for example, makes much sense to me in its details or its history. So, no, I don’t look to Catholic thinking as a guide to my life, how to live my life, but I do think it’s some aspect of being human to engage the question of gods and that engagement requires space and time. It’s a historical accident that I was brought up Catholic by my mother and that she was by her mother. So this tradition that carries us is just an accidental vessel. I could have been a Muslim and been equally confused, I’m sure.

INTERVIEWER

Do you think of yourself as having a relationship with God?

CARSON

No. But that’s not bad. I think in the last few years since I’ve been working on this opera and reading a lot of mystics, especially Simone Weil, I’ve come to understand that the best one can hope for as a human is to have a relationship with that emptiness where God would be if God were available, but God isn’t. So, sad fact, but get used to it, because nothing else is going to happen.

INTERVIEWER

He’s not available because he chooses to remove himself or he’s not available because he doesn’t exist?

CARSON

Neither. He’s not available because he’s not a being of a kind that would fit into our availability. “Not knowable” as the mystics would say. And knowing is what a worshipper wants to get from God, the sense of being in an exchange of knowledge, knowing and being known. It’s what anybody wants from any relationship of love and the relationship with God is supposed to be one of love. But I don’t think any kind of knowing is ever going to materialize between humans and gods.

INTERVIEWER

Is it stymied because of the nature of the beast?

CARSON

Yes, because of the difference of the two orders. If God were knowable, why would we believe in him?

— Anne Carson, The Art of Poetry No. 88

Peace be with you.


© 2011 The Epicurean Dealmaker. All rights reserved.

First, Let's Shoot All the Philosophers

A few days ago, a friend of mine on Twitter linked to an article written earlier this month by the chairman of the Department of Philosophy at the University of Nevada, Las Vegas, Professor Todd Jones.¹ Apparently the state's current fiscal crisis has inspired the university to consider eliminating the entire department and firing all of its members. Naturally, Mr. Jones took exception to this assault on his profession and livelihood, and he took to the pages of the Boston Review—friendly and understanding fora for such arguments apparently being rather thin on the ground in the land of perpetual sunshine, consequence-free sex, and instant, undeserved riches—to make his case.

Mr. Jones founds his argument on the practical utility of philosophical education:

people think of philosophy as a luxury only if they don’t really understand what philosophy departments do. I teach one of the core areas of philosophy, epistemology: what knowledge is and how we obtain it. People from all walks of life—physicists, physicians, detectives, politicians—can only come to good conclusions on the basis of thoroughly examining the appropriate evidence. And the whole idea of what constitutes good evidence and how certain kinds of evidence can and can’t justify certain conclusions is a central part of what philosophers study. Philosophers look at what can and can’t be inferred from prior claims. They examine what makes analogies strong or weak, the conditions under which we should and shouldn’t defer to experts, and what kinds of things (e.g., inflammatory rhetoric, wishful thinking, inadequate sample size) lead us to reason poorly.

This is not to say that doctors, district attorneys, or drain manufactures cannot make decent assessments without ever taking a philosophy class. It’s also possible for someone to diagnose a case of measles without having gone to medical school. The point is that people will tend to do better if, as part of their education, they’ve studied some philosophy. (This is one of the reasons why undergraduate philosophy majors have the highest average scores on the standard tests used for admission to post-graduate study.) No matter what goals someone has, she can better achieve them through assessing evidence more effectively, which philosophy can teach her. Questions about whether this or that goal is one that is good to have or whether certain goals are consistent with other goals, in turn, concern ethics and values—other subjects that philosophers have long pursued.

Perhaps it is superfluous for me to say this in this forum, but I am unpersuaded.

* * *

Arguing that society should fund university philosophy departments because they teach practical knowledge is disingenuous, at best. There's nothing remotely practical about philosophy. It is the most radical (from the Latin radix = "root") intellectual discipline of all, because it recognizes no limits to its subject matter and no limits to the depth or breadth of its analysis. Philosophy aims to discuss not only what we know, how we know it, and why our belief is justified (epistemology), but also the very nature of reality (ontology and metaphysics) and the justification for our actions toward each other (ethics), inter alia. Its tools are rigorous critical analysis, rational argument, and logic. It considers no subject off limits and no question or issue completely and permanently resolved.²

This is a key point to understand: philosophy, as a discipline, does not provide answers.³ Notwithstanding the inference a naive reader might draw from Mr. Jones' discussion of physicians and detectives, there is no body of widely accepted answers to commonly encountered questions like reason for belief or standard of proof, such as might be found in a natural science, for example. Instead, almost every subsector of philosophy known is riven by multiple competing critiques, opinions, and worldviews, each carefully and exhaustively argued, which even professional philosophers cannot—and do not wish to—reconcile. Philosophy provides questions, plus the tools with which to try and answer them and persuade others to your point of view. As such, it can be rightly said that the proper effect of philosophy is to make people exquisitely alert to their assumptions, sensitive to the rigor of their analyses, and—truth be told—permanently uncomfortable about the validity of their conclusions. If anyone should realize that, an epistemologist should. If Professor Jones does not, perhaps he doesn't deserve to teach philosophy.

I shudder to think what a sensitive and intelligent criminologist, jurist, or physicist would take away from a rigorous course in the foundations of knowledge. If he or she has half a brain, they would be rendered permanently uncertain about the validity of their own day-to-day work. Frankly, this may not be such a bad thing. The most likely practical outcome from a non-philosopher taking one or more philosophy courses is the potential inculcation of healthy self-doubt and skepticism. Even if a student does not or cannot take each argument fully on board, the mere exposure to powerful, persuasive, contrasting points of view on multiple sides of a carefully defined issue can persuade the densest individual that life, knowledge, and "truth" are not the oh-so-simple constructs he or she may have been led to believe. At its most basic and abstract, philosophy teaches that no topic is off limits, that there are no simple or unchallengeable answers, and that there are only good questions. Among more sensitive and reflective souls, this can engender a lifelong skepticism of simplistic arguments, facile rhetoric, and conventional wisdom.

* * *

Now I happen to believe that training our young people to think this way can be highly salutary for society in general. In my opinion, we need more independent thinking, more critical analysis, and less blind obeisance to party lines of every stripe. Accordingly, I am a big proponent of philosophical training for almost everyone. But you can see how authority of every kind—social, political, economic—would find such attitudes irritating at best and terribly threatening at worst. Mr. Jones himself acknowledges this, by calling attention to the fact that the enlightened Athenian democrats of 399 BC sentenced their own leading philosopher, Socrates, to death for "corrupting the minds of the youth of Athens and of 'not believing in the gods of the state.'" Power has never enjoyed having truth spoken to it, much less the truth which calls its very existence and justification into question. True philosophy concedes the privilege of being right to no-one and nothing. It is the ancient enemy of authority of all kinds. Accordingly, perhaps Mr. Jones should be less surprised that the State of Nevada has decided to use the cover of fiscal distress to remove yet another source of gadflies from its polity.

I am sorry Professor Jones and his colleagues seem likely to lose their jobs. However, the counterargument he puts forth here just won't fly. If he is determined to fight practical fire with practical fire, perhaps he should pursue the argument that philosophy departments—like humanities courses in general—actually subsidize many of the more glamorous and supposedly profitable disciplines taught at modern universities. After all, as another of my interlocutors on Twitter opined, running a philosophy department is pretty darn cheap. You need professors, a few rooms, pencils, and some pads of paper. I don't know what the tariff for higher education at UNLV is nowadays, but you can be damn sure that every $50,000-a-year Philosophy major at Harvard is subsidizing a hell of a lot of electron microscopes for the glamorous—and much less profitable—Molecular Biology majors.

Don't even get me started on the MBAs.


¹ Perhaps you, Dear Reader—like me—are surprised to learn that a hotbed of scholarly inquiry like UNLV actually has a philosophy department in the first place. But, putting aside any special needs UNLV might have concerning the ontology or metaphysics of college basketball, or the ethical justification for bribery of student athletes, I suppose it makes sense, if only for the sake of curricular completeness.
² Naturally, you should understand that I am talking about the Western philosophical tradition. I am not talking about Eastern philosophy, with which I am largely unfamiliar, although I will observe that it strikes me as much more focused on mysticism, spirituality, and the provision of answers than the cultivation of questions. I am open to being corrected here.
³ Sure, sure. Plenty—if not most—Western philosophers have come up with their own systems, answers, and worldviews which their writings advocate in no uncertain terms. But last time I checked, the discipline of philosophy has not said, "Look, Kant got the categorical imperative pretty much right, so let's all just move on, shall we?" in the same way physicists have done with Newton and Einstein. We are talking about the discipline of philosophy here, which is concerned with only questions.

© 2011 The Epicurean Dealmaker. All rights reserved.