You Can’t Regulate Human Nature

    Clay Brewer is an associate attorney at Thompson Burton PLLC. His practice area focuses primarily on serving young, direct selling companies. He assists Kevin Thompson in providing exceptional legal support for companies ranging from early-stage startups to well-established entities.

    The human mind is miraculous. The capacity for what we can achieve is without limits. Despite our great gifts, there’s one thing that will likely never change: our primal nature to seek immediate pleasure over pain. This results in us being stuck on the Hedonic treadmill, mostly contrary to our own best interests. Stated another way: while humans have an infinite capacity for growth, we also have an instinct for self-destruction. When work is hard, people tend to choose the path of least resistance.

    As a regulator, the question being asked should not be was there any “consumer harm,” but rather was the consumer harm that was caused or is likely to be caused done with the intent to cause consumer harm.

    The anti-MLM community, the FTC, and other regulatory agencies have come to believe in the power of their own good intentions. The crusade on which they have embarked is admirable but the war in which they seek to fight has developed into moral rightness becoming a form of social power wielded by those who are continuing down the path of “good intentions” absent genuine understanding. Of course individuals should never be wrongfully or fraudulently deprived of their hard-earned money. To argue that those who are in favor of LESS FTC involvement support the opposite is an absurd proposition, yet the argument is still made. Small businesses willing to take the risk to fulfill their dreams should not have their efforts stifled due to individuals wanting to make a quick buck taking the path of least resistance and then crying wolf when they get burned.

    Growth Requires Stressors

    The magic that is American capitalism is that one has the ability to take their life into their own hands, for better or for worse. The presence of success and the presence of failure are threads that weave the fabric that is American entrepreneurship. The pain of failure only makes the pleasure of success that much more gratifying. But out of all the numerous success stories, there are that many more failures. Failure, like pain, instructs. With each successful business in the community, there are dozens of similar businesses that just never made it. These failures instruct the market, making the economy more robust and the products and services better. All business owners view themselves as above-average. They know the odds are stacked against them, yet they give it a go. The sad reality: the stats are real, failure rates are real, and most people, statistically, are average. The harsh reality: Failure is a feature not a bug of an evolving and dynamic economy.

    The question remains: Is this very necessary and common human tendency something that should be regulated away? I’ll be the first to tell you that there are scumbags in the world that habitually deprive consumers of their hard-earned money, making unreasonable promises and painting ostentatious lifestyles when the attainability is nearly impossible. But following the law and not passing judgment on the whole due to the actions of a few is not ruling on the side of crooks and fraudsters, it’s establishing a path through the forest of current unknowns and avoiding arbitrarily changing the signs (or removing them all together) once people are already on the trail.

    Regulators are ever increasing their impact upon markets by searching for solutions to problems that are better left to the forces of economic destruction. This interventionist notion of saving the many due to the actions of a few can be linked to Nassim Taleb’s discussion of iatrogenics in his book Antifragility. Iatrogenics can be tied to many things in the common day, but first can be linked to medicine where the cost of intervening inevitably caused more harm than good. For example, back in the day you had an infection, the doctor would come and bleed you out a little. Sounds crazy, I know. But this was “top science” back in the day. Little did they know calling the doctor to your home initiated the beginning of the end.

    The Cure Is Understanding

    We can now take a step back and realize that when regulators make decisions based on emotion and not based on law or sound business judgment, they’re the doctor uttering the most ominous words in the English language: “I’m from the Government, and I’m here to help.” In other words, “Small business, prepare to bleed. It’s for your own good.”

    Heightened interventionism and hold-your-hand regulation can do more harm than good, commonly referred to as second-order consequences. So you provide more disclaimers. And these disclaimers explicitly inform person X that they most likely won’t be able to sell bottles of lotion and purchase a yacht in a few years. The second-order consequences are that individuals lose the ability to learn from trial and error, the natural consequence of learning how the world works. It’s not impossible for these sorts of atypical results to be achieved, just like it’s not impossible for someone to achieve other low-probability success, e.g., pro sports, dream jobs, etc. But success also won’t fall in your lap, and, even if you work harder than anyone, it still might not happen. It’s my belief that this is already intuitively known by most people. It’s common sense that failure is always a real possibility, and they better do their homework before throwing in serious capital. THIS is the message that should be presented. I’m all for Income Disclosure Statements and requiring companies to be open and upfront about the potentiality that truly exists for those who join. What I’m against is the lack of guidance that results in regulatory agencies blindsiding companies. 99.9% of companies seek to do the right thing but it’s hard to make it out of the maze of American capitalism when the ones making the signs along the path are furious that you even thought to begin.

    The power of the anecdote continues to run rampant as personal stories tug at the heart strings, and understandably so. But sometimes a little bit of stress strengthens the immune system to fight off the infection and avoid the “scientifically proven” bleeding technique. Regulatory agencies would be best served in reaching their goals by reaching out to the communities and truly seeking to understand the issues and concerns from all sides. Instead of looking to cure the infection, they just keep buying bigger knives. It’s now my goal to continue to write, work with you all, work with clients, and embark on our journey to create a better path forward. Those that don’t follow the signs on their journey deserve to be punished, but those that get lost because they were never told where to go shouldn’t be targeted for venturing from the path.

      Clay Brewer is an associate attorney at Thompson Burton PLLC. His practice area focuses primarily on serving young, direct selling companies. He assists Kevin Thompson in providing exceptional legal support for companies ranging from early-stage startups to well-established entities.