1, #197 - Corruption is value destruction.

When you hear the term “corrupt,” it probably brings to mind a politician taking bribes or a CFO embezzling money. But I loved this perspective, which suggests that corruption is both broader and more dangerous than that:

“Not all forms of making money are equal. Some create wealth; others destroy it. Over the centuries, when people have gone searching for the moral logic of capitalism, they always hit this same bedrock principle: Fully informed, uncoerced, voluntary transactions create surplus value because both parties end up better off.

Think about your last genuinely good purchase. You valued the product more than the price you paid, so you are better off. But the seller, too, is better off (otherwise they would not have sold). Both parties are wealthier. When this happens, it’s a bit of a magic trick. In an instant, new value exists that did not a moment before. This wealth was not stolen; it was generated.

But this only works when the exchange is truly voluntary and informed. Remove any of these conditions and the mechanism breaks.

[E]mbezzlement, coercion, fraud, bribery, and deception … corrupt the fundamental premise of our entire economic system. They transform transactions meant to create value into ones that destroy it.

[All of these share] the same value-destroying logic, regardless of whether the violation is illegal or even immoral, [so] we should use the same word to describe them all: corruption.

Our modern sense of ‘corruption’ has become catastrophically narrow. What I’m talking about is something much broader than bribery or embezzlement. (After all, the Latin corrumpere means ‘to break completely.’)”

— Eric Ries, in his new book, Incorruptible.