Former Trucking Exec Wes Kemp Retired To Teach Capitalism, Not Play Golf

Editor’s note: This article appears in the latest magazine edition of Talk Business & Politics, which you can read here.

Former ABF Freight President and CEO Wes Kemp isn’t spending his retirement years on the golf course. Instead, he’s worked to develop a course that acquaints students with the principles and ethics of free-market capitalism.

It was a simple question. Followed by two more.

A little over six years ago, Wes Kemp was speaking to a class of students at the University of Arkansas at Fayetteville, as he often was asked to do while serving as an executive at ABF Freight System, Inc., in Fort Smith. The exchange that took place that day may just be one of the reasons that he’s now spending part of his so-called retirement years as executive in residence at the UA’s Walton College of Business, sharing his years of experience and expertise with the leaders of tomorrow.

We’ll let him explain.

“I was scheduled to speak to one of Professor John Ozment’s classes in November of 2008 and during the Q&A following my lecture, I was asked three questions that served as a pivotal point, although I really didn’t realize it at the time,” Kemp recalled. “The first question was ‘What keeps you up at night?’ which I had been asked numerous times before. I usually told students that I sleep quite well, which is one of the benefits of surrounding yourself with great people who are responsible and can be relied upon to excel at their work. But, at the particular time of the question, I wasn’t sleeping very well.

“I related to them that I was named president of ABF in August of 2008 and six weeks later the bottom fell out of the economy. What became known as the Great Recession was set in motion. By November, we had lost 25 percent of our top-line revenue and frankly had a real mess on our hands. About half the revenue loss was business volume and the other half pricing yield. We were accustomed to dealing with down-cycles in the economy but nothing of this magnitude.

“We moved quickly to scale the company and, as difficult as it was, laid off around 3,000 employees, which was unprecedented in our history. Even though we reduced other discretionary spending categories, we continued to operate at a loss. A large part of our cost structure was fixed and semi-variable in nature, which take considerably more time to scale than do the variable categories.

“The problems presented by the recession were not of our doing but they had to be dealt with, and it required more than our typical 10 hours per day, five days per week to work our way through them, including some fairly sleepless nights. So, I told the students that the state of the economy was the reason I wasn’t resting well.”

MORE QUESTIONS
That’s when someone asked Kemp a second question: “What caused the problem?”

Kemp said he “described what I believed and still believe was at its root, which was government policy. I described the series of initiatives that frankly made the disaster inevitable. When things are done that distort markets, there will be a price to pay and a day of reckoning at some point. It’s simply a matter of time. The bursting of the ‘housing bubble’ was one such thing. So, I described the government policies and actions that created it.

“The third question asked was ‘What should be done to correct and prevent the problem from happening again?’ and I told them that government should stop getting in the way and let the power of free-market capitalism function as intended.

“I’ve been greatly influenced by the works of Milton Friedman and Ayn Rand,” Kemp explained, “largely because we’re seeing play out what they essentially predicted. So, I described to the class what I believe is the proper role of government and how so very important it is to understand, honor and protect what our founders declared. That is our right to life, liberty and the pursuit of happiness. While there will still be down-cycles under capitalism, typically they won’t be extreme and nearly as long as those caused by government’s distorting of markets.

“Well, the students seemed to perk up and were much more interested in what I had to say about the economy than my lecture on the trucking business. It also occurred to me that I was providing most of the students with information they hadn’t heard before. Since their response was so positive, I made it a regular part of my future lectures. There were a couple of professors in class that November day and they summoned others to attend future lectures. The next thing I know I was asked to deliver the keynote address at a conference on campus the following spring which went well.”

Eventually, it wasn’t the students asking the questions of Kemp, but Matthew A. Waller, who is currently the associate dean for executive education at the Walton College and the Garrison Endowed Chair in Supply Chain Management as well as the Supply Chain Management Department Chair.

A COURSE IN MIND
Waller asked Kemp, who retired from ABF in January 2012, if he would consider teaching a class at the university. And while he was willing to let Kemp teach just about whatever he wanted, he was hoping Kemp would consider building a course around his lecture on capitalism.

“Wes Kemp’s 42 years of experience at ABF Freight System, Inc., which culminated as president and CEO, provides a plethora of examples that are useful in the classroom,” Waller said in a press release early in 2014 that announced a $100,000 gift from Kemp and his wife, Sharon, to the university in support of the course. “Wes is student-centered, and his student evaluations are stellar.”

That Kemp – after consideration and conversations with other UA officials – took Waller up on his offer gets us to his career after his career. We caught up with him recently to ask about the response to the course, including the most recent online version, “The Logistics of Capitalism,” his passion for the works of Friedman and Rand and how they’re still applicable, plus his thoughts on the challenges facing the trucking industry today and the state of the nation’s infrastructure.

TB&P: So once you agreed to teach the course – which will be offered again next fall – you had to develop it. Tell us a little about that and what the response has been.

Kemp: When I retired, I was still incensed by how frequently I heard capitalism being blamed for the recession, which I believe is absolute nonsense. What drives people to hold such an opinion is mostly out of ignorance on the one hand caused by being poorly schooled on the subject, or politics on the other wherein a party attempts to deflect blame away from something in which they have a vested interest. I can’t do much about the politics, but I was being afforded the opportunity to try and do something about the schooling albeit small. …

So in January of 2012, I went to work as an executive in residence in the Walton College and started building the course primarily around the works of two people. The first is Milton Friedman, Nobel Prize winner in economic sciences and famous for his “Free-to-Choose” PBS TV series in 1980. And, the second is Ayn Rand, noted novelist, philosopher and screenwriter. Many consider Miss Rand’s novel “Atlas Shrugged” prophetic. As Dr. Yaron Brook of the Ayn Rand Institute described it, “In ‘Atlas Shrugged,’ Rand tells the story of the U.S. economy crumbling under the weight of crushing government interventions and regulations. Meanwhile, blaming greed and the free market, Washington responds with more controls that only deepen the crisis. Sound familiar?” And there are certainly differences of opinion on these two personalities, Ayn Rand in particular. When I run into folks and mention Ayn Rand’s name, I find they’re either very fond of her work or they absolutely hate her. After inquiring, I usually learn that the haters have done very little study of her work. Unfortunately, they’ve usually based their opinion on what they’ve heard from others.

The course is based on the fact that capitalism is a socio-economic system deeply rooted in the rights of individuals, including property rights. People have the right to own property and no other person or entity has the right to take that property by force or by fraud. Ownership can only change through free trade wherein two consenting parties agree to exchange value for value. True capitalism limits the role of government to protecting those rights from domestic threats by maintaining an effective police force and from foreign threats by keeping a strong military. Also, the government is to maintain the judicial system wherein criminals are prosecuted and our civil disputes are adjudicated in a rational and objective manner. Other than that, government’s role should be limited. The initiation of force is banned under capitalism, reserved only for government use and then only when necessary to protect individual rights.

In spring 2012, a young man arrived on campus by the name of Jason Arentz. Jason had just received his Ph.D. in economics from George Mason University. Of course, GMU is renowned for its study of economics and is home to such free-market thinkers as Walter Williams, Russell Roberts, Don Boudreaux and Peter Boettke. Jason had accompanied his wife to the U of A and was seeking employment. So, we started working together on the capitalism project. I had never even written a syllabus before, and he was most helpful in not only guiding me through the course development process, but also sharpening the course content. We ended up teaching the first class as a team. Currently, he teaches the classroom and I teach the online version of the course.

The classes have gone very well, and in some respects, students seemed starved for the course’s content. Their interest and reaction have been better than I might have anticipated. Of course, there’s a lot of discussion and debate on redefining terms and rethinking some basic questions such as what is capitalism, what is a right, what is greed, is self-interest bad, what’s selfishness, how do we best help the poor, etc. It’s new ground for students as surveys indicate that there’s little if any duplication of our content in other courses. And, in course evaluations at semesters’ end, a number of students have stated the course tested their critical thinking skills like no other and is the best course they’ve taken so far in college. Jason and I both find this very gratifying.

TB&P: I would imagine this is something you’re very passionate about since you’ve long appreciated the works of Rand and Friedman. Why is their work still important today?

Kemp: At the root of my concern is the future of our country, the preserving of our constitutional republic. Most people that I encounter know that the fiscal practices of our federal government today simply aren’t sustainable. And when you study and reflect back on Dr. Friedman’s and Miss Rand’s work and their warning of the dangers of an ever-expanding, intrusive government, it’s really not surprising. There have to be limitations on our taxing and spending … I believe there’s a day of reckoning coming at some point in time. It may not be in my lifetime, but when it does, we’re going to need someone other than the Keynesian thinkers of today who know what to do. You gain that knowledge by studying Friedman and Rand and others kindred minds.

The word “sustainability” is used a lot these days, and usually refers to the environment in one way or another, which is fine. We certainly shouldn’t trash the planet. But I wish I heard more concern about sustaining our republic. There’s never been a form of government that has done more good for more people than our constitutional republic, which freed people to pursue their rational self-interests, and I believe it’s at risk. It’s at risk because we’ve lost our way in terms of how best to tax, spend and govern. We need a strong government but its role must be limited and we’ve departed from that substantially. As Dr. Friedman once put it, “It’s turned many of us into children.” And, since inequality seems to be a coming political theme, I hope we don’t forget Dr. Friedman’s famous quote: “A society that puts equality before freedom will get neither. A society that puts freedom before equality will get a high degree of both.”

TB&P: Expand on that a little, if you don’t mind, and let’s talk about government policy and how it affects the economy and American business.

Kemp: The funding of runaway spending by government requires taking a disproportionate amount of money out of the private sector where money is spent most productively. Goods are produced in the private sector by people working to better themselves. Competition ensures responsible spending by private enterprises. When firms depart from that, they fail, and when they excel, they reinvest their earnings, which results in growth and greater employment, i.e., more jobs.

Government has no competition. We rely on elected officials who hold office by pleasing voters, and over the years many voters have acquired a sense of entitlement to government benefits, diminishing the importance of relying on our right to life, liberty and the pursuit of happiness. Consequently, to hold office and maintain their jobs, legislators promise more entitlements, which requires even more spending and taxing. With the public so ill informed about true capitalism and the proper role of government, it’s become a never-ending process.

Of course, entitlements are a huge part of our runaway spending, and the blame is bipartisan as both Republicans and Democrats have had a hand in expanding government beyond its means. And, the sad part about it is that it’s mostly done under the guise of helping people. We all should be interested in helping people, but I don’t think government does it as efficiently or effectively as does the private sector. The best way to help people is to let business get to the business of business under the principles of free-market capitalism. This leads to a robust economy wherein there is so much commerce firms must compete for employees. When workers are in demand, their pay, benefits and work environment improve naturally, not by government edict.

TB&P: You had a long career with ABF. What do you consider to be your top accomplishment and please talk a little bit about how the industry changed during that time.

Kemp: ABF is a source of great pride for me, and I think my work contributed to its success but not any more than a lot of other people. As far as my top accomplishment, I’m not sure I would lay claim to a single thing as I don’t recall anything I did solely on my own. I always had support and assistance from the folks around me. Other than the people I became acquainted with and the ability to provide well for my family, I think I most value and appreciate the company for the learning opportunity it provided. I felt as though I was still learning the business on the day I retired, and that was a blessing as I was never bored. The acquisitions we made over the years were interesting and never easy. I always felt a sense of accomplishment once we survived them and started prospering again.

Deregulation of the industry was a big deal not only to ABF but to the industry. That experience actually shaped my opinion on government policy. After its passage and witnessing the good things coming out of it a few years down the road, I learned firsthand the power in freeing markets. I also take considerable pride in the fact that at the end of 2011, my last year with the company, ABF was the sole surviving legacy carrier since the industry was deregulated in 1980 still operating under the same name.

TB&P: The trucking industry faces a number of challenges – such as a shortage of drivers being one of them. What are your thoughts on what trucking companies need to do to meet these challenges?

Kemp: I certainly have some opinions but honestly they may be outdated. Bear in mind, I’m not very close to the industry or ABF anymore. I still read and find Transport Topics interesting. And, I have lunch with Robert Young (ArcBest Corp. chairman) every month or so. However, we seldom talk business. We usually spend the time catching up on family matters, talking politics or discussing how the ducks are flying.

The driver shortage has been a chronic problem for a long time. It peaked for us between 2004 and 2006 as I recall. Even though we paid the top wages and benefits in the industry, we still had trouble finding qualified drivers. That changed for a while after the recession, but I always felt it was but a pause and would raise its ugly head again, and apparently it has. I still believe the problem is fundamentally pay, benefits, working conditions and providing an opportunity for drivers to advance well beyond the base pay when they and their company excel. You’ll always be shorthanded during peak periods so companies need a relief valve of sorts. Employment is not the solution as drivers can’t make a living working only two to three months per year. Expanding the use of intermodal services or owner operators typically help during these times.

On the working conditions, the companies that can get their drivers home every day or every other day will improve their odds of recruiting and keeping drivers more than those that don’t. I recall carriers that kept drivers away from home three or four weeks at a time, and they also, not so coincidently, had the greatest turnover and difficulty hiring qualified drivers, which is very costly and disruptive to the business.

Also, I’m not sure it’s generally understood that a person can make a good, honest, dignified living driving a truck. I’ve noted that the drivers who acquire some basic understanding of transportation logistics and supply chain management often take pride in their work as they understand its relevance. Transporting goods from coast-to-coast and border-to-border in a timely, efficient and effective manner is critical to our country’s economy. Those performing the work deserve our respect and they don’t get it often enough.

TB&P: From your experience as both a transportation executive and now a business instructor, what are your perspectives on our infrastructure needs and how to pay for them?

Kemp: If the reports are correct, and I have no reason to believe they aren’t, we have massive infrastructure in disrepair. Here are the basics. Highways and bridges deteriorate due to time, weather, stress and the quality of construction. Heavier vehicles impose more stress than lighter vehicles. Consequently, trucks likely shorten the life of pavement more than passenger cars and should pay for their fair share in the cost of repair and maintenance. Given that, the only remaining question is what’s the right number? What’s the industry’s fair share of the tax burden? How much is enough? Some of my trucking friends may not like this, but if we’re not paying enough to cover our fair share, then tax us until we are. Just make sure the metrics of that calculation is rooted in sound science and that it’s objectively for the right reasons, not in reaction to the alarmists with hidden agendas and political pull.

In addition, privatization should not be ruled out. People fear price gouging by profit seekers under such an arrangement. However, the process of seeking profits in a competitive environment typically produces better products at better prices than does the nonprofit, noncompetitive approach by government. Are highways and bridges really an exception?