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How business is done as a rhetorical defense

Examines the phrase "it's how business is done" as a test for distinguishing fair market conventions from scams, using real estate commissions, Enron, and drug pricing as cases.

It’s not a scam. It’s just how business is done.

The two sentences do opposite work, and you hear them wherever people profit from knowing more than the person across the table. The first denies wrongdoing. The second admits the practice is everywhere. The logic runs: if everyone does it, no one is guilty. That isn’t exoneration. It is a description of an industry-wide problem, filed under normal.

Sometimes the defense is fair. Most industries run on practices that look exploitative to outsiders and function as understood conventions among the people inside them. The question is which kind the speaker is defending. The test: would the person on the other side agree to the terms if they understood them fully? When “how business is done” means the way informed parties deal with each other, it is a fair defense. When it means what we get away with because the other party doesn’t know better, it is a scam with a dress code.

American real estate ran that test in public. For decades, commissions sat near six percent, paid by the seller and split between the seller’s agent and the buyer’s. A rule of the National Association of Realtors required a listing broker to offer the buyer’s agent a share before a home could go on the listing service. Buyers rarely saw their agent’s fee; it came out of the price they paid, by way of the seller. Neither party saw the whole arrangement. It was how business was done. In October 2023 a Missouri jury found that the association and several large brokerages had conspired to keep commissions high and awarded home sellers $1.78 billion. In March 2024 the association settled for $418 million and agreed to drop the rule, strip commission offers from the listings, and require buyers to sign a written agreement with their own agent. The convention lasted as long as its terms stayed out of sight. Once they had to be written down, it broke.

The same test sorts the defense’s other examples. Recruiting firms charge fees that look outrageous to the candidate, but the employer pays them knowingly, negotiates them, and can walk away; that convention passes. Drug makers point to research costs to justify their prices. The test sets that argument aside and asks whether the people paying can see what they are paying for. The patient pays against a list price, the insurer against a rebated one, and the rebates in between go undisclosed. Mostly, they can’t.

When a practice fails the test, “how business is done” is the phrase its defenders reach for. Enron’s mark-to-market accounting was legal; the SEC’s chief accountant signed off on it in 1992. It was how business was done, right up until the company used it to book gains it had never collected and hid the losses in partnerships off its balance sheet. Bundling subprime mortgages was how business was done. The phrase is an appeal to convention, among the weakest justifications there is. Slavery was how business was done. Child labor was how business was done. That a practice persists tells you nothing about whether it is legitimate.

The phrase moves responsibility from the person to the structure. A scam needs a bad actor exploiting an honest system. When the system itself runs on exploitation, the person saying this isn’t lying. They can say, truthfully, that the water was dirty before they got in. “I didn’t design the game; I just play it.” The move works because it holds a real insight. Systems do shape behavior, and the people inside them face genuine constraints: most work inside arrangements they didn’t build, toward ends they wouldn’t choose. The phrase is the sound of that. But it treats complicity in a structure as if it were innocence, and the speaker’s candor makes it worse: anyone who can describe the problem that clearly has seen it, and chosen it anyway.

My position is that the phrase is almost always a confession dressed as a defense. People who work in fair markets don’t need to say it. It turns up exactly when someone has been shown the gap between what they charge and what they deliver and has chosen to defend the gap rather than close it. It is reliably the last thing said before someone decides not to change anything.

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