“MORALITY AND BUSINESS – WHAT YOU CAN DO”

William Black is an Associate Professor of Economics and Law at the University of Missouri-Kansas City. He was the Executive Director of the Institute for Fraud Prevention from 2005-07. Bill is an outspoken critic of our regulators, banking, and business leaders. You may have caught him on Bill Moyer’s Journal, or in his congressional testimony where he stressed accountability and the fact that elites refuse to accept responsibility.

I recently attended a conference on institutional decision making and group behavior. Many academics presented experimental results and mathematical models to explain how we make bad decisions. Yet, when I asked about the role morality plays in individual decision making, I was told that little research has been done and therefore there was not much that can be said about the topic.

Bill: Yes, control fraud is when the people that control a seemingly legitimate entity, whether it is private, non-profit, or governmental, use it as a weapon of fraud.

Brooke: There seems to be a lot of that going on now.

Bill: Yes, way too much. And the FBI just announced that property crime had fallen to yet another all-time low, because we don’t count serious white collar crime. None of the major things that cause massive losses are even counted. And, if you don’t count it, at the end of the day, it doesn’t much exist [as far as they are concerned].

Brooke: I recently sat next to a young soldier coming back from Afghanistan; a wise man at age 20. I asked him, “What have you learned?” And he said, “I have learned to make apologies, not excuses. If your gun jams because you have not maintained it, and your buddy gets killed because you can’t cover him, you have to apologize to his widow, and it is not your gun jamming that caused his death.”

He also said, “I now see my country as a nation that cannot apologize, and that is full of excuses masquerading as reasons.”

How can we be excused just because we haven’t modeled morality mathematically therefore we can’t know anything about it? This young man knows something about it.

Bill: Brigadier S. L. A. Marshall found that small unit cohesion was the absolute key. You will do astonishing acts of bravery for your little group, and you will do it for members of your group who you actually hate. And they’ll do the same thing for you.

What you see from our elites is an almost complete unwillingness to take responsibility. We even have all these flakey apologies. To take the soldier’s statement, when he apologizes, he doesn’t say, “I am sorry if you have interpreted my comments in a manner that caused you distress,” which is the standard non-apology apology that people use today that puts it on you; there must be something flawed about you that led you to take offence at your husband being shot down because my gun jammed.

Brooke: I have an MBA in Finance, and I took an ethics class, which was all about how to stay legal, and not about ethics. The strongest impact for me was in a course called Managing Organizational Behavior where we talked about the Milgram Experiments. [A series of experiments conducted by Stanley Milgram of Yale University, where he showed that most people would go so far as to give people an apparently lethal shock when instructed to do so by an authority figure.] These experiments were presented in class as things that couldn’t be repeated again. We are obligated to mention them, but don’t worry about them because we can’t repeat the experiment. But, isn’t that experiment repeated all the time? I had a hard time sleeping after that because I saw it in all our behavior. It was not Germans in Germany who did what they did in World War II, but humans, just like the rest of us, and we are all capable of that. That, combined with small unit cohesion (you fight for your buddies, not your cause) is a combination that is extremely powerful and scary, isn’t it?

Bill: It’s weird, but I had the same experience. That is the single scariest thing I have ever watched in my life, and of course, I have seen much more horrific, graphic, violent things that are real – and that was an experiment. My fear was, my god, what would I have done? I know what I hope I would have done, but after you see that film, you have to wonder. [He continued with a discussion of the Stanford Prison Experiments.] That’s why you have to have immense restrictions on abusing people you have made powerless, because it is such a human thing to abuse them.

Perhaps psychologists consider running the Milgram experiments to be unethical these days, but reality TV producers do not. In 2006, a British TV station produced a show called The Heist in which illusionist, Darren Brown, began with 13 businessmen and women, and was able, in just two weeks, to persuade four of them to commit what they believed to be an authentic armed robbery. As part of the show, he reenacted the Milgram experiment as a test to identify his four most obedient participants. Darren got the same results Milgram did in 1963: over 50% of the subjects administered what they believed to be lethal shocks simply because a man in a white coat told them to. You can watch a report on the TV show here.

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Brooke: Are business schools doing a good job of teaching ethics?

Bill: When I am in a dispirited mood, I refer to them as “fraud factories.” They do a miserable job right now. We know empirically that in business schools and econ programs, when people enter they are materially less altruistic than their peers, and we know when they get done with the program, that is even more true. (See a paper by Gintis and Khurana.) So, through self-selection, training, and peer effect, we are turning out people who find it easier to cheat other people and to not care about other people. So, yes, we are teaching ethics, and we’re teaching it effectively, but it should be called “anti-ethics.”

Brooke: So, if you want to get a good ethics education, you should take diligent notes, and then negate whatever you are being told.

Bill: Yes, put a negative sign in front of most anything.

I refer to our prior conversation with Professor Mintzberg of McGill University, in which he said there is a clear moral obligation for colleges to disclose the flaws in their education, but not a legal one. Bill and I continued to discuss how a moral obligation is enough of a reason to refuse to do something that is wrong, and you don’t need to discuss it any longer.

Bill: That’s right. You’re done. Period. It doesn’t matter how fancy you make it, how many excuses you create, you’re done. End of story. It’s off the plate as an option if it’s unethical.

Bill explains how our simple social rules keep most of us from cheating each other. He continues,

Bill: What if you say my job is to maximize return to the shareholders, and, if it is not illegal, and short-term profitable, then am I supposed to do it even when it is immoral? If that’s the rule, then you have just developed a rule that will destroy America.

Brooke: A psychologist friend of mine says that many of her patients don’t have psychological problems; they have morality problems. They want to feel good about themselves while they cheat on their spouses, screw their business partners, or steal from their clients, and if she can’t help them with talk therapy, they want a drug. She says, “They don’t have an emotional problem. The problem is their emotions are working fine.”

Bill: Exactly. The problem is they are not listening to their body. There is something in their system that is telling them that what they are doing is very wrong.

We return to the question of whether ethics can be taught.

Brooke: A fellow applied for a job with me, and I asked if I hire him, could I introduce someone to the job he currently has because I am all in favor of helping improve employment, and when I hire someone away from another employer, I haven’t decreased unemployment, I’ve just transferred my problem to his prior boss.

He said, “I would never recommend anyone to my job because I am asked to do immoral things.”

So, I asked him why he had not quit.

He said, “What are you talking about? I need a job.”

I said, “Let me see if I have this straight. What you are doing is immoral and you don’t think anyone on the planet should do it, but you are willing to do it.”

How does this work? How can I teach someone that, if they have that feeling, they have to stop, and it doesn’t matter if they are getting paid to do it; they have to stop?

Bill laughed: Did he get it, once you talked to him?

Brooke: I might have succeeded in sending this guy home much more conflicted, because he came with an attitude that it was his employer that was causing his problem, and the solution was to get Brooke to hire him. I made it clear to him that he was not qualified to work for me. I said, “If I do something immoral, which can easily happen – I’m deathly afraid of that – I need you to tell me that I am doing something wrong. And if I don’t respond, you need to tell my boss, and Compliance, and if the organization doesn’t respond, you need to quit your job and you have to go to the regulators.” I need that because I do not think I am immune from what Milgram showed.

Bill: You expressed that it was an ethical issue where the individual had deliberately put scab tissue on to make sure he did not internally frame it as an ethics issue. All you can do with a person like that is make the point that they are acting immorally directly to their face, in a naked way, and you did it where there was an actual consequence of his unwillingness to take a moral stand.

Similarly, when you find somebody is unethical and you fire him you need to consider avoiding the advice you get from everyone and give him a negative reference. People have to take a willingness to get sued, and if that can’t work, then as a society, we have to give protection.

We must simply start teaching ethics in our own ponds with our own kids, or own friends’ kids, using our own behavior. You always look, as a parent, for teaching opportunities that are not didactic, so it was always great when someone gave me back too much change when my kids were present, because I simply made sure that they heard me giving it back, and that they were actually paying attention when I did it.

Brooke: Recently, I was on a train and sat with this young woman who is in her second week on the job working for a dubious corporation, that’s to say a large Wall Street firm, but I repeat myself.

I ask her, “What do you do if you are asked to do something unethical?”

She says, “What are you talking about? There are two sides to everything?”

I say, “But what happens when you are on the wrong side? Have you ever taken an ethics class?”

She says, “Of course. It was required. But, that’s what’s wrong with you old people, and how you guys used to be taught, because in our classes, we all get to discuss all sides, and everybody is entitled to their opinion.”

Do you think that is the right way to teach it?

Bill: I’ll give you my interaction with a young person who worked for a law firm who said, “What I like about my firm is that it is really ethical.”

You know, you don’t often hear that, so I said, “Wow, that’s great. How did you learn about that aspect of the firm?”

And she said, “Well, I know that my firm would never do anything against the interests of Israel.”

We both laughed. This would probably distress supporters of Israel, but Bill and I know that you can’t know in advance that Israel will be for all time on the right side of every issue.

Bill: I was dumbfounded. Frankly, I decided my powers of persuasion were probably impossible when dealing with somebody like that. It is bizarre what some people define as ethics.

The young woman you met was taught that ethics disappears because issues are complex, so there is never an answer, and we are not required to seek an answer.

Brooke: Many of our subscribers at http://www.noshortageofwork.com/ are in the New York area, used to work in finance, and are now unemployed.

One of the things I try to teach, which is probably the most useful thing from economics, is the concept of opportunity cost.

I say that when you’re unemployed, the advantage is that you can do anything because the opportunity cost is zero. You might have to struggle to get people to bid up your price, so it is a good idea to pursue things of value to others.

If you are not working at an unethical firm because you are not working at all, then you are not called upon to compromise your ethics. You will not have to say to yourself, “Oh, my god, if I don’t continue to do this, then I will lose my job, and I won’t have money to send my kids to college where they can take an ethics class.”

Perhaps, if you are on the street without a job, now you have time to reflect on those things.

Bill: That’s right. Reflect. Take the opportunity to read. And teach your children well.

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Bill Black recommends To Kill a Mockingbird.

What do you recommend? If you have read a book lately of interest to No Shortage of Work readers, let us know. We will even try to arrange for you to interview the author, although I wouldn’t count on getting Harper Lee to take your call.