David R. Henderson  

Merit, Ethics, and Reward

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I've enjoyed the back and forth between co-blogger Bryan Caplan and Trevor Burrus. I'm starting to think that a good line for Vizzini to have used in "The Princess Bride," besides "Never get involved in a land war in Asia," something that JFK, LBJ, Nixon, Bush I, Bush II, and Obama failed to heed, is "Never get involved in a debate with Bryan Caplan." Of course, that latter advice makes sense only if your goal in a debate is to win. If your goal from such a debate is to learn, then I say one should occasionally get in a debate with Bryan Caplan.

I basically agree with Bryan that in a free society, there is a strong correlation between merit and reward. Here are some excerpts from "Do the Right Thing," the final chapter, and one of my favorite chapters, from Henderson and Hooper, Making Great Decisions in Business and Life.

This book has an entire chapter extolling the benefits of expanding the alternatives available to you. So you might think that the expedient person, by freely using any means and, therefore, having more alternatives available to him, would be more successful. If I have five alternatives and you have my five plus five others, you should be more successful than I, right? Not necessarily. In the case of ethics, a powerful force works against this. The problem arises when the expedient person works for, works with, works around, or employs others. The problem arises, in short, in over 99 percent of real-life situations.

Consider what would happen if you took up cannibalism. At first, you would expand your eating options, but then your friends, coworkers, and neighbors would shy away from you, fearful that you would mistake them for a snack.

And here's my own story about how someone showed his true unethical colors to me and, by doing so, failed to get me involved in what might have been a profitable project for him:
In the fall of 1996, a former student whom I (DRH) had taught at the Naval Postgraduate School called me and told me he would be visiting his in-laws in Monterey and wanted to discuss a business proposition. I found it intriguing and had enjoyed his participation in my class; so I bit. He picked me up in his mother-in-law's brand-new Saab, and we stopped at a juice bar so that he could get a strawberry juice shake. While pulling his papers out of the Saab's trunk, he spilled the juice all over the light beige lining of the Saab's back seat. He did his best to clean up the stain, but what was left was very obvious. "Well," he said lightly but with no hint that he didn't mean it, "I'll just have to point it out to my mother-in-law and remind her not to leave lipstick in the back seat where the sun can melt it."

Instantly, I knew that I wanted no business dealings with this man, except in a situation where he paid me in advance. I stuck around for the presentation and found it reasonably interesting and thoughtful. Ironically, the presentation touched somewhat on business ethics.

Then the double whammy. While driving me home, he told me that his wife had once seen O.J. Simpson batter Nicole Brown Simpson in the parking lot of a retail establishment where she had worked. There was a chance, he said, that she would be called to the stand in the civil trial. She had not wanted to get involved in the criminal trial earlier, he said, because she wanted to avoid the limelight. All this was said matter-of-factly, with no hint of disapproval of his wife's actions. So, here was a guy who thought it quite all right to withhold information relevant to a grisly murder case. I looked forward to getting home and out of that strawberry-stained Saab. Of course, I had no business dealings with him.

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COMMENTS (6 to date)
Jack writes:

I like to teach my finance students that even if we, in finance, have no particular expertise or special understanding of ethics, it is pretty straightforward that when some people stop playing by the rules, others will no longer wish to play, period. Business dealings dry up, and no one can make money. Unless you're a fly-by-nighter, good business ethics is good business.

Steve_0 writes:
Instantly, I knew that I wanted no business dealings with this man, except in a situation where he paid me in advance.

What does it say about your moral high ground that your only interest was "self interest"? You used the information available to keep from getting personally exposed to risk, but had no qualms about being associated with this character as long as your check cleared first. (?)

David R. Henderson writes:

What does it say about your moral high ground that your only interest was "self interest"?
It says that I didn’t want to be cheated and I didn’t trust him. I’ve worked occasionally with people I don’t trust and I always keep them on a shorter leash. I had qualms, but not necessarily enough to cause me to say absolutely no to a business relationship. What put me over the edge was the O.J. thing. Strawberry stain? Ethically lacking. Totally supporting a wife who refused to get involved in a murder trial where it might have made a difference? Evil.

Eric Falkenstein writes:

Caro's biographies on LBJ show him as being totally unconcerned with a consistent approach to people, or worrying whether a man was kind to others, his main concerns being about domineering or sucking up to the right people. Could that be because in politics, legislation is a zero-sum game, if you think about the 'revenue' as votes (eg, my votes take away from another's votes)?

steve writes:

How does one then explain the creation of no-doc loans (liars loans)? How could one ever believe that loans made to people without knowing their income or savings? People made billions off of these. Is this an exception that proves the rule?


Jim writes:

Harry Browne made a point of being painfully honest, even at the price of great discomfort. He did so for the simple reason that he wanted his wife and his friends to witness this so they could be completely comfortable in trusting him. Your potential business partner appropriately suffered from the opposite dynamic.

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