Doing the Right Thing

Why should business people care about morals?

“Avarice” by Jesus Solana. Source: Wikipedia

In Hollywood, the amoral business person is a standard trope – the greedy capitalist who only cares about increasing the bottom line, no matter what the cost to workers, communities, or the environment. But markets need to have standards – like trust, honesty, and fairness – in order to work. It’s bad business to deceive people. If I buy a bag of potato chips and find mostly air inside, I won’t buy that brand again. Reputation matters. And online reviews can be devastating.

Hayek called our shared standards “tradition.” Tradition, he says, captures the accumulated wisdom of previous generations in a way that we couldn’t discover for ourselves. By practicing these traditions and passing them on, we avoid costly mistakes. Ironically, societies with strong traditions make the best environment for innovation. Property rights, the rule of law, and sound money are essential to sustain a market economy.

But each of us can make cognitive errors that take us down the wrong road. We’re self-interested: we make excuses for little mistakes when they benefit us. And little things add up to big things. We’re all in denial: we don’t like to look at things that challenge our prior assumptions. It’s the flip side of confirmation bias. And there’s social proof, a type of herd-mentality, where a questionable practice becomes acceptable because it seems to be commonplace. It’s why terrible behavior spreads, and some companies seem like ethical and moral sewers: a herd of lemmings running off an ethical cliff.

People try to do the right thing because we have to live with ourselves. But it’s also good business practice to take the high road: it’s far less crowded.

Douglas R. Tengdin, CFA

By | 2017-11-30T06:05:44+00:00 November 30th, 2017|Global Market Update|0 Comments

About the Author:

Mr. Tengdin is the Chief Investment Officer at Charter Trust Company and author of “The Global Market Update”. The audio version of each post can be heard on radio stations throughout New England every weekday. Mr. Tengdin graduated from Dartmouth College, Magna Cum Laude. He received his Master of Arts from Trinity Divinity School, Magna Cum Laude and received his Chartered Financial Analyst (CFA) designation in 1992. Mr. Tengdin has been managing investment portfolios for over 30 years, working for Bank of Boston, State Street Global Advisors, Citibank – Tunisia, and Banknorth Group. Throughout his career, Mr. Tengdin has emphasized helping clients manage their financial risks in difficult environments where they can profit from investing in diverse assets in diverse settings. –
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