MonoRealism Philosophy Site

The Philosophy of Business

Part C: A Virtuous Business

I noted earlier that virtues are as essential for a business as for a person's life, and for the same reasons. So it is worth a more detailed look at how to apply them.

True Integrity

We have already seen that integrity is a fundamental business ethic. But when viewed objectively, this demands quite different behaviour from what is often claimed to be "ethical" business practice.

Consider the idea that companies should show "social responsibility" by "giving something back to society." It is clear from considering how companies make money in the first place that such a notion has no meaning. An honest company cannot get rich unless it has already given more to "society" (in the person of its customers and all others it and they trade with) than the monetary value of its profits! Any suggestion to the contrary shows either medieval thinking, a lack of economic understanding, or simple envy or political grandstanding. The first represents the view that wealth is causeless, fixed or looted, so the aristocrats who happen to control it, unearned, should dole out some to the peasants, unearned. The second fails to realise that in a free country, money can only be made by offering a greater value for a lesser one (in the mind of the buyer). The last is lamentably common in democracies with inadequate protection of individual rights, where the envy of some is easily parlayed into the power of others.

The morally correct behaviour of businesses is to proudly declare their right to the money they have earned, to spend or invest as they see fit. If they choose to give their money to a cause such as education, science, medicine or charity, they should do so only to causes that promote the values of the owners, and refuse money to anyone who works against them (e.g., for a business to fund an anti-business university faculty or a charity that demands hand-outs as a right, is immoral). And they should fight against, rather than attempt to appease, any group that wishes to shackle them or otherwise attack their existence, profitability or values – just as any individual should.

In other words, as we have seen in other contexts, a business should be run in the same way and for the same reasons as your life. You should choose rational values, then do all in your power to achieve and defend them, including proudly asserting your right to your existence and earnings. Nothing less will do, and nothing less is moral – in life or in business.

It must be stressed again that the above only applies to free enterprise (including any business even in a semi-statist economy which exists, as far as possible, by voluntary trade). Businesses who get their money by seeking government favours at someone else's expense, or persuading politicians to throttle their competitors for them, are not existing by the virtue of productiveness and free trade but by political pull and the use of force. To the extent that their money was acquired via governmental force, such companies have no claim to virtue and no moral basis on which to defend their "profits."

Truth

We have already noted why virtues such as rationality, independence, productiveness and pride are important to a business. But as companies by their nature must deal with other people in many ways, what can be considered the specifically social virtues (in that they concern how you treat other people), namely honesty and justice, warrant more detailed consideration.

Honesty, like all the virtues, is a selfish virtue: not something you do for the sake of others at your own expense, but for your own sake – concomitantly, to everyone's gain. To make reality your enemy, by basing any "success" on a lie contradicting the facts of reality, is the worst policy. Consider the case of the tobacco companies (at least, the case as it has been presented). While tobacco companies are often unfairly vilified, assume for the sake of argument that it is true that company executives knew that smoking was harmful to health and chose to suppress that information. But it is true that smoking can be harmful to health: so by lying about it, any short term gain was much less than the long term costs in lawsuits, loss of credibility and ceding the moral high ground from which to defend themselves, their products and profits.

Then consider an opposite case. When L.L. Bean invented a waterproof hunting boot in the early 1900s, 90 of the first 100 pairs sold were returned due to faulty stitching. Bean took full responsibility and replaced all of them, with the policy that "I do not consider a sale complete until the goods are worn out and the customer is still satisfied." The result of such a policy of scrupulous honesty and integrity was not bankruptcy, but remarkable growth and success, eventually into a billion dollar company.

Justice

Justice requires treating the people you deal with – customers, suppliers and workers (who are a type of supplier) – as they deserve. Like most others, this is a long term virtue. Just as stealing or lying can give the illusion of being in your interest because it can get you something in the short term, but in the long term is harmful to your own life, so any gains from injustice are short term and illusory. And just as a person lives longer than one day and has to measure their life and happiness over a span of years, so a business exists over a span of years and has to look to tomorrow and next year, not just today.

For example, if you try to underpay your employees compared to their objective worth, you will not end up with a bargain. Your best employees will leave, enticed by better salaries or conditions elsewhere, until all you are left with are workers who are only worth what you are paying and have no ambition to be any better. On the other side, if employees try to get more than they are objectively worth, all they will achieve in the long run is unemployment. Who decides what someone is objectively worth? That is a matter for everyone's individual judgment – and those whose judgment is the best are those who will succeed the most. And in a proper society where people are free to both offer and accept whatever salaries they choose, it is reality which will set the levels salaries reach. This is simply because people compete for both jobs and workers: employers want to save money but have to attract the best employees they can afford, while workers want to make as much money as possible but to make any money at all, someone has to be willing to hire them. This is the law of supply and demand, the plainest, most universally demonstrable – yet most ignored and evaded – principle of economics. This value of free markets in driving prices toward their true levels derives directly from the fact that the mind is our tool of survival and physical force is its opposite – so justice serves life, and injustice, nothing but destruction in the long term.

The same principles apply to all aspects of how businesses deal with people, whether they are workers, suppliers or customers. Justice for all is the only way to operate, and the wisdom to work out what is just is a key to success.

Being Discriminating

We last discussed why justice is an important business virtue.

An aspect of justice that is worth looking at specially is discrimination. To survive, all businesses should discriminate among all they deal with, whether customers, suppliers or workers, on relevant qualities such as ability and character. However, assuming both ability and character, there should be no discrimination, either for or against, on irrelevant qualities such as sex, race, age, sexual preference, and so on. By the definition of "irrelevant," it is unjust to do so. Again, as in life so in business: people must be judged as individuals, according to their individual characteristics, not by mere membership in any group. For example, it is certainly true that in some jobs, how old you are affects how well you can do the job. But the actual age where any given individual begins to decline is an individual thing, so it is valid to tell a man he is too old for his job if and only if he, individually, is unable to perform it properly because of his age.

This does not mean that discrimination should be illegal. There is never a justification for overriding any individual's judgments by force just because they are unpopular. In any event, there is no need. Like any irrationality, irrational discrimination is harmful to business, e.g. by artificially limiting its pool of customers or talented workers. In the long run, justice will be imposed by reality, and that is how it should be. As an aside, note the flaw in arguments that discrimination against some group or other should be illegal because of imagined disasters if most people did it. If most people did it – by what means, in a democracy, could it be made illegal? To put it another way, discrimination will only be outlawed in a democracy if it is unpopular: but if it is unpopular, any negative effects will rebound more upon businesses that practice it than upon their victims (who will have plenty of alternative opportunities). Furthermore, it is the opposite philosophy, that people have a right to impose their moral opinions on others, that has led to all the legalised discrimination in history and all the evils that have resulted. "I know best and I will force others to comply" is one of the most immoral statements there is and the cause of more grief than any amount of private discrimination could achieve.

All or Nothing

Because all virtues are aspects of rationality and concordance with reality, they are all interrelated: you cannot consistently practice one without the others. This applies equally to the philosophy of business, and so business provides a useful illustration of the principle.

For example, productiveness is the key to business success, and production derives from the thought and actions of human beings. Thus a business cannot be productive unless those working in it are productive – and they will not be productive unless they can and want to be productive. Likewise, a business exists by trade: and trade requires someone willing to trade their product for yours. But if a business operates unjustly, people will only work for them or buy their product grudgingly and as little as possible, inhibiting both production and trade.

Similarly, because trade is an exchange of value for value, those you trade with must trust that they will in fact receive the value they want. And trust cannot survive dishonesty. Furthermore, dishonesty comes packaged with injustice as well, as no honest person deserves to be treated dishonestly.

Finally, pride is a root of increased productiveness for the reasons noted previously, both pride and thinking assume and depend upon independence, and integrity is the glue that binds all your values and virtues together into a consistent whole, immune to short-term temptations that are long-term poison.

The Double Bottom Line

The philosophy of business can be summarised by two key points.

First, it is virtuous to run a business, to earn your own living, and to make as much money as you can and want to – as long as the money you earn is made honestly by production and trade, not dishonestly by force or fraud. It is right and proper to defend your right to the money you have earned, and more, it is virtuous to be proud of any money you have made in that way. You do not have to buy approval by "returning something" or appeasing someone else's agenda: making money by free trade is justification in itself and proof of its own virtue.

Second, businesses should be conducted virtuously. As in life, virtue is not an end in itself: it is a means to and end, namely values and their consequences, life and happiness. Nor does virtue consist of self-sacrifice or any other drain on your life: because its purpose is values, life and happiness. Again as in life, there may be temptations to take shortcuts, to commit this bit of dishonesty or that little injustice to make a quick gain. But such temptations have no power, if one holds in full context the principle that the road to life is paved with unbreached rationality, not with contradictions: any more than you would be tempted to drink the finest champagne if you knew it was poisoned. To act against rational virtues is usually not so immediately fatal: but it becomes a chronic illness that slowly poisons your life and undermines the values you hoped to achieve.

The Objectivist philosopher Tara Smith gave a good illustration of why one should live a moral life, which can be paraphrased to explain why one should be moral in business as well:

Imagine all you want to achieve in your business or your career. Think of all the things you value that can be yours if you succeed, all the reasons why you would want to succeed. Just think about it for a minute...

That is why you should be moral.


Further discussion on this topic, with special reference to the regulation of banks, can be found in The Banking Sector debate.

© 2008 Robin Craig: first published in TableAus.