Jonathan B. Wight

The John Templeton Foundation has funded a number of conferences around the world to explore the issue of spiritual capital in a business setting. To set the stage:

 “Spiritual capital is the fund of beliefs, examples, and commitments that are transmitted from generation to generation through a religious, moral or spiritual tradition, and which attach people to the transcendental source of human happiness.”  (Theodore Roosevelt Malloch, Yale conference on Practical Wisdom in Management, July 2013.)

 The final conference was held at Yale University’s School of Divinity last week.  It was a wonderful experience to be a part of this endeavor to: 1) explain how successful businesses can operate on the basis of principles that are supported by spiritual traditions; and 2) to popularize the view that markets can do far more than provide profits to shareholders.

 There were many CEOs at this conference (click on the link above to see a list) and virtually all of them were able to say from personal experience that the relentless pursuit of maximizing profits did not lead to human resource or environmental sustainability, and hence did not ultimately maximize shareholder wealth. A different approach is needed that focuses on virtues and commitments to transforming ideals.

 Profit are of course needed, just as humans need air to breathe. But the purpose of life is not to breathe air! It should be obvious that many business leaders make a lot of money by not following spiritual principles, and that some business leaders that follow spiritual principles go bankrupt. The key point is that people prefer to work for business leaders who genuinely pursue transformational goals in an ethical manner.

 Ted Malloch, who helped organize the conference along with Gilbert Lenssen, President of The Academy of Business in Society (ABIS), made an interesting comment:

"There are moral preconditions in a market economy: the sentiments of sympathy, benevolence and compassion, of approval; disapproval and indignation, which underpinned the social order and make it possible to engage in business in the first place. Human beings and the corporations they originate are not just profit-maximizers. They have moral scruples, personal commitments and the desire for happiness. These set limits to their plans for personal profit, and also stimulate them to pursue profit in ways that honor their higher values and generosity. Many companies, large and small, public and private, around the world and from each tradition exhibit fees, live and conduct business by these values thereby exhibiting their spiritual capital.

Ted has written a slew of books on this subject with co-authors:

 The End of Ethics and A Way Back: How To Fix A Fundamentally Broken Global Financial System (2013)

 America's Spiritual Capital (2012)

 Spiritual Enterprise: Doing Virtuous Business (2008)

Proponents of the spiritual capital view are now stepping up to the debate not with platitudes about CSR, but with data and many studies. This includes many studies in experimental economics.  This is an exciting time to be teaching ethics and doing business.  Business can be a calling, with meaning and purpose.

Jonathan B. Wight

The idea that innovators mainly work for money was an idea dismissed by Adam Smith. He noted that prestige, or other unknown urges, led entrepreneurs to make extraordinary exertions.

But to hear Republican leaders, the only thing that drives economic success is the incentive of money. That dissipates one of the strongest arguments for capitalism, which is a flexible system that allows people to realize their dreams, achieve meaning, change the world for the better, and many other aspirational goals that may have little to do with financial reward. The financial reward that comes from success is certainly welcomed, but the motivation for creativity is often something else.

James Fallows takes up these points in his critique of the Daily Show interview with Edward Conard (former partner at Bain Capital). This is a long quote, but worth reading:

"In the interview Conard took something about America that is important and true, and linked it to an explanation that (in my view) is profoundly destructive and false.

"The important and true point is that America remains uniquely favorable as an environment in which the Microsofts, Apples, Googles, and Facebooks of the world continue to arise. Plus the Disneys, the NBAs, the Harvards, the FedExes, and whatever example you choose. Our ability to foster the creative parts of "creative destruction" is fundamental to our prosperity and influence. Therefore America must be very careful to preserve the environment that makes such continued innovation possible.

"The destructive and false part was his assertion that the only causal factors worth talking about are tax rates and income share for people at the top of the economic distribution.

"I think any fair-minded observation of the world shows that other factors matter more in America's pro-entrepreneurial climate. My list would start with: openness to immigration and outside talent; strong university-based research systems; world's largest domestic market as incubator; rule-of-law and culture of venture capital (as opposed to absolute income share for venture capitalists); supportive "innovation in a garage can lead to glory" concepts and the related ideal of mobility and opportunity; and so on. A lot of my recent writing has been about why China, in particular, will have trouble matching this range of advantages -- and why America will be at risk if we neglect or throw away the pillars of our ongoing wealth.

"Moreover: there is no plausible evidence that income inequality like today's is necessary for this creative climate. How could it be, if most of the success stories on Conard's list -- Microsoft, Apple, Google -- in fact got their start when tax rates were higher and income inequality was lower than today's levels? Does any sane person think that Bill Gates and Paul Allen would not have started Microsoft if Gates had thought he would end up with $20-some billion rather than $50-some billion? That Steve Jobs was driven mainly by money? That Sergei Brin and Larry Page would have given up on Google if they thought they'd end up as only minor rather than major billionaires? That Mark Zuckerberg is quitting Facebook because the IPO is making him a lot less rich than he might have hoped?"

The John Stewart interview is well-worth watching, in three parts (start here). It is enlivening to listen to two extremely bright people with differing views have a debate about capitalism.

Jonathan B. Wight

The New York Times reports that Wal-Mart paid substantial bribes in Mexico to facilitate the construction of stores.

Let me draw a moral distinction:

I. A bribe paid to evade the law. If Mexico's zoning laws prevent the building of a retail store in certain neighborhoods, then paying a bribe to the zoning board to get a variance is clearly being used to subvert the democratic will. This would be illegal and immoral.

II. A bribe paid to enforce the law. Suppose instead that Wal-Mart submits paperwork to demonstrate lawful compliance with zoning and building codes, but such compliance has to be approved by a bureaucrat. However, in time-honored tradition, such bureaucrats will not approve any requests—even entirely legitimate ones!—without getting a kick-back.

This is the reality of how many government agencies work in developing countries. Hernando de Soto's attempt to start a small business in Peru, without paying any bribes, is recounted in his classic book, The Other Path (2002).

I spent many years in Brazil during the 1960s and again in the early 1980s. My experience then (I can't speak for now) is that to interface with a government agency you generally wanted to hire a despachante (or document agent) to run the hurdles for you. That includes knowing who to bribe to get particular things done. Although it never came up, I would be surprised if the despachante I hired to do routine tasks did not have to "grease the wheels" in order to get government agents to carry out their legally-mandated tasks.

Before you start attacking the government agents, consider the fact that many civil servants are woefully underpaid. In fact, it is much like waiters and waitresses in the U.S.: their salaries are held below minimum wage and they are expected to earn a decent living by working for tips. Government agents are likewise underpaid and expected to earn a living through the bribes that they can command. (Sure helps the budget deficit, doesn't it?)

This atrocious system is an enormous drain on productivity and entrepreneurship, and it hurts the poor the worst, since they typically don't have the resources to hire despachantes.

If Wal-Mart's alleged bribery turns out to be of this second sort—that is, paying government agents to perform their jobs—our moral outrage would be better directed away from Wal-Mart and towards the system in which citizens must pay bribes to get ordinary government services done.

[Photo source: http://radelaw.com/blog/2011/07/receive-a-bribe-pay-with-your-life/]

Jonathan B. Wight

MSNBC reports that three girls in Midway, Georgia had their lemonade stand forced out of business by the local fuzz. The budding entrepreneurs hadn't paid their $50 per day business license, nor had the board of health approved their operations.

I'm generally in favor of health regulations and even small business regulations. For example, street vendors use public sidewalks and take business away from store front retailers who pay taxes. So it seems appropriate that street vendors should be held to the same regulations as others—a level playing field.

But the enforcement here seems to go way too far. Do I need to pay a licensing fee to have a yard sale in my front yard? Regulators need to use some common sense!

Adam Smith: "To prohibit a great people, however, from making all that they can of every part of their own produce, or from employing their stock and industry in the way that they judge most advantageous to themselves, is a manifest violation of the most sacred rights of mankind." (Wealth of Nations, p. 372)

[Picture source: http://tinyurl.com/6toym53]

Jonathan B. Wight

This is a bit dated, but Steve Jobs' 2005 Commencement Address at Stanford is well worth watching.

He explores the intuitive and passion-driven life of the entrepreneur. He celebrates the fact that we can't predict the future and connect the dots only looking backward.

Hence, trust and love are essential parts of being a successful entrepreneur. He implores that "the only way to do great work is to love what you do."

Jonathan B. Wight

Do you know a young person who wants to start a business?

Here's a web link of "Teen Merchant and Entrepreneur Resources" that has lesson plans for both students and teachers (thanks to Mrs. Elizabeth Owens of the Pine Mountain Central School District).

One of the games highlighted is a PBS website "Build a Socially Conscious Business" which celebrates "the New Heroes." These heroes are not politicians and "Their 'arsenals' are not of weaponry, but of creative ideas, dogged determination and a deep belief in their power to change the world"—in other words, entrepreneurs.

A few thoughts: a business does not have to be "socially conscious" to do lots of good in the world. Running a business with the motive of making money is entirely ethical, provided one adheres to Milton Friedman's famous dictum to obey all laws, both legal and those embedded in moral norms. [For a friendly critique of Friedman's view that only making money for shareholders ought to be the goal of business, see my article "The Ethical Lacunae in Friedman's Concept of the Manager, Journal of Markets & Morality 11(2) (2008):221-238, with Martin Calkins].

I think the 21^st century is the epoch of socially-conscious business for two reasons. First, because genuine caring for others (as opposed to 'enlightened self interest' caring) is a stronger motivator, and leaders that genuinely care will attract better employees, suppliers, and customers. And second, because young people are avidly searching for meaning in their lives. Earning a profit in a competitive world means you are serving others well. Creating a business that not only makes money but also provides a sense of purpose is a double-whammy.