Sacrifice before Solvency

[MJ DeMarco]

An interesting article, especially for those who commented on the "Mensch is Dead" thread.

The Undercurrent | Sacrifice before Solvency

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What none of them learned at their business schools is that actual, enduring profitability requires a deep commitment to and habituation of a definite ethics—in other words, that true wealth creation is the result of tremendous dedication to rational principles that have to be learned and practiced. They never learned the practical necessity of practicing integrity and justice in dealing with others. They never learned the power of intellectual honesty—the ability to recognize wishful thinking and emotional bias in oneself. They never learned that making money is an exercise in focusing steadfastly on the facts of reality, of actively engaging the rational mind, of possessing a dedicated, virtuous drive to produce.
Business students never learn the ethics of moneymaking because business schools have never invested in identifying and developing such ethics. There are no courses, for instance, explaining the meaning of integrity and showing students precisely how practicing such integrity is a necessity of wealth creation.

 

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[Russ H]

Excellent article.

I went to University of Michigan (pre med, and med school). I had several friends in the business school (and my mom went there, too). They all took ethics courses.

As far as I know, Business Ethics has been a pre-req for graduation from the Biz School for a looooong time:

http://www.bus.umich.edu/Academics/Departments/LHC/Law/Courses/BA512.pdf

http://www.bus.umich.edu/Academics/Departments/LHC/law/Courses/LHC309.pdf

But there's a HUGE difference between teaching/learning about ethics, and being ethical:

Execs say Study of Ethics a Must for CEO Success, But Not Their Own - University of Michigan Business School

-Russ H.

 

[Rawr]

My school put a pretty heavy emphasis on ethics. Like Russ said it's one thing to say "you have to be ethical" and the other to actually do.

Two cases for my school though:

1. In one international biz class, where we were running our own companies, we had a choice to do unethical things through bribing or not reporting certain things. The teacher told us what the outcomes would be, and everyone was free to take the deal or not. We were doing great so we never had to bend the rules.


2. We had a former CEO of a big company come in, guy got caught taking a lot of $$ from the company, along with the CFO and another head guy. He was telling us his story and we were free to ask any questions. The CFO was spending money on strippers like it was going out of business - 5000, then 10000, then 15000 PER NIGHT.

But I can't say I am an angel because of this, I cheated in college more than once.

 

[Cat Man Du]

Yes........... I just brought it down to the neighbor.

 

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[mkzhang]

I wont lie, I have cheated in work and in school.

Some times in work you just can't help it, there are things in life where you must pursue the "other" path in order to get it done.

One can take a look at the things Google did in order to operate in China, all the human right violation and freedom of press filters they put in. If they want to be ethical they can let someone else earn the money :/

 

[Russ H]

I wont lie, I have cheated in work and in school.

Some times in work you just can't help it, there are things in life where you must pursue the "other" path in order to get it done.

This relates directly with your earlier posts about "business is business".

I've chosen to do business w/folks whose word I trust, and can rely on.

Read Trump Strategies for Real Estate: Billionaire Lessons for the Small Investor: George H. Ross, Donald J. Trump, Andrew James McLean: 9780471774341: Amazon.com: Books the book that George Ross did on Trump. You may be surprised. Trump is known for being a hard bargainer-- but some of his biggest early real estate deals came about because he was creative-- and knew what the people across the table wanted. And he kept his word.

I've posted this before (b/c sometimes when I say these things the newbs just think I'm a poser): My previous life I worked w/some real heavyweights: Venture capitalists worth tens or hundreds of millions. A few billionaires (cover of Time kinda stuff), and more than a few celebs.

The reason I got to know them was I was referred to them by others at that same level --- who trusted me in their homes/their lives. Word of mouth was the way I did business (I actually had an unlisted business number, no lie).

I understand and appreciate that you have chosen another path. You are who you are. I won't ever change that.

But I've met a whole lot of successful businessmen and women who feel the same way I do.

They may not work in the world of IPOs. I don't know.

But they're out there. Lots of 'em.

-Russ H.

 

[GlobalWealth]

Good article. Undercurrent is a campus newspaper written and produced by the Ayn Rand Institute (or some affiliation thereof).

While I don't necessarily consider myself to be a true objectivist, I do however agree with many of Rand's philosophical teachings.

I believe a huge problem exists today with the societal belief that wealth is something to be ashamed of, but if you acquire it, you have a moral obligation to give it away to help the 'common good'. I am a firm believer that the creation of wealth itself, is for the 'commmon good' and giving it away to an undeserving party does more to destroy wealth than help anyone.

For example, take a company that earns $1m in profit per year and decides to give away $250k to charitable organizations. If the owners were to keep the full $1m in profit, it could be reinvested in the company to grow the productivity of the business and hire more workers, which by hiring workers reduces unemployment. If the owners chose not to hire workers, but to take the extra money as cash bonuses, that money will flow somewhere through the economy either as savings, investment or consumption; all good for the economy.

Contrast that with giving away the $250k to a charitable organization that donates clothes to needy villages in Africa; executives of the charity are paid salaries but nothing is actually produced. The remaining money is used to buy clothes to give to needy people in Africa. When the clothes hit the 'street' in the needy village the local producers of cotton, fabric, and tshirts can no longer compete with the free tshirts being given to the community, thereby eliminating the communities ability to self-sustain.

If the busines owner wants to truly provide this type of assistance, he could go to Africa himself and buy land and create a productive cotton farm, employing local workers. He would reap the reward of profit from the enterprise which would in turn could be invested locally into more productive farms, fabric producers, or tshirt companies.

But today, our society does not condone this as ethical behavior. If we have somehow gotten lucky enough to accumulate excessive wealth, we owe it to our fellow man to give it back. It certainly doesn't help when high profile people like Warren Buffett and Bill Gates decide to donate their wealth to charity and make public appearances stating this is their moral duty.

To what do we owe this underlying theme of guilt? While I am a spiritual person, I don't really subscribe to any organized religious teachings. And many religions teach guilt and sacrifice as good moral behaviour. I don't want to dig in too deep here (and feel free to eliminate this if it crosses a boundary), but I believe this organized religious movement over the past couple of hundred years has gone a long way to create this sense of guilt in society as a way of controlling people. It goes without saying the Roman Catholic church is the wealthiest, non governmental, organization in the world. If they truly believed wealth was bad, what are they doing with it?

 

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[mkzhang]

This relates directly with your earlier posts about "business is business".

I've chosen to do business w/folks whose word I trust, and can rely on.

Read the book that George Ross did on Trump. You may be surprised. Trump is known for being a hard bargainer-- but some of his biggest early real estate deals came about because he was creative-- and knew what the people across the table wanted. And he kept his word.

I've posted this before (b/c sometimes when I say these things the newbs just think I'm a poser): My previous life I worked w/some real heavyweights: Venture capitalists worth tens or hundreds of millions. A few billionaires (cover of Time kinda stuff), and more than a few celebs.

The reason I got to know them was I was referred to them by others at that same level --- who trusted me in their homes/their lives. Word of mouth was the way I did business (I actually had an unlisted business number, no lie).

I understand and appreciate that you have chosen another path. You are who you are. I won't ever change that.

But I've met a whole lot of successful businessmen and women who feel the same way I do.

They may not work in the world of IPOs. I don't know.

But they're out there. Lots of 'em.

-Russ H.

I think you mistook what I meant as in I cheat to conduct part of my business. What I meant to say is "shortcuts".

Honesty and integrity is a big part of what I do and is one the biggest reasons why my clients choose me.

However some times there are legal issues involved in foreign countries where the company is located, and to clear those issues for the IPO some times you have to be a little more friendly with the government official than you would like.

For example, to file for a LLC in the USA is a simple matter, but to do it in say Ukraine you will have to go through six government offices. Any one of them will sit on your paper work and not budge for no good reason than wanting a cut of your future earning... some times you have to do what you have to do.

 

[Rawr]

Good article. Undercurrent is a campus newspaper written and produced by the Ayn Rand Institute (or some affiliation thereof).

While I don't necessarily consider myself to be a true objectivist, I do however agree with many of Rand's philosophical teachings.

I believe a huge problem exists today with the societal belief that wealth is something to be ashamed of, but if you acquire it, you have a moral obligation to give it away to help the 'common good'. I am a firm believer that the creation of wealth itself, is for the 'commmon good' and giving it away to an undeserving party does more to destroy wealth than help anyone.

For example, take a company that earns $1m in profit per year and decides to give away $250k to charitable organizations. If the owners were to keep the full $1m in profit, it could be reinvested in the company to grow the productivity of the business and hire more workers, which by hiring workers reduces unemployment. If the owners chose not to hire workers, but to take the extra money as cash bonuses, that money will flow somewhere through the economy either as savings, investment or consumption; all good for the economy.

Contrast that with giving away the $250k to a charitable organization that donates clothes to needy villages in Africa; executives of the charity are paid salaries but nothing is actually produced. The remaining money is used to buy clothes to give to needy people in Africa. When the clothes hit the 'street' in the needy village the local producers of cotton, fabric, and tshirts can no longer compete with the free tshirts being given to the community, thereby eliminating the communities ability to self-sustain.

If the busines owner wants to truly provide this type of assistance, he could go to Africa himself and buy land and create a productive cotton farm, employing local workers. He would reap the reward of profit from the enterprise which would in turn could be invested locally into more productive farms, fabric producers, or tshirt companies.

But today, our society does not condone this as ethical behavior. If we have somehow gotten lucky enough to accumulate excessive wealth, we owe it to our fellow man to give it back. It certainly doesn't help when high profile people like Warren Buffett and Bill Gates decide to donate their wealth to charity and make public appearances stating this is their moral duty.

To what do we owe this underlying theme of guilt? While I am a spiritual person, I don't really subscribe to any organized religious teachings. And many religions teach guilt and sacrifice as good moral behaviour. I don't want to dig in too deep here (and feel free to eliminate this if it crosses a boundary), but I believe this organized religious movement over the past couple of hundred years has gone a long way to create this sense of guilt in society as a way of controlling people. It goes without saying the Roman Catholic church is the wealthiest, non governmental, organization in the world. If they truly believed wealth was bad, what are they doing with it?

Interesting post, about two weeks ago I was going to start a thread about helping other financially. I've discussed it before with people and basically we came to two things:

1. Giving should be done when you can, not just when you hit it big
2. Some people will resent you for trying to help them financially, even if they need it.


I noticed an interesting behavior in myself - anytime I do make some money, I feel like I want to give some to my family/friends. Yet when I think about it, most of the people I want to help have MORE stuff than I do! Better cars, Iphones, etc... The straw that broke the camel's back came about a week ago when I lost big chuck of my $$. I sat there and thought - now I am risking everything, I am coming up with ways to make things happen, I am the one who's a$$ is on the line - why am I so happy to give my rewards away? May be this is more cold hearted, may be I am a bad person or whatever, but from now on, I will set my life up first, reinvest my rewards, whatever, and later in life if I have some extra $$ I'll help.
For now I'll help if it is emergencies or small stuff I am happy to share.

 

[mkzhang]

2. Some people will resent you for trying to help them financially, even if they need it.

Good point, my friend who is a car fanatic like me, wanted to buy an used BMW M3 but doesn't have the money.

I offered to buy out the car for him and he can pay me back long term with no interest and all I got back from him was a "F---- you".

I think some times trying to help people with financial things you have to be careful, even people who need help still holds their ego in high regards, you don't want to make them feel belittled even if what you are doing is helping.

 

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[Russ H]

I think you mistook what I meant as in I cheat to conduct part of my business. What I meant to say is "shortcuts".

Honesty and integrity is a big part of what I do and is one the biggest reasons why my clients choose me.

However some times there are legal issues involved in foreign countries where the company is located, and to clear those issues for the IPO some times you have to be a little more friendly with the government official than you would like.

For example, to file for a LLC in the USA is a simple matter, but to do it in say Ukraine you will have to go through six government offices. Any one of them will sit on your paper work and not budge for no good reason than wanting a cut of your future earning... some times you have to do what you have to do.

You're right-- I did misunderstand. My apologies-- thanks for setting me straight.

And it's funny you mention this-- as I read articles on business ethics yesterday, that was the thing that came up again and again-- the fact that business ethics differ by country/culture, so what do you do, as a businessperson?

If you need to do something considered *unethical* by US standards to do biz in another country, how do you handle it? Because if you follow *that* country's/culture's ethical standards, sure as shootin', the western media will call you on the carpet for your unethical behavior.

I read a few interviews from company execs, and some said, "We looked at the upside (increased business) and the downside (bad press), and decided not to do business in that country. It just wasn't worth it."

Moral crusaders for the Amercian Way of Life would be cheering right now-- but I couldn't help but feel that this is a real moral dilemma. In my mind, it is not our right (or our job) to go in and change other cultures (many would disagree w/me). We risk losing cultural heritage, and the rich tapestry of the world's many cultures, by imposing American values on all those we do business with.

So what to do?

I have no solutions.

My naive answer would be that the other cultures need to respect our ways, too, so that if they want to do business with us, they need to respect our ways. But isn't that a double standard? Isn't that like saying, "Yeah, I won't do it your way. Respect me---do it *my* way."

I dunno.

The only folks that would have no issue w/this are the America First folks, who see no problem in "whipping a little American culture and ethics" on the rest of the world, if the rest of the world wants to play in the sandbox.

That just seems like a bully posture to me. I realize that it's one the US has taken for years. Perhaps it can be done in a way that is a bit more sensitive? I'm not sure.

Note that this is a topic where you HAVE to draw the line somewhere: You may not want to impose your values/ways on another country, but if that country chooses to invade your borders, what do you do?

Or if that country chooses to send thousands or millions of people into your country, who bring their culture with them, what do you do?

Not a simple answer.

But one worth discussing. And a situation worth dealing with-- with answers that change constantly, as society and the world change.

-Russ H.

 

[mkzhang]

My simple answer is that negativity or morals aside, if I need to feed my family or myself, then no one else (specially the moral good doers) have any rights to judge me.

The arm chair generals, or arm chair business owners are always the most vocal ones. Its hard to convey the experience or reasons for doing some things until you've been there yourself.

Maybe if I was a tycoon, then people can complain about my ethics. But I am not there yet so I don't know what that's like or what influences their decisions.

I just think that look, if I want to do business in a foreign country I will respect their culture and do what is acceptable there, which I do.

But when they come over to the USA for an IPO, they must be willing to work with our culture.

This is the reason why I pulled the plug on one of the $40m IPO I was working on for the last few months. They were used to mistrust in their country - and that is why I worked for free to earn their business to show my commitment - but now that they are going to operate in the USA, if they can't learn to trust and show commitment back to me and everyone else who helped him, then he can't do business here.

Last thing I want is for my name to associated with a slime ball company delaying payments to people, working around previous binding contracts, and trying to bribe their way around in the USA. Since they are located in a foreign country, it becomes impossible to hold any real "liability" to them if they decide not to honor their word.

 

[GlobalWealth]

Interesting post, about two weeks ago I was going to start a thread about helping other financially. I've discussed it before with people and basically we came to two things:

1. Giving should be done when you can, not just when you hit it big
2. Some people will resent you for trying to help them financially, even if they need it.


I noticed an interesting behavior in myself - anytime I do make some money, I feel like I want to give some to my family/friends. Yet when I think about it, most of the people I want to help have MORE stuff than I do! Better cars, Iphones, etc... The straw that broke the camel's back came about a week ago when I lost big chuck of my $$. I sat there and thought - now I am risking everything, I am coming up with ways to make things happen, I am the one who's a$$ is on the line - why am I so happy to give my rewards away? May be this is more cold hearted, may be I am a bad person or whatever, but from now on, I will set my life up first, reinvest my rewards, whatever, and later in life if I have some extra $$ I'll help.
For now I'll help if it is emergencies or small stuff I am happy to share.

Your own self-interest in creation of wealth is what will improve society. Think about it for a bit. If you give away 25% of your profit every year, where is it going? Do you really think they are using it for good deeds? Who determines if it is really a good deed to begin with? But if you, the greedy capitalist pig (jk), keep your profits all to yourself, you can grow your business. When your business grows, you hire workers. Then they have a job and can provide for themselves and their families. You earn more money and you spend, save or invest it. Of course, these all have positive economic effects. But giving it away is the shortest route to destruction of wealth. I don't necessarily mean your wealth (although that certainly is true too), but I mean the wealth of the society. I realize this is controversial and I am happy to debate it in a respectful manner with anyone. But I believe, and my firms mission is to promote long term wealth creation for entrepreneurs and investors and through the productive members of society, the world prospers.

 

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