TRUTH IN THE BUSINESS ARENA
by Geoffrey Klempner
[Presentation for a four-day conference 'Shared Values: Strategy, Finance, CSR and
When I first got the idea for this talk, I asked a colleague what she thought of the title. Her reply was forthright:
We don't want business people to be honest. You want your lawyer to manipulate others for you, your accountant to avoid as much tax as possible, your estate agent to gloss up the facts, the shop keeper to ask you how you are when they don't give a damn.
The Greek Cypriot owner of a local fish and chip shop where I get my weekly take-away put the point more concisely. When I told him I was going to Prague to give a talk on truth in the business arena, his features stretched to a broad smile. 'There isn't any!' He started his business 31 years ago, in his early 20s. He'd learned the hard way not to trust anyone — not bankers, not accountants, not estate agents, least of all sales people. Down our high street, the competition for take-aways is cut throat. It says something when you succeed in keeping a business like that going for 31 years.
I'm not a cynic, at least I don't think I am. In the first unit Ethical Dilemmas: a primer for decision makers I wrote,
What does not seem to me to be a matter of debate is that being a good judge of business ethics is an essential accomplishment of a business person. If ethical questions leave you cold, or if you would like to be ethical but become flustered and reduced to inaction by your first encounter with an ethical dilemma, then you lack something that is required for being good in business — no matter how successful you may be in making money for yourself, or your company.
As I went on to say, that 'won't stop such persons listening in at the door: it is the nature of business that all information is regarded as potentially of use, for example as a way of predicting how others will behave.'
It's safer not to make any assumptions. I don't know you, and I can't be sure of the reasons why you have come here today. If you are interested in truth in business because you want to grapple with some of the problems of being truthful in your dealings with customers or other business people — or even the tax man — then you will learn something. If you are interested in truth in business because you want to learn how to become better, more accomplished at lying, then you will also learn something.
Why be truthful? Let me be honest with you. In the past, I have lied on at least one occasion. I don't think there's a single person in the room who wouldn't say the same. (I can't be sure of that. Abraham Lincoln never told a lie, so the story goes.) But there's a problem with what I've just said. I asked you to 'let me be honest with you'. Why should you believe me, when I have just owned up to telling a lie? Maybe I'm lying now. Maybe my colleague didn't say what I said she'd said. Maybe there was no man in the fish and chip shop. I could have made the whole thing up.
Too late now to plead that I am telling the truth, really, believe me. This time. Forget the past. I've turned over a new leaf. I will never lie again. But you know and I know that's probably not true.
I think there's something important in the idea that, in some sense, it is logically self-frustrating to admit that you sometimes tell a lie — a key to what is wrong with lying. The philosopher Immanuel Kant famously claimed that it was wrong to lie in any circumstances whatsoever, even if you knew for sure that by doing so you could save a person's life. I don't think Kant's idea that it can absolutely never be right to tell a lie is as nutty as it sounds, although it will take a while to explain. I'll get back to Kant later.
But let's just stop a minute. How can we possibly be asking about being truthful if we don't know what truth is? What is it? What is truth? Do you know?
Here's a thought. If you are looking for truth, the world of business is the best place to find it. There's nothing clearer, or more absolute, than the consequences for a business decision in terms of profit and loss. The bottom line. You can have the best product or marketing idea in the world, but if the product bombs, it was rubbish all along. Every day, beliefs and ideas are tested in the market place, and back comes a decision that you just can't argue with. That is truth, in an exemplary sense. Anything else is just hot air.
One of my Pathways to Philosophy students, Dave, a business consultant, put the idea concisely:
Is business ethical because the customers expect it to be or is business ethical because it is right to be so? Well ultimately it's about hitting or overachieving the numbers, that is the primary target, but to hit numbers you have to do a lot of things right (I mean correctly or as required, not right in an ethical sense). To understand what is right, you have to talk and listen to your customers (and see what your competition is doing). Once you have the formula you go with that plan, tweaking it along the way as is required. Corporate social responsibility has to fit into those plans, now, it is expected and regulated in, but it costs and has to be paid for.
When I first got interested in the philosophy of business, that is one of the aspects that fascinated me. Philosophers have debated the nature of truth for thousands of years, and still not come up with a definitive answer. But there it was, all along. You only have to look out at the world of business and commerce. It's all about the numbers, stupid!
However, one thing that stands out to my philosopher's eye in what Dave said is that numbers are the 'primary target'. To say that a target is primary, implies that there are, or might be, other targets as well. To me, this looks like a bit of a fudge. Yes, you want to achieve the numbers, but there are other things you want to do as well, even if they are not primary. What other things?
An example might be Steve Jobs' famous pitch to John Sculley, then President of Pepsi-Cola, 'Do you want to spend the rest of your life selling sugared water, or do you want a chance to change the world?'. After a long battle to win Sculley over, Steve Jobs' inspired question was the clincher. You could say, that was Sculley's moment of truth. Sculley went on to be CEO of Apple from 1983-1993.
Sugared water rots the teeth. That's something to worry about, isn't it, being a major contributor to world wide dental disease. But maybe you run a company which manufactures the cardboard tubes that go inside rolls of toilet tissue. There's no shame in that. Someone's got to make them. OK, it's not anything to get excited about — hardly world changing — but you earn a good income, your family have a comfortable standard of living, you provide work, contribute to the economy. And, hopefully, you have outside interests and the time to pursue them so that, overall, you can say you live a good life.
Not everyone in business has that pragmatic attitude, however. For some, the necessity to believe in your product, to feel that you are doing something important, something that makes a difference to the world, is the main thing. That's a different kind of 'truth' from numbers truth.
Or consider a company, which to all outward appearances is doing well. But the profits, the numbers, depend largely on exploitation of third world labour at wages that are barely subsistence level. Another kind of truth again. — I could give a long list of all the evils perpetrated in the name of making a profit, but you get the idea. Relying on the numbers alone to take care of ethics just won't do. It will never happen, not in the world we live in.
But why care? I said at the beginning of this talk that I am not making a pitch for ethics. The assumption is that you do care, but the main problem, or stumbling block, is finding a way to reconcile this with the need to hit those financial targets.
Here's one of my favourite quotes from Nietzsche:
'The truth is simple.' — Is that not a compound lie?
In some translations this is rendered as 'doubly a lie'. Why two lies? The first lie is that the truth is simple. The second lie is that the proposition, 'The truth is simple' has simple truth conditions, that is to say, that it is either simply true, if it is true or simply false, if it is false. In other words it is not a simple truth that the truth is not simple.
Nietzsche's pungent maxim serves as a reminder that being truthful in all your dealings might not necessarily be as easy as it sounds. There's more than one kind of truth. We live in a world of multiple truths, competing truths. It's not always clear which kind of truth comes out on top. Truth depends on your point of view, what you are looking for.
Even if your primary focus is on the numbers, to say that a company is doing well is an interpretation, not a simple truth. If you are looking at the yearly balance sheet, strict profit and loss, well, maybe. But what about the long-term sustainability of the business? What about new competitors coming into the market place? Or upcoming EU legislation which could potentially cripple your business model? Or the overly complacent attitude of your R & D department for which you will pay for dearly in the years to come?
As experienced business people, you don't need to be told this. I'm reminding you about something you already know. The point I want to make is that if the truth isn't simple, than neither is the injunction to be truthful. If someone demands a simple answer from you, yes or no, and you know the truth in this particular case is complex, what do you say? You can try playing the role of the philosopher and answer with a speech, but that probably won't go down too well. So maybe you compromise, trying to suggest in your necessarily brief answer that there is more to the question than meets the eye. That might do the trick. Or, if you are less lucky, you'll find yourself in a whole load of trouble. The smart thing was to tell the questioner what they wanted to hear and be done with it.
You meet an old acquaintance in the street and they ask you how you are and how you're doing. Before you answer (and, note, you have around half a second to decide this) you need to consider whether they really want to know how things are with you. Or, supposing that they do, whether you really want them to know. Human beings are remarkably subtle and perceptive in the way they daily handle potentially hazardous situations such as this.
If the truth isn't simple, then the very same statement can be the truth and be a lie — at one and the same time. You'll all be familiar with this sort of case, there's nothing obscure or deep. A little bit of truth helps a bigger lie slip through undetected. Or you deflect a difficult question by giving an answer to a different question, more or less subtly altering the meaning of the original question into one that the questioner didn't intend.
There are lies, damned lies, and then there is advertising. In Ethical Dilemmas, I considered variations on the theme of untruth, such as bluff, spin and bull. It is one of the necessary skills of the business person — or any leader for that matter, a politician for example — to know when to bluff when bluffing is called for, to know how to put a positive spin on an uncomfortable truth, how to dish out bull as well as being able to detect it when it is dished out to you.
Truth is pliable. You can stretch the truth, implying more than is strictly the case. Or you can be more or less economical with the truth. I won't repeat the various examples here. It is not necessary to go into the finer points of where exactly truthfulness shades into falsehood, because you already know this. It isn't philosophy, it's part of our shared understanding of how one functions in business and in society at large, and how one expects others to behave.
What interests me, from a philosophical standpoint, is the different expectations that we have on the topic of truth and truthfulness, depending on whether or not we are engaged in business activity — or, as I would put it, 'competing in the business arena'.
I would to come at this today from a different angle from the approach I took in my 2004 article 'The Business Arena'. There, I relied on the metaphor of a boxing ring to explain how it is that the ethical injunction to help others in need does not apply in a competition, where there are winners and losers. If you have your opponent on the ropes, you don't offer a helping hand or give him a chance to catch his breath, you finish him off.
This image is valid so far as it goes but it is misleading insofar as there are many situations in business which are win-win. More often than not, that's what you strive for. You want your customers to be satisfied. You need your competitors and they need you, because that gives potential customers a sense of choice, and choice is good — even if it is only the illusion of a choice. Business competitors can be allies, too.
The essential point about the business arena is that, like other areas of social activity, it has ground rules. We may not be able to state the rules explicitly, but they are there permanently in the background. Because knowledge of the ground rules is necessary for being able to carry out that activity, the rules are in a sense axiomatic. And yet they are also like the digitally encoded rules in The Matrix. As Morpheus tips Neo in the 1999 movie, 'Some of their rules can be bent. Others can be broken.'
In the case of our social relationships, a close relationship or marriage, or just friendship, the essential ground rule is honesty. A 'player', or a 'user' — someone who habitually deceives for his or her own ends — can't be a good friend. They can be great fun, the life and soul of the party, but you wouldn't share confidences with them. You don't want to risk getting too close.
Grant the rule of honesty, and certain consequences follow. You might think that you can get away with being scrupulously honest about the fact that 'I look out for number one'. However, if we are engaging in honest dialogue, then the fact that 'I am number one' isn't a fact to take into consideration. From our point of view, it's a mere tautology, an empty repetition: everyone is the person that they are. Everyone is an 'I'. The relevant question is who deserves the benefit in question. In ethical dialogue, we decide what is best for us, factoring in our individual preferences and reaching an accommodation, an acceptable compromise.
The greatest challenge for moral philosophers seeking a foundation for ethics is extending the more or less narrow social circle — the persons we care for, the persons who 'count' for us — to include the rest of humanity. That's a point on which Nietzsche and I part company, sorry to say. Intellectually and emotionally, I am a universalist. I don't believe in caste systems, or master and herd moralities. But then again, is that a simple truth, that universalism is true? I doubt it, but that would be a discussion for another occasion.
What about the business arena? The essential ground rule is private property. The game of business is defined by the rule, 'Do not steal.' That is not to say that other kinds of wrongdoing, for example, lying, are not sometimes as bad as theft, far from it. If I lie about a product I am advertising for sale, and by this means get you to part with your money, then that is money I have effectively stolen from you. Then again, there are cases one would describe ethically as theft, which the law permits. Ground rules can be bent.
In the business arena, honesty is still valued and lying still frowned upon. Yet there are also any number of examples where lapses from strict truth-telling are expected, even the norm. 'I'll try to get the goods to you by Friday.' You know the earliest you can possibly deliver is Monday, barring a miracle. When you said you would try, your customer assumed that you didn't mean that you would be praying for a miracle. 'You've done a great job.' The marketing report on your desk is a mess, but you can see that your new intern is trying hard, and you don't want to dent their confidence. So you use a bit of bull — maybe offer some tactful advice for next time — and it has the desired effect.
No-one believes that an advert tells the literal truth about a product, do they? But, that means adverts have to exaggerate to some extent, because the advertiser knows that the viewer will automatically filter the exaggeration out. Some misleading adverts try to get under your guard by admitting their product has shortcomings. A case of admitting a small truth so that a bigger lie can pass undetected.
I'm not necessarily condoning examples like these. But then again, I said I wasn't going to judge. You don't want to get a reputation for making false promises about delivery times, or habitually offering insincere praise. Adverts have still got to be legal, and they've got to be at least capable of being believed. It goes without saying that if you are playing the lying (or fibbing) game, you always consider the shorter and longer term consequences before you act.
In the business arena it is still wrong to tell a lie, but its wrongness is not axiomatic in the way it is in our social relations outside the arena. What's the difference, exactly? Untruths are still told, either way. But the standards, the priorities are not the same inside and outside the business arena.
Now we come to the difficult part. I promise to keep this as short and painless possible — the ethics of Immanuel Kant.
When Kant asked why it is wrong to tell a lie, his answer was essentially that human discourse would break down if it were not automatically assumed that when you make a statement, you are telling the truth. This is on the principle of the Categorical Imperative: Only act on that maxim which is capable of being — or which you could intend to be — a universal law. A liar does not want this. What they want is an exception to be made solely for themselves, while everyone else goes on telling the truth. In doing this, the liar is effectively admitting to themself that what they are doing, or want to do, is wrong.
Imagine a world where truthfulness is no longer expected. You can say what you like, true or false, in any situation. I am describing an alternative 'language game' in Wittgenstein's sense (not an example Wittgenstein ever considered, so far as I can recall). No-one is ever blamed for telling a lie, no-one is ever praised for telling the truth. If you want to know whether someone is actually telling the truth in any given situation, you need to do some elaborate second-guessing. Did they say what they said because it is true, or did they say what they said because it is false? What's the payoff, either way? (This is something you can try at home. You might want to set an agreed time limit to the experiment first.)
Here is how I explained the point in Ethical Dilemmas. Consider the statement, 'I never tell a lie, except when I am in a very tight spot.' That seems a not unreasonable thing to say. It's more or less what I said in the beginning of this talk. The problem is, if I do admit this, then you know that next time you find me in what I call a 'very tight spot', you will have no reason to believe anything I say. I know that you know this, because I just told you, and you know that I know that you know this. So if you ever find me in a very tight spot, I might as well keep my mouth shut as far as you are concerned.
As I go on to argue in the program unit,
... as I can no longer get away with lying when I am in a very tight spot, the tightest spot where I can successfully lie is a tight spot. So you will not believe me in this case either. Nor, repeating the same reasoning, will you have any reason to believe me when I am in a slightly tight spot. Generalizing from this example, to admit that one sometimes lies, to gain any advantage whatsoever, is logically self-defeating.
Is this argument valid? It has some resemblance to the surprise test or hangman paradox. You can prove that it is impossible to set a surprise test, but that won't prevent the teacher from setting the test, and taking the class fully by surprise. You can prove that it is inconsistent to admit to ever having lied, and yet sometimes we lie. You take a friend into your confidence, 'Actually, I didn't tell the truth to so-and-so.' Why should the friend you've confided in believe you? They just do, at least on this occasion. Tolerance of inconsistency is part of the language game, part of this Wittgensteinian form of life.
Nevertheless, there is something wrong with the very idea of lying. Unlike Kant, we may not have the confidence to state exactly what this is, but we feel it and acknowledge it to be true.
In the case of theft, on the other hand, it is less clear that there is something intrinsically wrong with taking something that isn't yours. This is familiar territory for students of political philosophy, starting with Locke's famous defence of private property. Other social arrangements are possible, such as those of the early Christians or along marxist or anarchist lines. The problem is, given the vagaries of human nature, it is not so easy to run a society on the sole principle of brotherly and sisterly love.
This is my base line defence of capitalism. Trading is a game that human beings invented long ago. It is a game at least as old, or older than the eighth Commandment, 'Do not steal.' It is unthinkable that we could get back to a golden age — supposing such a time ever existed — when the trading game was not played, in some form or other. Capitalism is the latest, most sophisticated version of that game. Which is not to say that further improvements might not be possible (capitalism 2.0 as some have proposed).
I now want to draw your attention to an interesting symmetry. I stated that the rule of honesty defines the social game — or the game of 'ethical dialogue' as I would like to call it — while the rule of private property defines the business arena. In ethical dialogue, it is axiomatic that one tells the truth, while all other rules of conduct have to be argued for on their merits. In the business arena, it is axiomatic that one does not steal, while all other rules of conduct have to be argued for on their merits.
I believe that it was the perception, or half-perception of this fundamental distinction between two types of conduct, two games, which led Albert Carr to argue in his notorious 1968 Harvard Business Review article, 'Is Business Bluffing Ethical?' that it was acceptable to do many actions in business that would be unacceptable outside business.
From a post-Enron perspective, Carr's article is a shocking indictment of attitudes which were then prevalent, at least in American business. (I don't want to sound chauvinistic, but on this side of the Atlantic in the 60s there was still nominal lip service paid to the notion of the virtues of the 'English gentleman'. Maybe the Yanks were just more honest about it?) It was irksome, to say the least, when I discovered that my view had been compared to Carr in an anonymously authored Wikipedia article on the philosophy of business.
I mentioned this in my 2005 Prague College Open Lecture. Carr seems to be saying that any action in business is ethical provided the law lets you get away with it. Hence, the poker analogy. You can win a game through bluff but you're not allowed to physically steal your opponent's chips when he's not looking. And yet, as I argued, the logic of Carr's position seems to be rather, 'Don't get caught,' or even, 'It's OK to get caught provided the penalty isn't too severe,' as in the case of a so-called professional foul in football.
Carr is a cynic about ethics in business, while I am not. That's the essential difference between us. Partly, or perhaps largely, the difference mirrors the progress that has been made in raising ethical awareness within business over the last 40-50 years. That's something good, isn't it? The game is nicer than it was 50 years ago. But many nasty things still go on, as you and I well know.
I came to the concept of the business arena through consideration of the nature of ethical dialogue in relation to the philosopher Martin Buber, and also thinking about the early philosophy of Karl Marx, in particular his 1844 Manuscripts. As I argued in 'The Business Arena', we don't leave the world of ethics when we enter the business arena. We merely agree to play by special rules which allow for more or less unrestricted competition. It is OK to 'look out for number one' because that's the game you're playing.
Though not a cynic, I'm not a starry-eyed idealist either. My main focus is on how I can make my own life better, in a way that is consistent with the well being of those around me, as well as those whose lives I have an effect on. From now until Kingdom come, in all likelihood, the bank chairman will walk away with a salary in the millions, while the cleaner who comes in before office hours will get by on the minimum wage. The bank chairman believes he fully earns his salary, and who am I to argue? I earn enough to live and I love what I do, which is enough for me.
If I was to make a pitch for honesty, it would be that telling the truth and being known as someone whose word can be relied on, isn't just about selling a product, or selling your company as an ethical company. It's a way of life. Honesty is its own reward. That's a personal view, from someone who aspires to be a truth seeker. But if you find you are in agreement with me, don't be misled into thinking that somehow, if you take sufficient care, you can get off scot free of any taint of unethical conduct. There will come a time when you will be forced to compromise your lofty principles, including the principle of never telling a lie. When that that time comes, face the situation bravely and do what needs to be done. In business, typically, yours is not the only head on the chopping block.
What about business ethics? There are people who call themselves 'business ethicists' (as you will have gathered by now, I am not one) whose primary role is to help you stay on the right side of national and international legislation, and sell your business to an increasingly ethically discerning public. In other words, business ethics is a variety of PR. A company's ethical credentials are now an expected part of the total marketing package. By the same token, no company would try to be more ethical than their customers ask them to be. Any such action would be rightfully treated with the greatest suspicion. That's not included in the business ethicist's remit.
I am not accusing business ethics of being somehow a dishonest activity. Not at all. A good business ethicist does exactly what they advertise on the tin. It's money well spent. And the results are verifiable. It's all about the numbers, remember?
As my Pathways to Philosophy student pointed out, social responsibility costs money which has to be factored in when you crunch those numbers. The same can be said about ethics. In a good year, you can afford to spend more on ethics, in a bad year less. Ethics is just one more item to take into account when you tweak your business plan to get the optimal result. You spend as much time as needed to think about ethics, and spend as much money as you can afford, given ever-present financial constraints.
I'm not here to preach. I'm not standing in judgement. I'm out of this. In my choice of life style you could describe me as a would-be marxist who accepts that capitalism is the best of all possible social arrangements. I therefore have no desire (you will be glad to hear) to convert anyone else to marxism, or even my idiosyncratic or ironic brand of it.
What I would like to do is get you thinking. Don't rely on so-called experts to do your thinking for you. Hire a business ethicist if you must. A business ethicist in your office is a luxury you can afford, as the advertising slogan goes. Listen to their advice but don't take it uncritically. You can be your own business ethicist too!
Most important of all, you don't have to become a philosopher in order to be interested in the philosophy of what you do, I mean a philosophy of practice not of high-blown theories. Let Kant scholars worry about exactly what Kant said, or meant. But in between bouts of more or less frenzied business activity, give yourself a bit of time to think about ethics and philosophy, and the true meaning of your life inside and outside the business arena.
1. Personal communication, used with permission
2. Ethical Dilemmas: a primer for decision makers Unit 1 http://ethicaldilemmas.co.uk (PDF)
3. Immanuel Kant 'On the Supposed Right to Lie from Benevolent Motives' 1797
4. Personal communication, used with permission
5. Walter Isaacson, Steve Jobs Simon & Schuster 2011 p.154
6. Friedrich Nietzsche Twilight of the Idols R. Hollingdale, tr. 'Maxims and Arrows', ¤4
7. Geoffrey Klempner 'The Business Arena', in Philosophy for Business Issue 5, 7th March 2004 http://klempner.freeshell.org/businesspathways/issue5.html
8. Ethical Dilemmas: a primer for decision makers Unit 5 http://ethicaldilemmas.co.uk (PDF)
9. John Locke Two Treatises of Government 1689
10. Albert Carr 'Is Business Bluffing Ethical?' Harvard Business Review 46, January-February, 1968, pp. 143-53
11. Although the article was drastically pruned at the beginning of this year, there are still find numerous versions on the web. The article is also preserved in full in Philosophy for Business Issue 15, 11th January 2005 http://klempner.freeshell.org/businesspathways/issue15.html
12. Geoffrey Klempner 'Corporate Social Responsibility and Ethical Dialogue', in Philosophy for Business Issue 19, 1st June 2005 http://klempner.freeshell.org/businesspathways/issue19.html
13. Karl Marx The Economic and Philosophic Manuscripts of 1844, Dirk J. Struik, ed. International Publishers 1964
© Geoffrey Klempner 2014