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P H I L O S O P H Y F O R B U S I N E S S ISSN 2043-0736
http://klempner.freeshell.org/businesspathways/
Issue number 53
26th August 2009
CONTENTS
I. 'Transparency and Trust' by Dena Hurst
II. 'Business Ethics' by Gillian Griffin
III. 'Socrates on Money and Happiness' by Kristian Urstad
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EDITOR'S NOTE
I am delighted to introduce Issue 53 of Philosophy for Business which is guest
edited by Dena Hurst of Florida State University, who has also contributed an
article. The other contributors are Gillian Griffin from Flinders University
South Australia, and Kristian Urstad from the Nicola Valley Institute of
Technology, Canada.
Having guided the e-journal through over 50 issues since its launch in November
2003, I plan to take a back seat over the next few months in order to focus my
researches on more theoretical aspects of philosophy. Meanwhile, I very much
hope that others will bring in some fresh ideas and new directions. If you
would like to be a guest editor of Philosophy for Business contact me at
klempner@fastmail.net to discuss your ideas.
On a technical note, Philosophy for Business is moving to a new
bells-and-whistles list server at the University of Sheffield. If you are an
older subscriber you will be receiving two copies of the e-journal (just for
this issue), from the old list address businesspathways@sheffield.ac.uk and
also from the new list address businesspathways@lists.shef.ac.uk. Please let me
know if you do not receive a copy from the new list address.
Geoffrey Klempner
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I. 'TRANSPARENCY AND TRUST' BY DENA HURST
I am pleased to have had the opportunity to work on this issue of Philosophy
for Business, and I thank Gill Griffin and Kristian Urstad for their
contributions. The focus of this issue is business ethics, a topic sparked by
my readings these past three months.
The June 2009 edition of Harvard Business Review contained a series of articles
on rebuilding trust in business and public institutions. The series begins with
an article by James O'Toole and Warren Bennis advocating a culture of candor
based on the premise that trust cannot be rebuilt until leaders 'learn to
communicate honestly' within and outside their organizations. This article is
followed by a plea to add more substantive business ethics courses to business
school curricula by Joel Polodny, and a review of the concept of trust by
Roderick Kramer.
I read these articles, thought to myself, 'Yes, this stuff makes sense,' and
put the magazine aside. Over the past couple of months, however, I found myself
returning to these articles and more closely listening to other conversations
around this notion of trust that have risen to the surface of public debates
after the Bernie Madoff scandal.
As discussed in HBR, in current business books, and on current television talk
shows (CNN, MSNBC, BBC), trust seems to be a function of transparency: the more
transparent an organization is with its own employees and in dealings with its
stakeholders, the more trustworthy it will be. The primary use of transparency
in business (and political) discourse is to describe a policy that allows
employees (or members) open access to useful, relevant, and accurate
information.
Transparent organizations encourage employees to speak their minds to their
peers, bosses, and subordinates and leaders to listen to dissenting ideas, and
allow information to freely flow through all levels of an organization.
Transparent organizations also practice semantic transparency, a phrase
borrowed from linguistics and philosophy of language. Semantic transparency is
the effort to simplify information so that it appeals to the widest possible
audience without losing its original meaning.
In democratic societies, transparency in the public sphere is necessary to
ensure that political affairs are managed in the interest of the people.
Elections need to be openly held and results openly tabulated. Legislative
debates should be accessible by the public. Laws should be written in language
that is easily understood by the average person. In market-driven economies,
some measure of transparency is necessary in order for transactions to occur
(though, ironically, too much transparency in markets actually has a detrimental
effect). Buyers and sellers need to know what goods or services are available
and at what prices, and they need to be able to come together and negotiate
deals.
Current emphasis on transparency in public discourse, then, is not to tout
'transparency' as a new and innovative concept; its purpose is to remind us of
'transparency' as a fundamental governing principle and to raise our awareness
that what should have been present in our political and economic systems was
not. Ongoing efforts to increase transparency in government and businesses
through new standards and procedures and more effective use of technology are
indicative of the seriousness attributed to its importance. This push for wider
and deeper transparency is a powerful reaction to the sudden realization of what
can happen when there is insufficient transparency. Supporters of transparency
argue that a lack of transparency was a major contributing factor in the recent
decline or demise of many large corporations.
While this is a fair claim, it is important to keep in mind that what caused
company declines and CEO downfalls was the behaviors of certain executive
leaders. The lack of transparency enabled the harmful behaviors by allowing
information to be misrepresented or hidden from stakeholders, thus preventing
those who may have been able to halt illicit activities from being able to step
in. Greater transparency, then, should serve as a deterrent to illegal or
unethical behavior (much like the rationale behind Bentham's panopticon -- all
eyes are watching) or offer more opportunities to stop such behavior before it
causes too much harm.
But if we accept that the result of transparency is to provide a deterrent (at
least for some individuals) and a means for corrective interventions, how does
it relate to trust? Let us first clarify what we mean by trust; to do this I
have chosen two key definitions. Trust is 'reliance on the integrity, strength,
ability, surety, etc., of a person or thing' This meaning of 'trust' shows the
level of interdependency needed for social cooperation. I as an individual can
conduct diligent research on individuals or companies, but ultimately, because
the information I have access to is finite, I will have to make a judgment
about how best to act. For example, if a person tells me that she is a safe,
professional driver, I might be able to access her driving record or talk to
others she has driven, but eventually I will have to decide whether or not to
trust her to drive me to the airport. If a company states that it has the
lowest prices or has the most honest sales force, again I can review available
information so that I can make an informed decision on whether or not to do
business with them.
Forming this level of trust is easier in transparent systems for it is
strengthened by access to information. The more I can verify that what I am
being told is accurate, the more secure I will feel in my trust. Transparency
assures greater access to timely, relevant, and accurate information. But
transparency is not necessary for us to hold this type of trust; it is possible
for us to accept what we are told at face value, and we are likely to continue
to do so provided word and deed continue to align. In fact, this describes the
business environment during the past three years. Trust was earned by companies
because they were able to do what they said they would -- and then many
companies reached a point where they could not follow through as they had
committed. Had more information been available and had the information that was
available been easily understood by more people, it could be argued that the
company collapses would not have been as severe as they were.
But let us look at another definition of trust, 'the obligation or
responsibility imposed on a person in whom confidence or authority is placed.'
This idea that our trusting another places a moral burden on them is a central
point of ethical inquiry. If the other person (or organization) accepts our
trust, are they morally obligated to conduct themselves so as to honor that
trust? Intuitively, we want to say yes, that trust is a two-way street. Suppose,
for example, that I trust that my local grocer offers only the freshest
fruits while my grocer, who assures me that he offers only the freshest fruits,
in no way feels obligated to do so. I would be foolish to say that I trust that
he offers the freshest fruits if the quality of his fruits is inconsistent. It
would only take a rotten apple or two before I realized that my grocer felt no
compulsion to uphold his word to me and withdrew my trust in his
fruit-supplying ability.
That we should keep our promises (my grocer did, in effect, make a commitment
to me) is an accepted norm that goes back to the Aristotle's Nichomachean
Ethics, where it is rooted in the notion of virtue; surfaced in Aquinas as an
obligation of natural law and again in the social contract theory. Hobbes was
the first social contract theorist to argue that keeping promises is essential
to cooperative action for it allows individuals to trust one another.
How, then, does this notion of trust, as the underpinning of a relationship of
mutuality and cooperation, connect to transparency (open access to relevant,
timely and accurate information)? I am not sure that such a connection is
present beyond the scope of what has already been discussed. When we talk about
trust as the bond of obligation, we are talking about a relationship between at
least two parties, a relationship in which one party trusts the other to
fulfill a promise and the party making the promise accepts the obligation
placed upon it. This relationship is governed ultimately by the behaviors of
the individuals involved, and transparency cannot make people's actions any
more moral than those people choose to make them.
Transparency cannot remove the potential urge of executive leaders to bend the
rules for the sake of profit, power or prestige -- appropriate Hobbesian
motivations as recent scandals have served as examples of Hobbes' state of
nature, where self-preservation appeared to be the primary motivation for
action. Transparency is an important component to democratic, market-driven
societies and can positively influence the success of businesses in those
arenas. It can lead to greater profits and greater social responsibility.
Transparency can foster one type of trust, a trust in the system, by making the
system open to analysis and criticism, and it can help curb the impacts of
illegal or unethical behaviors. It cannot, however, stop individuals from
practicing those behaviors if they are bent on doing so.
(c) Dena Hurst 2009
Dena Hurst, Ph.D.
Instructor and Researcher
Florida State University
and Jorgensen Learning Center
E-mail: klempner@fastmail.net
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II. 'BUSINESS ETHICS' BY GILLIAN GRIFFIN
Abstract
It is becoming common to see articles on virtue ethics in business. Many
companies have core values which in essence seem to be virtues. Many companies
have lists of values of which they are proud and rightly so. However there are
still incidents of unethical behaviour of employees including those who work
for companies which maintain that they have core values. Discussions of virtue
or discussions of values will not suffice unless there is an understanding of
the difference between the two and their individual importance and the part
they play in professional ethics. This article maintains that the reason there
are unethical incidents within companies which profess to have values, is that
a mistaken role is given to values and the importance of virtue is ignored, not
understood, or simply confused with values.
Introduction
It is common to see lists of values applied to the world of business and other
professions. Most companies have a 'statement of values.' These values are
often deontological, which means they are more a code of conduct, which
employees are expected to uphold. With some company or professional values
there is often a focus on complying with rules, regulations and general
principles. For example, professions such as engineering have rules and
regulations designed to protect the reputation of the profession. Other codes
of values place more emphasis on the personal traits of staff and on personal
development. Codes of values often take the form of rules which are actual
legal obligations/ prohibitions, such as, health and safety in the workplace.
Therefore any statement of values has some type of responsibility attached to
them.
Often the corporate code of values is based on the principles of the CEO and
other senior management executives. This is problematic as it sometimes means
that there are lists of values based on the personal values of individuals
which may not match the values of other stakeholders, such as staff and
customers or clients. When possible or feasible all stakeholders should
contribute to the structure, content, development and implementation of the
code of ethics, but this is rarely the case.
Some companies such as Levi Strauss believe that the values they hold are
fundamental to their success, the very foundation of the company and what sets
them apart from their competitors. Four core values are at the heart of Levi
Strauss & Co: Empathy, Originality, Integrity and Courage. They describe
integrity as the willingness to do the right thing for employees, the company
and society as a whole despite economic pressures.
This is admirable and it makes one wonder if one company can regard having
values so highly, why they do not work for every company. The answer is simply
that 'values' or 'professional values' have too much responsibility placed upon
them. Values are not virtues and should never be confused with virtues. Values
do have importance to every company and profession, but they work, only if
their true nature is understood.
Enron's values could have been summed up as risk taking, aggressive growth and
entrepreneurial creativity. These are not bad values for a company, but they
were not grounded in an ethical ethos, such as the one expounded by Levi
Strauss. The staff who worked hard to uphold these values did not understand
the ethics which underpin codes of values. Consequently they became valueless.
Levi Strauss underpin each of their values with a substantial ethical
foundation. Their values have a virtue based explanation. There are specific
virtuous requirements to uphold each value. In other words, staff are expected
to have a 'certain type of character.'
Values are a fairly recent attempt to bring a character perspective to the
company. Companies want their staff to be ethical. We have seen in recent years
a proliferation of formulated lists of values. Thus in any discussion on
business ethics, values or codes of conduct hold an important place but there
is a need to clarify their role and status in business ethics.
Firstly in whatever terms values are couched, such as courage, service,
integrity, honesty amongst others, they are not virtues. Values are ideals and
do not motivate people to be ethical. Values are in fact the 'moral goods' of a
company or profession, no more, no less. They are essentially moral ideals held
to be valuable by their writers as exemplifying the 'moral dimension' of their
particular company or profession.
Corporate values do not offer definite moral guidance because this is not their
remit. Although written with the best of intentions, a statement of values do
not and cannot clarify the 'grey areas' of business which will necessarily be
present in a profession, whose primary motive is to make a profit. Yet values
are important because they are the moral ideals of a particular company. They
do have a role to play and are important to any discussion on business ethics.
Although values are often used interchangeably with virtues, and may share the
same name such as honesty, courage or truthfulness, they are in fact, unlike
virtues. They do however because they are moral goods, or ideals bear a
similarity to moral law. They are more like moral laws than virtues, in that
they are commanding and not optional. They are a requirement of duty. It is the
duty of a company employee to be honest in their dealings with colleagues,
clients and stakeholders. Values are often written as short, pithy lists of
commands that uphold an ethos and are integral to a particular company.
For example, when a company employee breaks the law, not only will they be
punished by the law, but they will no longer be allowed to work with that
company. This simple example illustrates a total integration of a law and the
company values which may be honesty or integrity. It is not only the law that
has been broken but also a particular value. The employee failed in his or her
duty to not only obey the law but also to obey an explicit value inherent to
the professional role he or she has assumed.
Unfortunately, neither rules nor values can offer guidance in the 'grey areas'.
In fact values cannot offer guidance at all, unless they are interpreted
properly as moral goods or ideals. It is to do them a disservice in Ethics
teaching and training programmes to leave them simply as lists of quasi virtues
reliant on interpretation by individuals. Values are always open to a bias of
meaning. A value may be open to many interpretations in the business context.
In fact a value and a virtue are as different as chalk and cheese.
To use values and virtues interchangeably is not only impractical but is a
philosophical error. Firstly, values are a modern invention, suitable for
pluralistic communities but which have no philosophical foundation. Practical
wisdom and moral judgment, both of which play a vital role in business ethics,
are to do with virtue not values. Values, or the interpretation of values, can
be detrimental to the role of company employee. Loyalty, for instance, is an
important value/ virtue but can lead to the covering up of crime. Loyalty as a
virtue in the sense of virtue ethics would not lead to the covering up of crime,
because if it did, it would not serve as a virtue. Values do not aid personal
development, but virtues do, because the development of virtues enable the
individual to develop morally or, according to Aristotle, to flourish as a
human being.
It is by flourishing as an individual that one sees clearly how one can benefit
others and in what manner. This is turn enables an individual to contribute to
the company in its narrowest and widest sense. It is those companies who expand
their codes of values to encompass moral guidance which stand the best chance of
motivating their employees. The strength of values lies in their function as
moral goods. They are ideals which, if properly understood and realised, are a
valuable component of the moral dimension of any professional organisation.
This, I would argue, cannot happen without the support of some studied virtue
approach.
It is not possible or desirable to redress the perceived shortcomings of values
by trying to change them into virtues, for this leaves one open to many
difficulties. Firstly, for example, the values of honesty and integrity contain
so many virtues, which are open to interpretation in myriad ways, that the whole
concept is simply too vague and amorphous to be used successfully. Even if
supported by endless lists of virtues, it is simply adding to a list of values,
in effect enlarging the list of values. Courage, for example, without the
philosophic foundation of virtue ethics, transfers easily from a missionary
community to a Mafia organisation.
Virtue refers to a good habit, a habitual disposition of the will towards
goodness. Value, on the other hand, is a quality of things which makes them
desirable. Although values and virtues often intersect, values cannot be
reduced to moral virtues. A value presupposes a standard, a purpose and the
necessity of action in the face of an alternative, but it is to virtue that we
have to eventually turn to ensure those values are upheld. Virtue means
character and character is central to any corporate ethos from the CEO to the
junior.
Character and Virtue
Kupperman, in his book Character, notes that all of us will find ourselves
repeatedly placed in situations that we cannot entirely control and acted upon
by forces that we cannot control. Character has a vital role in how we act.[1]
This is self evident and applies to all people in all walks of life and in all
professions. The business profession in particular has, witnessed such a growth
and technological change that there are going to be situations containing many
ethical variables. There are now situations, such as increasing use of cheaper
labour in other countries, increased competition from abroad that there are
situations in which it is absolutely impossible to envisage all the likely
ethical dilemmas which can occur. To prepare anybody for incidents which may
occur and be assured that they will be dealt with not only competently but
morally and ethically, means personal development or, in everyday terminology
'character development'. This happens not only through training in and
understanding the company ethos but by integrating the study of character into
company training.
Kupperman in his excellent book on character describes, having character in the
broadest of terms as the presence of virtue and the absence of vice.[2] It then
follows that teaching character is to integrate virtue ethics into teaching,
together with duty and values training. When a company sets aside training to
inform their employees of the values which make up the ethos of the company,
there must be included some kind of discussion on the importance of character
or virtue and what sets virtue apart from simply having values. The company may
have values, but it is the character of each individual staff member which
ensures that these values are meaningful and trustworthy in the eyes of the
public consumer.
However whilst there is no doubt that character is important to any
professional Organisation or Company, the very word character has moral
overtones and suggests that people of character will behave with moral
integrity in every situation. There must be care not to emphasise the
idealisation of character and what it should mean to an individual because this
can be counter-productive, leading to misunderstandings and narrow conceptions.
There are many literary illustrations of honourable character in the service of
dishonourable organisations with dishonourable motives.
If the aim of company values is to produce moral employees and not merely
effective employees, there needs to be an objective account of morality which
transcends the goals of the organisation. This would help individuals to not
only develop the character to uphold the valued goods of the organisation, but
to understand the true meaning of these goods.
In Whetstone's article on Virtue Ethics in Business his description of virtue
is contextual, and his argument is extensive in that he highlights this
contextual aspect of virtue as the importance of understanding the environment
as it affects both the actor and the action. He moves beyond attributes to the
important realm of practical wisdom. This is also a move from understanding
virtue as an attribute to understanding virtue as character. He says that,
A virtue is not merely a principle. The practice of an
ethics of virtue requires that a person have perceptive
insight concerning the context of each act. What is most
right to do depends on the situation, including recognition
of coercive pressures and intentions for acting. Act
orientated approaches also require consideration of the
situational context but a virtue perspective enriches this.[3]
In other words practical wisdom points out what is the right means in each
situation, what is the right virtue to exercise, in the right way and directed
to the right ends, if it is a virtuous wisdom.
The benefit of adopting a virtue perspective, as Thomas Whetstone suggests, as
a complement to act-orientated perspectives, is that virtue can expand the
scope and perspective of ethical analysis and understanding. This is a
complementary approach which to be fair does not eliminate the risk of
relativism sometimes attributed to virtue ethics, because it will on occasions
involve making subjective judgments. However, this is minimised, by companies
adopting an integrated approach to ethics, which means applying lawful actions
with practical wisdom. It is the only approach which will enable corporate
values to assume a rightful place in business and professional ethics.
Legality will be honoured, but practical wisdom will also discern which actions
are legal and which are legal and ethical. Individual character will assume a
greater importance and the true meaning of the values which constitute the
company ethos will be truly understood, and upheld by all members of the
company.
Business Ethics can be defined as written and unwritten codes of principles and
values which will govern decisions and actions within a company. These set the
ethos of the Company and set the standards for the behaviour of every member of
the company. Values should determine the difference between good and bad
behaviour but on their own, this is an impossible task. The ability to know the
difference between good and bad decisions lies with the individual and that
means character or virtue, and not just practical wisdom but practical wisdom
guided by virtue.
Footnotes
1. Joel Kupperman, Character. OUP (1995). 7
2. Ibid. 8
3. Thomas Whetstone, 'How Virtue Fits Within Business Ethics,' Journal of
Business Ethics 33, no. 2 (2001). 105
(c) Gillian Griffin 2009
Dr Gillian Griffin
Research Associate
Faculty of Education, Humanities, Law and Theology
Flinders University
South Australia
E-mail: gillian.griffin@flinders.edu.au
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III. 'SOCRATES ON MONEY AND HAPPINESS' BY KRISTIAN URSTAD
Given the greed and ensuing economic meltdown that will go on to characterize
the first bit of the 21st century, it is perhaps fitting to reflect on what the
father of western philosophy had to say about the value of money and its place
in the good life. Most people, when they think of Socrates, think of an old man
who lived the ascetic life and renounced money altogether.
Indeed Socrates does reproach his fellow Athenians for being too concerned with
going after the greatest amount of money. He does, however, go on to qualify
this. What he says is that the pursuit and acquisition of money is fine, as
long as this is accompanied by a kind of knowledge. But what does Socrates mean
here by knowledge, and how does he take this to be connected to the good or
happy life? In what follows, I will try to say something about Socrates' view,
and see if anything in it still resonates with us today.
Most of us, Socrates thinks, believe we will be happy and successful if we have
or possess an abundance of wealth. But this is simply too quick. According to
Socrates, to have money will not help us out, or benefit us, unless we also use
it. To believe that all that matters is to have money is like thinking it would
benefit an artist to possess brushes, paint and a palate if he never used them.
Similarly, money or wealth is of no benefit to us unless we use it. But that it
should benefit us of course implies that we are to use it in the right way.
In this sense, money is like that dangerous tool lying around in our shed; if
we use it in the wrong way, it can do us great harm. So how can we make sure
that we use the money we have in the right way and so not be harmed by it, what
is it that guides right use? This, Socrates thinks, is knowledge.
Knowledge enables us to use wealth (and other so-called goods) rightly, and so
to achieve happiness or success. Socrates likens this knowledge to a
craftsmen's knowledge of his craft. It is the carpenter's expert knowledge of
his craft which enables him to use his tools and materials in the right way, so
as to guarantee a successful structure (say, a house).
Money then, without knowledge of its proper use, is dangerous and harmful.
Returning to the earlier example, it is like handing over a bunch of sharp,
hazardous tools to someone who is eager to use them, but without the slightest
sense of how. The implication here is that if we are going to possess money
without being directed by the knowledge of how to use it, it will be better for
us to limit our financially-related undertakings. The less we do with our money
(without knowledge), the less blunders we will make, and so the less miserable
we will be.
Money then, is better than its opposite, poverty, when combined or guided by
knowledge, but actually worse than its opposite when detached from it. So if we
are going to proceed without knowledge, we will be happier, Socrates thinks, if
we are poor rather than rich, timid rather than bold or inert rather than
active. It turns out that knowledge is really the only unconditional good in
the world (and ignorance or stupidity the only unconditional bad); everything
else, money included, is made either good or bad through them.
So far we have been taking for granted that success or happiness is what
everyone is ultimately out for (a given, I take it, both in our time and in
Socrates') but we have not yet said much about what it consists in. For
Socrates, happiness fundamentally consists in a kind of harmony of mind, where
our desires, emotions and our reason work together to facilitate the enterprise
of living. This should not be dismissed as an interesting yet antiquated and
irrelevant notion.
We have simply to take a look at the books which fill out the 'Self-improvement',
'Well-being' or 'Success' sections of today's bookstores to appreciate that
this idea of internal balance or harmony is still very relevant. Given this
conception of happiness, we may now be in a better position to understand what
Socrates is trying to tell us about the pursuit and use of money without the
accompaniment of knowledge.
The person who uses money without the guidance of knowledge (knowledge of what
will benefit him, make him happy) will inevitably pursue financially-related
activities, and this sort of involvement will eventually cause his reason,
desires and emotions to become unaligned or disharmonious.
This may sound somewhat wordy and abstract, but in fact, it happens all the
time. The CEO pushes on for greater and greater profit despite having made more
than enough. He buys more cars, more properties, more businesses, etc. The more
he buys and satisfies his desires, the easier it becomes for his desires or
appetites to trump his reasoning. The more monomaniacal his will, the less
sensitive or emotional he becomes, and so the less aware he becomes. And so on
and so on. Soon he is caught in an interminable process of pursuits and
acquisitions, each round contributing to more demands and so to more immoderate
and narrow-minded responses.
Eventually, it gets harder and harder for him to orchestrate his way through
life. At some point, immobility sets in. Finally, he is forced to acknowledge
to himself that he is not happy, that the life he leads is not a life of
happiness. How many times do we hear about this sort of thing, about the up and
coming business prodigy who goes on to make a mess of his life, who is no longer
able to function? He thought, along with many others, that money would
facilitate his way through life, while it actually ended up frustrating and
immobilizing it. Again, according to Socrates, this happens because people lack
the knowledge of how to use money in a way that will benefit them, contribute to
their happiness.
One final point. There is a bit of a paradox or reverse effect in Socrates'
counsel. When we come to understand that our happiness or success in moving
through life consists in the cooperation and harmony of our reason, emotions
and desires, we may come to realize that we do not need to acquire much money
at all.
A stable or harmonious mind or soul instills in us moderate pursuits and
activities. Once we come to know what it means to be happy, and how easily we
can achieve this, we will probably come to reject or at least limit many of our
financially-related pursuits. We can be completely happy, in Socrates' sense of
that word, with very little.
(c) Kristian Urstad 2009
Nicola Valley Institute of Technology
and University of the Fraser Valley
British Columbia
Canada
E-mail: kristianurstad@hotmail.com
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