Published in CommPRO.biz 2013.09.17

Good News “IS” News, Occasionally

We find ourselves largely focused on a minority. The majority, most of us, are trying to do the right thing everyday. By nature we are an honest hard-working people. And most businesses understand that an ethical model is a roadmap to long-term strong profitability. Take care of your customers, employees, vendors, community, and the environment; and the bottom line takes care of itself.

In our weekly pursuit of ethical issues, we find ourselves largely commenting on players who choose to ignore the ethical model. Those not interested in long-term growth. Then there are those who operate in a non-competitive market. A market that is structurally immune to competition such as healthcare. When was the last time someone struck a deal with a surgeon whilst headed for the operating room?

More disturbing are those made immune to failure through their lobbying efforts. Take the monster banks. They have created a world where they are not only too-big-to-fail; they are permitted to take part in unimaginably outrageous practices. They make huge bets –outright gambling– on anything they can label “investing;” even with depositors’ funds insured by the United States taxpayers. Worse, our Department of Justice is afraid to go after these scumbags; a monumental failure.

So between big pharma, predatory healthcare entities, and smarmy bankers, we have lots of unethical issues. We aren’t forgetting that the scumbags make up a tiny minority. Most folks in healthcare are there for the right reasons, executing herculean efforts everyday. Most bankers focus on depositors and businesses in their community. They guard depositors’ savings; make loans to keep businesses growing, homes building, and dreams evolving.

However, good news rarely makes “The” news. That’s what we like when we find a major story about a newsworthy ethical happening. IBM, a pioneer in personal computers, sold that business in 2005 to Lenovo, a Chinese company most of us never heard of. Since then Lenovo has grown their share of the home computer market, recently surpassing Hewlett-Packard. Ninety days ago Lenovo opened an assembly plant in North Carolina. 

All of that is nice, but the icing on the cake came earlier this month (2013.09.02) when Lenovo CEO, Yang Yuanqing, announced that he was splitting $3.25 million –most of his annual bonus– with his workers. For the workers in North Carolina the $300 bucks they received was a nice surprise. For the vast majority in China the $300 is roughly a month’s pay.

Hats off to Yang. He gave away $3 million of his bonus last year. It wasn’t news here until Lenovo built their plant and Yang announced that he would split his time between two headquarters in Beijing and Morrisville, NC. Those who see this as a marketing ploy may have a point, but the impact on Lenovo workers in twenty countries is still there. Unlike other big players, Lenovo produces their computers, phones, laptops and tablets in their own factories. And we’ll bet they don’t have nets stretched around them to prevent the workers from jumping to their death.

Rule Or Ruin?

Many technical advances present two faces. For instance, we have an unrealistic view of life in the “Horse & Buggy” age. In the motor vehicle age we see death and injury rates and imagine that things were better in earlier times. They were not by any measure; horses are difficult to control at best and the drivers then were no more responsible than they are now. The key to reducing the downside of motor vehicles has been to make cars, trucks and big boy’s toys safer through technical improvements. The rules of the road -among other things- have to improve as well.

A new book, Automate This: How Algorithms Came to Rule Our World, came out last week. Former tech journalist Christopher Steiner delves into the rise in the use of this digital tool as well as its impact on our society. In a Fast Company interview, he says he initially planned to just cover the use of algorithms on Wall Street. But from that starting point his research took him out further and further into our lives like the concentric waves when a rock splashes in a lake. Algorithms make Google search work. They drive customer service programs, they are everywhere.

Many of us know that algorithms underlie the high-speed traders who dominate our stock markets these days. They carry out most of the billions of trades the markets see every day. The upside is that the cost of trading has been going down with this volume. One downside is that some high-volume traders use this tool to shadow trades being exercised by pension funds and other wealth management entities. They can race ahead of these traders scooping up their target stocks and selling them to the funds at a higher price seconds later. The effect is to drive up the cost of the securities in your 401(k) or Grandma’s pension plan.  

Worse, they have contributed to the market’s abandonment of its only benefit to society, as a source of capital for business. In fact the markets have veered from the view of arguably the most talented investor in the world, Warren Buffett, who famously said, "The best time to sell a stock is never." Businesses are obsessed with daily prices and struggle to meet the quarterly expectations of the market instead of the long-term goals that could make them hugely more profitable.

There is a simple solution for this problem. Tax capital gains based on the length of time an investment is held. Just for fun let’s say if you hold an investment for twenty years or more, there would be no tax liability. Ten to twenty years, 5%, five to ten years 10%, two to five years 15%, one to two years 25%, one month to a year 50%, one week to a month 75%, less than a week 95%. Better than pirating value from Grandma’s pension, better for investors, better for business and their employees, better for America. Ethically there is no basis for the gambling hall culture on Wall Street; high speed trading is one gaming table we don’t need.

“Good News, Bad News”

First, the good news. A study* by a group of academics from UC Berkeley and the University of Toronto supp0rts our long-held belief that most folks are by nature ethically inclined. They carried out a series of seven naturalistic and experimental studies. The first two –using the naturalistic method– in our opinion put their unwitting participants in the easiest atmosphere to ignore their ethical standards – they were encased in a large steel machine, driving their cars.

The academics had students work in teams during light traffic periods. In one test they had a student walk up to a crosswalk as a car approached and make eye contact with the driver. Sixty-five percent of the drivers stopped and allowed the student to cross. The other study had to do with stop sign courtesy. At a four-way intersection, observers watching from a distance noted when drivers cut in front of another car that had the right of way. About thirteen percent hit the gas pedal, but a wide majority, eighty-seven percent of those in this study waited their turn.

The other five experimental studies tested voluntary participants in a controlled laboratory environment. They went through a series of tests that showed-up those who cheat, lie, and seem to feel that they are entitled to more than their share. In these studies –just like the first two– a majority of the participants chose an ethical path.

Now the bad news. The academics were checking the relative ethical behavior of the rich vis-à-vis those further down the food chain. They found that some of the well-dressed luxury car drivers were more likely to blow through a pedestrian crossing or to cut in front of a car with the right of way at an intersection. In the other experiments more of the well-off took extra candy from a jar leaving less for the children, and they endorsed the over-worked Gordon Gekko line from the movie Wall Street, “Greed is Good, etc., etc., etc.

Keep in mind that disappointed as we might be that those blessed with wealth and its accoutrements do not deal with their fellows as ethically as those less endowed, the majority of the well-off “did” follow an ethical path. Even Gekko has changed his view and can now be seen in FBI sponsored television appeals to guard against insider trading.

Greed is not good. It’s a lousy way to live, even for those who succeed following this path. Those who choose an ethical business model, those who care for their customers, their employees, their suppliers, their community, the environment, those who put their fellows first, find that their bottom line takes care of itself. Studies show this path to be many times more profitable than that taken by the what-ever-it-takes, profit-comes-first believers. It’s all good news! 

*Citation: Proceedings of the National Academy of Sciences (PNAS), Vol. 109 No. 9, Feb. 28, 2012.  “Higher social class predicts increased unethical behavior.” By Paul K. Piff, Daniel M. Stancato, Stéphane Côté, Rodolfo Mendoza-Denton, and Dacher Keltner.