Interview

Q: The title of your book seems to be a contradiction: people commonly believe that business cannot be profitable and moral at the same time. Can you explain?

I chose the title deliberately because it is controversial and because I make the case that profit making and morality do not conflict. In fact, I argue that being moral is a requirement for long-term profitability. The view that you cannot make profits and be moral at the same time is based on conventional morality, altruism. According to altruism, you are moral only if you sacrifice your self-interest for the sake of others. And because business pursues self-interest of its owners—profitability—it cannot be moral, by definition, in the altruist view. This is a mistaken view for which I offer an alternative: rational egoist morality (originated by the Greek philosophers such as Aristotle and further developed by Ayn Rand). I show in the book that rational egoism is a requirement for long-term profit maximization.

Q: You argue that business should and could be conducted morally, or ethically. What do you mean by “moral”?

I’m glad you asked! As I said, the conventional view of morality is altruism: putting others’ interests ahead of your own—something that business cannot do, if it wants to survive and succeed in its task of producing and trading goods and services. The same is true of individuals; we cannot put others’ interests ahead of our own if we want to survive and flourish. “Moral” conduct is conduct that is consistent with the requirements of human nature. In order to survive and be happy, we have to act in a way that our nature requires. Let me explain that.

Every species has some requirements that have to be met in order for them to survive. Grizzly bears in the wild need a large enough territory so they can satisfy their nutritional needs by hunting and foraging; tropical fish need water in the right temperature range, for example. We humans also need right nutrition and temperature in order to survive, but we are different from all other species in that we don’t automatically know what’s good for us and how to get it. A grizzly bear sees a ground squirrel, catches is, and eats it. Tropical fish instinctively congregate in warm waters. The bear and the fish do not contemplate: “Is this the right thing to do?” They instinctively do what is good for their survival, within the limits of their knowledge.

But people are different; our fundamental characteristic is that we need to think to discover how we should live—we are rational animals. We may feel hungry, but we don’t automatically know what is good to eat and how to get it. We may feel cold, but we don’t automatically know how to make clothes or build shelters. We have to adhere to reality and think—to be rational—in order to discover the knowledge required for our survival and flourishing. This is what our nature requires of us—if we want to achieve our values and survive.

The capacity for rationality is the most fundamental human quality in that it determines all the others, such as the ability to produce food and shelter. To be moral means to think, to adhere to reality by the means of reason, and to act on one’s thinking. To be moral in a social context also means leaving others free to do the same.

Q: Would you describe briefly what your book is about and who should read it.

I would call my book “a thinking manager’s guide to ethics”—ethics that will lead to profits. I show briefly why the two main alternatives to egoism, altruism and cynical egoism (which really means predatory exploitation of others) are incompatible with success in business, and make a case for rational egoism—pursuit of self-interest without sacrificing yourself to others or others to yourself—as the moral code for business. The cash value of the book, in my view, lies in the “chewing” of the egoist principles: rationality, productiveness, honesty, justice, independence, integrity, and pride—that are tools for achieving long-term profitability in business and for long-term flourishing in other areas of life. I show what these principles mean and how they apply in practice.

In addition to using a running example of fictitious CEO Bob Miller who is grappling with the decision to offshore software engineering jobs to India, I include a lot of other concrete examples and opportunities to apply the principles to real-life ethical dilemmas in business. Besides to “thinking managers,” my book would be valuable to those who aspire to become managers: business students at all levels.

Q: What prompted you to write the book?

I have taught business ethics for more than 20 years, and my students—mostly undergraduate business students and MBA students, but also Executive MBA students and executives in non-degree programs—have always responded to rational egoism. Yet there is almost nothing written about rational egoism (although that has changed in the recent years), from the perspective of business. When my students asked for references for further reading, I could point them to the works of Ayn Rand, Leonard Peikoff, Tara Smith, and Andrew Bernstein, but there really was not anything concise out there that would help businesspeople apply rational egoism to dilemmas they encounter.

I was also concerned that there was no real alternative to the altruist advice most ethicists are offering to businesspeople. Business cannot thrive under such advice; yet our well-being depends on successful business.

The third reason why I decided to write the book was to defend businesspeople on moral grounds and to show them how to defend themselves. Due to immoral conduct of some, business in general has been under attack by those (in the media, movies, literature, government) who subscribe to altruism, and most businesspeople have not been able to mount a moral defense. That has undermined they ability to be as successful as they could have been—which harms all of us who benefit from the products and services of their companies.

Q: Is there a problem with a lack of ethics in business in general? Are the debacles reported in the media, from Enron to Bernie Madoff and other fraudulent schemes, merely the tip of an iceberg?

I think most businesspeople want to be ethical. The problem is more about a lack of awareness of ethical issues and a lack of proper tools—correct principles—to make ethical decisions and to act ethically. But because we have free will, some businesspeople choose to act unethically, for example by exploiting others, like Bernie Madoff did and like all the other pyramid schemers in history have done, starting with Charles Ponzi. But such fraud artists, or the Chinese manufacturers of infant formula or pet food who mixed toxic melamine in their products to make them “go further,” or software producers who skip quality control and ship out defective products, are not “the tip of a iceberg” representing wide-spread unethical conduct in business. I argue that a vast majority of businesspeople act, or want to act, ethically most of the time. If they did not, the entire business system would collapse: no one could trust each other, the courts would be clogged with litigation cases, and no productive work would get done because people would be either planning fraud schemes or suing each other. Most businesspeople want to act ethically because it is in their self-interest to do so.

Q: Should profitability be the goal of business?

Absolutely. Profit motive is an important driver of human progress. Without it, we would be all starving like the North Koreans today, or barely subsisting, like everybody from the pre-historic cave-dwellers to serfs in the Middle Ages and even later when their ownership of land and property was curtailed by the remnants of the feudal system. Human progress in every area, from science to medicine to technology to food production, took a significant upward trend only when profit motive and the pursuit of profits were made possible by relative freedom: the discovery and the gradual recognition of individual rights in the 17th and 18th centuries in Europe and America, which led to the Industrial Revolution, and the booming of business.

Business, being free to pursue profits and competing with others, comes up with new products and technologies that cost less or are of higher quality and that make our lives longer, more comfortable, less painful, more enjoyable. If human wellbeing is our goal, then we want to encourage business to pursue profits as much as possible (within the limits of ethics, of course: by acting rationally, without violating the rights of others).

Q: How could lapses of morality in business be prevented in the future? Is more government regulation the solution?

Less government regulation is the solution, not more of it. There will always be people who try to achieve profits through immoral means; because people are free to choose, you cannot eliminate immoral behavior altogether. However, there would be less immoral conduct by businesspeople in a system of free competition where all property is privately owned and individual rights are recognized, in other words, laissez-faire capitalism.

Consider the example of a racist business owner, who will not employ or sell to people who are in his view of “inferior” race. (Racism is condemned as immoral by both egoism and altruism. Egoism condemns it as irrational judgment of others which is based on an irrelevant characteristic, their race. Altruism condemns racism because it does not put others’ interests above one’s own). Which is more effective in eliminating racism: government regulation that forces companies to hire racial minorities and prevents discrimination based on race, or a system of competition and private ownership of property where individual rights are recognized? I argue the latter. The racist business owner will simply not survive in the competition when he limits himself to employing and dealing with only those who are of his preferred race. His competitors will be hiring from a much larger pool of qualified candidates and will thus get better qualified, more productive employees, leading to better profit margins. The competitors’ market shares will also be naturally larger, allowing them to have higher volume of production, and thus lower costs. With such significant advantages, the competitors will drive the racist businessman out of business.

The same dynamic will weed out every other kind of immorality as well. And those businesspeople who try to act immorally by violating the rights of others will be prosecuted by the government, whose task is to protect the individual rights of citizens.

Q: What are your hopes for “How to Be Profitable and Moral”?

My hope is that my book will reach its intended audience, “thinking managers,” who I know are out there (despite the skepticism of one publisher who rejected my manuscript; he did not believe there was a market for my book …). I hope my book will help thinking managers and businesspeople in general achieve higher long-term profitability, which would be good for us all. I also hope that the book will help them defend themselves and business on moral grounds, thus achieving greater success.

LISTEN TO A LIVE INTERVIEW OF JAANA WITH TAYLOR O ON REASON FOR SUCCESS BLOG HERE.