Pragmatism is impractical—why does it rule in business?

Pragmatism—compromising principles to achieve goals—is prevalent not just among politicians (think of President Obama’s nuclear deal with Iran). It is also a common hazard among business people, many of whom think that to succeed in business you have to compromise principles. It’s OK to compromise honesty and fake a little, to win investors or to sell more products, they think. Or why would you fire an employee who steals a little from you, if he generates a lot of sales and profits, regardless of little pilfering of money?

Just as in politics, pragmatism does lead to achievement of goals in business. Obama’s lifting of sanctions will not deter Iran from developing a nuclear bomb or lead to peace in the Middle East. Deceiving investors or customers, or tolerating unethical employees, will not lead to long-term profitability in business. So why do so many politicians and business people embrace pragmatism?

Pragmatism among politicians could be attributed to short election cycles: the pressure to show some tangible achievements and to deliver on election promises to get re-elected. (This of course does not apply to Obama in his second term; he is likely motivated by a desire to create a legacy in international politics). Short-term earnings pressures from Wall Street explain some of the pragmatism among CEOs, but what about pragmatism among CEOs of non-publicly traded companies and other business people?

There is a more fundamental reason for pragmatism than external pressure for short-term results: failing to think in principles. Principles, such as the moral principles honesty and justice, are generalizations that serve as standards for decisions in any given situation (see Harry Binswanger’s excellent book, How we know, for a full discussion on the role of principles). Principles are indispensable tools of thinking that integrate and condense knowledge and guide our choices and actions across countless concrete situations for achievement of long-term goals. For example, the principle of honesty—Don’t fake facts to gain a value—steers us away from deceiving customers, investors, or employers. The principle of justice—judge people objectively and grant them what they deserve—guides us against sanctioning and tolerating unethical conduct, whether sponsoring terrorism or pilfering money.

Principles in any field (such as engineering, medicine, and morality) are indispensable because as fallible beings without automatic knowledge of the right goals and the means to achieve them, we need a tool that allows us to project the future consequences of any contemplated choice or action: will it lead to our goals or not? Principles are such a tool. Because they integrate vast amounts of knowledge, based on observation and experience, they allow us to see consequences clearly.

Despite the power of principles and our ability to develop and apply them, pragmatism rules in politics and business—but fortunately not in fields such as engineering and medicine where long-term soundness of buildings and patients’ health are compromised far less often. Thinking in principles—asking “what principle(s) applies and how?”—is not difficult. However, integrating knowledge into principles and applying them to guide choices and actions is a skill that must be developed and then chosen to be exercised.

The failure to think in principles is rooted in the failure of the education system (outside of physical and applied sciences, such as chemistry and engineering) to teach integration of knowledge from observation into broad generalizations, The consequences of ignoring principles of physics and chemistry, or engineering and medicine, are usually tangible and more immediate—such as of ignoring the strength of materials when constructing a building or applying an inappropriate treatment to a patient—and therefore harder to ignore. There is less room for pragmatism in such fields. But in fields where the consequences are more difficult to see (buildings don’t collapse and patients’ condition does not worsen), principles are easier to evade. Yet, in politics and business, the broadest—moral—principles, such as honesty and justice, are needed, and ignored at our peril.

Unfortunately, there is no short-term solution to get more business people to identify and apply principles, and moral principles in particular. We can keep advocating principled thinking by showing its benefit: long-term profitability, while at the same time pointing out the perilousness of pragmatism. This can go only so far, however, when identifying and applying principles is not taught at schools, including universities. But employers of graduates and alumni have a lever: universities listen to them, and they can demand teaching of principles, including in business schools.