In the spring semester of my MBA program earlier this year, I took a class on “Ethical Decision Making”. I’ll admit that having been a philosophy major in college, I was unusually excited to once again be studying ethics in the classroom.
One of our introductory texts was an “Overview of Major Ethical Theories" by Georgia Tech professor Lucien J. Dhooge. Reading through it was a trip down memory lane. It walked through various ethical frameworks that I had studied in somewhat greater depth as an undergrad.
The text begins by introducing teleological frameworks1 such as ethical egoism2, moral relativism3, and utilitarianism4. For the deontological frameworks5, we read about divine command theory6, the categorical imperative7, and contractarianism8. It covers a lot of ground in just four pages. As we read through business cases throughout the semester that explored various ethical dilemmas, we would interpret what we read in light of these frameworks.
For taking 2500 years of western philosophy and cramming it into a short PDF and about 20 hours of class time, it wasn’t a bad survey of ethics. But it’s the ethical framework that the course didn’t emphasize that’s most needed in today’s business environment.
We’ll come back to the most-needed ethical framework in a minute. But first:
The rhetoric and fall of Sam Bankman-Fried
Last week, FTX, one of the world’s largest crypto exchanges filed for bankruptcy and its CEO, Sam Bankman-Fried, resigned. While the news is in itself shocking—I had begrudgingly gotten used to seeing an FTX patch stitched to the uniform of every Major League Baseball umpire—I couldn’t get over the brazenness of the communication coming from its CEO and just how divorced it ended up being from reality. Sam Bankman-Fried, known as SBF, would say one thing publicly on twitter, and then the next day what he had said would turn out to be completely false. Take a look.
November 7th, 2022:
One day later:
What happened? For starters, it seems that FTX had used customer money to fund risky bets at its sister company, Alameda Research9. There were various lenses of "bad" through which you could view this arrangement. In a certain sense, loaning customer funds to other counter-parties is totally normal—this is what banks do—but when the loans are especially risky and collateralized by a crypto token representing the value of the original company, that’s a recipe for a death spiral if there were ever to be a run on the bank-I-mean-crypto-exchange, and that’s exactly what happened.
I still can’t get over the incongruity of the public image of SBF—wholesome, altruistic “good guy” of the crypto world—with the suddenness of the collapse of his business and the total about face in his communication. One day he uses his voice and influence to say “everything is fine”—and he’s believable because he’s the good guy—and the next day it’s all over.
Where would we get if we applied the ethical frameworks from “Ethical Decision Making”?
Perhaps SBF was acting in his own self-interest, trying to profit off the backs of trusting customers and gullible investors. Or maybe he’s actually utilitarian, trying to make as much money as possible—no matter how—so he can focus on effective altruism. That almost sounds like a sort of social contract, but where he justifies exceptional risk for the end of positive societal change, you know, “make all this money so I can give it all away.”
Virtue
In the ethics PDF, after the four pages that cover teleological frameworks and deontological frameworks, there’s a single paragraph on “Virtue Ethics: An Alternative Framework” (emphasis mine):
An alternative to teleology and deontology is virtue ethics. Virtue ethics focuses on what people can become rather than the rightness or wrongness of a current action. This theory emphasizes how people can cultivate habits of good character that will lead them to their fullest potential. One such method is through continuous training to develop virtues, which are defined as moral abilities. Examples may be found in the teachings of Aristotle and Plato. In Nicomachean Ethics (350 B.C.), Aristotle stated “[m]oral virtue comes about as a result of habit” and requires training. Aristotle holds that people “become just by doing just acts, temperate by doing temperate acts, brave by doing brave acts.” Virtue is developed through repeated exposure to decent behavior within families and communities. The law also provides moral training. According to Aristotle, the primary purpose of law is to cultivate habits that build moral character rather than merely promulgating rules. Families, communities and the law thus make “a very great difference, or rather all the difference” in helping people acquire the disposition to act virtuously. “Virtuous behavior” not only refers to proper actions but also to knowing how and when to apply differing rules as “questions of what is good . . . have no fixity.” This training is a lifelong conditioning process. The disadvantages of virtue ethics are that it provides little guidance for current decision-making and assumes ethical behavior is teachable rather than innate.
I disagree wholeheartedly with that last sentence, or perhaps a version of it. Sure, the study of virtue ethics may not provide guidance for current decision-making, but actually becoming virtuous sure does.
I sort of wonder what would happen if business schools flipped the ethics classroom on its head. Set aside the “ethical frameworks” for a moment and seek a life modeled after virtue. Be good is your starting point and your destination. “But how do you teach it?” You’re smart—figure it out!
If you fail to approach ethics from a place of virtue, you’re left picking and choosing your favorite ethical framework based on what exactly? How you’re feeling? Your own sense of ego? You’re presented with competing theories of justice and rationality—which do you choose?
It’s an odd sort of hubris that dismisses ethics as a “dumb game we woke westerners play” when the author of that statement watched his empire and reputation crumble due to failure to take the “game” seriously.
Perhaps it’s time to return to virtue.
From the text: “Teleological frameworks focus on the ramifications resulting from the actions and conduct of individuals.”
“Ethical egoism is defined as a theory of ethics recognizing that people act in their own self-interest.”
“Moral relativism focuses on determining what is right behavior based upon the time and place of the circumstances.”
“Utilitarianism focuses on whether an individual’s action adds to the overall utility of the community.”
“Deontological frameworks focus on duties or obligations in determining whether a given action is right or wrong.”
“Divine command theory is defined as a theory of ethics in which resolution of dilemmas is based upon tenets of faith within religious beliefs.”
“The Categorical Imperative derives from Immanuel Kant’s Groundwork for the Metaphysics of Morals (1785). Kant stated that “[o]ne ought to act such that the principle of one’s act could become a universal law of human action in a world in which one would hope to live.””
“This theory holds that membership in society is imbued with certain duties and responsibilities.”
I also of course recommend everything Matt Levine has written on this topic. Go ahead and subscribe to his (free) newsletter so the next time I reference one of his posts you don’t have to worry about hitting the paywall.