Skills Recent Grads Need the Most: The Ethical Dimension

Bob Clary, the community manager of Webucator, has asked me to identify and blog about a valuable skill  that recent grads need to succeed. Bob would like to make the job market a less scary place to recent grads of his program, and he's asked bloggers with relevant knowledge to offer advice.  Bob writes this:  "We’re excited about this newest blogging campaign in our Webucator Asks series, and we look forward to reading about creative ways to help guarantee success!"

I decided to do Bob one better and identify four skills to write about.  The four skills that I am covering are ethics, job search, interpersonal skills, and writing.  Interpersonal skills boil down to communication, and communication is the focus of my discussion on that topic. This blog and my next three will cover these skills just as I discuss them with my students.

I start with ethics, the most basic of all managerial skills. Ethics is a competency or skill just like job search, interpersonal skills, and writing. Many students mistakenly believe that there is a dichotomy between profit-making or high wages and ethics.  That is a false dichotomy. Making money is a good, just as honesty and concern for others are goods.  Our job as business people is to balance these and other goods or virtues so that we, our associates, and society, can flourish.

As Warren Buffett pointed out in a talk he gave in the 1990s to MBA students at the University of North Carolina, ethics is much of the reason high achievers achieve.  It is true that in the short term money can be made through dishonesty; it is also true that low achievers can become successful by dishonest means. Look at those who engage in organized crime or in government corruption. They can be successful, although corrupt executives, as in the cases of Enron, Tyco, and Worldcom, pay a high price when they are caught.  Nevertheless, the reason we seek education is to achieve well, not to become drug dealers, confidence men, or thieves. Education is not necessary for such professions.  We achieve well and successfully on an ethical foundation.

The reason the most successful achievers achieve is that they play by the rules of the game. They respect their customers, their employees, their stockholders, and their society.  As society becomes more concerned with the environment, environmental concerns become business concerns.  That is why customers repeatedly return to a firm that produces great products, and that is why society turns to business in times of crisis. One of the great triumphs of General Motors was its ability to convert to war production to assist the US government during World War II.  Without such assistance American victory would have been more difficult, and more soldiers' lives would have been lost to tyrants in Europe and Japan.

Business's products are moral goods because they help many billions of people.  The ability to expand the availability of such goods to ever greater numbers of people is the moral triumph of business.  Making business more efficient and helping business to better meet customers' needs, the mission of recent grads entering the workplace, fulfills a higher moral good. To do so one must rest his or her actions on a moral foundation.

The moral foundation is a set of competencies that students need to identify for themselves.  These likely include what Warren Buffett called the "Ben Franklin virtues" that were identified by his teacher and the inventor of value-based investing,  Benjamin Graham. Buffett calls them the "Ben Franklin virtues"  because Franklin identifies them in his writings in Poor Richard's Almanac and in his 1758 book The Way to Wealth.  Franklin's virtues include honesty, sobriety, hard work, and prudence.  In ancient Greece, 2,500 years ago, Aristotle listed similar virtues--not geared to commercial life, although there is much overlap--as necessary to success.  The reason that there is much overlap between Aristotle's and Franklin's virtues, written more than 2,000 years apart and in different cultures,  is that Aristotle's students aimed to become leaders of the Athenian city state, and the virtues that he describes in his Nicomachean Ethics were geared to success in that ancient society.  These included the cardinal virtues: moderation, prudence, courage, and justice.

Justice, as in Aristotle's day and in Franklin's day, is the cornerstone of ethical competence when working in business. Just as is the case with emotional intelligence, in order to act well we need to develop ethical intelligence. Ethical intelligence means asking ourselves whether an end is justified, whether we can accomplish it prudently, whether we can reduce or eliminate costs or harm, whether we can improve quality or increase the good that we do, whether any harm is more than balanced by the good, and whether our actions serve our colleagues, society, and ourselves.

Many corporations recognize this balance. For example Johnson and Johnson's Credo describes the firm's vision of ethical intelligence in dealing with nurses, doctors, customers, employees, suppliers, and the greater community.  J&J's conclusion is this: "When we operate according to these principles, the stockholders should realize a fair return."  Compare the success of this great firm with that of any of the dishonest ones that have made the news and often no longer exist.

Ethics is the most important competency because all dealings depend on it.  It is the chief recipe for long-term success. Whether we are looking for a job, dealing with the challenges of interpersonal communication, or negotiating an important deal, it is important to ask ourselves whether we are doing the right thing by balancing all considerations in a way that yields an optimal outcome for others, for society, and for ourselves.

Proposal for a Conference Presentation

Why the Worst Get on Top: The Case of Higher Education

Proposal for a Paper for the Manhattanville Hayek Conference

Mitchell Langbert

May 30, 2014

In “Why the Worst Get on Top,” Hayek argues that, because of the unpredictability of social phenomena, the contradictory demands of interest groups, and the need to adopt a comprehensive plan, socialism requires a coalition of the worst. To lead the coalition, individuals rise to the top if they are willing to sacrifice moral duty to what they interpret to be expedient, social-welfare-maximizing decisions; assumption of leadership positions in a socialist state is of interest only to those who lack a moral compass. 

My claim is that American universities, both as propagandists and as independent economic interests, play a part in this process.  The evolution of universities in the United States has made them dependent on donations from large industrial and financial organizations as well as from the state.   American universities therefore take on characteristics that are similar to public German universities, but they also take on characteristics of allies to and beneficiaries of corporate interests.

I can trace the flow of donations to universities in two ways: through a listing of large donations since 1967 that the Chronicle of Higher Education (2014) publishes and through an examination of the names of buildings at top-tier universities. Universities often name buildings after large donors, and the business careers of at least some of them can be traced.  Then, I can content analyze quotations during the 2008-2009 bailouts from academics working at the same institutions.  I would look at quotations in the second-largest-circulation newspaper, the New York Times and quotations in one of the largest-circulation magazines, such as eleventh-ranked Time or first-ranked AARP The Magazine.   

Universities and Propaganda

In the chapter that follows “Why the Worst Get to the Top,”  “The End of Truth,” Hayek discusses the importance of propaganda.  Hayek argues that totalitarian propaganda destroys morals because it undermines “respect for truth,” (Hayek, 172).  Universities play a role in the production of propaganda. Readings (1996) points out that Wilhelm von Humboldt, the inventor of the modern university, saw the German university as bonded to the state: “The state protects the action of the University; the University safeguards the thought of the state.”  Academic freedom, in Humboldt’s view, correlated with universities’ commitment to sustaining the state.  Readings adds (Readings, p. 82), “The capacity of the [German] University structure [during the Nazi era] to adapt itself to Nazism should give us pause.”  Hayek points out that the symbiosis went further than Readings admits and that the Nazi minister of justice said that all scientific theories must serve National Socialism.

The Humboldtian university served as a model for the American university in terms of the integration of research and teaching and the claim of academic freedom, but the economic foundations of the American university were different from those of the German university.  America’s economy had not proceeded along the syndicalist lines that had earlier proceeded in Germany and gave Germany, in Hayek’s view, a militaristic culture.  Rather, universities in the United States grew out of free-standing religious colleges.  Their transformation and growth was financed by leaders of business and finance.  For instance, the first American university designed along Humboldtian lines, Johns Hopkins, was endowed by a wealthy Baltimore merchant, Johns Hopkins, who consulted about the university’s structure with fellow Baltimorean George Peabody, one of the first important American investment bankers. Their strategy meeting about the founding of Johns Hopkins University occurred during one of Peabody’s rare trips home to Baltimore from his firm’s London headquarters (Parker, 1995).  By then, Peabody had made significant gifts to Harvard and Yale, and he had endowed a Baltimore research library, the Peabody Library, on which Johns Hopkins relied for the first several decades of its existence.

On June 27, 1901 the New York Times wrote that JP Morgan, Peabody’s partner’s son, had made a one million dollar gift to Harvard Medical School for the construction of three buildings. In accordance with the recommendation of Carnegie Foundation-funded Abraham Flexner, Harvard modeled itself along the same lines as Johns Hopkins Medical School--as an allopathic, Humboldtian research institution.

Not to be outdone, the following year John D. Rockefeller also donated one million dollars to Harvard Medical School. Carroll (2009) notes:

In 1903, Rockefeller founded the General Education Board (GEB). In the succeeding decades, the GEB would become the dominant philanthropic enterprise in early-twentieth-century American medical education. It contributed over $94 million to American medical schools by the time of the organization’s termination in 1960.

As well, Rockefeller endowed the University of Chicago and appointed its first president. William Rainey Harper. 

Joseph Wharton, an executive at Bethlehem Steel and a mining entrepreneur, funded Wharton’s endowment so that there would be a basis for dissemination of knowledge about the advantages of protectionism.  There is no shortage of examples; virtually all private major research universities have depended on donations from corporate or financial donors, and they have been intimately integrated with the Progressive model since its inception.  Walter Weyl, for example, one of the three founders, along with Walter Lippmann and Herbert Croly, of the New Republic Magazine, was one of the first Ph.D. graduates of the Wharton School.

Scholars have pointed out that Progressivism reflected specific industrial and financial interests.  Expertise in fields like economics was necessary to justify to the public the formation of the Federal Reserve Bank (Kolko, 1963), while expertise in psychology was necessary to facilitate control in large-scale corporations that Progressivism encouraged (Baritz, 1974).  Croly (1915), in Progressive Democracy, advocates scientific management, and in 1910 Harvard Business School appointed Frederick Winslow Taylor, the founder of scientific management, to its faculty.

My claim, then, is that American universities did not develop according to a pure symbiosis between state and university characteristic of the German university—a symbiosis that is consistent with Hayek’s claims—nor did they develop along the lines of a countervailing model whereby universities speak truth to corporate power in accordance with the claims of critics of the post-modern university (D’souza, 1992).  Rather, the development of American universities has been consistent with the history of Progressivism described by Kolko (1963), Sklar (1988), and Radosh and Rothbard (1972), who see the development of Progressivism as a case of Olsonian (1984) special interest pressure or capture.   The American university’s symbiosis with the American state is less direct than the German university’s symbiosis with the German state, and one of its characteristics is its left-wing opposition to right-wing conservatism, but it remains a defender of sensitive corporate interests, such as banking and Wall Street.   

To illustrate my claims, I will review three sources of information about American universities.  The Chronicle of Higher Education (2014) publishes a list of major donations to universities since 1967.  These are donations in excess of $25 million.  I will tabulate the industry in which each donor has worked.  A large share of the donors will be in finance.  Second, I will review the names of the buildings of 25 major universities.  I predict that a significant percentage will bear the names of financial and business leaders.  Third, I will analyze comments in the media from 2008 and 2009 from academics.  I predict that finance-and-industry donations to universities will correlate with the tone and temper of academics ‘opinions about the desirability of subsidization of industry.

Bibliography

Baritz, L. 1974. The Servants of Power: A History of the Use of Social Science in American Industry. Westport, CT: Greenwood Press.

Carroll, Katherine L. 2009. “Moderning the American Medical School,” Internet file accessed on May 31, 2014 at http://www.rockarch.org/publications/resrep/carroll.pdf . 

Croly, H. 1915. Progressive Democracy. New York: The Macmillan Company, http://books.google.com/books?id=QBUpAAAAYAAJ&printsec=frontcover&source=gbs_ge_summary_r&cad=0#v=onepage&q&f=false

Chronicle of Higher Education. 2014. “Major Private Gifts to Higher Education.” http://chronicle.com/article/Major-Private-Gifts-to-Higher/128264/

D’Souza, Dinesh. 1992.  Illiberal Education: The Politics of Race and Sex on Campus. Vintage Reprint Edition, www.amazon.com

Hayek, FA. 2007.  The Road to Serfdom: The Definitive Edition. Edited by Bruce Caldwell. London: The University of Chicago Press.

Kolko, G. 1963. The Triumph of Conservatism.  New York: The Free Press.

New York Times, June 27, 1901. “JP Morgan Gives over $1,000,000 to Harvard: Offers to Pay for Three Buildings to be Erected in Boston,” http://query.nytimes.com/mem/archive-free/pdf?res=F10E1FF93A5D1A728DDDAE0A94DE405B818CF1D3

Olson, M.  1984. The Rise and Decline of Nations.  New Haven, Ct: Yale University Press

Parker, Franklin.  George Peabody: A Biography.  Nashville, Tenn.: Vanderbilt University Press

Radosh, R. and Rothbard, M.A. 1972. A New History of Leviathan. New York: EP Dutton.

Readings, Bill. 1996. The University in Ruins. Cambridge, Mass: Harvard University Press.

Sklar, MJ. 1988.  The Corporate Reconstruction of American Capitalism, 1890-1916: The Market, the Law, and Politics. New York: Cambridge University Press

Which Little Piggy

Makes me wonder why anyone watches cable news

Is the dumbest

Smells the worst

Is a traitor

Has the most air in her head

Is the ugliest

Grunts the loudest

Emits noxious gas when he speaks

FA Hayek on How Obama's War on Income Inequality Will Nazify America

I'm rereading The Road to Serfdom.  Accessibly written, Hayek lays out many of his most important ideas. According to Bruce Caldwell's introduction to the Definitive Edition, the book has sold 300,000 copies, which is rare for a book written for an academic audience. Hayek comments on income inequality, an issue that the Democrats and their media have adopted this year.  

I do not understand this obsession because the greatest gains to the poor have occurred in countries whose laws are objective, that is, that follow the rule of law and that permit entrepreneurs to innovate.  Such innovation results in increasing real wages, but it allows even greater gains to the entrepreneurs. The result is that in free market economies the poor become better off because of income inequality; the greater the entrepreneurial success, the greater the gains to the poor.

I wonder if the  aim of the advocates of income redistribution is really to enhance state control, further reduce freedom,  and improve the position of the inept rich, crony capitalists, at the expense of the poor.  College professors do well when the inept rich do well because crony capitalism typically benefits universities.   Show me a proposal for regulation, and I will show you a Rockefeller, Ochs-Sulzberger, Bundy, or Bush angling for the fruits of government violence.  I will also show you a clique of academics cheering on the redistributive policy and the inadvertent gains to the inept rich in the interest of additional government subsidies to universities.

In order to effect wealth equality, government must violently compel its victims to give up their wealth to benefit the state's beneficiaries.  Government violence results in declining national wealth, as failed socialist economies such as North Korea's, France's, India's, and the United States' show.  As Winston Churchill put it, "The inherent vice of capitalism is the unequal sharing of blessings; the inherent virtue of socialism is the equal sharing of miseries."  Of course, the effect of government violence is never really equality.  Government cronies inevitably do well as the families of Kim Il-sung, George W. Bush, Barack Obama, and John D. Rockefeller illustrate.

Capitalism benefits the poor the most. Life expectancy in early modern Britain was between 25 and 40 years old, and in revolutionary America it was about 35. The gains in life expectancy came about because of improvements in sanitation and public health, and secondarily because of the invention of drugs. Market capitalism made both possible.  For example, the wealth needed to construct sanitary housing did not exist in the precapitalist economy.  The capitalist increases in the real hourly wage that continued in the US until the expansion of government spending in the 1960s, when the US transitioned from a capitalist to a socialist state, meant that the poor working person could improve his lot through saving.  Today, many working Americans cannot save because of the high costs of home ownership, commodities, and taxation, all due to government and Federal Reserve policy.

In The Road to Serfdom Hayek discusses how, in the absence of public resistance,  socialism leads to totalitarianism. The requirements of central planning, economic regulation, and wealth redistribution directly contradict the requirements of the rule of law and democracy.  Wealth redistribution is inherently coercive.  The advocacy of income equality is the advocacy of violence.

With respect to government programs to enforce wealth equality, Hayek draws parallels to Nazis (p. 117):

A necessary and only apparently paradoxical result...is that formal equality before the law is in conflict with, and in fact incompatible with, any activity of the government deliberately aiming at material or substantive equality of different people, and that any policy aiming directly at a substantive ideal of distribution justice must lead to the destruction of the Rule of Law. To produce the same result for different people, it is necessary to treat them differently.  To give different people the same objective opportunities  is not to give them the same subjective chance.  It cannot be denied that the Rule of Law produces economic inequality--all that can be claimed for it is that this inequality is not designed to affect particular people in a particular way.  It is very significant and characteristic that socialists (and Nazis) have always protested against "merely" formal justice, that they have always objected to a law which had no views on how well off particular people ought to be, and that they have always demanded a "socialization of the law," attacked the independence of judges, and at the same time given their support to all such movements as the Freirechtsschule which undermined the Rule of Law.

Hayek, who came from Austria, adds this footnote:

It is therefore not altogether false, when the legal theorist of National Socialism, Carl Schmitt, opposes to the liberal Rechstaat (i.e., the Rule of Law), the National Socialist ideal of the gerechte Staat) ("the just state")--only that the sort of justice which is opposed to formal justice necessarily implies discrimination between persons. [Editor Bruce Caldwell adds the following: German jurist Carl Schmitt (1888-1985) was a critic of liberal parliamentarianism and defender of the authoritarian state. In the 1930s he attempted to reconcile his views with those of the Nazis, offering legal justifications of their takeover of the government and defending the Nuremberg Laws that excluded Jews from public and social life. Though he lost favor with the Nazis by 1936, outside of Germany he was often viewed as the legal theorist of National Socialism.  Hayek also refers to the Freirechtsschule, which is the German term for "legal realism," a doctrine that holds that instinct rather than rule-following is the actual basis of judicial interpretation of the law."--Ed.]