The Psychology of Business: Selfishness is Not Enough (Part I)
In the classic movie Wall Street, the anti-hero Gordon Gecco (Michael Douglas) gives an impassioned speech to stockholders in which he powerfully proclaims: "[G]reed is good...Greed works. Greed clarifies, cuts through and captures the essence of the evolutionary spirit...It's all about bucks. The rest is conversation."
Are selfishness and greed really the driving psychological forces in business today? Is this the path to success?
The intellectual justification for the view that "greed is good" has been around for hundreds of years, and many would say it goes back to the founder of economics, Adam Smith (17231790), whose famous maxim was, "It is not from the benevolence of the butcher, the brewer, or the baker, that we expect our dinner, but from their regard to their own interest. We address ourselves, not to their humanity but to their self-love, and never talk to them of our own necessities but of their advantage" (The Wealth of Nations, Oxford University Press, 1976 , pp. 2627).
As it turns out, Adam Smith was not a proponent of greed, and he spent most of his intellectual life opposing that proposition. Smith lived during the Enlightenment and was trying to counter the argument of the Church that said all self-interested behavior was bad. Smith argued in favor of letting people pursue their own self-interest because that could lead to a commercial society that would benefit others. But while Smith felt that self-interested behavior could be morally virtuous, in a narrow sense, and useful to society, this was only a small part of his moral system. The more important part of Smith's moral system draws upon the idea that people's actions would be guideddisciplinedby an internal moral conscience.
When this insight fully sinks in, it contains profound implications for the attitudes of workers, of consumers, and even stockholders, and hence for business behaviors and strategies that might succeed or fail if Smith's ideas prove to be correct. Smith's model is based upon notions that are intuitive to any parentthat children are driven first by the basic instinct for survival, and beyond that, the basic instinct for approval. Smith takes this one step further, arguing that adults as well as children desire not only pats of encouragement and approval, they desire to be worthy of that approval. People want to be virtuous.
In my novel, Saving Adam Smith: A Tale of Wealth, Transformation, and Virtue, I bring back to life the 18th century Adam Smith to passionately plead his case for a view of economics that treats people as real human beings, not the automatons of homo economicus. The two excerpts in this series (Parts I and II) show that Smith's vision is related to a modern business setting. What we find is that selfishness may not be enough to succeed in some business settings.
Setup for Part I
ADAM SMITH, the founder of economics, has come back to life to remind us that markets and morals go hand-in-hand. RICH BURNS is the first-person narratoran economics graduate student who makes a trip across country with Smith sharing his adventures. During a camping stopover at the beach at Big Sur, just down the California coast from Silicon Valley, they meet PETER CHEN, a computer-chip entrepreneur. Let's listen in to this excerpted dialogue about what makes a business succeed in this day-and-age...
Peter's soft-spoken manner was in contrast to his large, athletic frame, and the deeply tanned and strong look of his closely shaved face. His hands were muscular, the nails carefully manicured. A long whitish-gray ponytail went halfway down his back.
"Must be nice taking off in the middle of the week to go surfing," I said.
"One of the perks of being boss," he laughed. "Actually, we're all on flex-time."
"Your business?" Smith asked.
"Computer chips. Specialty boards." Again he spoke softly, humbly. "Sixty million in sales, about forty associates. Just had our tenth anniversary."
Smith and I nodded appreciatively. "But you don't look..." I started to say.
"Like a boss?" He laughed. "Thank you. That's a compliment. You must be from back East?"
"How'd you guess?"
"The mindsetit's different. Got to be different to succeed here. You've probably heard about all those start-ups going belly up? Well, we haven't. In this market, creativity is vital, but so is efficiency. Not just in product design, but production, marketing, distribution. Loyalty and motivation are the key. Takes a different kind of workplace to bring that about, and a different sort of person to run it."
"Not that different," I said. "Still run for profit, I guess."
"No, it's paradoxical," Peter said. "We don't run it for the bottom line. That's not the way we succeed."
Dinner was over and we sat in silence. Smoke drifted upward through breaks in the canopy; stars glittered. We were full in the belly and pensive in the mind.
"Tell us about yourself," Smith said.
Again Peter's voice was low and unassuming. "The key experience of my life happened when I was nineteen, serving in Vietnam. I was a radar operator in flight control. My best friend Roy was flying in one day, and I stood out on the tarmac to welcome him back. Next thing I knew enemy rockets were exploding all around. Then his 'copter was hit and Roy was cut in half. He lived just long enough for me to get to him, and watch him die."
He stoked the fire with a stick. "When you hold someone dying, there's no more bull. It's not a game anymore. There's no trying to be something you're not. No more trying to sound intelligent or witty. None of that matters. There's only being. That was the gift Roy left me."
The fire settled and Peter threw on a small log. "Being real means being the same person at work as at home and at play. Life is integrated. Heck, when I came back I got plenty of experience working for others, some big companies, some small. In some companies the tension is so thick it it's like mud. No one can be themselves. You smell fear in every corner."
Peter spoke so softly I slid closer to him on the bench.
"Bosses who motivate with fear make decisions they aren't proud of," Peter said, "and they justify it by saying, 'it's just a smart business decision.' But if it's so smart, why is everyone wracked with pain? Why is turnover so high? They want to see themselves as good people, but they're trapped in a sick organization, an organization that doesn't let them be human beings making human decisions."
"Being in business means making hard choices," I said.
"People accept hard choices for the right reasons," he said emphatically. "So you ask, what are these right reasons? What is it that motivates people to work willingly with all their energy, and with sacrifice on occasion?"
"We've all heard about the fantastic stock options in Silicon Valley," I said.
"No question, people work hard when their contributions are recognized and rewarded. Stock options are important. But you'll miss something momentous if you stop there." Peter hunched forward and chose his words carefully. "The secret is this: People work harder when they appreciate themselves for what they have done. When the goal of the enterprise is worthy of their highest aspirations... when you touch someplace deep inside, by having them buy into a dream bigger than themselves. That unleashes a creative spirit, and the mind and heart are integrated. So the company becomes, in a sense, the vehicle for the aspirations of the workers as integrated human beings."
"I thought the company was a vehicle for making profit," I said, remembering Milton Friedman's and Adam Smith's injunctions against "do-goodism."
"It has potential for much more than that," Peter said. "When people accept a bigger dream, there's a remarkable transformation. The workplace becomes alive, dynamic, charged with energy. Profit is the by-product of achieving that higher aspiration."
"Not just money, but something better?"
Peter laughed. "Have you ever seen a company mission statement couched in terms of making money? You won't find one, and the reason is simple: It doesn't engage people as efficiently as a higher aspiration will. You've got to touch people by aspiring to be the first, the best, the biggest, the newest, or trying hardest, caring most, by tying your success to that of a lofty and worthy social goal. Even Donald Trump, after his come-back, said money was never the object of his success, only its measure."
I nodded. "Of course, most companies proclaim something other than money as their goal. They say they want to 'serve customers'. But that's a gimmick, isn't it, for public relations?"
Peter shook his head. "Better not be. Workers and customers have pretty sharp detectors for insincerity and pretense. If the company is run solely for the bottom line, workers become cynical and disillusioned. To succeed, the higher aspiration has to come honestly from the heart. The mission statement doesn't mean a damn thing without commitment and action. But why listen to me?" Peter said. "Why not come see for yourselves?"
Smith nodded thoughtfully and I assented.
"It's arranged, then," Peter said. "Day after tomorrow at noon."
[End of Part I. To be continued in Part II.]