Home > Articles > Business & Management > Finance & Investing

The Psychology of Business: Selfishness is Not Enough (Part I)

This article is excerpted from the author’s novel, Saving Adam Smith: A Tale of Wealth, Transformation, and Virtue (Financial Times Prentice Hall, 2001, ISBN: 0130659045). The 18th century Adam Smith is brought back to life 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.
This chapter is from the book

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 (1723–1790), 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 [1776], pp. 26–27).

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 guided—disciplined—by 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 parent—that 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 narrator—an 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 mindset—it'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.]

InformIT Promotional Mailings & Special Offers

I would like to receive exclusive offers and hear about products from InformIT and its family of brands. I can unsubscribe at any time.

Overview


Pearson Education, Inc., 221 River Street, Hoboken, New Jersey 07030, (Pearson) presents this site to provide information about products and services that can be purchased through this site.

This privacy notice provides an overview of our commitment to privacy and describes how we collect, protect, use and share personal information collected through this site. Please note that other Pearson websites and online products and services have their own separate privacy policies.

Collection and Use of Information


To conduct business and deliver products and services, Pearson collects and uses personal information in several ways in connection with this site, including:

Questions and Inquiries

For inquiries and questions, we collect the inquiry or question, together with name, contact details (email address, phone number and mailing address) and any other additional information voluntarily submitted to us through a Contact Us form or an email. We use this information to address the inquiry and respond to the question.

Online Store

For orders and purchases placed through our online store on this site, we collect order details, name, institution name and address (if applicable), email address, phone number, shipping and billing addresses, credit/debit card information, shipping options and any instructions. We use this information to complete transactions, fulfill orders, communicate with individuals placing orders or visiting the online store, and for related purposes.

Surveys

Pearson may offer opportunities to provide feedback or participate in surveys, including surveys evaluating Pearson products, services or sites. Participation is voluntary. Pearson collects information requested in the survey questions and uses the information to evaluate, support, maintain and improve products, services or sites, develop new products and services, conduct educational research and for other purposes specified in the survey.

Contests and Drawings

Occasionally, we may sponsor a contest or drawing. Participation is optional. Pearson collects name, contact information and other information specified on the entry form for the contest or drawing to conduct the contest or drawing. Pearson may collect additional personal information from the winners of a contest or drawing in order to award the prize and for tax reporting purposes, as required by law.

Newsletters

If you have elected to receive email newsletters or promotional mailings and special offers but want to unsubscribe, simply email information@informit.com.

Service Announcements

On rare occasions it is necessary to send out a strictly service related announcement. For instance, if our service is temporarily suspended for maintenance we might send users an email. Generally, users may not opt-out of these communications, though they can deactivate their account information. However, these communications are not promotional in nature.

Customer Service

We communicate with users on a regular basis to provide requested services and in regard to issues relating to their account we reply via email or phone in accordance with the users' wishes when a user submits their information through our Contact Us form.

Other Collection and Use of Information


Application and System Logs

Pearson automatically collects log data to help ensure the delivery, availability and security of this site. Log data may include technical information about how a user or visitor connected to this site, such as browser type, type of computer/device, operating system, internet service provider and IP address. We use this information for support purposes and to monitor the health of the site, identify problems, improve service, detect unauthorized access and fraudulent activity, prevent and respond to security incidents and appropriately scale computing resources.

Web Analytics

Pearson may use third party web trend analytical services, including Google Analytics, to collect visitor information, such as IP addresses, browser types, referring pages, pages visited and time spent on a particular site. While these analytical services collect and report information on an anonymous basis, they may use cookies to gather web trend information. The information gathered may enable Pearson (but not the third party web trend services) to link information with application and system log data. Pearson uses this information for system administration and to identify problems, improve service, detect unauthorized access and fraudulent activity, prevent and respond to security incidents, appropriately scale computing resources and otherwise support and deliver this site and its services.

Cookies and Related Technologies

This site uses cookies and similar technologies to personalize content, measure traffic patterns, control security, track use and access of information on this site, and provide interest-based messages and advertising. Users can manage and block the use of cookies through their browser. Disabling or blocking certain cookies may limit the functionality of this site.

Do Not Track

This site currently does not respond to Do Not Track signals.

Security


Pearson uses appropriate physical, administrative and technical security measures to protect personal information from unauthorized access, use and disclosure.

Children


This site is not directed to children under the age of 13.

Marketing


Pearson may send or direct marketing communications to users, provided that

  • Pearson will not use personal information collected or processed as a K-12 school service provider for the purpose of directed or targeted advertising.
  • Such marketing is consistent with applicable law and Pearson's legal obligations.
  • Pearson will not knowingly direct or send marketing communications to an individual who has expressed a preference not to receive marketing.
  • Where required by applicable law, express or implied consent to marketing exists and has not been withdrawn.

Pearson may provide personal information to a third party service provider on a restricted basis to provide marketing solely on behalf of Pearson or an affiliate or customer for whom Pearson is a service provider. Marketing preferences may be changed at any time.

Correcting/Updating Personal Information


If a user's personally identifiable information changes (such as your postal address or email address), we provide a way to correct or update that user's personal data provided to us. This can be done on the Account page. If a user no longer desires our service and desires to delete his or her account, please contact us at customer-service@informit.com and we will process the deletion of a user's account.

Choice/Opt-out


Users can always make an informed choice as to whether they should proceed with certain services offered by InformIT. If you choose to remove yourself from our mailing list(s) simply visit the following page and uncheck any communication you no longer want to receive: www.informit.com/u.aspx.

Sale of Personal Information


Pearson does not rent or sell personal information in exchange for any payment of money.

While Pearson does not sell personal information, as defined in Nevada law, Nevada residents may email a request for no sale of their personal information to NevadaDesignatedRequest@pearson.com.

Supplemental Privacy Statement for California Residents


California residents should read our Supplemental privacy statement for California residents in conjunction with this Privacy Notice. The Supplemental privacy statement for California residents explains Pearson's commitment to comply with California law and applies to personal information of California residents collected in connection with this site and the Services.

Sharing and Disclosure


Pearson may disclose personal information, as follows:

  • As required by law.
  • With the consent of the individual (or their parent, if the individual is a minor)
  • In response to a subpoena, court order or legal process, to the extent permitted or required by law
  • To protect the security and safety of individuals, data, assets and systems, consistent with applicable law
  • In connection the sale, joint venture or other transfer of some or all of its company or assets, subject to the provisions of this Privacy Notice
  • To investigate or address actual or suspected fraud or other illegal activities
  • To exercise its legal rights, including enforcement of the Terms of Use for this site or another contract
  • To affiliated Pearson companies and other companies and organizations who perform work for Pearson and are obligated to protect the privacy of personal information consistent with this Privacy Notice
  • To a school, organization, company or government agency, where Pearson collects or processes the personal information in a school setting or on behalf of such organization, company or government agency.

Links


This web site contains links to other sites. Please be aware that we are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of each and every web site that collects Personal Information. This privacy statement applies solely to information collected by this web site.

Requests and Contact


Please contact us about this Privacy Notice or if you have any requests or questions relating to the privacy of your personal information.

Changes to this Privacy Notice


We may revise this Privacy Notice through an updated posting. We will identify the effective date of the revision in the posting. Often, updates are made to provide greater clarity or to comply with changes in regulatory requirements. If the updates involve material changes to the collection, protection, use or disclosure of Personal Information, Pearson will provide notice of the change through a conspicuous notice on this site or other appropriate way. Continued use of the site after the effective date of a posted revision evidences acceptance. Please contact us if you have questions or concerns about the Privacy Notice or any objection to any revisions.

Last Update: November 17, 2020