Category Archives: business

“From each according to ability, to each according to need?” Not in sports! Or Politics 101: Learn to play the game, fairly or not

Frank Knight, one of the founders of the so-called “Chicago School” of economics, took seriously the idea that markets are a kind of game. But he wondered whether something that is both a game and a system designed to satisfy wants could be fair.

“In a system which is at the same time a want-satisfying mechanism and a competitive game we seem to find three ethical ideals in conflict.  The first is the principle already mentioned, of distribution according to effort.  The second is the principal of ‘tools to those who can use them.’  This is a necessary condition of efficiency, but involves giving the best player the best hand, the fastest runner the benefit of the handicap, and thus flagrantly violates the third ideal, which is to maintain the conditions of fairness in the game.” (“The Ethics of Competition,” p. 54 [1923])

There is no reason to think the system or game can meet all of our ethical expectations. If winning is a priority for the team, can we expect them to play fair? Does being fair to the team and its fans (e.g. by giving them the best chance to win) require being unfair to certain players (e.g. not letting them play because they aren’t as good)? And are these notions of fairness in games appropriate in settings dealing with people’s livelihoods? Is it right for firms to give some workers benefits that others don’t get? Should firms be able to horde secrets that might make all firms more efficient if they were shared?

So what is fair and what is foul in sports or business? Knight seems to be suggesting that it is hard to tell because we have at least three “ethical ideals” for justice and they each give us different answers to this question.

A friendly chat about adversaries

This blog got plenty of free publicity last Friday when I (Wayne Norman) did a turn on Duke University’s weekly “Office Hours” live tweet-in show. For better or for worse, the conversation should be permanently accessible here:

Some of the topics of conversation were plucked from my other blog, This Sporting Life, including one on Why the NCAA Tournament is the American Idol of Sports, and What’s Wrong with the Wonderlic Test.

Bethany’s post here about what we learn about political ethics from primary elections also got a quote and a shout-out during the interview, and it can be found here. Stay tuned for some of her follow-up thoughts on that topic.

Race-to-the-Bottom Watch: Are We Drowning in Advertising

Advertisements are everywhere.  Cabs and busses are covered in full-size ads, billboards are placed every 50 yards along highways, YouTube now plays ads before you can watch the video you intended, TV events are created out of one-sentence announcements (e.g. Heisman Trophy presentation, American Idol final), pop-ups pervade web browsing while we simultaneously find ads for pop-up blocker applications, high school prom dances turn into ads for the usefulness of duct tape, and people are ever getting paid to get advertisements tattooed on their bodies.  A 2009 study suggests that the average American adult spends over an hour a day watching advertisements on TV alone.

But really, you’ve got to feel sorry for the advertisers, don’t you? Think about it: the more ads that are put into the public domain, the less effective each individual ad becomes.

This stems from the fact that advertisers are competing to satisfy the existing and limited demand of a consumer base, rather than creating new demand.  Think of the sheer volume of ads for food and drinks.  These companies are not assuming that without advertisements people will just not eat at all; rather, they assume that people are going to eat somewhere, and advertisements are intended to direct the consumers’ demand in their direction.

While there is a certain amount of demand created by advertisements, advertisers aren’t so naïve as to assume that they can convince you, with a single 30-second spot, to buy a brand new car out of the blue.  Rather, their primary interest is to direct, and at times exaggerate, a consumer’s existing desires.  This means that marketers are essentially competing to win the same consumer demand, and consequently, with each entrance of a new competitor, the old ones have to fight even harder to maintain its market share.

Imagine visiting a city for the first time and getting lost on your way to the hotel.  Contrast the following scenarios:

Scenario 1 –You pull over and ask someone for directions.  The person says they know where you are intending to go and gives you concise enough directions to follow.

Scenario 2 – You pull over and ask a group of people for directions.  They all say that they know where you are intending to go and each gives you concise enough directions that you believe you can execute—however; everyone in the group gives you a different set of directions that lead you to altogether distinct places!

Presumably in scenario 1, you would simply follow the directions you were given, but scenario 2 seems much more confusing.  Whose directions are you to follow?  The person who has lived in the city the longest?  The one who seemed most confident?  The one who claimed to be a taxi driver?  The one who claimed to be a doctor?  The one who was most well dressed?  In fact, the situation seems altogether so confusing that you will probably reject all of their opinions and ask a new person or try purchasing a map.

The same confusion arises when advertisers compete for your demands.  The more businesses that decide to advertise, the more the existing advertisers have to shout louder, in more places, and in smarter ways in order to get your attention.  This ultimately leads to more and more of our dollars and minutes being spent on advertisements every year. We are, in short, in a commercial race to the bottom wherein the more effort that is expended leads to not only fewer gains but higher costs for both businesses and consumers. 

Bringing a snake to a knife fight

(Continuing the theme of the previous post by K. Listenbee.) From this week’s issue of the eponymous magazine of the City so nice they named it twice: a cartoon on the ethics of deception in adversarial negotiations.

 

 

(This cartoon is retransmitted without permission and will be removed upon request.)

Is bluffing just business, or is it bad business?

Consent and fair play can both provide reasonable justifications for the deceptive behavior in some contexts. If you agree to play poker with me, you can’t complain if I bluff — though you certainly could complain if you caught me playing with a marked deck. But these reasons do not necessarily work in the case of all adversarial institutions.

To an extent, part of what adversaries do is deceive and coerce people in order to win the game that they are a part of. This deception amongst adversaries is part of the game, not accidental. The minute difference between a foul and an intentional foul in the sport of boxing is just one example. In order to win, some boxers try to disguise intentional fouls as mere accidents. In his book Ethics for Adversaries, Applbaum argues that those within adversarial institutions have a better chance of getting away with actions that might not be as acceptable in other situations.

“One cannot coherently claim that one aims at the good ends of a competitive system if one seeks to undermine features of the system that make it good. Perhaps the claims that adversaries make about their aims and the actions that they take cannot be made to cohere. Or perhaps the good ends of the system are for its practitioners a sort of idle hope that is unconnected to what their actions aim at. But there is no plausible way to redescribe the violation that adversaries aim at as accidental, a foreseen but unintended side effect. If, to pass a test of reasonable acceptance, actions cannot aim at violation, then much of the violation that results from adversary institutions does not pass the test” – Applbaum, p. 187

When one plays to win, it can often involve actions that undermine the aims of the game. If adversaries are aiming at good ends, then the violations they inflict upon one another can be reasonably justified. As the final sentence of the quote implies, however, not all violations of normal moral codes (like honesty) in adversarial institutions are accidental.

In short, for Applbaum, the good ends of deliberately adversarial institutions will not always justify the means if the means are deliberately unethical.

 

Diving in soccer is like [blank] in business

In the comment-thread to a post by “Matiok” about soccer dives, below, I suggested that diving is in some sense significantly worse that most other fouls in sport (say, among fouls that do not involve significantly injuring your opponent). This is because diving involves a player who was not able to better his opponent on the field, and so instead decides to accuse the opponent of a foul in order to gain an advantage. You can’t win fair and square, and not only do you cheat, but you accuse your opponent of being the cheater.

There isn’t a good word for “chickenshit” in formal academic ethics. “Hypocrite” doesn’t quite capture the ethical nastiness of that kind of competitive tactic. (Yes, I realize it’s much more complicated than that, and that we have to look at the way the institution of soccer has evolved, etc, etc. I’ve done some of that in my other blog, here and here.)

But in this post I want to think about how we might fill in the blank in the title of the post. What, in other adversarial realms (like business or politics), resembles diving in soccer?

Well, here’s something similar. In a Reuters story yesterday we learn that:

Nickolas Galiatsatos, owner of Nina’s Bella Pizzeria in Upper Darby, Pennsylvania, is accused of putting bags of mice at nearby competitors on Monday afternoon, according to Upper Darby Police Superintendent Michael Chitwood.

The owner of Verona Pizza watched Galiatsatos go into his restroom carrying a bag but emerge empty-handed, and alerted two patrol officers who were in the restaurant, Chitwood said.

The officers found a bag of mice and footprints on a toilet seat, suggesting someone had been trying to reach the ceiling tiles, he said.

The officers then found Galiatsatos near another pizza place, Uncle Nick’s, where he was seen putting something in a trash can. There, police found a bag containing five mice, Chitwood said.

“This guy planted them to put these guys out of business,” Chitwood said. “I’ve been at this for 47 years, and I’ve never seen mice used as a criminal tool.”

Like many divers in soccer, he claimed he had to do this because his opponents were doing the same to him:

Galiatsatos claimed his shop had been infested with mice, and he blamed his competitors for the problem, he said.

Chitwood said that Galiatsatos told police he bought the mice at a pet shop for $10.

He faces misdemeanor charges of cruelty to animals, criminal mischief, harassment and disorderly conduct.

A misdemeanor?! You can NOT be serious, ref! Surely that’s a red-cardable offense.

Who needs trade unions?

So far on this blog we have not talked much about the choices between adversarial and non-adversarial relations inside of firms. But this is a great context in which to sharpen our understanding of adversarial ethics, because we do have experience with much more and much less adversarial corporate cultures and industrial relations.

The legal recognition and buttressing of labor unions from the late 19th century until, say, the 1980s, could be described in two ways: either as instituting deliberately adversarial mechanisms in the governance and management of firms, or as making an already-adversarial relationship between owners of capital (and their managers) and laborers less unfair. There are other ways of describing this contested institution, for sure.

We’ll talk much more about what goes on inside the firm in the future; but at this point I would just like to flag a brief debate going on in the blog space at The Economist. Mark Thoma, an economist at the University of Oregon, proffers a brief answer to the question “What good are labour unions?” His one-sentence answer is, “Governments should replace unions as a protector of workers.” And of course, in many ways they have. Government occupational health and safety legislation, along with extensive bodies of employment law, now give to all workers what unions had to bargain tooth-and-nail for on behalf of their members.

But however important unions may have been in the past (and for Thoma this is an open question), he argues that:

In an increasingly globalised world where digital and other technology allow firms to easily escape unionised labour, unions have lost their ability to act as an equalising force in negotiations over wages and benefits.

Global labor organisations could provide an alternative, but this would require global institutions that do not presently exist, and that do not look likely to emerge anytime soon. For now, the answer has to come domestically and the only institution powerful enough to protect workers is government. Government-provided health and dental care, security in old age, workplace safety, insurance against job loss, higher education that is essentially free, and other such benefits would go a long way toward remedying what workers have lost since the 1970s. In addition, government redistribution of income may be needed to ensure that economic gains are shared more equitably. In combination, this would provide the things that unions fought to get for workers and maintain the current social protections that government provides.

There seems to be a general trend to make more institutions adversarial, competitive, or “market-like.” Ed Sullivan got people to watch singers and dancers on TV, but now we won’t watch them unless they’re competing against each other and we can vote on who wins. But here is a proposal to make one very important economic and social institution — the firm — less adversarial. Or maybe just less fair.