The Profitability of Morality

September 22nd, 2010

By Brianna Aubin

They say that morality is unprofitable, and profitability immoral.  But is it actually true?  Look at the story of two banks, one which adhered to an inflexible moral code and another which chased the almighty dollar, and check your premises for yourself:

One bank, chaired by an individual with a deep moral code, did several things which went against the prevailing atmosphere of the industry over the last decade.  While other banks were getting deep into the subprime lending business, this bank flatly refused to participate on the grounds that such participation was not beneficial to its customers.  When Kelo v. New London extended the government’s right of eminent domain to such an extent that practically any confiscation of private property could be justified, this bank refused to grant any more eminent domain loans to the government on the grounds that the government had overstepped its moral bounds.  When Bush proposed TARP in order to bail out the failing banks during the financial crisis, this bank campaigned against TARP to anyone who would listen, took TARP funds only under threat of being driven out of business by the government, and was the first to pay back its TARP “loan” to the tune of a loss of $100,000,000.

Another bank was chaired by someone who openly admitted to being an Objectivist, a philosophy well known for its glorification of the profit motive.  He based his business practices around Atlas Shrugged and made all of his high-level employees read the novel.  He made decisions based purely on their profitability and became incredibly successful thereby.  During this man’s tenure, his bank grew from $4.5 billion in assets to $137 billion, and he himself made millions in salary and stock options.  He’s deeply involved with the Ayn Rand Institute, and he regularly donates money and copies of the book to colleges in order to get them to study Rand’s philosophy.

Actually, the truth is that these banks are the same bank, BB&T.  The former CEO of this bank was John Allison (he retired at the end of 2008), and every fact I just referenced in both of the above paragraphs applies to him and his bank.

I recently had the privilege of attending a speech given by Mr. Allison in Chicago.  The title was “Using Ayn Rand’s Values to Create Competitive Advantage in Business” and the subject* turned out to be about the 10 values which Allison had come up with to run his institution by:

1) Reality – It is real, and cannot be wished away or evaded.

2) Reason – It is our means of survival, and in order to survive and thrive we must make clear and logical decisions based on facts.

3) Independent thinking – Every human being is alone in his own mind and responsible for his own actions, and each employee must acknowledge those principles by making rational decisions based on the evidence (instead of groupthink) and sticking to them.

4) Productivity – An organization survives and grows by producing capital, which in the case of BB&T is done by the efficient and rational allocation of funds to productive enterprises and by providing good services to clients.

5) Honesty – To be honest is to be consistent to reality; to be dishonest is to set yourself in conflict with reality, and is therefore self-defeating by definition.  Therefore it is impossible to make a profit by lying, cheating or stealing, because any deal based on such acts is by definition doomed to failure.

6) Integrity – To break principles developed logically based on reality is to set yourself against it and inevitably to one’s long-term detriment.  This means that while it might be possible to gain in the short-term by breaking those principles, it is never possible to do so in the long run and any attempt to try will again be self-defeating and doomed to failure.

7) Justice – Individuals should be evaluated based on their contributions to the organization.  Those who contribute little or are a drain on the organization should be reprimanded or fired, and those who contribute the most should receive the greatest rewards.

8) Pride – Pride is a psychological reward we gain from successfully living out our values, and we should conduct our work in such a way that we are able to be proud of what we have accomplished.

9) Self-esteem – This is the reward we get from setting and attaining long-term goals and working in our long-term, rational self-interest.  Hint: if you don’t want to work hard and accomplish stuff, don’t work for BB&T.

10) Teamwork – People think alone, but often accomplish goals together.  Each employee must agree to accomplish the goal of the group while maintaining respect for the other members of that group.

Sounds simple, I know.  I bet that everyone here is thinking that they do those things all the time, and have no problem with those concepts, but…really, do you? Do others?  Was Citibank considering the facts of reality when they started offering subprime mortgages to people who would likely be unable to pay them back?  Were banks so worried about maintaining independent thinking when they went along with the subprime boom under the logic that everybody else was doing it, and if they didn’t offer the mortgages then somebody else would?  Was Barney Frank (whom Allison has met and claims is highly intelligent, a thought I find absolutely terrifying) concerned with honesty when he insisted that Fannie and Freddie were “just fine” even as the consequences of the government’s actions were becoming blatantly apparent in 2008?  Was it justice that Washington was concerned with when it forced BB&T to enter into a deal in which it would lose millions of dollars, in order to prevent the irresponsible, such as Citibank, from suffering the punishment which capitalism would have visited upon it and which it deserved (liquidation)?  Was it a thorough consideration of the long-term consequences which made failing banks seek the protection of the government — only to find that by doing so they had entered into a Faustian bargain which allowed Washington to dictate terms to them from then onward?

The truth is, of course, that morality properly understood is profitable, and profitability pursued rationally is moral — unless someone steps in wielding force in order to make the successful pay the price for others’ failures.  As everybody now knows, by the time of the financial crisis it had become quite clear which banks had made the smart decisions, and which the foolish ones.  The only reason moral and practical failures like Citibank are still here, or that a moral and practical success like BB&T lost any money at all, was because the government intervened in order to make BB&T (and the taxpayers!) bear the costs of other banks’ moral and practical failures.

To my mind, that is a course of action which is neither moral nor profitable.

*If you want to see what the actual presentation was like, you can watch this video.  It’s not exactly the same, but it’s close enough.

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6 Responses to “The Profitability of Morality”

  1. Tom Carter |

    Very interesting, Brianna. The principles Allison uses are essentially the same most wise leaders/managers use — and there aren’t enough of them. It isn’t necessary to rely on Ayn Rand or Objectivism to get there; all the leadership training I’ve gone through emphasizes basically the same things. What makes the difference is whether the leader/manager has the ability to put it all into effect.

    The idea that finding that Barney Frank is intelligent is frightening can be taken humorously or as an indication of a serious mistake in juding one’s … enemies, I suppose … and underestimating them. The fact that people disagree with you (or me, or anyone else) doesn’t necessarily mean that they’re unintelligent — they just look at the same reality and see it differently. That’s why politics can be a noble undertaking, when intelligent people who disagree respectfully engage on the issues. Seems that more and more these days, the “respectfully” part is missing.

    The video of Allison’s presentation is interesting and worth the time to watch. He does become rather Randian when he talks about egalitarianism and altruism, and what he says makes good sense.

  2. Brianna |

    Hmmph, I didn’t mean that #8 to be a smiley face, but I think I want to keep it there anyway. It fits well with the value it was supposed to enumerate 🙂

  3. Tom Carter |

    I wondered about that, but it looked like a proud face in sunshades was introducing a statement about pride, so…. 🙂

  4. Brianna |

    “It isn’t necessary to rely on Ayn Rand or Objectivism to get there”

    Well, yes. After all, truth is true. You might as well bash your head against a wall as try to hold a belief which is not true. After all, the end result is about the same.

    ” they just look at the same reality and see it differently”

    Yes, that’s what I mean. It’s scary that Barney Frank can be smart, and yet see reality the way he does.

  5. Tom Carter |

    Well, to develop that last sentence a little further, Brianna, it seems you mean that it’s scary that someone can be smart and still not see reality the way we see it. Shouldn’t that motivate us to examine his point of view to find out why he thinks that way? No one has a monopoly on being right, and there is often more than one valid interpretation of reality.

  6. Brianna |

    No, what I mean is that it’s scary that someone can be that smart and still ignore reality, the way Frank did when it was abundantly clear in 2008, to everyone except him, that the housing market, Fannie and Freddie were all going down.

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