1 Hutton, once the second largest broker in the nation, never recovered from the blow to its reputation and finances and was forced to sell out to Shearson.Įxxon’s Valdez disaster is another celebrated example. Hutton was brought down by its check-kiting fraud. The moralists’ standard tale recounts how E.F. Cases that apparently demonstrate the awful consequences of abusing trust turn out to be few and weak, while evidence that treachery can pay seems compelling. This sounds plausible enough until you look for concrete examples. A man or woman with a reputation for fair dealing will prosper. If you violate a trust, your victim is apt to seek revenge and others are likely to stop doing business with you, at least under favorable terms. It allows us to join in great and exciting enterprises that we could never undertake if we relied on economic incentives alone.Įconomists and game theorists tell us that trust is enforced in the marketplace through retaliation and reputation. Materially, too, trust based on morality provides great advantages. We can be proud of a system in which people are honest because they want to be, not because they have to be.
When push comes to shove, hard-headed businessfolk usually ignore (or fudge) their dollars-and-cents calculations in order to keep their word.Īnd for this, we should be happy. Most of us choose virtue because we want to believe in ourselves and have others respect and believe in us. Without values, without a basic preference for right over wrong, trust based on such self-delusion would crumble in the face of temptation. But there is little factual or logical basis for this conviction. Businesspeople do tell themselves that, in the long run, they will do well by doing good. Honesty is, in fact, primarily a moral choice. There is no compelling economic reason to tell the truth or keep one’s word-punishment for the treacherous in the real world is neither swift nor sure. To our surprise, our pet theories failed to stand up. Through extensive interviews we hoped to find data that would support their theories and thus, perhaps, encourage higher standards of business behavior. Economists, ethicists, and business sages had persuaded us that honesty is the best policy, but their evidence seemed weak.
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