Morality and Reality: Duty, Not Convenience

On reflection, I would suggest that virtue (morality and ethics in action) imposes on us a first order duty to embrace and engage with reality whenever we make or recommend decisions. Holding up standards is one part of moral conduct, but it is insufficient action when we seek to have others support our thinking or to effect events.

Virtue’s engagement with reality is not a best practice only; it is a higher calling: a duty.

Morality and ethics, if divorced from consideration of reality, can’t bring virtue to life.

Virtue and reality are a pair – a duality. They relate one with the other through dialogue. And through dialectic – positing a thesis, contrasting that with an antithesis and ending up with a considered judgment – a synthesis.

The contemporary German philosopher, Jurgen Habermas, posited that we humans live simultaneously in two very different realms of what, to us, appear to be realities. One is the realm of normativity – ideas, ideals, words, concepts, mental constructions, spaced only in our heads and resonating selfishly with our psyche. The other reality is the realm of facticity – the realm of time and space and all of the material cosmos which takes up space and exists through time.

By being present in both realms at once, we can transition from one reality to the other, from the internal to the external and from the external to the internal. We can take inner realities from normativity and apply them through effort to facticity. We can also take experiences in the realm of facticity and use them to modify what we have in the realm of normativity.

A rather superficial example I use of how facticity can change our normative reality is the first experience of a child with a lit candle. Fascinated by the flame, the child touches it with a finger. Being burned, the child learns and so comes to understand mentally that touching a flame has a hurtful consequence. The child has mediated between facticity and normativity, changing normativity to align better with facticity.

Our creaturely facility is to serve as a feedback loop between normativity and facticity. In Christian terms, we can be “in” the world (facticity) and yet still not be wholly “of” the world (normativity). As Jesus said, “Man does not live by bread alone.”

We are most helped when living in and between both normativity and facticity by choosing a course of moderation, a middle way between opposing states of experience. This, of course, was the advice given by Aristotle, by the Buddha in his first sermon and by the Chinese text, The Doctrine of the Mean. It is also the guidance we receive in Qur’an, which is to keep the balance (Mizan).

If there is no mediation between normativity and facticity, then we become too immersed in one or the other. If we live mostly in normativity, we become subjective, solipsistic. Narcissism and hubris take over. We succumb to illusions and delusions. What we then seek to impose on others or on the world most likely runs contrary to what “is.”

In normativity, we build our own idols, investing too much of our personal authenticity in false gods, whatever we might choose them to be. We may overvalue having power over others, accumulating money, even the importance of the self. Here, in our personal realm of normativity is where ideologies and tyrannies, large and small, originate.

None of this leads us to virtue.

Papal encyclicals call this state of mind “anthropocentric,” making idols of ourselves and what we create to our own order.

The reality of facticity is not intuitively evident, nor is it self-evident. People differ in their perceptions, their measurements, their calculations. Yet, facticity is not social constructs. There is something to reality more transcendent than ideas we form in our own minds. What transcends social or personal constructs is factuality, like a flame on a candle.

But it is normativity that assists us in discovering what is reliably factual, what we can name and what we can process as being “out there.”

Virtue thrives where constructs mesh constructively with factuality and the constructs sustain themselves over time without our insisting and demanding that they are “so” in the realm of facticity. I think this is what the Buddha had in mind when he described the Dharma.

Public Office as a Public Trust – A Workshop on the Ethics of Public Stewardship – Friday, April 10th

The Preamble to our Constitution holds that: “We the People of the United States, in Order to form a more perfect Union, establish Justice, insure domestic Tranquility, provide for the common defence, promote the general Welfare, and secure the Blessings of Liberty to ourselves and our Posterity, do ordain and establish this Constitution for the United States of America.”

Beating at the heart of our constitutional democracy is the ethical proposition that “Public Office is a Public Trust.” But what does this mean? Where did the idea come from? Is it still true? How can we tell a good public servant from an unworthy one?

We’re delighted to invite you to participate in the Caux Round Table for Moral Capitalism’s (CRT) workshop on Public Office as a Public Trust scheduled for 8:30 am Friday, April 10th, at the Humphrey School of Public Affairs.

The mission of the workshop is to promote good stewardship in office, thoughtful trusteeship and enlightened fiduciary practices using the CRT’s Principles for Government as best practices. The commitment of the workshop is taken from George Washington’s remarks to the delegates at the 1787 Constitutional Convention that “Let us raise a standard to which the wise and the honest may repair.”

The workshop will present historic, intellectual and moral foundations for the ethics of public stewardship, including the Bible, John Locke, Adam Smith, Max Weber and the Federalist Papers, among others.

The agenda will include:

  1. Pew Research Center findings on political polarization
  2. Movie High Noon: public trust and personal courage
  3. The Moral Sense: human nature and natural justice
  4. CRT Principles for Government
  5. History of trust responsibilities

The two main presenters will be Stephen B. Young, Global Executive Director of the CRT and Doran Hunter, Emeritus Professor of political science at Minnesota State University, Mankato.

Congressman Dean Phillips will tentatively be joining us for lunch to speak about the Problem Solvers Caucus which he is an active member of.

Tuition is $50 per person (does not include cost of lunch).

To register, please click here.

Space is limited.

The CRT is an international network of senior leaders from business, government, academia and non-profit institutions who work together to improve private enterprise and public governance around the world.

For additional information, please visit: www.cauxroundtable.org

What Happens When Governments Fail?

In a democracy, the role of government is to serve the people, not just the rich and powerful or the dictates of a close-minded ideology. Throughout the relatively recent development of democratic societies, the consequence of governments neglecting or ignoring this imperative has invariably resulted in negative – and sometimes tragic – consequences.

An early textbook example of this phenomenon was the Irish Potato Famine.

This year marks the 170th anniversary of the end of this terrible chapter in history. The famine kicked off with the failure of the Irish potato crop in the fall of 1846. A fungus that began in the Americas quickly spread worldwide. When potatoes were harvested, they immediately turned into an inedible mush. The fungus caused dietary problems in many places, but nowhere were the effects more devastating than in Ireland.

Why? Because historians estimate that in the western – and poorest – region of Ireland, the average male farmer or day laborer consumed more than ten pounds of potatoes every day. Mixed with buttermilk, this combination – much like beans and corn in the new world – provided the nutrients necessary for a healthy, if monotonous, diet.

The first ten months of the crop failure caused widespread hunger, but not a massive wave of deaths. England’s Tory government ordered shipments of corn from across the Atlantic to be distributed to the Irish free of charge. Unfortunately, that government fell and was replaced by Britain’s first liberal coalition. In those days, “liberal” meant two things: first, the extension of voting rights and secondly, the imperative that government not interfere in the dynamics of the “free market.”

The new prime minister called for a halt to the free distribution of corn to the Irish peasantry. The food was sold – at a discount – to grain merchants and the Irish assigned make-work jobs whose wages were to be used to buy corn. Unfortunately, the government did not foresee that, in the face of widespread hunger, the price of food would become increasingly inflated, while the wages for Irish laborers remained fixed.

The outcome? The “wages” were not sufficient to cover the cost of nutrition. By 1850, more than half the people of Ireland had either died of starvation – thousands of them expiring on the site of the so-called “famine roads” that were supposed to weave the country together – or fled to other countries.

As was said of Hurricane Katrina, a natural disaster was turned into a man-made catastrophe by government ineptitude.

Stakeholder Risk Management of Boeing Revealed Higher Risks, Foretold Lower Value

In 2018, before Boeing encountered flaws with its 737 Max 8 aircraft in design and software to compensate for design shortcomings, Magni Asset Management, using a Caux Round Table (CRT) proprietary assessment methodology, assessed Boeing for governance. The assessment gave Boeing lower scores for risk management of customers and employees and a higher score for attending to shareholders.

The 737 Max 8 debacle happened at the interface between Boeing and its customers and employees. As a result of its performance, Boeing has suffered massive losses in cash flow, net worth and reputation.

Those losses might very well have been reduced or prevented if the company had paid more attention to governance of stakeholder risk management.

The link to the Magni analysis can be found here.

The value of Boeing as a company was determined by its stakeholder relationships, which can be assessed and improved with CRT metrics.

The Morality of Profit

In my last consideration of morality and ethics, I supposed that being good presumes an engagement with reality and not just with principle and abstractions. Then, I saw a report that for the first nine months of 2019, Airbnb experienced losses, in other words, no profit. This development caught the attention of many who were open to buying Airbnb stock once it was sold to the public. Now, however, warned by the fact of the company making losses and not profits, there are questions about how much a share of Airbnb might be worth in a public offering.

Now, for 200 years, profit has been touted as evidence of inherent immorality in capitalism. Capitalism, with its private property, cash nexus and the rights of owners to net profits, has been criticized by moralists from Christians like Charles Dickens to Karl Marx as misguided and an abuse of human potential. Because of profit, capitalism is said to draw out the worst in people; that it is sin institutionalized; that one can’t serve both mammon and God and since profit sits at the feet of mammon, to choose capitalism is to reject God.

And yet, as we see in the Airbnb case, profit ties our aspirations to reality. It is the reality principle operating to check the pleasure principle, to use Freudian terms. Where there is no profit, there is a mismatch in reality between supply and demand. Simply put, losses reveal that there is insufficient demand for the company’s goods or services at the price needed by the company to remain a going concern. Losses are not sustainable over time.

Profit links Airbnb to others. Thus, it functions as a moral presence in the working of the mind, directing our attention to the needs and situations of others. Lack of profit causes us to question Airbnb’s ability to relate to the needs of others.

I would then suggest that anything which works to ground our self-centered romanticism or hubristic self-conceits externally in relationships with others, who are an important reality, is both a public and a private good. It is morality in action.

Morality and Reality

Two recent articles about pollution and global warming triggered a thought which had been a latent reflection arising from reading Cicero’s writing on duties (De Officis) where he seems to be descriptive about morality and ethics rather than prescriptive, though it is clear he advises choosing some behaviors and values over others.

Nevertheless, one of his notable assertions is that the honestum and the utile in reality are interdependent. What is virtuous and authentically good when shown in public leads to prudent and efficacious consequences and what is of real utility in life tends to have an affinity with virtue and goodness.

My college education largely posed a conflict between morality – deontology, like Kant’s categorical imperative – and reality – utilitarian calculation of benefits and enjoyments, following Bentham and John Stuart Mill. We were told to take sides – either the moral and impractical or the practical, though it might be immoral on occasion.

But if reality is part of morality and ethics, then the decision as to what to do is either more simple – just follow the facts – or more complicated – figure out what the facts are when much is poorly known or unknown.

Since it is said that we live in a “post-truth” age, taking reality and facts as our guideposts seems foolish and a throwback to past imperfections.

One article I just read described how certain California communities and firefighters are preparing for the coming dry months and forest fires. They have moved beyond a Greta Thunberg moment when looming catastrophe overwhelms judgment and, immobilized, we resort to emotion and denunciation. They are rather learning from reality how these fires start and spread. They are clearing dry brush and grass from the forest understory; planting rows of trees as firebreaks where fierce winds will blow; and telling homeowners not to put flammable plantings near houses.

I consider their behavior to be ethical and admirable.

Next fall, we will learn how successful these intentional efforts will have been.

In another commentary, the author, John Tierney, broke ranks intellectually with many who see the moral course of action as prohibiting the use of plastic bags. His sense of reality is that plastic bags are not the problem many say they are and, in fact, have advantages for sanitation and sustainability.

He asserts as fact – as a reality check – that most of the plastic in the Pacific Ocean does not come from more wealthy consumers, but from ships and from Asia “as mismanaged waste.”

His take on reality leads him to make certain policy recommendations. Those recommendations would seem to deserve the status of being ethical or moral, as they are designed to reduce harm.

One of the ethical principles we proposed for NGOs and other civil society organizations is to take care – to be guided by reality when trying to be moral. The principle of care is:

“A Civil Society Institution (CSI) will recognize that its policies and activities are a legitimate subject of public comment and analysis. It is, therefore, willing to engage in reasoned discourse regarding its mission and objectives, values, principles, governance, actions and means used to achieve its objectives. When engaging in advocacy, a CSI will always, in good faith, present accurate facts and truthful information. When planning its actions or executing its policies, a CSI will demonstrate enlightened care and concern for those whose interests will be affected by its contemplated actions. In case a CSI inflicts damage upon a government, international organization, corporation, or other party, it will be accountable for its actions.”

Valuation of Intangibles

Our recent round tables exploring modernization of balance sheets and valuation methodology have produced consensus that intangibles can be valuable assets of a company.

In support of this conclusion, I just read two reports in the Wall Street Journal.

One was that the stock of Morgan Stanley, Bank of America and Citigroup trade at levels still below their market valuation in 2007, before the 2008 collapse of credit markets.

Badly wounded by the 2008 crisis, Morgan Stanley and Bank of America switched business models to lessen their dependency on trading and investment banking revenue and bring in wealth management clients. Those changes in their business model – an intangible aspect of governance – did lead to increases in their stock prices. An analyst’s comment was that “some people” still put a discount on their valuation, given their line of business.

Another comment by John D. Stoll pointed out that the valuation of Peloton, a maker of exercise bikes, depended on its being able to bill itself as a “tech” company because it includes an internet feature on its stationary bikes. The company – like Uber and WeWork – sought a tech aspect to its goods which would differentiate it from the competition when “tech” companies are given higher multiples on earnings by market speculators. Thus, the intellectual property, along with access to its creators and maintainers of a program for internet access to others also using the bikes has important value for Peloton.

Catch the Wave: Support the CRT!

Last fall brought us some very good news: the vision of our Principles for Business was unexpectedly fully affirmed by statements from the Business Roundtable on August 19 and by Klaus Schwab of the World Economic Forum on December 2. Further, we also received affirmation of the importance of moral capitalism from French President Emmanuel Macron.

Now, with leading organizations providing validation of our work, we need to press ahead with greater efforts in 2020 to provide more thought leadership for global business. Your financial support is needed. You can support our work in confidence that it is making a very constructive difference.

As our advocacy of a moral capitalism now reflects a tipping point in conventional thinking, we have opportunities to help companies with training of their managers and employees, to guide investors and the accounting profession in consideration of valuation methodologies which take proper account of stakeholders and the intangible capitals now so necessary for firm success in the marketplace and to convene more round tables around the world. We need support for our publication on Amazon of unique books, important intellectual contributions written by our friends and those who we admire which may not attract conventional publishers.

We would be very grateful for your consideration of a beginning-of-year contribution to our work.

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