Individual Morality

I heard recently of an initiative for large banks to develop extremely fast information technology equipment to enable them to profit from market trades. As it was explained to me, it goes something like this. Many market trades are now done electronically. A seller puts out an offer to sell at a certain "ask" price. A buyer puts out a bid for the same shares (though likely a different number of shares) at a certain "bid" price. If those prices overlap (bid is higher than ask), the market server executes a trade. If they don't overlap, they just sit there until they find a partner they can make the deal with.

From what I was told, these large banks are trying to beat the speed of the market servers by putting out a bid and somehow by doing so, they learn whether there is an ask price that matches. When that happens, they retract the bid so quickly, the market server doesn't have time to execute the trade. They then lower their bid and repeat until they reach the seller's ask price. Now, I'm no economist and I may have misunderstood some of the details, but based on my understanding of this, I have a problem with it.

These banks that want to pull this little trick are obtaining a little extra wealth without generating anything of value. That means they are sucking money away from those poor schmucks (like me) who don't have this trick up their sleeves. Economics is not generally a zero-sum game, but when no one is generating value, it becomes a zero-sum game. It's not quite theft, but it's similar.



I have long believed that in business, if it's not a good deal for everyone, it's simply not a good deal. Let me explain what I mean by that. Developing trust is how we grow business. I develop trust with customers and partners by acting honestly and honorably. At work, we have a list of organizational values. The first value on that list is "integrity" and one of the reasons I love my job is that we take that value seriously. There have been times when we have reported unfavorable results from our research to our customers, knowing they would not be happy with the product. But we have done it because it was the honest answer. This has sometimes hurt us in the short term, but I believe it has always been good for us in the long run because our customers see us as an honest broker. They know they can trust us to do the right thing.

Integrity is a key in doing good business in the long run. There are other morals and ethics that feed into running a good business, but I'm not going to try to list them all because I know I'd leave some out. The execution of these virtues while seeking to earn a living is what Adam Smith called "enlightened self interest." That phrase does not mean that you seek to get whatever you can out of the world (as many have assumed), but rather that you seek to make your living within a moral framework, recognizing that those morals ultimately come back to benefit you. You act with honor and integrity in business and your business will grow, giving you more opportunities to provide valuable goods and services to those who may want or need them. Within a free market, this type of economy actually blesses the poor by making products more widely and less expensively available. It also encourages people to be free to pursue their own interests and keep the fruits of their labors.

Adam Smith, by the way, was a professor of moral philosophy. He is regarded as the father of modern economics.

An economy as described by Smith should be based on freedom, but operating within a moral framework on an individual level. Without such a moral framework, this system can deteriorate into subjection of the poor, not by political tyrants, but by the wealthy. In our government, Republicans often extol the benefits of the free market system, but without a moral code applied on an individual level, that market can quickly become a means of economic tyranny fueled by greed. Democrats are more likely to condemn the whole system and then try to compensate for the failings by redistributing wealth to benefit the poor. That sounds laudable, but it's ultimately coercion and ends up harming both the poor and the wealthy.

Freedom is precious. It can't be forced or legislated. It has to be earned. Joseph de Maistre wrote in 1811, "Every nation has the government it deserves." I think governments around the world are becoming more invasive and tyrannical because those internal controls on an individual level (a moral compass or true self-government) are lacking in many of us today. In 1798, John Adams said, "We have no government armed with power capable of contending with human passions unbridled by morality and religion .... Our Constitution was made only for a moral and religious people. It is wholly inadequate to the government of any other." No government can force us to act honorably and no external pressure can change who we are on the inside. See my previous post on A Pure Heart.

There is simply no good substitute for individual morality.