The Emergent Nature of Doing Good

Ex-Goldman employee Greg Smith wrote a New York Times editorial on the standard lament that his company doesn't care about the customer any more:

Today, many of these leaders display a Goldman Sachs culture quotient of exactly zero percent. I attend derivatives sales meetings where not one single minute is spent asking questions about how we can help clients. It’s purely about how we can make the most possible money off of them.

He sees the problem that his company maximizes profits, not helping the customer. This is a common refrain, one made by Einstein, who noted that socialism was better than capitalism because one system produces for everyone, the other for profit.

People serve others in modern society in very nonintuitive ways. In small tribes we are pretty aware of who is part of the team and who is a loafer, and how our stuff gets there. In modern society, by contrast, we have things as simple as pencils that we simply could not make even if we knew how to make it. We all rely on a vast number of things we have no way of making ourselves, from our iPad to our breakfast, and it isn't possible for everyone to go back to being a hunter-gatherer even if we wanted to, our productivity would be insufficient to feed everyone.

Adam Smith presented the argument on the invisible hand, how the self-interest of the butcher and blacksmith incented them to create goods and services that, in a competitive market, lead to specialization, cost minimization, and gains from trade. As a businessman, profit is one of the better signals of value out there simply because everyone else likes profit too, so you have identified an area where you are literally creating value. This is a highly counterintuitive point, and so most people simply don't believe self-interest is consistent with a good society, because that's not how their family works.

The problem is, altruism is very specialized in focus, whereas self-interest is not. Altruism is centered on people related to us, where I would sacrifice myself for my two siblings, or 8 cousins, thus, unconditional charity does not generalize from kin to non-kin very well. However, there is reciprocal altruism, basically helping other who can help you regardless of genome, and this is where it truly pays to understand how to service a customer--but only for the end-result of making money! It happens all over the animal world, as you see animals expending valuable resources towards another, yet only if there's some quid pro quo (eg, flower and bee, plover and alligator).

Recent support for this comes from a variety of sources, and the latest is a paper in Science--Markets, Religion, Community Size and the Evolution of Fairness and Punishment--by Joe Henrich et al, who administer fairness experiments across 15 diverse populationsand found that more commercial societies tended to be fairer. That is, people are nicer the more commercial they are, because being nice is good business. It took McDonald's to get Muscovites to smile.

The world is not filled with people like your mom and dad who showered you with love and resources merely for being you. It is filled with people totally indifferent to you except in so far as you can help them. If that makes you sad you really haven't thought about it, because a society of that much love would be really oppressive--even just one mom can be smothering, imagine thousands of her.

Smith then ends with a riff that really underscores the weakness of his point:

My proudest moments in life — getting a full scholarship to go from South Africa to Stanford University, being selected as a Rhodes Scholar national finalist, winning a bronze medal for table tennis at the Maccabiah Games in Israel, known as the Jewish Olympics — have all come through hard work, with no shortcuts.

Talk about selfish, such accomplishments didn't help anyone but him! There is no customer that will pay for self-indulgent status climbing in irrelevant hierarchies, regardless of how much we encourage our kids to play such games. That is, ping pong is a fabulous avocation, a pathetic vocation. We all want our children to play and engage in poetry, and when they excel at these things we are rightfully proud. Yet these are things kids do to develop skills like discipline, creativity, courage, that ultimately are valuable because of what they can do for others. They are not good in themselves, at least to society at large.

A similar quandary comes up in other domains such as science. The objectivity of science is not primarily from the integrity of scientists, but by scientists competing with others about how to explain the real world. As the left-brain is constantly rationalizing beliefs and data it receives from the right side, rationalization is the default method of reasoning whether we like to admit it or not. It helps to be on the side of truth because it's a lot easier and more fruitful, but it is not essential, and generally we make some base assumptions off our intuitions and then apply an 'anything goes' rhetorical style. It is naive to present your side of some scientific debate as being better because it is filled with people of integrity, as all sides in any large debate involve omitting inconvenient data and exaggerating the consistent data. They key is being on the right side, having the right biases, prejudices, assumptions, because confabulation is hard-wired into the human mind.

Being a good businessman is like being a good scientist. The most important thing is having the correct foresight to see the long-run, as in the long run the truth or value will win out. Having empathy for the customer or a respect for the truth in science is helpful in achieving those ends because you are better able to correct yourself before becoming too tied to bad causes via sunk costs and golden handcuffs. Day-to-day a simple focus on profits cuts through a lot of confused thinking about vague concepts like 'serving our customers', a subject that has produced its share of tiresome essays. Alternatively, nonprofits do this all the time if you really enjoy that kind of focus, or you can go off Jerry Maguire-like and start your own thing if really inspired, many people do.