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Ed Kless: Ron, would you kill the fat man? That's the question. Let me explain. There's afamous ethics conundrum where a person is standing at a switch for a trolley ora train, and it varies based on the story that's told. The train is going to gostraight ahead, and it's going to kill a family of four who happen to be walkingalong the tracks.  You're standing by the switch and have the ability pull the lever and switch thetrain so that instead of going straight and killing the family of four that's walkingalong the tracks, instead, it's going to kill this fat guy walking on the other track.  The majority of people would say that, yes, they would, in fact, pull that lever.  What's interesting, though, is that if the same scenario were the case and there'sjust a straight track, family of four walking on it and here comes the train, but inthis case, you have to push the guy onto the tracks to stop the train, would youdo it? Most people say, no, they would not, even though ethically or, in the end,  it's the same one one guy who's dead and you've saved this family of of four.  That's the interest. Would you kill the fat guy, Ron?

Ron Baker: Ed, it's a great question and, as you know, I teach ethics, and we actually use thetrolley example, and this is actually called trolleyology. There's a whole bookwritten on this called "Would you Kill the Fat Man?" by a guy named DavidEdmonds, and he actually lays out ten different scenarios of this trolley example,  but let's just stick with these two examples.  When we ask that question among thousands of professionals, a good majorityof them will pull the lever to save the family, but then when you ask would youpush the fat man, very few people will do that, and something feels differentabout those two things, doesn't it?

Ed Kless: It sure does. I've always felt, when I've thought about it, is that one is, there'sthis mechanical thing in between you, so the fact that you're pulling this lever ina way cuts you off from the humanity of having to touch the other person, andthat was really the difference, but that's not always the case, is it?

Ron Baker: No, that is certainly one explanation. The other explanation that some peoplewill tell you is that whole it feels different to have to physically touch anotherhuman being, and pushing the fat man, it feels that way; but that's one of thescenario changes that they said, "Well, what if you could pull the lever, open upa drop door, and the fat man drops out, so you wouldn't have to push him overthe bridge, he would drop out and fall on the track," and people still won't do it.  Philosophers have a very interesting explanation about this. I want to get youropinion on it. It's called the doctrine of double effect. It kind of grows out of theJust War doctrine of Aquinas and it kind of goes back into that spirit. What is saysis there's a difference between an event that is foreseen and an event that isintended. If you think about it, if you pull the lever and send the train off on thesecond spike just to kill the one person, and let's say that one person movesaway in time and saves themselves. Isn't that the best possible outcome, right?

Ed Kless: Yep, yep.

Ron Baker: That would be great, because then you'd save both sides of the track. You'd saveall five people; but in the fat man example, whether you push him off the bridgeor whether you drop the drawbridge and send him down, he has to die. You areintending for him to die. There is no good scenario there. He has to die to savethe four. That's what philosophers think is the difference. Again, it's called thedoctrine of double effect.

Ed Kless: In a way, it's what I think is one of the most incredibly powerful words incertainly the English language, and I think it exists in most other languages, is theword "possibility." The idea that in the scenario with the switch where the guy'swalking, it is possible, however improbable, that the situation resolves itself so,  therefore, that's why our minds will go that way and say, "Yep, okay, it'spossible, so let me give that a shot."

Ron Baker: Right. Ed, when I've talked to priests about this, or if you hear a rabbi talk aboutthis trolley example, they say that you have to leave it up to fate, because we arenot to play God, so you don't interfere. You don't really know what's going tohappen. Yet, I've talked to some Jesuits about it, and they said, "No, they'd pullthe lever."

Ed Kless: The Jesuits, you got to understand, were a little different breed, current popeincluded. I have personal friends of mine who are Jesuits as well. You never go toa Catholic mass with a Jesuit where they don't invite you up on the altar. Theyget lonely or something, so I think that's the issue.

Ron Baker: What's your line about them? 

Ed Kless: The Jesuits were invented to keep the agnostics in the church is really ...

Ron Baker: Maybe that has something to do with it. You know, I know this example is kind offar-fetched, and it's very hard to ... We can sit here and cogitate about ethics andwhat would you do in this situation, but we might act very, very differently in theheat of the moment.

Ed Kless: Certainly. 

Ron Baker: There's that issue, but I do think it's a useful thought experiment, because itdoes raise some very interesting issues especially in today's society how we tendto be utilitarian. We'll say, "Well, look, we're saving four lives here and it onlycosts one, so, yeah, I'm going to pull the lever," and yet is that really the rightthing to do?

Ed Kless: Exactly. I think it also goes to speak about the whole idea of even organdonorship, let's say, and the power of the default value. In this ethical case, thedefault value is where the switch is, the fact that the train or trolley is goingstraight. That's the default value, and the fact that should you change thatdefault value, which is what the point of the rabbis are, is that, no, you don'tchange fate. Couldn't the same thing be said of organ donorship? By that logic,  couldn't we say that, "Well, we should not be organ donors, because that wouldchange fate?"

Ron Baker: Correct. Now that's a really good point. Another twist on the trolleyologyexample is a homeless person walks into a hospital, and the doctor happens tonotice that he's a perfect match for five people in the hospital who are going todie unless they get certain organs replaced. Would the hospital, would thedoctor be justified in killing the one person to save those five other people in thehospital?

Ed Kless: Wow.

Ron Baker: When people hear it that way, it really ... You get repulsed by that question.

Ed Kless: Yeah, a visceral repulsion to it, sure.

Ron Baker: It really is. I mean, the trolley thing is one example. Like you said, you're pullingthe switch, so you're kind of not involved in anything, but this is really activelyinvolved, and is that what we really want doctors to do? So, it brings up thosetypes of issues, but that's just another twist on this; but it does point out theflaws in utilitarian thinking that we can just do everything by the numbers.

Ed Kless: Right. That's the second time you've used this phrase utilitarian. I can't even sayit properly. Let's talk a little bit about this. I think we're really using this trolleyexample as a springboard for the subject of today's show, which is ethics inbusiness, and we want to make a clear distinction that we think that what wetalk about is ethics applied in business as opposed to the idea of business ethics,  because as you and I talked in preparation for the show, neither one of us thinkthere's such thing as business ethics. There's no qualification. There's no specialexemption for business under the topic of ethics to begin with. 

Ron Baker: Right. Like you see on cable TV when they're debating an issue like stem cell orsomething, you'll see a medical [effaces 00:08:34] or something, and I rejectthat. Ethics is like economics. It's the study of human behavior, and it doesn'tmatter what sphere that takes place in; so whether you work in a bicycle factory,  or you're a barber, or you work for the government, ethics is ethics. It's justabout human behavior, so we can't draw these pointless distinctions betweenbusiness ethics and medical ethics and all of this.  That's not to say that certain professions don't have their own set of ethicalissues, they certainly do, but it's still about human behavior and, ultimately,  we're trying to do the right thing.

Ed Kless: Therefore, what we're talking about here is the application of ethics in business.  My simplest and my favorite definition of ethics, Ron, just for me personally iswhat are you doing when nobody's watching? It's a very, as I've mentioned,  Catholic-kind of thing. What are you doing when nobody's watching? Whatabout you? What do you think is your favorite way to think about ethics? Is itthat as well?

Ron Baker: That's one of them, Ed. Do the right thing even when nobody's watching,  because apparently somebody's always watching, right? [crosstalk 00:09:45]. Ihave actually a few favorite definitions, if I may, but one is a Greek statesman bythe name of Plenides. Don't even bother to look him up folks, he's only availableon parchment, but he said, he actually made the moral case against pedophilia,  because in 400 BC, it was legal. It was the will of the people.  He stood up and said, you know, is this the right thing? He tried to make a moralcase about it; and he said "To live a moral life, you must do more than is requiredand less than is allowed." I love that because to me, Ed, the law is the minimum.  It's the floor that society walks on, and it's the morals, the guardrails.  If we had to only be ethical because of laws, because laws deter us or whatever,  we'd live in a very brutish society, because the law is a lagging indicator, right?  The cop shows up after the murder; so I love the idea that you must do morethan is required and less than is allowed. I guess I don't want my tombstone toread "Here lies

Ron Baker. He abided by all the laws." I just don't think that'sworthy of man.

Ed Kless: Yeah, and that brings up something that's even a current event, and perhaps wecan delve into that in a future segment today, is the whole idea with the illegalimmigration, which is redundant by the way. By definition, immigrants are illegal,  so I should say, but the folks who are coming in illegally, there's this big call, well,  we'll stop up the border first, then we can talk about the path to citizenship.  Well, that's kind of the same thing that you're talking about here, is if that's theminimum, you're kind of stuck there.

Ron Baker: Right. The other example I like along the difference between law and otherthings is ethics is obedience to the unenforceable, whereas law is obedience tothe enforceable. In other words, our ethical guide shouldn't just be the law. Justbecause something's legal doesn't make it moral. We could look at slavery. Wecan look at apartheid. We can look at Nazism. These are legal, but they wereimmoral institutions.  Probably my other favorite example is morality, or definition, morality is doingwhat's right regardless of what you're told, and obedience is doing what is toldregardless of what is right. I think of the Nuremberg defense. I was onlyfollowing orders.

Ed Kless: There you go. There you go.

Ron Baker: Ed, let's talk about why we even need to study ethics. Charles Murray wrote afascinating book called "Human Accomplishments," and he studied amazinghuman accomplishment from 800 BC to 1950, and he basically came up with 14meta-inventions that really advanced civilization; things like the scientificmethod, [churim 00:12:51] theory.  One of his meta-inventions is ethics. He said we only study ethics because wehave to interact with other people. If we were all living on a desert island, wewouldn't need to study ethics, because there'd be nobody to be just to, ornobody to be unjust to. I've always liked that way of thinking about it, because ifyou think in a modern economy how many people, strangers, we interact with,  it's overwhelming.

Ed Kless: Oh, yeah. I've often said that the trust is ... We're swimming in trust, but wedon't see it and, of course, we only call out the bad stuff that happens. Thinkabout this, you and I travel a lot. We go to a foreign city sometimes on adifferent continent. We show up at a hotel at 2:00 in the morning, and we showthem a piece of plastic and they're like, "Yeah, come on in. No problem. You canstay here a week." Because I have a piece of plastic? Somebody looking at thisfrom a previous century, not even a different planet, but a previous centurywould look at this and say, "What is wrong with these people? All he did wasshow him this card that had his name on it and said, 'yeah, come on in and stayat my hotel?' That's insane."

Ron Baker: It is. One economist pointed out that if you roll the clock back about 100,000years and look at our ancestors who probably moved around in tribes of no morethan 50 or 100 people, if they saw a strange tribe coming towards them, theirinstinct was fight or flight. It wasn't, "Hey, let's embrace these people or try andsell them something." It was, "Let's get out of here. They're going to kill us ortake our things."  Today, like you say, we can be in New York amongst tens of thousands ofstrangers, even go into a deli at 2 in the morning and buy food from maybe theowner who isn't of our religion, maybe not of our ethnicity, maybe has totallydifferent politics, maybe his people's been warring with our people for years,  and yet we buy food and actually consume it with no thought that he's trying toharm us or poison us. Ed, let's put aside the Adam Smith point of how did thatbagel get to New York just when you needed it? Because New York growsnothing. 

Ed Kless: Right. 

Ron Baker: That's a whole other ... That's kind of like the toaster project we talked about theother week; but how do these things get there?

Ed Kless: Yeah, through an incredible amount of cooperation amongst people who nevermet. That's the whole I, Pencil idea, that we did mention. Let's delve into thisidea of ethics a little bit more. You teach a course in ethics. Set it up a little bitfor us. What are some different ethical ways of thinking?

Ron Baker: Ethics, the word, is a Greek word, ethos, meaning habit. Ethics is actually abranch of philosophy that tries to develop normative theories about whatbehavior, individual behavior, is right or wrong. The four, I call them the Big Four,  the four schools of thought that we kind of look at are utilitarianism, deontology,  virtue ethics, which is what the Greeks, Plato, Socrates, Aristotle was all about,  and then, of course, natural rights, the whole rights theorist.  The fun one to start out with like we did with the trolley example, isutilitarianism. Utilitarianism was kind of founded by a guy named JeremyBentham. There were others like John Stuart Mill and David Hume and othersthat also believed in utilitarianism, but the thing that strikes me aboututilitarianism is they believe that the battle in life is not between good and evilor between reason and passion, but between pleasure and pain.  Bentham was sitting in a coffee house reading a book, and he came across thefollowing line: The greatest happiness of the greatest number. That was hiseureka moment. He kind of ran out of the coffee house and said, "Well, youcould build a whole ethical framework around this," because he thought it's theconsequences of your actions that should be judged.  He actually developed the idea of the util, so economists have taken that andturned it into utility, but he thought that a util was either positive or negative,  pain or pleasure, and you could sum up the consequences of your action, and ifthe pleasure outweighed the pain, then it was an ethical decision that you'vemade. He actually called this felicific calculus.

Ed Kless: Good Lord. Talk about somebody who's just taken it to the extreme and try tomeasure everything, holy cow.

Ron Baker: If you look at this guy, he was born in 1748. He lived till about 1832. He was avery interesting guy. He was a polymath. He was a true renaissance man. He wasthe first guy to wear cotton underwear, and he was the first guy I think that weknow of who jogged on a regular basis because he thought it had salutary healtheffects. He was quite an eclectic thinker.  The more I study about him, the more I just admire his mind, because he was atremendous thinker. You think what does this dead white guy have to do withanything today? If you look at like progressive income tax, actually moreaccurate to say graduated income tax, or the death tax, the defenders of that,  people like George Soros or Bill Gates, Sr., Bill Gates' dad, who is a lawyer, by theway, and even Warren Buffet, they will say, "Well, look ... "  Bill Gates actually wrote this. "If you take a dollar from my son, you're inflictingvery little pain; but if you take that same dollar from my son and buy a homelessperson a hot meal, then you're creating that much pleasure more than the painyou inflicted on my son and, therefore, it's a moral decision." That is the numberone argument that we hear for the progressive income tax, and the question is,  is it flawed?

Ed Kless: The idea of equality of outcome. If it doesn't happen naturally, we mustreinforce it some way. That's really what they're looking at.

Ron Baker: Right, and they're just totally looking kind of at the numbers. It kind of goes backto the hobo example walking into the hospital with the organs. It just seems likeutilitarianism can rule out the individual and kind of put everybody into this masscalculus, and if the numbers come out right, then we're doing the right thing,  and that's not always the case. 

Ed Kless: A full-on utilitarian would say, "Hobo, done." 

Ron Baker: Yeah. I'd love to have dinner with Jeremy Bentham if I could and ask him some ofthese questions directly, because I can't get a read on how he might answer that.  I think he'd have problems with it, but I'm not 100% sure; and, look, there areutilitarians that you can find on college campuses to this day, guys like FredSinger at Princeton, who say it's quite all right to do an abortion even up to theage of 7 if the kid's not going to have a good quality of life. 

Ed Kless: Wow. Wow. Give me another example. You find that most modern economistsare utilitarian? Would that be a fair statement?

Ron Baker: Certainly, they lean that way, and I'm not saying utilitarianism is always bad. It'sa very useful framework to look at the consequences of your action and see ifyou're creating more pleasure than pain. 

Ed Kless: That's exactly where I was going down with this, because I think in the fewminutes before the break here, let's bring this down from this heady subject ofethics to the business world. These are things that are very useful business tools.  Cost benefit analysis is certainly a useful business tool, so we're not saying that ifyou buy this, if you think that utilitarianism is evil because of what it impliesbased on what we've talked about, that you should never do a cost-benefitanalysis. We would be silly to say that.

Ron Baker: Absolutely. In fact, Bentham was kind of the father of the cost benefit. He justcalled it pain and pleasure, but we've kind of morphed it in a business setting tocost-benefit. I think where it can kind of go off the rails, Ed, is if you look at thefamous Ford example with the Pinto, when they decided not to make thecorrection, and yet the gas tanks exploded. From a calculation standpoint, theywere absolutely correct. How many people is this going to kill?  This is, I think, a lot of economists' argument, especially one that we bothadmire, Steven Landsburg. He actually put out a thought experiment that got alot of blog comments about if one billion people in the world had a headache,  would we be justified in killing one person to alleviate the pain of one billion?  You know how he does, he ran through some calculations, and he said, "Yes."  You can imagine the comments. Well, "What if it was you, Steve?" "What if itwas your daughter?" He said, "Look, you're missing my point." We make thesedecisions every day about the value of human life. Maybe you're going to go getin your car later after the show and you're going to drive somewhere. My guessis you're not going to do a 75-point inspection and make sure your brakes aresafe even though you'll be driving at high speeds in close proximity to otherpeople.

Ed Kless: No, and I love the example that he uses. He said, "We could eliminate all trafficfatalities simply by placing a metal spike on the steering wheel pointed directlyat the heart of the driver." This will virtually eliminate all traffic fatalities exceptwhere people had heart attacks anyway and then maybe caused others, but itwould also make commerce come to an absolute screeching halt, because youwouldn't do more than 2 miles an hour."

Ron Baker: I think he even said "And change the speed limits to 5 miles an hour and installthat metal spike." It's like, yeah, we would think that that is cost prohibitive eventhough we have some 35 or 40,000 traffic fatalities in this country every year.  When people say, Ed, that, "Oh, if it saves one life, it's worth ... " That'snonsense.

Ed Kless: It is nonsense, yep.

Ron Baker: We say it, but we don't act that way. We never do. We actually do make thesecalculations. We'll only put a stoplight in an intersection after two people havebeen killed.

Ed Kless: That leads to what I call precautionary principle thinking, is that you must thinkof absolutely every possible contingency before you make a decision, because itmight harm one person, and you're to be held responsible if it's harming thatone person. It's really unfair.

Ron Baker: It's crazy, because if you think about the precautionary principle taken to anextreme, well, then we'd still be sitting in the cave rubbing two rocks togetherand somebody would be stopping you, trying to ... "You can't create that. That'sfire. That could be dangerous."

Ed Kless: Absolutely.  The famous story about Leonard Bernstein, he had a favorite piece of graffitumthat he once saw, which was Genkas Khan, but Immanuel Kant. 

Ron Baker: I've never heard that. That's great. 

Ed Kless: That sets up our next segment, which is this guy, Immanuel Kant. Fascinatingdude, Ron. Fascinating guy.

Ron Baker: He was. He's kind of known as the father of deontology which, again, is anotherone of these Greek words meaning "duty." Ed, unlike a utilitarian, Kant didn'tcare about our happiness. He said, "Forget your happiness. Do your duty." Hewas very big on duty, and he was big on universals like no murder, no stealing.  He didn't even think it was proper to lie, because he says if we start allowingsome lies, even white lies, then the wheels of society will come to a grinding haltbecause we won't know who to trust and who not, and who's telling the truthand who's not. 

Ed Kless: A good example of a Kantian would be Dr. House. 

Ron Baker: Yes. I was a huge fan of House, MD, the TV show. It's because every episode wasan ethical dilemma, and House, even though his methods were sometimescompletely wrong or harmful ...

Ed Kless: Abusive.

Ron Baker: Abusive, yes, that too, inhuman sometimes even, he always did the right thing byhis patient. If you believe a doctor exists to first cause no harm, he did live bythat, and he did do his duty despite how sloppy and messy he sometimes was.  He did always do his duty.

Ed Kless: There's even a couple of episodes where I guess he's challenged by somebodyabout unexpurgated truth-telling, then he immediately tells about three or fourtruths right on the scene that made everybody completely uncomfortable, andthey realize, yeah, we don't tell the truth all that often.

Ron Baker: His mantra was "everybody lies," so he never took anybody's word for it. Like hesaid, it was a principle. It was a heuristic that served him quite well; but, boy, hewould go to the ends of the earth for a patient to save their life. I remember oneof his doctors challenging him; he said, "Oh, yeah. I'm trying to save her life. I'mmorally bankrupt."

Ed Kless: My other favorite was, "Oh, that's right. We must follow the process. We mustn'tlet results get in the way."

Ron Baker: Of process. That is a great [inaudible 00:26:50]. The thing that strikes me aboutKant, and I guess it's the most vivid portrayal of this in my mind, is I think it wasthe history channel that did a documentary on the morning of 9/11 in New York.  It was a compendium of just people's home videos, like off their cellphones ortheir video cameras, and they just kind of ran them all together.  There's one scene of a fireman showing up on the scene of the towers after thefirst one had collapsed, and he's gearing up. He's putting on all of his heavy gear,  and he's going to run into the tower and try and help these strangers get out. Heglances up at the second tower as it's smoldering, and he says, "That's thestairway to heaven." Like you always say, Ed, "If this building catches on fire, I'llbe running out;" but we know there'd be hundreds of people running in. Kantwould say "That's his duty. Good for him."

Ed Kless: He was doing his duty.

Ron Baker: He did perish, by the way. 

Ed Kless: Yes.

Ron Baker: The thought was nobody asked him to be a fireman. He knew the dangerssigning up just like you do when you enlist in the military. One thing, and I wastelling you about this book I just got done reading called, "The Rule of Nobody"  by Howard Phillips, and he said, "The rule of law without human judgement is atyranny."  Just one quick example of doing the right thing: A lifeguard, I believe it was inFlorida. I don't remember exactly; but he actually went out of his zone on thebeach and saved a life, and they fired him because he didn't stay within his zone.

Ed Kless: Okay, so the ethical piece of that is the duty to stay in the zone? Or is it the dutyto save the life?

Ron Baker: Exactly. The duty to do the right thing. We've had a case down here in the Bayarea where a fireman and a cop stood on a beach and watched a man drownedbecause their life-saving certification had expired and their cards weren't up todate. Actually, a bystander went in and tried to save the person, a completestranger, and a cop and a fireman or paramedic stood on the beach and watchedthis whole thing and wouldn't go in the water. Kant would be spinning in hisgrave.

Ed Kless: Right, and I guess the idea was if they had done this, it would've been knownthat their cards had expired and, therefore, regardless of the result, would'vebeen open to a lawsuit, etc. 

Ron Baker: Correct. I know you fly a lot, and I'm sure it's happened to you. You've probablyhad a medical emergency onboard, or maybe your plane was diverted once. It'shappened to me maybe five or six times. You know how they always go on andask "Is there a medical personnel on the plane? A doctor? A nurse?"

Ed Kless: Yeah, that's happened to me twice. 

Ron Baker: Every time, Ed, somebody volunteers, and I really have to commend them, insuch a litigious society as ours, that they are taking a huge risk; but you knowwhat? They're doing the right thing. They're doing their duty.

Ed Kless: Let's talk about this. Let's again try to bring this down to the business contexthere and how would you see deontology and playing a day in everyday ethics inthe workplace? Let's face it, most of the people who are listening to thisbroadcast are not going to be in a situation where they're going to have todecide whether to save a life or not. 

Ron Baker: Right, and you know most ethical dilemmas are not between right and wrong.  We kind of already know that difference. You probably knew that as a child, atsome point, your ethical framework is formed. It's actually the dilemmas that areright versus maybe less right that cause some of the ethical dilemmas andconundrums that we face.  Another favorite definition of mine, and I really do love this one. It's from the[Josephin 00:30:47] Institute, which is a think tank in Southern California, andthey say "Ethics is about how we meet the challenge of doing the right thingwhen that will cost more than we want to pay." They don't just mean amonetary price, Ed, they mean sometimes doing the right thing, which is usuallythe hardest thing to do, will cost you a friendship. It will cost you a job. It willcost you a marriage. It's not just a monetary price.

Ed Kless: That's the application. If you notice a coworker who's figuring out a way to placeorders at the end of the month so that his or her numbers won't be hurting onthe guy's ... Well, they're just going to come in early next month anyway. It'sthings like that, and what do you do in those circumstances? Do you tell?  Especially if you're operating in a public company, right?

Ron Baker: Right. I always try and think of the Oscar Wilde line, "No man is rich enough tobuy back his past." It's a reputation of a business; or if you're a professional, it'syour personal reputation, and you can lose that very, very quick. I'll tell you, ifyou lose that, you've lost everything, so no amount of short-term gain is worth it. 

Ed Kless: We'll be sure to post this on the website. My favorite example of that is theArthur Andersen website, which is Andersen.com you go to, and all that's left ofthe great Arthur Andersen is a webpage, static webpage, that says ArthurAndersen, and then there's an address for Chicago. It might as well ... It doesn'tsay this, but it might as well say Please send all legal correspondence here.  I often wonder what it must've been like for ... And maybe there's even some inour audience who were there at Arthur Andersen when the whole Enron scandalbegan to completely unravel, what it must've been like to go into the officeevery day thinking I work for a company that has really had a significant andserious ethical breach. 

Ron Baker: It must've been very, very painful and, in fact, there was a billboard campaignthat Maker's Mark ran at the time in between the Enron blowing up and AAbeing indicted, so it was that time period where you would pick up the paperevery day and see 50 more companies fired Arthur Andersen as their auditor, sothe firm was kind of already imploding before the indictment, and the Marker'sMark ad showed a picture of a Maker's Mark bottle tipping over, and it said"disappears faster than a Big Five accounting firm." 

Ed Kless: Ouch. Did you have any friends who survived that, Ron? Who were in Andersenat the time? It really must've been devastating to their psyche.

Ron Baker: It was. I didn't personally, Ed, but my ex-partner, Justin, who was an AA personfrom Houston, I might add, so he knew some of the people involved in theArthur Andersen audit. Now they all kind of landed in other firms and things likethat but, yeah, there was an enormous hit and, yeah, I can imagine it must'vebeen devastating.  The same thing happened to Lockheed in the 1970's. I kind of date myself here,  but Lockheed got caught bribing defense officials, I think it was in theNetherlands, to accept their defense contracts, and they got caught for it and itled to the passage of the foreign corrupts practices act by congress where youcouldn't do this.  Lockheed undertook this enormous study. They brought in economists andpsychologists and industrial people, and they said, "What makes really smartpeople ..." Let's face it, we are talking rocket scientists, literally, " ... Lockheed todo these unethical things?"  The report is very long, and you can get it on-line, but the executive summarybasically says there's four things: One, pressure to meet organizational goals,  objectives, or deadlines; lack of resources; peer pressure; and a belief that thedecision was in the organization's best interest. I think those exact same thingsapplied to David Duncan, who was a lead auditor at Arthur Andersen on Enron. 

Ed Kless: Don't they apply to everyone in business? The conversations that are had, wellthis is in the best interest of the shareholders or the best interest of the firm orthe best interest of whomever. Let's take it out even to politics. It's in the bestinterest of the nation in the Edward Snowden case.

Ron Baker: Absolutely, and I think it's even, like you said, it's even more intense pressure tofudge or cheat when you see your peers doing it. When somebody within oursocial group is doing it, then it almost becomes overwhelming.

Ed Kless: "We hold these truths to be self-evident, that all men are created equal, thatthey are endowed by their Creator with certain inalienable rights; that amongthese are life, liberty, and the pursuit of happiness." Thomas Jefferson, of course,  Declaration of Independence, July 4, 1776.  For those of you who have been listening to the show, we started our show onJuly 4th of this year and ended a whole show where we talked about theDeclaration of Independence, but we were declaring our independence from thetyranny of Taylorism; but, really, the same thing is true. What they were talkingabout was a rights-based theory, a rights-based theory of ethics. Ron, why don'tyou introduce us to this concept? This is the third of the great theories, right?

Ron Baker: Yes, and I really like this one, of course, because it basically says that our rightscome from our Creator. They're not something that's granted to us bygovernment. The people created the government in this country, and I thinkthat's what we mean by American [Exceptualism 00:36:50]. It was the first timethat we basically, the people, were telling the government what they could dorather than the other way around.  The thing about rights theories is, there's negative rights and positive rights.  Sometimes this is referred to as negative obligations and positive obligations;  but if you look at our constitution and especially the Bill of Rights, the first tenamendments to the constitution, all of our rights, Ed, are framed negatively.  You have a right to free speech, but that doesn't mean I have to pay for yourradio show. You have a right to privacy, but that doesn't mean I have to buy youVenetian blinds; or you have a right to a gun, but that doesn't mean I have tosupply them. In other words, because you have a right imposes no obligation onanybody else, and that's the negative right, and that's how our documents andour entire system has been framed.

Ed Kless: Yes, and I think the people misunderstand that because, unfortunately, thewords 'negative rights' sounds almost like it's a bad thing. Wait a minute, I havenegative rights? That's got to be bad for me. No, it's actually the imposition.  What does it cause for another? Again, by you having something, it does notdegrade me having it as well.

Ron Baker: Right, and the way to really bring the contrast, because everything's contextual,  is to compare that negative right to a positive right. My favorite example ofpositive rights is the United Nations Declaration of Universal Human Rightswhere apparently, Ed, we all have the right to a certain caloric food intake perday, a roof over our head, adequate clothing, medical care, and now even avacation. 

Ed Kless: What does that actually mean then? If I have a right to caloric intake, I can sit onmy bum and wait for people to serve me? Is that what it means by that right?

Ron Baker: That means that somebody has an obligation to provide those calories to you;  but what if the doctor thinks you're a jerk and doesn't want to treat you? Or thecarpenter doesn't want to build your home? Or the employer ... Oh, by the way,  you have the right to a living job ... A job at a living wage. What if the employerdoesn't want to hire you? In other words, it puts an obligation on somebody toprovide these things, and that's why it's called a positive obligation. When youstart thinking about that, start thinking, hmm, that doesn't sound like freedom tome. 

Ed Kless: We have to then ... It would be wrong for us not to bring up the idea of Ayn Randhere, who one of my favorite points of argument with people, although I'm notan objectivist, would be to say by what standard, or by whose standard are yougoing to judge this?

Ron Baker: Right; because she argued that there was no such entity as a society, so onlyindividuals could be moral. Yeah, I think she does lay out a pretty compellingcase for natural rights.

Ed Kless: Although I don't see what she sees at the top of the mountain is really where wediverge paths. 

Ron Baker: Right. The other set of ethics that we talked about, the other school of thoughtcalled ... I call them schools of thoughts, probably the wrong phrase, but is virtueethics, and these were the Greeks. The Greeks thought that everything revolvedaround character. They thought character was destiny, and character and virtuewas its own reward. Kind of like utilitarians, they thought that we were a bundleof virtues and vices, and that the sum total of our virtues and vices developedand formed our character.  If you've ever used that phrase "I can't believe they did that. That's totally out ofcharacter for them," that's a very virtue ethics way of looking at things. Is thereno doubt that if you're an HR person in a company, I would rather hiresomebody with good character and weak skills than the opposite.

Ed Kless: Yes, and I've always felt that. It's really about hiring for behaviors, or what I liketo call behaviors rather than particular skills. Skills are relatively easy to educatefolks on. Those things ... No, not high-level technical skills, but I'm going topresuppose some aptitude for that. If there are certain skills that people need toacquire, that's way easier to acquire than are they going to be an ethical person? 

Ron Baker: Right. I guess to bring this all back like we always try to do to a business setting,  business is a serious moral enterprise. You do have to do right by strangers, i.e.,  customers, and you do have to serve them, and you do have to put theirinterests before your own.  When I'm sitting on a plane at 11:00 at night flying to some little podunk city, I'mthinking to myself, this pilot doesn't know me. He doesn't care about me. Hemay be a different religion or whatever, and yet he's flying me, and he's enablingme to earn a living and, yeah, he's doing it out of his own self-interest, but isn'tthat a good thing, because he's serving me. 

Ed Kless: Yep. The good news about pilots, too, is they don't want to die either, which Ialways feel very comforting in that, and I'm constantly surprised by peoplearound me who, if we have to pull back in to whatever airport, weather's bad,  malfunction, we don't want to risk it, the people who complain. I'm like, really?

Ron Baker: It's amazing.

Ed Kless: No, no, I'm okay. This guy thinks that there might be something wrong with thebrakes, yeah, that's okay. Let's get off the plane. Thanks. 

Ron Baker: I'm going to take his word for it, absolutely. I guess, again, this 100,000-year timespan from our ancestors in tribes to today, we have all these strangers out therewilling and able to service us and add more value than what we pay them, and Ithink that's a pretty good way to organize a society.

Ed Kless: Which is our case on this idea of the soul of enterprise is that business has amoral component. It's got a vocational component. It's a calling. It's about payingit forward. We've talked a lot about that, this idea that it's looking forward.  I know we've mentioned this before, but George Gilder's idea that profit is anindex of your altruism, I think, comes to bear really in this whole conversationabout ethics, because let's face it, all these four different schools of ethics orwhatever it was that we wanted to call them, we're going to take pieces fromthem and apply them to our lives; but the reality is that as business people, wehave a higher calling to our customers; and it's a good calling. It's a decentcalling. It's a moral calling.  If there's anything that you and I are about, it's about bringing that word out toother people, because we just see it persecuted left and right. 

Ron Baker: I agree, and I do think it's a serious moral enterprise, and I just wish that peoplewould stop thinking about it as being greedy. Greed has been around forever. It'sone of the seven daily sins. Business has nothing to do with greed. You're notgoing to succeed in the long-run if you're greedy.

Ed Kless: No, everybody's greedy. Everybody else is greedy. It's always the other guy,  never me.

Ron Baker: Right. Greed's kind of a constant, so it doesn't really explain much.   

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