An MBA student of mine who had just read my book commented: “Those principles you write about make a lot of sense, but at the same time, business is ruthless, and most people do not follow such moral principles. How can you act on principle when others don’t?” My immediate answer was: “What alternative do you have? What are principles for?” I then went on to explain why it pays to act on principle in business—and in life—even when we observe others around us not doing it.
By acting on principle I mean consistently applying principles we know to be true, based on evidence. For example, engineers build bridges and other structures based on engineering principles (such as the strength of materials), farmers grow crops based on the principles of agriculture (“cultivate the soil before sowing”), and advertises advertise products and services based on advertising principles (“the form of an ad should not overshadow its message”). People have identified valid principles in every field, but I focus on moral principles—fundamental principles that shape our character and life course—such as rationality, honesty, integrity, and justice.
So what are principles for? Principles are general truths that act as guidelines for achieving our values: a sound bridge or a building (as opposed to one that collapses, injuring or killing people), a good crop yield, increased sales of products or services, or a happy life/a successful business (as opposed to a miserable life or death, or a bankrupt business). What is the alternative to acting on principle? Abandoning them, and acting on impulse, on expediency, or by following what everyone else is doing. (For examples, look at today’s politics).
Why is abandoning principles a bad idea? It’s bad because as fallible beings, identifying and applying principles is our only means of achieving our values. Unlike other species, we don’t know automatically what is a value or how to achieve it. Unlike animals that have been programmed by evolution to sustain their lives, we cannot safely act on impulse and hope to survive. We need to observe and think to determine that a structurally sound building is a value and a shoddily built one is not, that a truthful advertisement is a value and a deceptive one is not, that wealth creation is a value but a fraud is not. And we need to observe and think to identify the principles that allow us to achieve our values, long term, and then to choose deliberately to act on them.
I want to point out that while principles are absolute, they are not dogmatic rules: they must be applied in their context. For example, the principle of honesty does not command: “Never lie.” That would be a dogmatic order which ignores the context, compelling us always to tell the truth, even to those who are threatening our values with physical force, such as a thief or a terrorist. Instead, the principle of honesty guides us not to fake reality in order to gain a value—because values cannot be gained by faking: by deceptive advertising, or another fraudulent transaction. This principle guides us to take the context into consideration and not to reveal the truth to those who initiate physical force to threaten our values. Similarly, following the principle of independence does not mean that we cannot receive a loan from the bank to start a business, or advice from a consultant—as long as we think and act independently in using the money and the advice in pursuing successful business.
It is true that in business, like in every realm of life, there are people who have not identified or have abandoned valid moral principles and try to pursue success without them. By throwing out valid moral principles, they are abandoning not only integrity, but rationality, honesty, justice, independence, productiveness, and pride—and any chance of obtaining long-term success. Should you give up principles because others do it, your fate would be the same. A better policy is to stick to your principles, to identify other principled people (using the principle of justice), and to choose do business with them, avoiding the unprincipled ones. Principled businesspeople are out there—long-term wealth creation through production and trade can only be sustained by principled action.