This week I want to talk with you about the economics of ethics. I must say that I am one of those people who is cynical about teaching ethics to adults, especially business people. I believe that most of our value systems are built in our childhood and are based on the family and community values to which we were exposed. In a society where crime seems to pay, and pay well, it makes it more difficult to make a case for ethical behaviour.

I wish to share with you the wisdom of my mentor who so eloquently shared with me his understanding of the economics of ethics in business.

If you do business ethically, you can pretty much do business with anyone, even unethical people. You constantly make a choice to remain ethical in your dealings. As you grow more successful, you will become more and more tempted to become less and less ethical. The stakes become higher on both sides of the equation. You need to do bigger deals, requiring more ‘convincing’. The economics of convincing may become compelling for big deals. A small ‘Convincing Envelope’ is cheap relative to a multimillion rand deal. However, as we have seen in the press, the consequence of getting caught is losing everything. Just this week, a Beijing official was sentenced to death (suspended to a life sentence) for taking bribes, and someone I know fled the country after being caught defrauding his customers of over R100 million.

Let’s follow a scenario where you decide to do business unethically. The chances are very high that even if you are not caught, word will get out that you are not a straight up-and-down kind of guy. This is particularly true of small communities or industries. The consequence is that you will find it harder and harder to trade in the industry with ethical people. So you decide to then drop down to the next level. This is a level of people who are somewhat unethical. Because you are so smart, you manage to do some unethical business at this level too. You mange to con someone. Once again, word gets out and it becomes harder to do business at this level. Dropping a level then becomes your only option. This can continue - for many levels - until at some point the people you deal with are more unethical and smarter than you. They con you and you lose all your money.

Play this any way you like, the outcome is always the same. Short term gain, long term loss. The economics of unethical behavior do not add up in the long run.