May 2012 Archive

The role that the Internet plays in our lives today is truly astounding.

Facebook’s IPO is an indicative example. The second largest in the U.S. it raised $16 billion, selling 421 million shares at $38.00 a share. At that price, the share is selling at 108 times earning! The price dropped some 20% since the offering. Facebook has approximately 800 million active users worldwide and only 1,300 employees, many of whom have become quite wealthy since the IPO.  

According to the European Travel Commission - New Media Trend Watch there were 2.3 billion internet users (2,279,709,629) worldwide in the first quarter of 2012, which represents approximately 30% of the world’s population.

From an ethics point of view, the Internet presents some interesting challenges. It is a tool in communication that can be used for evil as well as for good.

Crimes such as people trafficking for prostitution, child pornography and fraud are facilitated by the Internet. 

On May 22^nd. Interpol announced a global operation targeting individuals using social networking sites such as Facebook, to exchange child abuse material. Interpol arrested 55 suspects in 20 countries and rescued 12 children.

The Jewish Orthodox community in New York is aware of the risks of the Internet. On Sunday May 20^th 2012 a gathering of some 40,000 ultra-Orthodox Jews in Citi Field to alert their community on the risk of the Internet such as addiction and pornography, and how to use it in a religiously responsible way. One of the organizers said: “The risk comes not only from pornography but from social media and the addictive pull of the Internet, which can limit human interaction, reading and study.” He added: “These are the same concerns that people across society - in academia, in psychology, parents, spouses have about the Internet.”

The Internet can also be an amazing tool for good.

The Jed Foundation whose mission is to prevent suicide among college students uses social media in its prevention strategy. John MacPhee, its executive director, said, “There are a huge number of students who aren’t talking about their distress. Social media is a vehicle for communication and education to help understand what is going on with themselves or friends.”

Last week, Children’s Right launched, with the help of RF Studios, an interactive Facebook experience organized called “Trapped” that allows the user to get more information about the tragic situation of many children’s in the Foster care system. Marcia Lowry, the Founder and Executive Director of Children’s Rights says: “Few people know that many children exit foster care far worse off than when they entered… Trapped? is a compelling means of informing a wide swath of the public about these grim realities.”

Ultimately, as responsible human beings, it is really about the moral choices we make. It is up to us to “do the right thing” whether in the cyber world or in the “real” world.

As Eleanor Roosevelt once said:

“One’s philosophy is not best expressed in words; it is expressed in the choices one makes… and the choices we make are ultimately our responsibility.

Can it be called a wake-up call if the parties involved go right back to sleep?  

Last week it was made public that JPMorgan Chase had lost $2 billion of its own money in trading of derivatives. The bank is the largest assets and wealth management in the world and the largest U.S. bank with more than 270,000 employees and more than $ 1.4 trillion under management. Since the announcement, it lost 10% of its share value.  The Wall Street journal estimates that the real loss could possibly be of more than $ 4 billion. Jamie Dimon, the CEO said: “In hindsight, the new strategy was flawed, complex, poorly reviewed, poorly executed and poorly monitored.”

There have been a number of so-called “wake-up calls” for the financial industry these past few years. Let me mention just a few:

• The collapse of Lehman in 2008 that provoked a crisis that nearly toppled the U.S. economy and provoked the largest economic downturn in this country since the Great Depression.
• MF Global “lost $1.6 billion of customer’s money, 75 % of its share value, last year which led the company into bankruptcy.
• UBS suffered a trading loss of $2.3 billion dollars in 2011 as well.

The New York Times editorial dated Saturday May 12, 2012 entitled JPMorgan Chase’s $2 Billion Loss-The lesson is that the banks haven’t learned their lesson and neither have the politicians. The editorial calls for the adoption of the Volcker rule that would “curtail risky and speculative trading with a bank’s own capital.” and against a repeal or weakening of the Dodd-Frank Act.  It concludes by saying “Now politicians and regulators need to stand up to the banks.”

It seems to me that Wall Street has been engaged in continued reckless behavior apparently refusing to learn from past mistakes. (Although I would be surprised if those engaged with what we consider in hindsight reckless behavior thought of their actions as being reckless. The might have honestly believed that there were just risk-takers.)

Gretchen Morgenson, the New York Times Pulitzer Prize-winning columnist documented that behavior in her book Reckless Endangerment-How Outsized Ambition, Greed and Corruption led to Economic Armageddon published in 2011. In her article entitled JPMorgan’s Ghost of Dinner Parties Past, published last Saturday about the JPMorgan loss she wrote that “the hypocrisy is that our nation’s big financial institutions protected by implied taxpayer guarantees oppose regulation on the grounds that it would increase their costs and reduce their profit.” She quotes Mr. Greenberger a law professor at the University of Maryland and an expert on derivative. He said: “These regulations are not just protecting the United States taxpayers, they protect the bank themselves. The best friend of these banks would be laws that prevent them from shooting themselves in the foot. The fact is, they can’t do it themselves.” And Ms. Morgenson adds “as if we had to hear that lesson again.”   

Learning from our mistakes is not easy but can be vital. To learn from our mistakes we must first embrace them, own them; analyze them and then change behavior because there is always the risk of that fatal mistake you can never learn from.

Dale E. Turner, author of Words of Wisdom wrote: “It is the highest form of self-respect to admit our errors and mistakes and make amends for them. To make a mistake is only an error in judgment, but to adhere to it when it is discovered shows infirmity of character.”

I am afraid he just described Wall Street.

The British parliament culture committee said that Rupert Murdoch, chairman of News Corp (which owns the Wall Street Journal) is not fit to run the company that he created because he has shown “willful blindness” in the management (or mismanagement) of his company.  In other words, the parliamentarians do not believe that Murdoch’s claim of ignorance in the phone hacking and other malfeasance is acceptable.

The concept of “willful blindness” is not new but dates to Victorian times. According to Ken LaMance, attorney and managing editor of Legal Match Law Library “it describes a situation where a person intentionally avoid learning of facts or occurrences so to avoid criminal or civil liability.”

Margaret Heffernan, author of Willful Blindness: Why We Ignore the Obvious at our Peril believes that “willful blindness is not just a character flaw; it is a structural trap that lies in wait for anyone in power.  She has observed in her rich corporate and academic life that people in power have a tendency to surround themselves with people who “tell them what they want to hear and hide from them what they imagine they don’t want to hear.” She says: “the truth is that it takes individuals of terrific integrity and fortitude to resist the willful blindness that comes with power.”

I believe that we all have a tendency to avoid facing reality particularly when we think that the reality we are avoiding could be detrimental to our well being.

Per Segerdahl, editor of the Ethics Blog and Associate Professor of Philosophy at the Center for Research Ethics & Bioethics of Uppsala University says that “our ethical challenges are more typically about thinking well; about understanding complex facts properly; about avoiding tempting oversimplifications in our descriptions of reality. In short, our ethical challenges are very much about facing reality well.”

Facing reality sometimes takes courage but it is worth it. Let me list two of its many benefits:

Facing reality may prevent a disaster because situations do deteriorate with time and a remedy is sometime possible and it will save time because sooner or later, that reality we tried to avoid will face us!

Melody Beattie believes that gratitude can be a remedy to denial. I like this intriguing idea.

She wrote: 

“Gratitude unlocks the fullness of life. It turns what we have into enough, and more. It turns denial into acceptance, chaos to order, confusion to clarity. It can turn a meal into a feast, a house into a home, a stranger into a friend. Gratitude makes sense of our past, brings peace for today, and creates a vision for tomorrow.“

Sadly, gratitude is not the most common emotion among people of power and wealth!

As the Roman historian Sallust once said:

“Ambition forgets the obligation of gratitude.”