Classical economics is heavily involved with the concept of self-interest: in the pursuit of your own ends, you make yourself productive to the rest of society. But what is your self-interest? Chicago Booth’s John Paul Rollert says that self-interest is a set of concerns that’s different for each of us, both in the things that it entails and the trade-offs we make among those things. The decisions we make about those trade-offs have important consequences for our professional lives, the business world at large, and our own personal identities.
What’s in your self-interest? Most of us don’t ask ourselves that question very often. Probably we don’t even think about it, not in those terms at least.
If it means anything, our self-interest is just the sum total of the choices we make, how we decide to spend our time each and every day, like if you decide to learn Vulcan because your girlfriend says your life decisions are illogical, and you want a deeper insight into Spock, or if you hit the gym at 6 a.m. every morning because you’ve been double fisting Dunkin’ Donuts and it’s almost June, and hey, sun’s out, guns out.
Or, if you go to your Aunt Sophia’s house for dinner because it’s Sunday and she made linguini and she’s very proud of her linguini. “Special recipe,” she says, “Straight from the Old Country,” and, well, you know you should. And of course you’ll play pinochle afterward because it’s been almost a year since Uncle Elmer died and, yes, you know it will make her happy, and you told your mom, “Yes, I’ll go. I’ll go. I’ll go!”
In any of these cases, you might say this: “This is my self-interest, going about my days, doing the things I wanna do, the things that I think are important to me. My actions say enough.” Maybe so, but when economists use the term self-interest—and they use that term a lot—they mean something slightly different. You’ll often hear them talk about the pursuit of self-interest in a commercial sphere, and what motivates that pursuit. Frequently, they’ll invoke this guy, Adam Smith.
When Smith wrote The Wealth of Nations, the foundational text for modern economics, he was interested in the question of how we motivate people to get what we want from them. Near the beginning of the book, he famously said, “It is not from the benevolence of the butcher, the baker, or the brewer that we expect our dinner but from their regard to their own interest. We address ourselves not to their humanity but to their self-love and never talk to them of our own necessities but of their advantages.”
Another way of saying this is that if I want something from you, I’m not going to tell you about my interests. I’m going to try to figure out yours. If you’re a butcher, a baker, or a brewer, and my interest is ham, dinner rolls, and a frothy mug of stout, I’m probably going to get what I want by giving you what you want: a fistful of dollars.
Fair enough, but even if you think Smith is onto something, does that therefore mean that money is our only interest, that the money motive is really the only motive that moves us? It can sometimes sound that way when we talk about the pursuit of self-interest as if it would be silly or naive to appeal to motives like honor or fairness or common cause or even kindness. These things don’t move us—or at least they don’t really move us, not the way money does. We could try appealing to them or we could wise up and realize how the world actually works.
In the 1970s, the debate about the nature and purpose of self-interest took shape around the mission of the modern company. At the time, there was a strong belief among some very famous economists such as Milton Friedman, Michael Jensen, and William Meckling that the motives that were guiding senior executives at many major American companies were inconsistent with sound business practices. These executives, they said, were spending too much time focused on the wrong set of interests, such as rewarding the loyalty of employees, supporting the communities they were part of, or protecting the environment, when only one interest should guide them: making money.
Now, whatever you make of this conclusion, it needn’t be said that making the shareholders of a company as much money as possible doesn’t also mean that you or I or anyone else working at the company is also making as much money as possible. Our interests and the interests of shareholders aren’t one in the same, which, for these economists, was precisely the problem. They therefore focused on what is known as the principal-agent problem in economics. Say you’re the principal, and I’m the agent. When you pay me to do some task, how can you assure that I do it with the same hard work, efficiency, and intelligence that you would show were you doing the task?
Now, to be clear, this isn’t just a matter of getting the job done. If you pay me to paint your house, and it takes me seven years and 300 buckets of paint, and when I’m done, your foyer looks like the fever dream of Jackson Pollock, we can safely say that your interests were not fully realized, no matter how delighted I am with the final product. If, then, you’re a shareholder, and your interest is that the company makes as much money as possible, if I’m an executive at the company, you need to make sure that’s my interest too—indeed, my only interest. As your agent, I shouldn’t bother with creating a sustainable workplace, providing paid family leave, or pursuing any other type of interest that might undermine profits. The company’s bottom line should be my only line of concern.
In order to solve this problem, Michael Jensen and William Meckling spent a lot of time in the ’70s and ’80s talking about the virtue of stock options packages, performance bonuses, and other ways of making money a primary lever of human action. This wasn’t because they believed that money was the most important thing in the world, much less that it was the only thing that mattered to people. On the contrary, as Jensen and Meckling wrote, “Where money incentives are required, they are required precisely because people are motivated by things other than money,” which is another way of saying that if I need you to care only about money, I better be offering you a lot of it.
Now, whatever you make of the notion that a company should have no interest guiding its actions other than profitability, let’s be clear that this position is not required by law, custom, or the history of the American business. In fact, there are plenty of companies, such as Patagonia, Chick-fil-A, and Zappos, that have made concerns other than making money a central part of their corporate strategy. The larger point, though, is that whether you’re talking about an individual or a business enterprise, caring about only one type of interest is something of a perilous venture. Most of us spend our entire lives navigating an evolving set of interests and the moral trade-offs we have to make whenever we choose between them. Yes, you can spend 100 hours a week at the office, but if you do, you’ll have to give up your interest in, say, reading War and Peace, watching your son play soccer, or just getting a good night’s sleep. The bottom line is that it’s just not normal to care about only one thing, inside or outside of business, and structuring institutions to inflame one type of interest so that we are tempted to sacrifice everything else in its favor—health, hobbies, higher aims, personal dignity, individual conscience, peace of mind, or even Sunday dinner with Aunt Sophia—well, it’s a dangerous endeavor at best. In the final analysis, the trade-offs we are willing to make among our various interests define the contours of our individual ethics as well as the “self” at stake in self-interest.
So let’s go back to the original question and let’s change it slightly. What are the interests in your self-interest, and what are the trade-offs you’re willing to make between them? And most importantly, what does that choice say about you?
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