The Ethics of a ‘Passive’ Investment
Modern economies have severed surplus from work.The Ethics of a ‘Passive’ Investment
A sellout. At business schools, the epithet is less likely an accusation than the makings of a quiet misgiving: Am I one? Am I a sellout?
Students don’t ask me for my verdict. If they did, I would tell them: it all depends on what you’re selling—and why exactly it’s being sold.
The danger of “selling out” has long had theological overtones—and insofar as the answer to what you’re selling could be your eternal soul, a distinguished literary pedigree in the story of Faust.
A figure of German folklore inspired by at least one reputed sorcerer of the same name, Faust entered canonical literature in the late 16th century and, in time, was appropriated by writers such as Christopher Marlowe, Johann Wolfgang von Goethe, and Thomas Mann. In each of these authors’ imaginings, Faust’s offense is essentially the same. He is a savant (academically or artistically inclined) who sells his soul to the devil for an intimate acquaintance with genius and all the power that comes with it. “Whatever is the lot of humankind / I want to taste within my deepest self,” Faust says in his most famous incarnation, Goethe’s eponymous play:
I want to seize the highest and the lowest,
To load its woe and bliss upon my breast,
And thus expand my single self titanically
And in the end go down with all the rest.
Such ambitions must have seemed quite menacing to members of a Christian audience who were immediately reminded of the crime that got Adam and Eve banished from the Garden of Eden, but whatever one thinks of ransacking the Tree of Knowledge, the notion of selling one’s soul seems inadvisable, regardless of what one gets in exchange.
But why so? Why do we recoil at the idea of selling our souls, whether for art, for knowledge, or, more prosaically, for filthy lucre?
For the faithful, the answer is simple enough: whatever you might hope to gain by selling your soul, it can’t possibly be worth an eternity of damnation. But what about those who have no heavenly pretensions? Why should they care about some supernatural essence? Or, more intriguing yet, what about those who actually believe in an afterlife but hold that the bargain of going to work on Wall Street is merely hellish hours, not a bar to the pearly gates?
Even if you don’t believe that accepting an offer from Goldman Sachs risks damnation, this doesn’t mean the idea of selling your soul is incoherent. Rather, it is a metaphor for the hazard of misvaluation.
There are two senses in which the hazard of misvaluation might be understood. The first is more familiar to economics classrooms than colloquies about ethics. Professionally speaking, selling your soul or, less dramatically, selling out is a slur only insofar as you didn’t get the proper price for your time and attention. You are fundamentally for sale, because everything is for sale. The price for your person—mind, body, and soul—is not some abstruse matter of moral disputation but a straightforward case of profit maximization. The offense isn’t selling your soul per se, but failing to get every last penny for it.
Now, when it comes to selling one’s soul, the misvaluation that haunts most people is neither identified with nor potentially remedied by the price mechanism. Instead, it involves the moral and practical implications of putting a price on one’s character. Judas’s mistake, we might say, was not that 30 pieces of silver was an insufficient price for betraying Jesus, but that his loyalty was for sale in the first place. This is essentially what we mean when we say that someone is selling his soul or, more simply, selling out. He is willing to sell something greater (honor, virtue, integrity) for something less (money), and striking such a bargain either corrupts one’s character or suggests it was already compromised to begin with.
Putting matters in this light raises an obvious question, however: Why might someone do such a thing in the first place?
If you take the eccentric approach of some economists, most notably those of the Chicago School, the matter is fairly straightforward. A person must be either ignorant or unskilled in striking a bargain that would maximize the return for her character. But if the misvaluation in question isn’t an economic matter, if it has something of a deeper moral or existential significance, the reason for the bargain may have less to do with an accounting error than a failure of will. Much like the man who raids the pantry for another cookie knowing that the indulgence will undercut his diet, we can be crystal clear in conscience that securing our integrity is far more important than stuffing our wallets and sell our souls nonetheless. Humans are fallible creatures, and lapses of intention are far more familiar than instances of iron resolve. Keeping this in mind can provide a helpful reminder that, if actions speak louder than words, it isn’t because the words themselves are necessarily hollow. Rather, talk is cheap, and it can be hard to live by the commitments our mouths so freely make.
Andrew Carnegie provides a useful illustration. Long before he became a steel baron, the 33-year-old Carnegie wrote to himself regarding the moral and practical upshot of the success he was already enjoying investing in railroads. “I propose to take an income no greater than $50,000 per annum!” he declared, identifying the dividend income he already enjoyed in 1868, just over $1 million a year in today’s dollars:
Beyond this I need ever earn, make no effort to increase my fortune, but spend the surplus each year for benevolent purposes! . . . Man must have an idol and the amassing of wealth is one of the worst species of idolatry! No idol is more debasing than the worship of money! Whatever I engage in I must push inordinately; therefore should I be careful to choose that life which will be the most elevating in its character. To continue much longer overwhelmed by business cares and with most of my thoughts wholly upon the way to make more money in the shortest time, must degrade me beyond hope of permanent recovery.
In the letter, Carnegie gave himself two more years to settle his business affairs before relocating to England to attend Oxford, make “the acquaintance of literary men,” and eventually purchase “some newspaper or live review” so that he could participate in “public matters.” Of course, even though Carnegie apparently kept this letter on his person, it would be more than 30 years before he finally gave up “the amassing of wealth” in favor of devoting all of his time to “benevolent purposes.”
Carnegie’s religious commitments are somewhat murky—he famously endowed thousands of church organs because the music they provided was the only part of Sunday services he could tolerate—but I assume that he did not literally view himself as having sold his soul to the devil for the benefit of US Steel. Nevertheless, his urgent concern over the corrupting influence of money and moneymaking highlights two potential perils of selling out.
The first is that, to the degree the practice of moneymaking encourages individuals to think consistently in terms of private benefit rather than public good, it tends to warp their approach to human affairs (of which, we sometimes forget, business conduct is always a portion). It isn’t a stretch to say that a life devoted to the single-minded pursuit of self-interest from nine-to-five tends to make one a little more selfish after hours, and, clearly, this is the degradation of character the young Carnegie hoped to avoid.
The second peril, however, is far more intriguing and, for my business school students, I suspect, much closer to the heart of their own fears when they contemplate selling out. It is hinted at in Carnegie’s warning to himself that he should be “careful to choose that life which will be the most elevating in its character.” The implication, of course, is that a life devoted to moneymaking doesn’t qualify, that there are better ways one could be spending one’s time, and, frankly, that even in his early 30s, a man who enjoyed the financial security that Andrew Carnegie did could afford to explore them.
While the notion seems quaint nowadays in light of the vigorous materialism that colors so much of contemporary life, Carnegie always doubted the worthiness of a life committed to moneymaking. “The millionaire business man rates his vocation higher than I, who sees in it the best or highest, or even a desirable career for his sons,” he wrote in 1891, nearly two dozen years after writing his letter and still a decade shy of its promised retirement.
The sons of the wealthy have a right instinct which tells them that to engage in work where the primary object is gain is unworthy of those who, relieved from the necessity of earning a livelihood, are in a position to devote themselves to any of the hundred pursuits in which their time and knowledge can be employed primarily for the good of the community.
Be a poet. Be a philosopher. Be a public servant. (Carnegie suggests.) You can be anything your heart desires if you don’t have to make money. (And if you do devote your life to making money nonetheless, know that it says something about your heart that hardly redounds to your credit.)
This, I suspect, is the real fear of my students when they contemplate selling their souls to the highest bidder. True, few of them enjoy the full luxury of choice that Andrew Carnegie contemplated, but even if they haven’t been entirely relieved of “the necessity of earning a livelihood,” my students know that their education has opened the doors to a wide array of professions that would all pay them quite well. Maybe they don’t want to be a poet or a philosopher, but they could launch a nonprofit, serve in the Treasury, or run a public hospital. Such avenues are all available to them, and I suspect that many of my students believe such work would be far more fulfilling and make a far greater impact on the world than the choices countenanced in most recruiting sessions. And yet, they are prepared to spurn such paths and the occasion they afford for upper middle-class comfort. Why so?
Set aside those students who have no qualms at all about moneymaking. They enjoy the eternal sunshine of a spotless mind—they don’t concern us. Of the bedeviled that remain, some feel the need to vaporize their student loans with alacrity, in which case they are making the rather unfortunate decision of treating their elite education as an anchor rather than an opportunity. Others overrate the scandalous implications of getting by on less than $100,000 a year. And finally, some cast aside career paths that are principally nonremunerative in favor of one goal chiefly: the potential for being unequivocally wealthy and perhaps even filthy rich.
If striking such bargains essentially captures what it means to sell out, what should we make of them?
Let me offer two thoughts. The first involves a key assumption of Andrew Carnegie’s letter, that, as a matter of moral estimation, not all vocations are created equal. Whether we would be inclined to admit that openly, most of us clearly believe this. We laud those who devote their lives to running into burning buildings and look askance at others who peddle predatory loans. These are extreme cases, of course, but if you look across professions, the allocation of esteem can vary considerably, and with good reason. One needn’t deem the vocation of a hedge fund manager hateful to believe the wealth enjoyed from that work is praise enough, and one may even go further in holding that the relative merits of the profession’s activities and the aims that guide them are worthy of debate. I am biased, but as an ethicist I think that not only are such controversies morally clarifying but they can have favorable repercussions for the world we share. Yes, the profit motive has a role to play in pushing society forward, but if the successful practice of a single-minded devotion to money entitles one to moral esteem as much as it does prestige, status, and purchasing power, soon we shall all be bankers.
The second thought is that ethics is mostly an art of managing trade-offs. If your world is one without hard decisions, you’ve either discovered a heaven on earth or you’re entirely delusional. Every day, we must make choices where any option has drawbacks, and the mark of moral maturity is not that we avoid these drawbacks altogether but that we accept the consequences of the choices that entail them.
How does this play out in practice? Over the years, I’ve had several students confide in me that, while they would love to take on post-MBA pursuits in which “their time and knowledge can be employed primarily for the good of the community,” they feel compelled to accept a job in banking or consulting in order to provide for their families. They don’t see such pursuits as necessarily wicked, but morally unremarkable, and given all that has been invested, not least in their Booth education, they feel like they should be doing something more.
I tell them there is nothing to apologize for, that I admire those who act with such a strong sense of duty toward those who depend on them. And yet, I add, in making this choice, they should be honest about the trade-offs. As a professional matter, they have chosen the responsibilities of family, not the opportunity to affirmatively improve the world around them. Their work does not admit of that reward, nor of the moral satisfaction that comes with it. It will most likely be what most work amounts to, a gray labor of going through the motions. It won’t be especially fulfilling, but it will entitle them to a biweekly bounty which will amply provide for their dependents.
To my mind, as long as one is clear about these trade-offs, there is nothing wrong with making such a choice. The danger is trying to convince yourself that they are not what they appear to be or even that they don’t exist in the first place. You are trading your labor for comfort and security, nothing more, nothing less. When you also endeavor to convince yourself that you really do love the work you do, that your time, your education, and your talents are all making the world a meaningfully better place, you are playing tricks of the mind that lead to moral and existential confusion.
You shouldn’t hate the work you do, but you needn’t love it, and you shouldn’t when there is no good reason for doing so. When you struggle to convince yourself nonetheless, the danger of succeeding is not that you sell your soul to the devil, but that you give it away gratis.
John Paul Rollert is adjunct associate professor of behavioral science at Chicago Booth.
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