Let's ask Confucius if greed is good

By Dr. Henry Wong Meng Yeong | Tuesday, May 14, 2013 at 7:10AM

Our discussion in this series of the seventh cornerstone 廉 -- which means honesty and incorruptibility -- brings us to the topic of greed.

You've probably noticed that greed is always somebody else’s problem. That's because we're all motivated, driven, and hungry, and we consider our own drive to be not greed but normal 'ambition.'

But it's crucial to distinguish between honest ambition and self-absorbed greed. Knowing the difference is what keeps some organizations and governments clean while others fall into corruption.

As we've learned, a hiring and promotion system based on meritocracy alone is severely flawed if integrity and principles are overlooked. Confucius maintains that if a person is honest, even if he's rewarded to steal, he won't. This nullifies the argument that unless employees are paid excessively they will be dishonest. Honesty and integrity cannot be bought.

Confucius also had a triangulated approach to spotting greed. Observe what he does, study his motivation, and examine what brings him contentment (i.e. whose interests does he serve?). The following three examples illustrate the point:

Clients entrust private bankers to manage and grow their wealth funds. Legendary financier J. P. Morgan was showing a client around the New York Yacht Club boat docks. "Those are my partners' yachts," he said. The client replied: "Where are the customers' yachts?"

Patients entrust their doctors and dentists to restore their medical and dental health. Information asymmetry is a monopoly of information which leaves the patient reliant on her doctor or dentist to make the decisions which should be in her best interest. If her entrusted clinicians are greedy, dishonest and unethical, taking advantage of information asymmetry to choose modalities of treatment for their lucrative gains instead of the best outcome for the patient, it would result in adverse selection (undesired results) and moral hazard (where risks are taken as the costs incurred are not taken by the party taking the risk). In economic parlance, this would be deemed market failure, which in this case will result in undesirable and even disastrous health outcomes.

Citizens entrust their countries to their ministers and government officials. Benefits from information asymmetry can result in insider trading or personal gain from the exploitation of restricted information. Confucius disowned his student Ran Qiu, who collected excessive levies and taxes from the citizens for personal gains and to feather his own nest. Are public or personal interests served by those entrusted with power?

Finally, Confucius warns that we should not work with the Gordon Gekkos of the world -- unprincipled people with no integrity. Their greed for personal gain will sway their loyalties. And ultimately they'll resort to every conceivable means to protect their vested interests.