Adam Smith, Identity and Cheating

In The Theory of Moral Sentiments Adam Smith wrote: 

“Man naturally desires, not only to be loved, but to be lovely; or to be that thing which is the natural and proper object of love. He naturally dreads, not only to be hated, but to be hateful; or to be that thing which is the natural and proper object of hatred.”

When it comes to behaving in ways that appear to violate our values, how influential is this natural desire for constituent belonging that Adam Smith talks about.   When we are in the right lane, driving along at 59mph in a 55mph zone while everyone else is zooming past at 70mph or more, and suddenly someone pulls close behind us.  Is it our desire, as Smith expressed it, not to be “that thing which is the natural and proper object of hatred” that causes us then to speed up to 63mph?  

Our Identity is formed in how others see us.  We nurture the right Identity and seek constituent acknowledgement of that Identity.  We avoid things that would diminish our identity.  Dan Ariely has done loads of experiments which suggest that we all cheat.  If driving over the speed limit is cheating (which it is) then his extrapolation to the whole population is probably right.   In Chicago it is fair to say that everyone speeds.  

In environments where cheating occurs, we only cheat by a small amount, perhaps an amount that leaves us with a result that most people could believe we are capable.  We don’t go so far that in our own eyes we become unworthy.  We expect to get away with it and perhaps enhance our public persona in the process.  Ariely suggest that we all cheat a bit from time to time...on our taxes, on expense reports, on insurance claims, on our resumes, and on the golf course,...of course.

Paying Attention to the Unintended Mis-direction

SEMCO is an extraordinary Brazilian company.  It operates on a Peer-to-Peer Accountability basis and has consistently performed superbly.  Like similar unusual and successful enterprises, NUMMI, Morning Star Company, Gore, and others, people visit the company from time to time to glean some ideas they might implement in their own enterprises to mimic SEMCO’s great results.

Sometimes, however, they take away the wrong thing.  Ricardo Semler, the owner of SEMCO wrote in an HBR article years ago, that the U.S. president of Allis-Chalmers came to visit.  During his tour he became enamored with their accounting departments fast, comprehensive, detailed, and organized monthly reporting process.  It even reported how much coffee workers were drinking in a particular plant.  He was so impressed with it that he ordered his Brazilian subsidiary to install the same type of system in their much larger business.

His interest in the system caused SEMCO to take a more critical look at it themselves.  As it turned out they realized that the meaningful information was being buried by the shovelfuls of detailed data.  They scrapped it favor of a much less detailed accounting and reporting system.  The reports now became much more valuable.

What happened to Allis-Chalmers in Brazil.  Well they ended up losing so much money and market share that the parts were broken up and sold off.  

Just because you observe a very successful company doing something, doesn’t mean it is a source of their success.  It may just be something they do.

Good Read: Monopoly Rules by Dr. Milind Lele

Monopoly Rules does something interesting.  It takes a concept like niche marketing and with the simple pen stroke changing the word from ‘niche’ to ‘monopoly’ opens up a wonderful new way of thinking about market position.  The author suggest that the prime goal for any company is to hold a monopoly position in whatever you deliver for customers.  Harvard graduate Dr Milind Lele, the author, suggests that there are five tests for monopoly

1. Do your customers see only you?
2. Are you invisible to your competitors?
3. Are your true competitors outside the dotted lines? 
4. Do you price like a monopolist?
5. Do you earn unusually high profits?

Monopolies do not sustain.  The author advises successful entrepreneurs to be always thinking about their next monopolies.