My Principle #1: Integrity (Part 2)

Foreword

This is Part 2 of the “My Principle #1: Integrity” series – if you are a first reader, I would suggest that you first read “My 3 Principles at Life” and then “My Principle #1: Integrity (Part 1)” before diving into this article to get some context.

Now let’s get into it!
 

My Moral Reasoning Framework

As elusive as integrity and morality sounds, I am of the view that such concepts can always be broken down into systems and a set of rules. When thinking about the concept of integrity, I rely on the following formulas:

Decision Score = Max (Net Benefit to All Stakeholders) – Max (Integrity)
Where:

(1) Integrity = w(1)*Principle (1) + w(2)*Principle(2) … w(N)*Principle(N)
(2) Net benefit = Benefit {Stakeholder(1), Stakeholder(2) … Stakeholder(N)} – Benefit (Yourself)
(2)(a) Benefit (Stakeholder(X)) = w(1)*Factor(1) + w(2)*Factor(2) … w(N)*Factor(N)

Integrity
Your integrity is essentially a function of your principles, weighted (w) by how much that principle has been upheld or compromised. This means that if honesty is Principle (1) and you have chosen to lie, then (w) would be a negative number, which in turn negatively contributes to your overall integrity score for that particular decision. The “worse” the lie is, the more negative (w) will be. Personally, I adopt an absolutist approach in determining my core moral principles, which are honesty, fairness and trustworthiness. Therefore, I would always endeavour to achieve a positive (w) in all decisions that I make. In an ideal world, the integrity score should be maximised and kept constant in all scenarios.

Net benefit
Usually, the concept of integrity refers to the way you interact with others rather than with just yourself, and thus, it is appropriate to consider the benefits of the decision to you as competing with that of all other stakeholders. Ideally, I choose to make decisions where the net benefit is zero, as it would mean that both the others and yourself benefit equally relative to each other, i.e. win-win situation. If the net benefit is positive, it means you are putting others above yourself and vice versa.

Using the example of lying, if the lie is “good” for the other stakeholders other than yourself, then the net benefit score may be positive. Note that the concept of “benefit” is dependent on the factors for that particular situation, and is weighted (w) by the importance of that factor to that particular stakeholder; for example, physical factors, emotional factors or financial factors. This is obviously dynamic and enables the decision maker to take into account the surrounding context. Clearly, this is where I adopt a relativist approach to moral reasoning.

Decision Score
Combining the concepts of integrity and net benefit together, the decision made should theoretically allow you to uphold your integrity to the greatest extent while maximising the net benefit to all stakeholders. Therefore, it is appropriate to consider the net benefit score has competing with the integrity score, with the latter being a constant while the former as dynamic. Theoretically, the “line” is drawn when your decision score is negative, and on the flip side, the most optimal ethical decision is one that maximises the decision score, i.e. does not compromise your integrity and benefits all stakeholders.
 

Real Life Application: Fundraising

A major ethical dilemma that I face constantly is fundraising. As a tech start-up, we are always trying to value our company at the highest possible valuation to obtain more capital. However, while a high valuation would positively benefit the start-up, while it may arguably negatively benefit the investor who is purchasing the company at a high price and struggle to generate returns. This is a difficult and complex ethical dilemma.

Now, let’s unpack this using my moral reasoning framework. Here are the basic parameters in a fundraising scenario:

Decision Score = Max (Net Benefit to All Stakeholders) – Max (Integrity)
Where:

(1) Integrity = w(1)*(Honesty) + w(2)*(Trustworthiness) + w(3)*(Fairness)
(2) Net benefit = Benefit (Investor) – Benefit (Start-up)
(2)(a) Benefit (Investor) = w(1)*Return + w(2)*Risk
(2)(b) Benefit (Start-up) = w(1)*Capital + w(2)*Interest Carved-Out

Integrity Score
Prima facie, my three principles of honesty, trustworthiness and fairness ought not to be compromised. This means I would never ever engage in any sort of misleading and deceptive conduct, take advantage of the investor’s trust, or come up with some unfair terms to the other parties (This is of course obvious, but you would be surprised at how rare this is particularly in the crypto world…). In upholding my integrity, I would endeavour to have the highest possible (w) by being as honest, as trustworthy and as fair as possible in order to maximise my integrity score; this is underpinned by my absolutist approach. 

Net Benefit Score
In considering net benefit, the investor’s interest and the start-up’s interest are arguably competing, such that the investor would always wish for the lowest valuation possible to maximise return and minimise risk, while for the start-up, the goal is to maximise capital raised while minimising the interest carved-out. The ideal net benefit score would be zero, because this means both the investor and the start-up would come to a middle ground and achieve a win-win situation. Of course, the commercial reality is that both sides are trying to sway the benefit towards their own side, and so as a start-up, we would naturally wish for the net benefit to be slightly in the negative, but not so negative that the overall decision score would be in the negative range. In other words, if the valuation terms are so much in the start-up’s favour such that the benefit to the investor becomes hugely negative, then this would result in a large negative net benefit score, and thereby driving the overall decision score towards the negative assuming the integrity score remains constant. The moment the decision score becomes negative is where the “line” is drawn. This is underpinned by my relativist approach.

Decision Score
Therefore, as long as we as a start-up are always honest, trustworthy and fair, and that the net benefit is as close to zero as possible meaning that all parties come to a win-win scenario, then the overall decision score would be positive, and as such, the ultimate outcome would be morally and ethically acceptable.

Final Thoughts

In Part 1 and Part 2 of this series, I have shared my moral reasoning framework and given a real-life example. In a nutshell, I adopt an absolutist approach when determining my principles, and firmly believe that all individuals should be honest, trustworthy and fair. However, I enable myself to be flexible depending on the situation by adopting a relativist approach when determining when the “line” is crossed.

Ultimately, we should strive to optimise the decision score, such that our actions always uphold our integrity while simultaneously benefiting all the stakeholders. Given that your integrity should be maximised and kept constant at all times, the “line” shall be drawn when the decision score becomes negative, as such a scenario would imply that you have “crossed the line” in the process of achieving a benefit for yourselves at the expense of the other stakeholders.

“Missionaries change the world, not mercenaries” – Someone wise

As such, I do not believe in the slightest that acting with integrity is naïve or commercially unrealistic. It is actually better in the long run to always act with integrity. Treating others with integrity empowers you to have a clear conscience, and in turn, people will naturally treat you with integrity. This is why the concept of integrity is so crucial: you will go as far as your moral compass allows you to.

So what is everyone’s moral reasoning framework?