Is lying part of business?

There’s a universe of ambiguity between outright fraud and the whole truth

John Paul Rollert

In-House Ethicist

John Paul Rollert | Nov 25, 2020

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How’s your day going?” “What do you think of this dress?” “Would you like to read my poems?” These are all questions that invite dishonesty, though certainly not of a rank or abject sort. On the contrary, we might call the insincere responses they elicit “little white lies,” implying not only that the lies themselves are trivial, but that they are largely blameless, even beneficial. They limit the friction of social life, and keep things moving smoothly.

Business executives find far more occasion for lying, or so it seemed to Thorstein Veblen. The most consequential economist at the University of Chicago at the turn of the 20th century, Veblen regarded lying as an essential cultural practice of American capitalism, a lubricant, if you will, for what he called the “arts of business.” That hardly made the practice blameless to Veblen, much less beneficial. “[T]he arts of business are the arts of bargaining, effrontery, salesmanship, [and] make believe,” he wrote in his final book, Absentee Ownership and Business Enterprise in Recent Times, “and are directed to the gain of the business man at the cost of the community, at large and in detail.”

Set aside for now the question of whether the everyday deceptions familiar to marketing, sales, negotiations, and other elements of business come “at the cost of the community.” Consider, instead, what it might be to practice business without them. 

To abandon any hint of exaggeration, strategic omission, or any other tactic that might be classified as vaguely deceptive could be said to be consistent with the principle of an affirmative fidelity to the truth. A commitment to this principle, we might say, entails precision in assertion, transparency in motive and means, and a fervor for telling the truth, the whole truth, and nothing but the truth. 

Whatever one might make of it, few, I imagine, are willing to dismiss this commitment outright. But I also suspect that for most people today, an affirmative fidelity to the truth seems a better fit for Boy Scouts than business executives. Take, for instance, the conventional wisdom of another authority on commercial conduct, writing decades after Veblen:

Most executives from time to time are almost compelled, in the interests of their companies or themselves, to practice some form of deception when negotiating with customers, dealers, labor unions, government officials, or even other departments of their companies. By conscious misstatements, concealment of pertinent facts, or exaggeration—in short, by bluffing—they seek to persuade others to agree with them. I think it is fair to say that if the individual executive refuses to bluff from time to time—if he feels obligated to tell the truth, the whole truth, and nothing but the truth—he is ignoring opportunities permitted under the rules and is at a heavy disadvantage in his business dealings.

This testimony belongs to Albert Carr, an economist and journeyman consultant whose eccentric collection of clients included paper mills and American presidents. He was also a promiscuous wordsmith, whose works of business history and biography feature salacious titles—John D. Rockefeller’s Secret Weapon, Juggernaut: The Path of Dictatorship—that seem better suited to his occasional forays into pulp fiction.

In January 1968, just a few years before Carr’s death, Harvard Business Review published “Is Business Bluffing Ethical?” a lengthy essay that would become Carr’s most durable contribution to public discourse. Importantly for Carr, the term bluffing is a catchall for a wide variety of commercial conduct that is unseemly and venial if not necessarily felonious. Cold-blooded cost cutting, lobbying practices that corrupt the common good, price gouging, industrial espionage, self-dealing, anticompetitive practices, and planned obsolescence all make the list, in addition, of course, to the wide variety of deceptions involved in everyday business. 

So much of ethics is not merely an exercise in choosing the principles that guide us; it’s also a matter of determining what we should do whenever they conflict.

Assessing the integrity of Carr’s argument is something akin to standing under a circus tent after a torrential storm. The view is capacious and colorful, but the sagging is evident, the stakes untethered, and the overall impression it makes is of something not entirely stable. It’s the type of popular work prim-faced PhDs routinely disregard as the specious currency of common sense, which is one reason it is a little surprising the essay became a touchstone for an ongoing debate in scholarly journals about the moral permissibility of lying in business. If these papers are assembled from the sturdier timber of academic argument, it’s notable that they never really challenge the principal observation and tenable opinion of Carr’s essay: “All sensible businessmen prefer to be truthful, but they seldom feel inclined to tell the whole truth.” Instead, these scholarly works merely gussy up the sentiment so that it becomes a sanction for anything other than lying. 

In this respect, the contrast with Carr is refreshing. He never wavers from what, for him, is essentially a commonplace: to be successful in business, one needs a liberal approach to truth telling. 

The spirit of that approach is well captured by the title of the book from which Carr adapted his essay, Business as a Game. Rather than a lawless realm where all is permitted, business is a contest of sorts with rules of its own beyond those of the public square. The competition Carr prefers by analogy is poker. He writes:

Poker’s own brand of ethics is different from the ethical ideals of civilized human relationships. The game calls for distrust of the other fellow. It ignores the claim of friendship. Cunning deception and concealment of one’s strength and intentions, not kindness and openheartedness, are vital in poker. No one thinks any the worse of poker on that account. And no one should think any the worse of the game of business because its standards of right and wrong differ from the prevailing traditions of morality in our society.

Carr’s analogy is a warrant for a certain level of acceptable deception in business, and I was curious to know what present-day business professionals made of it, so I emailed a few of the students who have taken my Business Ethics class at Booth to see if they would share their impressions. On the whole, most of them signaled significant discomfort with the width of Carr’s net, but they didn’t object to him casting it. “As I think about whether lying in business is ethical, I found myself coming back to the answer that I frequently came to in class,” one student confessed: “It depends.” 

If some amount of duplicity is simply a staple of the business profession, according to my students, two species of deception seem especially prevalent. The first is an inclination to exaggerate, especially when it comes to closing a deal. When pitching investment opportunities, one student told me, people “feel entitled to exaggerate because disclaimers like ‘Past performance is not a guarantor of future performance’ are always there.” This conviction, she noted, was fairly common among her fellow students. “Exaggeration is understood as particularly important in [venture capital] and the startup world,” she explained, “where people really are investing huge amounts of money and time in unproven ideas.”

The inclination to exaggerate is made more hazardous by a second category of acceptable deception: careful omission. As this second student described it in her email, the real “danger” in dealmaking is when the man on the make exaggerates the upside of a venture and potential clients do not ask the right types of questions. “There is no technical lying involved,” she said, but divulging the whole truth would certainly put the deal at risk.

Unlike parlor games, in business the lines between acceptable deception and appalling dishonesty aren’t exactly defined.

So if for my Booth students a certain degree of deception is de rigueur in business dealings, how do they square their own participation in such duplicity? “I think our acceptance is both a function of how widespread (descriptive claim) it is,” a third student explained to me, “and also because it’s seen as legitimate (normative claim) due to our expectation/perception that this is all in the service of a higher ideal, the maximization of economic value via [the] maximization of self-interest.”

Such explicit toggling between these two types of claims is something Carr’s essay avoids. It provides a candid assessment of business culture and a compelling analogy to make sense of its relationship to the broader world around it, but as a moral argument for deceptive behavior, in the end, the essay ultimately relies on the debauched logic of the neighborhood drug dealer: “C’mon, kid—everybody’s doing it.”

Now, to be clear, the notion that honesty can sometimes be set aside in favor of other moral commitments is hardly radical. Most philosophers agree that, if the proverbial Nazi comes knocking at the door, the person who answers it has no obligation to reveal the Jewish family hiding in the attic. A commitment to sincerity shouldn’t be a suicide pact. To contend in every circumstance that there is nothing more important than telling the truth is to confuse rigid consistency with moral clarity. 

The troubling example above is a reminder that so much of ethics is not merely an exercise in choosing the principles that guide us; it’s also a matter of determining what we should do whenever they conflict. To present “the maximization of economic value” as a moral defense in favor of some level of deception is merely to contend that this principle can trump, in business at least, an affirmative fidelity to the truth. 

Now, whatever you might make of this moral hierarchy, a few words should be said about its practical consequences. The first is that, as opposed to the harrowing episode above, when we deceive others in business, by and large, it is not to protect another person or even (as in the case of the little white lies we tell in polite company) to spare her feelings. Instead, it is to prevail upon another for our own benefit. We lie precisely because telling the truth might undermine such intentions. 

The second thing to note is that, unlike parlor games, in business the lines between acceptable deception and appalling dishonesty aren’t exactly defined. The poker player knows that he can bluff his way to a big pot, but if he’s found with the ace up his sleeve, he’s getting tossed out of the casino. The same can’t be said for business professionals—not, at least, with any precision. Moreover, if they are convinced that some duplicitous act is required in furtherance of some greater good, say, “the maximization of economic value,” there is nothing preventing it as a matter of principle. The law may stand in their way, but not their own moral commitments.

The final thing to note about a moral sanction for deceptive practices in business is that, rather than the rare exception one isn’t entirely proud of, it treats duplicity as an essential part of business. If business and poker do indeed resemble each other, it is because, rather than a defect of the game, deception is necessary for it to function. Lying, according to this view, is as integral to the practice of business as violence is to armed robbery. 

This is essentially Albert Carr’s claim, though he would surely reject the comparison. Not Thorstein Veblen, however. For him, duplicity is as integral to business, and therein to capitalism, as it is for Carr, but whereas for Carr the moral upshot of such activity is so obviously beneficial that we should regard the deceptions that support it with a wink and a nod, for Veblen, the results for the community are no laughing matter. 

No one is eager to provide a full-throated defense of lying, but most of us are willing to tolerate some level of dishonesty when it serves a clear social purpose. If I tell you I’m feeling great today even though I’m slightly exhausted, it’s because we don’t like to burden each other with trivial cares. If you warmly approve of my dress even though orange isn’t exactly my color, it is because embarrassment requires a better reason than slight predilection. And if I say that I would love to read your poems even though I cringe at the thought of confronting your tenderest sentiments, inchoate and barely expressed, it is almost certainly because I have struggled to share mine with others and am grateful for the care they showed them.

The social purpose of business deception is less clear. If Carr is right, if capitalism requires a casual relationship with the truth, it may not say anything particularly becoming about the profession of business. But it says something uglier, and far more fearful, if it also makes for a game where the public’s the real loser.

John Paul Rollert is adjunct assistant professor of behavioral science at Chicago Booth.