[MUSIC] Welcome to this third video of week three of our course on unethical decision making. In this video, we will discuss how the words we use influence what we think and what we do, and how language can drive ethical blindness. In this session, you will understand the role of language for framing processes. And you will learn about the potentially negative impact of two types of vocabularies on the ethical climate in organizations. Vocabularies of war and of gaming. When it collapsed in September 2008, Lehman Brothers had been one of the largest investment banks in the US. It has since then became a symbol of the financial crisis that had hit the world in the first decade of the 21st-century. Because of the hubris, the greed, and the arrogance of bankers who were only interested in their bonuses, the financial system was pushed to what's the risk of a global meltdown. Well, following our course, you will realize that the story is probably a bit more complex than that. Many different actors have contributed to the crisis. Governments who did not regulate the industry sufficiently. People buying houses they could not afford. Shareholders who wanted higher profits. Business schools, exclusively teaching ideological illusions of self-regulatory markets. Or journalists not asking critical questions, and many other actors. But of course, decisions inside investment banks like Lehman Brothers play a key role. Here, we do not want to analyze the technical side of the company's collapse,. In a nutshell, the bank collapsed because it was too deeply investing in high-risk financial products. For a while, Lehman Brothers and all the other banks made huge profits by packaging high risk investments in seemingly low risk financial products, which they sold to their customers around the world. These profits turned into huge losses when the financial industry ran into massive defaults, in particular because of their mortgage backed securities. Lehman Brothers understood this abrupt change from a housing boom to a country wide and then global recession and decline in home prices, too late. They had simply taken too high risks. We also do not want to discuss the details of the bank's bonus system. We have already analyzed incentives and performance evaluation as potential driving forces of ethical blindness in our session on the Enron story. The situation at Lehman and all the other banks was pretty similar, and not much has changed since then in the financial industry, by the way. Here, what we're going to do is we want to pick one little but very powerful detail in our analysis. We want to reflect upon the influence of language on ethical blindness. In our first video of this week, we discussed the influence of frames on our decisions. As you have learned, framing is important for our efficiency. We automize what kind of information counts when we make a particular decision. However, you also learned that frames can become too narrow. In such a case, we do not see what we should see to make a good decision. Framing is something we do with words, and thus, the basic material we use when framing the world is our language. As we know from the philosopher Wittgenstein, words and their meanings will group themselves in language games. These language games do not just reflect what we believe, but they determine and limit what we can believe. As the management scholar, Karl Weick, once wrote, how can I know what I think until I see what I say? The way we speak reveals what we think. What we think influences what we do. Thinking, speaking, and acting are strongly connected. We understand our reality through language. We use it to share meaning. Our words store meaning for us. Manipulating language, therefore, means manipulating thinking. Just assume you want to cut the budget for public schools, but you do not want the citizens to really understand the consequences. Call it No Child Left Behind policy. You pollute the environment with your factories and fear public criticism? Frame your activities as sustainable production and paint your website green. You want to ignore the rules of the game? Call yourself a member of the new economy for which the old rules do not count. You want to avoid tough regulation and higher tax? Move production to Bangladesh and pay tax in Luxembourg, but package it in a story on free markets. Who can be against free markets? Who can be against freedom? Your soldiers fight in a war and eventually kill each other instead of the enemy? Just call it friendly fire and it triggers less questions at home. In his book, 1984, George Orwell develops a dystopian vision of a future in which we are all ruled by the totalitarian dictator, Big Brother. One of the key elements of the repressive regime of Big Brother is the control of our thoughts. How do you get control over thoughts? By controlling, introducing the vocabulary the citizens can use. You abolish what they call old speak and create new speak, a simple language without any ambivalence and any metaphorical power. This is how one of the people working on the new language praises his work in a discussion with a colleague. Don't you see that the whole aim of Newspeak is to narrow the range of thought? In the end we shall make thoughtcrime literally impossible, because there will be no words in which to express it. Every concept the can ever be needed, will be expressed by exactly one word, with it's meaning, rigidly defined, and all its subsidiary meanings rubbed out and forgotten. If we move back from George Orwell to Lehman Brothers, what does language tell us about the belief system and the cognitive limitations of decision makers inside the corporation? Larry McDonald, one of the managers on the trading floor at Lehman Brothers, has written a book on his experience of the corporation's collapse entitled A Colossal Failure of Common Sense. What fascinates me about this book is less the story itself where the author presents himself as one of the few heroes who saw it coming but couldn't stop it. What fascinates me is the revealing language the author is using when telling his story. McDonald describes Lehman as an organization that was run by a junta of platoon officers. Traders spent a lot of time in combat like battle-hardened regulars. He himself worked on the gun deck of the ship where financial cannons roared. He liked to be where the bullets fly, where people drop their hand grenades and where the traders got dispatchers from the front line of a war zone. He describes his colleagues as soothsayers with an AK-47, a Navy SEAL, as a battlefield commander, and an old battle-zone warrior. Do you feel that the testosterone in this language? This is the language of war as if Lehman Brothers was an army, not a company. If you frame your reality in a language of war, it is obvious what happens. You create an atmosphere of war. Full of stress, pressure, fear and aggression. And in a war, the rules that count in times of peace, don't count anymore. You're surrounded by enemies. Sooner or later, people start to do things they would not do in a peaceful environment. Next to the war vocabulary, there's a second type of words used by McDonald. One colleague seems to have the instinct of a gambler, and the trailer room is cooled down like a casino in Las Vegas. He and his colleagues are in the finance game, the brokerage game, or the subprime mortgage game with a CEO playing his usual poker game. Here the world of traders at Lehman Brothers is framed like a game. And it is not difficult the imagine those traders sitting in front of numerous computer screens filled with numbers playing the game of winning and losing on financial markets, beating the gamblers of the competitors. And like the war, the game is a special situation that is disconnected from normal reality. These bankers operate within their own bubble, which they perceive as the whole reality. They cannot look beyond. Language reinforces this effect of being locked in one particular but much too narrow frame. Language of war and gaming is a warning signal that something might be wrong in the organization. To conclude, there are three take aways from this session. First, the way we talk reveals and influences the way we think and the way we think influences our decisions. Second, the words we use can limit what we can see and think. Third, ethical blindness can be reinforced by vocabularies of war and gaming. Thank you. [MUSIC]
