I am still depressed over the Volkswagen debacle. If you have not been following it, the Economist issue of September 26th-October 2nd, 1915 explains it well in the leader, entitled Dirty Secrets, which is here, and the lead article, entitled A Mucky Business, which is here. I was hurt because I loved the company. It seemed to not only have reliably produced wonderful cars, but was a symbol of Germany’s recovery from being bombed to pieces in World War II;
In short, Volkswagen desperately wanted to become the largest automobile business in the world, and in order to do so needed a larger slice of the U.S. market. Their strategy included a big emphasis on “clean diesel” engines, which sell well in Europe because of their low fuel consumption, and therefore low carbon dioxide emissions. But unfortunately, diesel engines emit a large amount of other unhealthy substances, such as nitrous oxides. The Volkswagen engines seemed to produce much less of these. But the engines that they have on the market in the U. S. were found to include mechanisms to turn on the smog control when they detected that a test was being run, but otherwise to leave it off.
This is not only cheating, but from what I have read, must have involved a large number of people in the company. The company is now not only in deep trouble, but has strengthened the calls for identifying individuals in companies responsible for such things and punishing them accordingly. Typically large companies found guilty of unacceptable acts are fined up to billions of dollars (BP, General Motors), but also typically can spread this across their customers and stock holders. Also typically the president resigns (often with golden handshake). I don’t know the fiscal arrangements, but the president of Volkswagen has resigned, and probably will face neither personal bankruptcy nor a jail term. In my opinion, the people who actually designed and produced the “cheating subsystem”, should all spend a bit of time in prison, and Volkswagen should suffer – a lot. I feel like I discovered that my junior high school girlfriend was sleeping with the janitor.
Unfortunately, humans seem to be subject to this problem—that of striving for more and more until they get into trouble. One of our chief motivations and problems in life is hubris—thinking we can do anything. An example is in the present U.S. preparation for the next election, in that two people with business credentials and no political experience to speak of are among the present Republican candidates for president, and doing quite well. In the last election that description fit Mitt Romney, who definitely did not win. A nicely written short article about the reason for this is the Schumpeter column in the same Economist mentioned above, entitled From Corner Office to Oval Office. It points out the vast difference between the two jobs, and the fact that neither of the two candidates this year, although good television draws, have been that outstanding in the Corner Office. It is here.
It seems to me that the larger and more successful organizations become, the more hubris seems to accumulate. It is partly due to past success, the amounts of money involved , and the media coverage they attract. It is perhaps because at least and the upper managers of large organizations depend on high-quality attorneys for advice, and such people may tend to think that laws and regulations are more debatable than the rest of us ( Donald Trump refers to “using” the law to make money). But I think the main problem is that we are all equipped with potential hubris as individuals. Most of us benefit from having this pointed out to us in memorable ways (often by a spouse that loves us), but there are times when this may not happen.
As an example, I had the good fortune to get to know John Ehrlichman after he had served his prison sentence for his role in the Watergate scandal during the Nixon administration. If you have no knowledge of this, look it up on Wikipedia. He was president Nixon’s domestic advisor and a member of his “inner circle”, and due to the scandal, lived through his reputation traveling from very high (next to the oval office ) to very low (prison). I met him initially because I was leading an executive program at Stanford for which I had invited Pete McCloskey, a popular member of congress to talk about government/business interaction. He asked whether he could bring an old friend who had a lot of experience in the executive branch to add his view. I said sure, sounded great, but when it came time to print the program, we found out that it was John Ehrlichman, who at the time had the same reputation in the academic scene as Satan.
But he turned out to be a very likeable person—suffice it to say he had received the Distinguished Eagle Boy Scout award as a youngster, and the Distinguished Flying Cross as a lead bombardier in the Eight Air Force (many casualties) in World War II. He still had many aspects of the Boy Scout—he knew he had done wrong and in fact was the only one of the Watergate group to serve his two year prison term without appealing it. Furthermore, he had made a study of why he went wrong, and why people who were advisor to the president often did. His explanation had to do with both coming to see their duty as protecting the president, who they were becoming increasingly close to, and taking the status and perks of their office as reality. During the talk, one of the participants in the program asked him why he had had gotten in trouble and Pete McCloskey had not. They had been room mates in law school and were lifetime friends, so he could be a bit facetious. He said that each morning McCloskey had been picked up by a limousine and brought to work. So had he. But, he explained, the flowers in McCloskey’ limousine were artificial, and his were real. His point was that if you are treated like you are above the law, you may start believing that you are.
I saw him quite a bit afterward and we would often discuss the fall of the high and mighty. He obviously retired from public life, and since he was a felon and no longer could practice law, wrote a few interesting books and worked as the Vice President of Human Resources for a large firm in Georgia. He died in 1999, and I only knew him as being a wonderful human—no hubris to speak of. Perhaps it is good to rise to the top, spend a few years in prison, and then live in infamy. It does cut through the hubris. Perhaps not a bad plan for the managers who were responsible for the cheating at Volkswagen.