Talk: "Ethical Fading" at Yale School of Management

How far would you go to close the deal?

That was the question posed during negotiations classes at Yale School of Management earlier this week, where I had the pleasure of discussing the role of ethics in negotiations and offer a real-life look at ethical fading.

During the class, students engaged in a role-play case study, negotiating a real estate deal that presented a dilemma—one side had to make serious ethical compromises in order to close the agreement.

In the end, more than 80% of participants had no problem misrepresenting their intentions, muddling material details, or outright lying in order to close the deal.

Some laughed, shrugged, and said they were just doing what they needed to do to get it done. Many pointed to the idea that "everyone does this" in the real estate universe they were dropped in to.

I understand that more than most. In the moment, (seemingly) minor misrepresentations I made while operating Benja felt harmless, too.

But those unethical choices jump-started the gradual process of ethical fading and before I knew it, one lie led to thousands, and those led to complete catastrophe.

That's why the story of Benja such a fit for this case - we were able to discuss what can happen next in a situation like this.

A few key takeaways:

• Ethical fading is a slow, incremental process where small justifications accumulate until the line between right and wrong is blurred or obliterated. I worked myself into a situation where I could no longer find the line. Every small decision matters.
• Ethical preparation should fundamental to all startups. The pressure of a startup environment is very real, and if you wait until you're in a challenging situation to decide what lines you won't cross, it's already too late: ethical decision-making requires preparation, and cannot be improvised. It's equally important to decide what you won't say or do as it is to decide what you will say or do.
• Perhaps most importantly, isolation is the enemy of ethical decision-making. It becomes far too easy to justify bad decisions when founders isolate from their communities, stop seeking outside perspectives, and create a culture where there is no room for governance. When I lost my community, I lost the ability to be objective and honest with myself about the state of play - and when you're not being honest with yourself, it's impossible to be honest with those around you. A strong community - one that challenges you and holds you accountable - can be the single difference between startup glory and losing everything.

Thank you to the Yale School of Management for the invitation and hospitality.

Quick plug for Dr. Frey's Professional and Personal Restoration Study, which explores the many professional and personal challenges presented by involvement in the justice system.