The Ethics of Diversion - Tobacco Example

What are the ethics of diverting people from smoking to vaping?

On the one hand, we have the following argument.

• E-cigarettes ("vaping") offer a plausible substitute for smoking cigarettes.
• Smoking is dangerous, and vaping is probably much less dangerous.
• Many smokers find it difficult to give up, even if they are motivated to do so. So vaping provides a plausible exit route.
• Observed reductions in the level of smoking can be partially attributed to the availability of alternatives such as vaping. (This is known as the diversion hypothesis.)
• It is therefore justifiable to encourage smokers to switch from cigarettes to e-cigarettes.

Critics of this argument make the following points.

• While the dangers of smoking are now well-known, some evidence is now emerging to suggest that vaping may also be dangerous. In the USA, a handful of people have died and hundreds have been hospitalized.
• While some smokers may be diverted to vaping, there are also concerns that vaping may provide an entry path to smoking, especially for young people. This is known as the gateway or catalyst hypothesis.

Some defenders of vaping blame the potential health risks and the gateway effect not on vaping itself but on the wide range of flavours that are available. While these may increase the attraction of vaping to children, the flavour ingredients are chemically unstable and may produce toxic compounds. For this reason, President Trump has recently proposed a ban on flavoured e-cigarettes.

Juul, which dominates the e-cigarette market in the US, is currently being investigated by the FDA and federal prosecutors for its marketing, and the inappropriately named Mr Burns has just stepped down as CEO.

And elsewhere in the world, significant differences in regulation are emerging between countries. While some countries are looking to ban e-cigarettes altogether, the UK position (as presented by Public Health England and the MHRA) is to encourage e-cigarettes as a safe alternative to smoking. At some point in the future presumably, UK data can be compared with data from other countries to provide evidence for or against the UK position. Professor Simon Capewell of Liverpool University (quoted in the Observer) calls this a "bizarre national experiment".

While we await convincing data about outcomes, ethical reasoning may appeal to several different principles.

Firstly, the minimum interference principle. In this case, this means not restricting people's informed choice without good reason.

Secondly, the utilitarian principle. The benefit of helping a large number of people to reduce a known harm outweighs the possibility of causing a lesser but unknown harm to a smaller number of people.

Thirdly, the cautionary principle. Even if vaping appears to be safer than traditional smoking, Professor Capewell reminds us of other things that were assumed to be safe - until we discovered that they weren't safe at all.

And finally, the conflict of interest principle. Elliott Reichardt, a researcher at the University of Calvary and a campaigner against vaping, argues that any study, report or campaign funded by the tobacco industry should be regarded with some suspicion.

I wouldn't be rushing to defend the vaping industry right now. Caution may well prove to be unfounded, but highly profitable products have a habit of turning out to be unsavoury as events unfold. This would not be a good one to be on the wrong side of history for, either way. https://t.co/vNeYX9u8Uz

— Jon Ayre (@Jon_Ayre) September 16, 2019

Meanwhile, the traditional tobacco industry is hedging its bets - investing in e-cigarettes but doing well when vaping falters.

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US Food and Drug Administration, Warning Letter to Juul Labs (FDA, 9 September 2019) via BBC News

Allan M. Brandt, Inventing Conflicts of Interest: A History of Tobacco Industry Tactics (Am J Public Health 102(1) January 2012) 63–71

Tom Chivers, Stop Hating on Vaping (Unherd, 13 September 2019) via @IanDunt

Jamie Doward, After six deaths in the US and bans around the world – is vaping safe? (Observer, 15 September 2019)

David Heath, Contesting the Science of Smoking (Atlantic, 4 May 2016)

Angelica Lavito, Juul built an e-cigarette empire. Its popularity with teens threatens its future (CNBC 4 August 2018)

Levy DT, Warner KE, Cummings KM, et al, Examining the relationship of vaping to smoking initiation among US youth and young adults: a reality check (Tobacco Control 20 November 2018)

Jennifer Maloney, Federal Prosecutors Conducting Criminal Probe of Juul (Wall Street Journal, 23 September 2019)

Elliott Reichardt and Juliet Guichon, Vaping is an urgent threat to public health (The Conversation, 13 March 2019)

Responsible Transparency

It is difficult to see how we can achieve an ethical technology without some kind of transparency, although we are still trying to work out how this could be achieved in an effective yet responsible manner. There are several concerns that are thought to conflict with transparency, including commercial advantage, security, privacy, and the risk of the device being misused or "gamed" by adversaries. There is a good summary of these issues in Mittelstadt et al (2016).

An important area where demands for transparency conflict with demands for confidentiality is with embedded software that serves the interests of the manufacturer rather than the consumer or the public. For example, a few years ago we learned about a "defeat device" that VW had built in order to cheat the emissions regulations; similar devices have been discovered in televisions to falsify energy consumption ratings.

Even when the manufacturers aren't actually breaking the law, they have a strong commercial interest in concealing the purpose and design of these systems, and they use Digital Rights Management (DRM) and the US Digital Millenium Copyright Act (DMCA) to prevent independent scrutiny. In what appears to be an example of regulatory capture, car manufacturers were abetted by the US EPA, which was persuaded to inhibit transparency of engine software, on the grounds that this would enable drivers to cheat the emissions regulations.

Defending the EPA, David Golumbia sees a choice between two trust models, which he calls democratic and cyberlibertarian. For him, the democratic model "puts trust in bodies specifically chartered and licensed to enforce regulations and laws", such as the EPA, whereas in the cyberlibertarian model, it is the users themselves who get the transparency and can scrutinize how something works. In other words, trusting the wisdom of crowds, or what he patronizingly calls "ordinary citizen security researchers".

(In their book on Trust and Mistrust, John Smith and Aidan Ward describe four types of trust. Golumbia's democratic model involves top-down trust, based on the central authority of the regulator, while the cyberlibertarian model involves decentralized network trust.)

Golumbia argues that the cyberlibertarian position is incoherent. 

"It says, on the one hand, we should not trust manufacturers like Volkswagen to follow the law. We shouldn’t trust them because people, when they have self-interest at heart, will pursue that self-interest even when the rules tell them not to. But then it says we should trust an even larger group of people, among whom many are no less self-interested, and who have fewer formal accountability obligations, to follow the law."

One problem with this argument is that it appears to confuse scrutiny with compliance. Cyberlibertarians may be strongly in favour of deregulation, but increasing transparency isn't only advocated by cyberlibertarians and doesn't necessarily imply deregulation. It could be based on a recognition that regulatory scrutiny and citizen scrutiny are complementary, given two important facts. Firstly, however powerful the tools at their disposal the regulators don't always spot everything; and secondly, regulators are sometimes subject to improper influence from the companies they are supposed to be regulating (so-called regulatory capture). Therefore having independent scrutiny as well as central regulation increases the likelihood that hazards will be discovered and dealt with. This could include the detection of algorithmic bias or previously unidentified hazards/vulnerabilities/malpractice.

Another small problem with his argument is that the defeat device had already hoodwinked the EPA and other regulators for many years.

Golumbia claims that "what the cyberlibertarians want, even demand, is for everyone to have the power to read and modify the emissions software in their cars" and complains that "the more we put law into the hands of those not specifically entrusted to follow it, the more unethical behavior we will have". It is certainly true that some of the advocates of open source are also advocating "right to repair" and customization rights. But there were two separate requests for exemptions to DMCA - one for testing and one for modification. And the researchers quoted by Kyle Wiens, who were disadvantaged by the failure of the EPA to mandate a specific exemption to DMCA to allow safety and security tests, were not casual libertarians or "ordinary citizens" but researchers at the International Council of Clean Transportation and West Virginia University.

It ought to be possible for regulators and academic researchers to collaborate productively in scrutinizing an industry, provided that clear rules, protocols and working practices are established for responsible scrutiny. Perhaps researchers might gain some protection from regulatory action or litigation by notifying a regulator in advance, or by prompt notification of any discovered issues. For example, the UK Data Protection Act 2018 (section 172) defines what it calls "effectiveness testing conditions", under which researchers can legitimately attempt to crack the anonymity of deidentified personal data. Among other things, a successful attempt must be notified to the Information Commissioner within 72 hours.

Meanwhile, in the cybersecurity world there are fairly well-established protocols for responsible disclosure of vulnerabilities, and in some cases rewards are paid to the researchers who find them, provided they are disclosed responsibly. Although not all of us have the expertise to understand the technical detail, the existence of this kind of independent scrutiny should make us all feel more confident about the safety, reliability and general trustworthiness of the products in question.

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David Golumbia, The Volkswagen Scandal: The DMCA Is Not the Problem and Open Source Is Not the Solution (6 October 2015)

Brent Mittelstadt et al, The ethics of algorithms: Mapping the debate (Big Data and Society July–December 2016)

Jonathan Trull, Responsible Disclosure: Cyber Security Ethics (CSO Cyber Security Pulse, 26 February 2015)

Aidan Ward and John Smith, Trust and Mistrust (Wiley 2003)

Kyle Wiens, Opinion: The EPA shot itself in the foot by opposing rules that could've exposed VW (The Verge, 25 September 2015)


Related posts: Four Types of Trust (July 2004), Defeating the Device Paradigm (October 2015)

Practical Ethics

A lot of ethical judgements appear to be binary ones. Good versus bad. Acceptable versus unacceptable. Angels versus Devils.

Where questions of ethics reach the public sphere, it is common for people to take strong positions for or against. For example, there have been some high-profile cases involving seriously sick children, whether they should be provided with some experimental treatment, or even whether they should be kept alive at all. These are incredibly difficult decisions for those closely involved, but the experts are then subjected to vitriolic attack from armchair critics (often from the other side of the world) who think they know better.

Practical ethics are mostly about trade-offs, interpreting the evidence, predicting the consequences, estimating and balancing the benefits and risks. There isn't a simple formula that can be applied, each case must be carefully considered to determine where it sits on a spectrum.

The same is true of business and technology ethics. There isn't a blanket rule that says that these forms of persuasion are good and these forms are bad, there are just different degrees of nudge. We might want to regard all nudges with some suspicion, but retailers have always nudged people to purchase things. The question is whether this particular form of nudge is acceptable in this context, or whether it crosses some fuzzy line into manipulation or worse. Where does this particular project sit on the spectrum?

Technologists sometimes abdicate responsibility for such questions. Whatever the client wants, or whatever the technology enables, is okay. Responsibility means owning that judgement.

When Google published its AI ethics recently, Eric Newcomer complained that balancing the benefits and risks sounded like the utilitarianism he learned about at high school. But he also complained that Google's approach lacks impartiality and agent-neutrality. It would therefore be more accurate to describe Google's approach as consequentialism.

In the real world, even the question of agent-neutrality is complicated. Sometimes this is interpreted as a call to disregard any judgement made by a stakeholder, on the grounds that they must be biased. For example, ignoring professional opinions (doctors, teachers) because they might be trying to protect their own professional status. But taking important decisions about healthcare or education away from the professionals doesn't solve the problem of bias, it merely replaces professional bias with some other form of bias.

In Google's case, people are entitled to question how exactly Google will make these difficult judgements, and the extent to which these judgements may be subject to some conflict of interest. But if there is no other credible body that can make these judgements, perhaps the best we can ask for (at least for now) is some kind of transparency or scrutiny.

As I said above, practical ethics are mostly about consequences - which philosophers call consequentialism. But not entirely. Ethical arguments about the human subject aren't always framed in terms of observable effects, but may be framed in terms of human values. For example, the idea people should be given control over something or other, not because it makes them happier, but just because, you know, they should. Or the idea that certain things (truth, human life, etc.) are sacrosanct.

In his book The Human Use of Human Beings, first published in 1950, Norbert Wiener based his computer ethics on what he called four great principles of justice. So this is not just about balancing outcomes.

Freedom. Justice requires “the liberty of each human being to develop in his freedom the full measure of the human possibilities embodied in him.”  

Equality. Justice requires “the equality by which what is just for A and B remains just when the positions of A and B are interchanged.” 

Benevolence. Justice requires “a good will between man and man that knows no limits short of those of humanity itself.”  

Minimum Infringement of Freedom. “What compulsion the very existence of the community and the state may demand must be exercised in such a way as to produce no unnecessary infringement of freedom”

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Of course, a complex issue may require more than a single dimension. It may be useful to draw spider diagrams or radar charts, to help to visualize the relevant factors. Alternatively, Cathy O'Neil recommends the Ethical or Stakeholder Matrix technique, originally invented by Professor Ben Mepham.

"A construction from the world of bio-ethics, the ethical or “stakeholder” matrix is a way of determining the answer to the question, does this algorithm work? It does so by considering all the stakeholders, and all of their concerns, be them positive (accuracy, profitability) or negative (false negatives, bad data), and in particular allows the deployer to think about and gauge all types of best case and worst case scenarios before they happen. The matrix is color coded with red, yellow, or green boxes to alert people to problem areas." [Source: ORCAA]

"The Ethical Matrix is a versatile tool for analysing ethical issues. It is intended to help people make ethical decisions, particularly about new technologies. It is an aid to rational thought and democratic deliberation, not a substitute for them. ... The Ethical Matrix sets out a framework to help individuals and groups to work through these debates in relation to a particular issue. It is designed so that a broader than usual range of ethical concerns is aired, differences of perspective become openly discussed, and the weighting of each concern against the others is made explicit. The matrix is based in established ethical theory but, as far as possible, employs user-friendly language." [Source: Food Ethics Council]

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Jessi Hempel, Want to prove your business is fair? Audit your algorithm (Wired 9 May 2018)

Ben Mepham, Ethical Principles and the Ethical Matrix. Chapter 3 in J. Peter Clark Christopher Ritson (eds), Practical Ethics for Food Professionals: Ethics in Research, Education and the Workplace (Wiley 2013)

Eric Newcomer, What Google's AI Principles Left Out (Bloomberg 8 June 2018)

Tom Upchurch, To work for society, data scientists need a hippocratic oath with teeth (Wired, 8 April 2018)



Stanford Encyclopedia of Philosophy: Computer and Information Ethics, Consequentialism, Utilitarianism

Related posts: Conflict of Interest (March 2018), Data and Intelligence Principles From Major Players (June 2018)

Conflict of Interest

@riptari (Natasha Lomas) has a few questions for DeepMind's AI ethics research unit. She suggests that

"it really shouldn’t need a roster of learned academics and institutions to point out the gigantic conflict of interest in a commercial AI giant researching the ethics of its own technology’s societal impacts"

and points out that

"there’s a reason no one trusts the survey touting the amazing health benefits of a particular foodstuff carried out by the makers of said foodstuff".

As @marionnestle remarks in relation to the health claims of chocolate,

"industry-funded research tends to set up questions that will give them desirable results, and tends to be interpreted in ways that are beneficial to their interests". (via Nik Fleming)

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Nic Fleming, The dark truth about chocolate (Observer, 25 March 2018)

Natasha Lomas, DeepMind now has an AI ethics research unit. We have a few questions for it… (TechCrunch, 4 Oct 2017)

Carillion Struck By Lightning

@NilsPratley blames delusion in the boardroom (on a grand scale, he says) for Carillion's collapse. "In the end, it comes down to judgments made in the boardroom."

A letter to the editor of the Financial Times agrees.

"This situation has been caused, in part, by the unprofessional, fatalistic and blasé attitude to contract risk management of some senior executives in the UK construction industry."

By no means the first company brought low by delusion (I've talked some about Enron on this blog, as well as in my book on organizational intelligence), and probably not the last.

And given that Carillion was the beneficiary of some very large public sector contracts, we could also talk about delusion and poor risk management in government circles. As @econtratacion points out, "the public sector had had information pointing towards Carillion's increasingly dire financial situation for a while".



As it happens, the Home Secretary was at the London Stock Exchange today, talking to female executives about gender diversity at board level. So I thought I'd just check the gender make-up of the Carillion board. According to the Carillion website, there were two female executives and two female non-executive directors in a board of twelve.

In the future, Amber Rudd would like half of all directors to be female. An earlier Government-backed review had recommended that at least a third should be female by 2020.

Lombard: Sir Philip to review why so few female senior executives. He could use a beefed up UK's governance code to propel women to top jobs

— kate burgess ft (@katebur95633594) February 9, 2016

But compared to other large UK companies, the Carillion gender ratio wasn't too bad. "On paper, the directors looked well qualified", writes Kate Burgess in the Financial Times, noting that "the board ticked all the boxes in terms of good governance". But now even the Institute of Directors has expressed belated concerns about the effective governance at Carillion, and Burgess says the board fell into what she calls "a series of textbook traps".

So what kind of traps were these? The board paid large dividends to the shareholders and awarded large bonuses to themselves and other top executives, despite the fact that key performance targets were not met, and there was a massive hole in the pension fund. In other words, they looked after themselves first and the shareholders second, and to hell with pensioners and other stakeholders. Meanwhile, Larry Elliott notes that the directors of the company took steps to shield themselves from financial risk. These are not textbook traps, they are not errors of judgement, they are moral failings.

Of course we shouldn't rely solely on the moral integrity of company executives. If there is no regulation or regulator able to prevent a board behaving in this way, this points to a fundamental weakness in the financial system as a whole. As @RSAMatthew writes,

"There are many culprits in this tale. Lazy or ideologically blinkered ministers, incompetent public sector commissioners, cynical private sector providers signing 'suicide bids' on the assumption that they can renegotiate when things go wrong and, as always, a financial sector willing to arbitrage any profit regardless of consequences or ethics."

There is a strong case that diversity mitigates against groupthink - but as I've argued in my earlier posts, this needs to be real diversity not just symbolic or imaginary diversity (ticking boxes). And even if having more women or ethnic minorities on the board might possibly reduce errors of judgement, women as well as men can have moral failings. It's as if we imagined that Ivanka Trump was going to be a wise and restraining influence on her father, simply because of her gender.

As it happens, the remuneration director at Carillion was a woman. We may never know whether she was coerced or misled by her fellow directors or whether she participated enthusiastically in the gravy. But we cannot say that having a woman in that position is automatically going to be better than having a man. Women on boards may be a necessary step, but it is not a sufficient one.

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Martin Bentham, Amber Rudd: 'It makes no sense to have more men than women in the boardroom' (Evening Standard, 15 January 2018)

Mark Bull, A lesson on risk from Carillion’s collapse (FT Letters to the Editor, 16 January 2018)

Kate Burgess, Carillion’s board: misguided or incompetent? (FT, 17 January 2018) HT @AidanWard3

Larry Elliott, Four lessons the Carillion crisis can teach business, government and us (Guardian, 17 January 2018)

Vanessa Fuhrmans, Companies With Diverse Executive Teams Posted Bigger Profit Margins, Study Shows (WSJ, 18 January 2018)

Simon Goodley, Carillion's 'highly inappropriate' pay packets criticised (Guardian, 15 January 2018)

Nils Pratley, Blame the deluded board members for Carillion's collapse (Guardian, 15 January 2018)

Albert Sánchez-Graells, Some thoughts on Carillion's liquidation and systemic risk management in public procurement (15 January 2018)

Rebecca Smith, Women should hold one third of senior executive jobs at FTSE 100 firms by 2020, says Sir Philip Hampton's review (City Am, 6 November 2016)

Matthew Taylor, Is Carillion the end for Public Private Partnerships? (RSA, 16th January 2018)


Related posts

Explaining Enron (January 2010)
The Purpose of Diversity (January 2010)
Organizational Intelligence and Gender (October 2010)
Delusion and Diversity (October 2012)
Intelligence and Governance (February 2013)
More on the Purpose of Diversity (December 2014)


Updated 25 January 2018

Drug Regulation

Dr David Graham, described by the FT as a safety official, told US senators last week that the FDA system was broken because of a conflict of interest.



According to the Financial Times, the FDA once enjoyed a high reputation. Few consumers challenged its judgement. The FT writes: "Such trust is one reason why the US public has been more willing than Europeans to accept foodstuffs containing genetically modified organisms."



So what has eroded this authority trust? The FT identifies two factors that may be relevant.

1. One can detect a regulatory cycle in drug approval. Testing standards became tougher after Thalidomide, were relaxed when AIDS stimulated demand for new and experimental drugs, and so on.
2. Division of responsibility and inconsistent handling of drugs at different stages of the innovation lifecycle. Approval follows one process; monitoring of approved drugs is done by a different department and follows a different process.
   
   

Oscillation and internal contradiction are both natural phenomena of complex systems, and tend to have a destabilizing effect on trust. One obvious response to this is to distrust complexity. But denial of complexity may merely create a false illusion of trust. Authentic trust may just have to accept oscillation and contradiction.



So whither the FDA - towards a restoration of authority, or towards an engagement with authenticity (if we can believe that)? Either way, a more intelligent and honest attitude to risk (as recommended by the FT) will be useful.



Source: FT Editorial No Pain-Free Option (November 20, 2004)

Commitment and Self-Interest

Cross-posted from System Viability and Corporate Governance blog

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Standard investment advice is to diversify. Among other things, this means that it's not a good idea to hold significant quantities of shares in your own company, since you are doubly exposed if the company fails. (Think Enron.)

Meanwhile, it is widely supposed that the company's interests are served if the directors and employees have an investment stake in the company as well as an employment stake. This is supposed to align the personal interests of the directors and employees with the interests of the company. There is personal commitment to the success of the company, with an inflated cost of exit.

Furthermore, by having large personal shareholdings, company directors demonstrate their confidence in the company's present state and future prospects, and their belief that the share price undervalues the true worth of the company.

There is therefore a structural conflict of interest between company (external shareholders) and employees (especially directors). How is this resolved?

Either the individual directors take an irrational stance in respect of their personal investments, accepting an unbalanced portfolio with a sub-optimal risk/reward ratio. However, we should not expect true alignment between the interests of a director with an unbalanced investment portfolio, and the majority of shareholders whose investments are (of course) properly balanced and diversified.

Or the directors cheat. For example, holding derivatives that hedge against the excess exposure to the failure of the company. For example, manipulating information. And as a privileged class, the directors hedge against failure by awarding themselves massive termination payments. (While not illegal, this is a morally corrupt practice.)

According to this argument, directors are driven by the system towards either madness or badness. (Some manage both at once.) The answer is not to recruit a new cadre of morally upright and selfless leaders, but to change the system.

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Click here for Trevor's reply  
http://systemviabilityandcorporategovernance.blogspot.co.uk/2004/08/commitment-and-self-interest.html

A leap of faith

Guest post by John

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I see clear connections between these issues. At the heart of the connection is ownership of knowledge (or ‘supposed to know-ness’ as I’m coming to think of it now) and the twenty-twenty hindsight that goes with it. Whatever I call it, it has little to do with trust. It ultimately requires a leap of faith into publicness. Consider:


The west learns that Pakistan has been peddling WMD technology and know-how to the ‘axis of evil’ for the past decade or so. We only learn this when the guy doing it publicly confesses. Instead of asking what our ‘intelligence’ services have been doing while all this has been going on we’re fed the hindsight view of what it means and how and why it happened.


An aeroplane crashes into the Red Sea killing scores of returning holidaymakers and shattering countless lives forever. It later comes to light that the carrier – Flash Airlines - is banned from certain European airspaces as a result of failed random safety checks in the recent past. This knowledge however remains with its owners until it enables twenty-twenty hindsight to kick in with its 'gotcha' payoff.


The dot-com bubble bursts and shortly afterwards Enron share price plummets from tens of pounds to single figure pence overnight. Millions of small investors are left penniless. It’s then revealed that Enron’s owners, their analysts, their brokers and their advisers have long since bailed at ceiling prices. The business press provides chapter and verse hindsight on the what, why, how and when of it. Nobody does anything apart from Eliot Spitzer NY state attorney general who tries to hold the SEC to account and gets Merril Lynch stung for damages in court. The SEC promise to tighten up their processes.


Closer to home, two zillionaire investors, fearing that Manchester United plc could have an Enron-like future, set out to protect their stake by getting their hindsight in first. For the small shareholder though, as with Enron, share price is all the information there is.


Crudely, trust in share price has two dimensions: a faith-in-brand commodity trust dimension offering the choice buy, sell or hold; and an authority trust dimension (and here comes the leap of faith) offering WYSIWYG assurance. Whether Man Utd or the Murdoch empire, this assurance is brought to you by the non-executive board members. So the question becomes can you make the leap of faith necessary to think these guys have your interests at heart (and the only Murdoch non-exec I can recall is Norman Sinjin Stevas).


The trust relationship between the executive and the intelligence services is similar to that between Murdoch as chairman and Lord Stevas as non-exec. As well as being entirely asymmetric in power-terms and dominated throughout by publicness and authority trust, I reckon a close look at POSIWID is what is really needed if a richer relationship is to be defined. Hence my contention that Richard and Aidan would do a better job than Lord Butler. But don’t get me started on the POSIWID of the ‘intelligence’ services: start by taking a look at its riverside palaces. Kublai Khan eat your heart out.

Who trusts James Murdoch?

John writes "if your business exists solely to serve the needs of its shareholders, why would I, not being a shareholder, believe you will take care of my interests?"

The price of trusting Murdoch (Feb 2004)

Yes, but which shareholders? Since the Murdoch family has an interest in both News International and Sky, there is a potential conflict of interest when it comes to prices paid by Sky to News International. It is the non-Murdoch shareholders who have to trust James Murdoch that he will put the interests of all Sky shareholders above the interests of the Murdoch family. Or can Rupert Murdoch (who engineered the CEO role at Sky for his son) trust James to place the Murdoch interests above the Sky interests?

Remember Enron, reminds John. The Enron bosses were shareholders too - but they were quietly dumping their shares.

Entitled to trust

originally posted by John

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My contention is that Aidan and Richard would do a better job of examining whatever trust relationship exists between the political process and the country’s ‘intelligence’ services than the Butler inquiry ever will. There are a million and one reasons why they’ll never get the chance to do this better job of course and all of them are to do with publicness.


In the sense that James P Carse uses the term in his book Finite and infinite games, Aidan and Richard have no ‘title’. Titles, Carse reckons, arise from past triumphs and as a result ‘There are precise ways in which one may no longer compete with (for example) the Dalai Lama or the Heavyweight Champion of the World’. Or, one might add, a former Cabinet Secretary and MI6. Publicness is itself a bullet-proof title with which one may not compete and for which, as a result, the notion of ‘conflict of interest’ cannot possibly exist.


According to Carse, titles – captain, sir, lord, professor, your excellency etc – signal not only a mode of address but also a manner of address – saluting, averting the eyes, bowing, respectful silence etc. Worst of all for trust in this specific instance and for its wider implications, titles signal a content of address – only certain subjects are suitable for discussion with an archbishop, an admiral or an inquiry judge who is a former Cabinet Secretary. Titles are the public face of publicness.


The idea that a process that readily gives rise to misleading intelligence (leading to the illegal invasion of a foreign country) is itself too important to have its secrets revealed for fear of destroying our trust in it is an irony that publicness has absolutely no difficulty swallowing. Publicness will swallow anything. In the end it feeds off itself.

The price of trusting Murdoch

Guest post by John

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According to (passé) market efficiency theory, the price of a quoted share reflects all available information and judgement. ‘Bad’ stuff is discounted, ‘good’ stuff sets a premium. As such, price is trustworthy.

In London – as theoretically efficient a stock market as there is - the price reflects any significant decision the second that it is taken. In less efficient markets – Jakarta say – the price reflects a decision as soon as it is communicated to key players by the decision makers. In the least efficient – say Kampala – the price reflects decisions when they are announced.

If nothing else, efficiency theory acknowledges that information is power and time is money. And as far as a share can ever be part of a trust bargain this is its basis. Technology has rendered market efficiency theory largely passé by destroying Chinese Walls just as the trust relationships made possible by the fax machine brought down the Berlin Wall all those years ago. Information is still power though and time is still money. And ‘insiders’ still deal. Markets evolved and are regulated in this knowledge.

The basis of capitalism is ‘more is better’ - not much space for trust of any kind there. So if you want to know what the Murdochs are up to, look at the share price. (Ever wonder why Richard Branson bought back all his shares and now runs his empire privately?) My initial trust question in this context is always the same, particularly when Murdoch is involved: if your business exists solely to serve the needs of its shareholders, why would I, not being a shareholder, believe you will take care of my interests? Remember Enron.



Related post: Who trusts James Murdoch? (Feb 2004)

Trust and Conflicts of Interest

Questions of trust often involve appreciating (Vickers) or making sense of (Weick) a person's judgements/actions. Do these judgements/actions seem reasonable given the position, perspective and partial knowledge of the person at the time? Can we make better sense of these judgements/actions by framing them within an alternative agenda (e.g. conflict of interest)?



For example, if James Murdoch, as CEO of BSkyB agrees a particular deal with News International, can we regard this deal as reasonable and fair, or is there any evidence that he has been influenced by a family relationship to the management of News International?



In the case of “related party transactions” – which way is the burden of proof? Is it for James Murdoch to demonstrate that he has not been influenced – perhaps by stepping aside from the detailed negotiations – or is it for his critics to show evidence that he has? (There are sometimes codes of practice and Chinese walls for potential conflicts of interest, but the general question remains open.)



If James Murdoch goes through several tough negotiations and produces good results for BSkyB, the shareholders may start to trust him more. They may never be willing to suspend all disbelief and waive all scrutiny, but this would be no different to the situation facing any other CEO.



(Note - this is quite different from the Sleeper pattern, where a security threat lies dormant for an extended period. The difference is that a sleeper carefully avoids situations where the threat he poses might be prematurely exposed.)

Rail Safety 2

originally posted by Aidan

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There is a political driver to the rail service and safety question which is disturbing from a trust perspective. There is a natural conflict of interest between the Treasury, the DTI and the MOT which led to the current structure and a political impasse which still exists. The political wrangle has nothing to offer customers and it makes no sense for customers to trust a service where policy is driven by concerns other than theirs.



Aidan