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What Situations Influence Our Choices? - Coggle Diagram
What Situations Influence Our Choices?
How social relationships change what feels acceptable
Readings
Asch / Conformity Bias: we take cues from peers instead of relying fully on independent judgment.
Prentice / Obedience to Authority: we defer to bosses or authority figures, sometimes without recognizing that we have suspended our own judgment.
Moral Muteness: even when we disagree, we may stay silent to remain a "team player."
Mechanism: Boss pressure + peer consensus + silence → perceived normality
Business connections
Corporate culture and "tone from the top"
Groupthink in investment committees and boards
Junior employees unwilling to challenge senior bankers, consultants, auditors, or PMs
Analyst herding in markets
Sales cultures where everyone uses the same questionable tactic
What I feel:A lot of "culture" may simply be repeated conformity. If nobody objects publicly, people begin interpreting silence as agreement. This makes dissent that much more valuable. Asch's finding that even one ally sharply reduces conformity tells me that firms dont need everyone to be very courageous people. Even if some people are speaking up that can spark creative thinking and dissent that can challenge embedded thought processes.
How incentives change both behavior and judgment
Readings
Pierce / Conflict of Interest: personal incentives can conflict with professional responsibilities.
Pierce / Incentive Gaming: people optimize what is measured rather than what the metric was supposed to achieve.
MechanismGoal → proxy/KPI → compensation → optimization of proxy → unintended behavior
Business connections
Sales commissions → volume over customer suitability
Mortgage origination → loan volume over credit quality
Quarterly EPS targets → underinvestment or earnings management
Bank bonuses → risk-taking
Consulting utilization targets → billing behavior
Executive stock compensation → potentially shorter-term decision making
ESG metrics → risk of optimizing disclosure rather than underlying impact
My thoughts: This is essentially Goodhart's Law in an ethical setting: once a measure becomes a target, it can stop being a good measure.
How previous choices change the standard for the next choice
Reading
Prentice / Incrementalism: small ethical compromises make slightly larger compromises easier.
Mechanism: Small exception → rationalization → new baseline → larger exception
Business connections
Aggressive accounting gradually becoming fraud
Increasingly aggressive sales practices
Safety standards slowly being compromised to hit deadlines
Cost cutting that initially removes waste but eventually damages product quality
Financial leverage gradually increasing because previous leverage "worked"
Risk limits being stretched during profitable markets
Overall I think this just resembles path dependence in strategy and finance.Today's decision does not just affect today's outcome, rather, it changes the reference point for tomorrow's decision. Ethical risks can one day compound into financial risks - think Enron.
How context determines whether we even recognize something as ethical
Readings / ideas
Moral Muteness: people avoid explicitly moral language.
Conflict of Interest: self-interest can subtly change how we interpret evidence.
Bounded Ethicality: social and psychological pressures can cause behavior to diverge from our stated values.
Mechanism:Framing changes what we notice. A question like “How do we maximize conversion?” focuses attention on performance, while “Are we misleading customers?” makes the ethical issue explicit. The action may be the same, but the framing changes how it is perceived.
Business connections:Cost optimization vs. layoffs; revenue management vs. exploiting willingness to pay; tax optimization vs. aggressive avoidance; its always some sort of trade off
I think businesses tend to break down complex situations into KPIs, margins, and other metrics. That helps decision-making, but it can also hide who bears the costs. A useful question is: what disappears when this decision is translated into a spreadsheet? or who is affected and how?