It is one of the factors which go to make up the world as we know it—this whole pell-mell of struggle, competition, confusion, graft, disappointment and advertisement, and if it is one of the permanent mainsprings then you may be quite sure of this. Unless you take measures to prevent it, this desire is going to be one of the chief motives of your life, from the first day on which you enter your profession until the day when you are too old to care. That will be the natural thing—the life that will come to you of its own accord. Any other kind of life, if you lead it, will be the result of conscious and continuous effort. If you do nothing about it, if you drift with the stream, you will in fact be an “inner ringer.”--C. S. Lewis, "The Inner Ring"
Years ago, when I was still a student, I was working on a diamond exploration program for a company which was at the time (or within a couple of years of that time) a TSE 300 company. That meant that the company was one of those whose stock price was used to calculate the TSE (now TSX) index. It was a junior resource company which had bought a small amount of production and was exploring worldwide for diamonds, gold, and base metals.
I had been brought in to groundtruth some interesting geophysical anomalies, through sampling, and occasionally by filling in gaps with ground geophysics. Anyway, after a couple of months, we had tested all the anomalies that head office had requested, and all of them were duds. The company then came up with a list of 300 additional anomalies for testing. I started checking my calendar.
Then the company asked us (well, they asked the exploration manager) to choose select two of the recently rejected anomalies and report them as drilling targets. What? The exploration manager pointed out that all of the anomalies had been rejected as unworthy of follow-up. Management said that a shareholder's meeting was approaching, and they wished to report that they were drilling. Therefore, choose two targets. So, the exploration manager did, and I thought, "well, I guess that's how we do that."
It will no doubt come as a surprise that this company soon found itself ejected from the TSE 300--and within three years had fallen to penny-stock status--a fate it escaped briefly a couple of years ago after a 10:1 consolidation.
It came as an order from management. To be fair, the exploration manager was a recent graduate himself, and wasn't that experienced. But geologists have a professional code of ethics that they are supposed to follow. Choosing dud targets so that management can mislead shareholders doesn't seem particularly ethical. Still, I am happy I wasn't the one in charge of this project.
I went back to school, so I didn't follow the company's fortunes too closely after that. But it did get me thinking--what motivates someone to follow such instructions, even when one knows one shouldn't. Money, of course, is a major motivator, but I think there is more to it.
I think it is what CS Lewis discusses in his speech excerpted above: within any endeavour, there is an "inner ring", and one of the major driving factors of human effort is to become one of those inside the ring. An insider. Someone who Matters.
It isn't just the advantages of making money that the insiders have (and I am using the word in a broader way than is usual for securities commissions)--it's the cachet of being on the inside--of being important enough to be granted options, or invited in on the next financing. Even if you don't participate, the mere fact of being invited--of being one of the special few--is probably more potent a temptation than the potential for gain.
Management in this company had made a lot of money during the run-up in their share prices, where they went from below $1 to above $10 (before dropping back to 5c in only a few years). The prospect of being an insider on the next deal - or perhaps a founder of their next company - can sorely test the anyone's ethics: or as Lewis describes it, may induce you to become a scoundrel.
. . . the choice which could lead to scoundrelism will come, when it does come, in no very dramatic colours. . . Over a drink, or a cup of coffee, disguised as triviality and sandwiched between two jokes, from the lips of a man, or woman, whom you have recently been getting to know rather better and whom you hope to know better still— . . . the hint will come. It will be the hint of something which the public, the ignorant, romantic public, would never understand: something which even the outsiders in your own profession are apt to make a fuss about: but something, says your new friend, which “we”—and at the word “we” you try not to blush for mere pleasure—something “we always do.”
. . . And then, if you are drawn in, next week it will be something a little further from the rules, and next year something further still, but all in the jolliest, friendliest spirit. It may end in a crash, a scandal, and penal servitude; it may end in millions, a peerage and giving the prizes at your old school. But you will be a scoundrel.C.S. Lewis, ibid.
What is the cure? Lewis tells us that there are many inner rings in society--and rather than entering the inner ring of financial chicanery, there is the possibility of entering a ring composed of those of good will--the sound craftsmen."
If in your working hours you make the work your end, you will presently find yourself all unawares inside the only circle in your profession that really matters. You will be one of the sound craftsmen, and other sound craftsmen will know it. . . . It will not shape that professional policy or work up that professional influence which fights for the profession as a whole against the public: nor will it lead to those periodic scandals and crises which the Inner Ring produces. But it will do those things which that profession exists to do and will in the long run be responsible for all the respect which that profession in fact enjoys and which the speeches and advertisements cannot maintain.There is an inner ring to aspire to, but one arrives not through chicanery or following questionable directions from your financial adviser.