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March 2021

Integrity: You Only Have It When You Know You Don’t

By Integrity, Principles No Comments

At Scholars of Finance, we have six core values that are at the center of what we teach: Integrity, Compassion, Humility, Curiosity, Impact, and Courage. Each month, our members vote on the “Value of the Month”, which helps focus our discussions on topics pertinent to that value.

Integrity was our value for March. Here are our epithet and principles for Integrity:

Integrity

Do what’s right

  • Do the right thing, always
  • Build trust through transparency and accountability 
  • Honor your responsibilities and commitments
  • Speak the truth at all times

We utilize integrity in both a moral sense and as a barometer of trust. It both calls us to do what is “right” while also calling us to be trustworthy. These are mutually reinforcing. There are millions of pages written about what is “right”, which have culminated in an abundance of religions and moral philosophies informing how we collectively act. However, I will unpack the question of how to “define what is right” in a later blog post. For now, I will offer one example that I think is not overly controversial, builds trust, and happens to be one of our principles – to speak the truth at all times.

Many people I’ve spoken with over the years have shared that integrity, or honesty, is a core value of theirs. We rarely meet someone who claims they need to become more honest. And while I hope that this is simply a result of surrounding myself with honest people, I often wonder if this actually reflects a lack of self-awareness? Or something even worse, that our collective standard for honesty or truth is diminishing? According to the Pew Research Center, I’m not alone in wondering, as a majority of people (51%) think that misinformation online is a problem that won’t be fixed.

However, speaking the truth at all times, for many of us, seems like a “given”. It is presumed that we will do this and that we already do this. If we were a liar, how could we live with ourselves? Yet, taking time to reflect on this principle and just how profound and radical it is, opens our eyes to just how much room we have to grow in honesty. Dinner with a friend, his niece, and a couple of her classmates recently got me thinking about this. Since “Speak the truth at all times” was the principle we spent the following week reflecting on there was a timely opportunity to dig into it with our organization as well.

The young woman was a senior in high school. I was visiting my friend when she and her friends also happened to be visiting him as well (he’s a cool uncle worth visiting). They explained to me that their classmates cheat on tests rampantly. Everyone turns off their cameras on Zoom, gets on a group FaceTime, and they take the exam together. It’s become commonplace. I was a bit shocked.

As I felt myself begin to judge, the maxim “judge not lest ye be judged” came to mind. I realized that I am not one to judge because I am not perfectly honest. As I started to think about my own shortcomings, a couple of Zoom-related “white lies” that I have told struck me. I started talking to our students and some of my friends about these and many of them reported doing the same things. 

For one example, have you ever been distracted on a Zoom call, whether with work or email, been asked a question, and said something to the effect of, “Sorry, my (audio, wifi) cut out (or insert other technical difficulties), can you say that again?” I’ve done this more than once. When I ask this question on Zoom calls, almost everyone smiles knowingly or nods. 

When I shared this with one of my teammates last week, they shared an example of a small concession of the truth in their own lives too. Notably, one person shared that they will sometimes do 10 push-ups in the morning just to be able to tell people they worked out that morning – to seem productive and disciplined. But they acknowledged that the statement “I worked out this morning”, while true, generally implies they spent at least 20-30 minutes exercising, which was not the case.

Personally, I was hardly even aware that I was making small concessions of the truth. It reminded me that we stray from the truth in small ways, oftentimes almost imperceptibly. This can lead to much larger concessions of the truth over time. Simon Sinek talks about this snowball effect in his recent book The Infinite Game, which my mentor Anthony Paquette sent me – the phenomenon is called ethical fading. Ethical fading is a well-studied process by which we “slowly and gradually make moral or ethical concessions sometimes unconsciously which compound into increasingly significant ethical failures.”

This concept implicates us in a high-stakes relationship with honesty. We need to be thoughtful and diligent about cultivating integrity. Especially if we are going to be finance leaders and investors – making decisions with millions of dollars – where the upside to being dishonest has lured many down the wrong path (and into jail). Every one of us can benefit from taking the time to introspect on our integrity. If you’re reading this and thinking, “you’re wrong, I’m completely honest and none of this applies to me”, just set aside 30 minutes and ask yourself these questions:

  • Have there been any times in the last month where I have not been 100% honest, even in small ways?
  • Is there something I’ve been holding back from saying to someone that needs to be said?
  • Have I been 100% honest about how I feel about things with the people close to me?
  • Does my language sometimes imply more about what I’ve done than I actually have?
  • Has someone said something to me recently that made me defensive? Could there be some truth in their statement that I am overreacting to?

None of us are perfect, and that’s ok. What’s important is that we are willing to own up to the times when our integrity lapses. It’s how we approach these moments of ethical fading that can either lead to a slippery slope of low integrity decisions or a career built upon trust that is rightfully earned. 

I believe that all of us doing this in our own lives can inspire many more to do the same. Just like talking about mental illness can break the stigma and fuel recoveries, talking about ways our honesty has slipped can break the stigma of failure and fuel deeper relationships, whether with loved ones or teammates. Counterintuitively, it builds trust with others as people recognize your self-awareness and conscious effort to hold yourself to a high standard of integrity. 

With that, I hope you haven’t judged me as you’ve read my confession about my own shortcomings (being honest about this stuff does feel vulnerable!) and I also hope that you’re feeling even just a little motivated to examine areas in your own life where you can grow in integrity. And, if you’re really inspired, I hope you’ll talk about it with others to get accountability and grow with them too.

Impact and Decision-Making: Analyzing the Economic Impact of the American Rescue Plan Act of 2021

By Financial Leadership, Humility, Impact No Comments

As an active member of Scholars of Finance, I have learned about the importance of having core values in decision-making and everyday life. One of our core values at Scholars of Finance and our Value of the Month for February was Impact. As the COVID-19 pandemic drags on, Congress recently passed a $1.9 trillion stimulus known as the American Rescue Plan Act of 2021. President Biden signed the bill on March 11th and it acts as another COVID-related stimulus that will impact the lives of American citizens and influence our economic trajectory.

On the surface, a bill intended to help others during a time of need sounds like it would receive bipartisan support after a year-long crisis. However, for the American Rescue Plan Act of 2021, that is not the case.

Primary Provisions

The American Rescue Plan Act of 2021 aims to address many issues ranging from unemployment, small business assistance, vaccine rollout, education, and a range of others including:

  • $1,400 direct payments for individuals making up to $75,000/year and couples making up to $150,000/year (being phased out at $80,000/year and $160,000/year)
  • An extension of $300/week in unemployment benefits up until September 6th
  • Household relief of up to $3,600 per child for families with children
  • $350B in state and local aid
  • $15B to assist small businesses through the Emergency Injury Disaster Loan Program
  • $125B in aid to K-12 schools to reopen
  • Tens of billions in funding for a nationwide COVID-19 vaccination program
  • And many more

However, the bill sparked debate in Congress over the enacted shortcuts and its $1.9 trillion price tag.

Political Opposition

The road to legislation for the American Rescue Plan Act of 2021 was far from smooth. The bill faced opposition from Republicans and some Democrats citing their disapproval of Democrats’ use of the budget reconciliation process bypassing the Senate filibuster to pass the bill and its expensive nature. Senate Minority Leader Mitch McConnell (R-Ky.) has stated that the proposed stimulus is “wildly expensive” and “largely unrelated to the problem”. Jared Golden, a House Democrat from Maine, voted against the bill, defending his vote stating, “I won’t support trillions more in funding that is poorly targeted or in many cases not necessary at this moment in time”. The high cost of the bill has been the main issue Democrats faced in getting it passed, however, the bill received a lot of support from the Democratic party.

Democratic Support

Despite Republican opposition, most Democratic leaders voiced their support for the bill. Senator Bernie Sanders (I-Vt.) has described the bill as “The most significant piece of legislation to benefit working families in the modern history of this country.” House Speaker Nancy Pelosi (D-Ca.) also stated that the bill “Goes a very long way to crushing the virus and solving our economic crisis.” Democrats who supported the bill cited its significance after a year-long crisis and as a preventative measure for the future.

Next Steps

On March 6th, the Senate passed its version of the bill – which did not include the initial $15/hr minimum wage proposal after it was struck down by the Senate Parliamentarian – in a party-line vote. Democrats then successfully passed the bill in the House with another primarily party-line vote on March 10th, and President Biden signed the bill into law on Thursday, March 11th. With the current round of unemployment benefits from December’s stimulus running out in the next couple of weeks, President Biden aims to “Get checks out the door starting this month to the Americans that so desperately need the help” in what will be the third round of stimulus checks since the pandemic started. 

The Effects on the Economy and Markets

With the economy still recovering from the COVID-19 pandemic that caused an economic shutdown about a year ago, the purpose of a stimulus such as this one is to accelerate economic and GDP growth to get the economy back on track. In addition to the stimulus bill, Chairman of the Fed, Jerome Powell, stated that the Central Bank does not plan to raise interest rates (currently at a record low 0.25%) any time soon. However, the proposed stimulus coupled with a relaxed monetary policy from the Fed has raised some concern about inflation and its spillover effects into the bond and stock market. 

One voice of concern comes from Former Treasury Secretary Lawrence Summers. Summers recently stated in an Op-Ed article that “The proposed Biden stimulus is three times as large as the projected shortfall. Relative to the size of the gap being addressed, it is six times as large”. His article raises a cautionary warning of inflation which has been reflected in the rising yields of treasury bonds in recent weeks and a decline in tech stocks. However, Nobel Laureate, Paul Krugman, responded by stating that the recession caused by the COVID-19 pandemic should be considered “A natural disaster than a normal recession,” and that any fiscal stimulus should be viewed as necessary “Disaster relief”. Krugman additionally argues that concerns over inflation are exaggerated, as stimulus checks are likely to be saved and not immediately spent, therefore providing consumers with stability and expanding their capabilities for future spending. 

On Wednesday, March 10th, the Dow Jones Index reached new highs breaking 32,000 showing signs of delight at the bill’s passage in the House, and continued to reach record-highs on Thursday. However, the effects of the stimulus on the economy will not be immediately observable. In the coming months, economists will be on the lookout for several indicators such as unemployment, treasury yields, inflation, vaccine rollout, and many others. Monitoring these trends will influence whether or not the Fed will have to take action and raise interest rates earlier than anticipated if inflation gets out of control.

Conclusion

Is a $1.9 trillion bill a necessary relief needed to provide citizens and the economy with the support they need, or should the inflationary concerns take precedence? As we have seen, it is up for debate. 

Nonetheless, as a member of Scholars of Finance, I know that my decisions impact those around me. Although they may not be as large-scale as those of politicians and financial leaders, having a values-based approach has undoubtedly helped guide my decision-making. Learning how to implement the values of Integrity, Compassion, Humility, Curiosity, and Courage into my decision-making has enabled me to achieve another core value — Impact. For politicians deciding on the American Rescue Plan Act of 2021, reflecting on their values and their responsibilities as public servants to citizens hopefully helped guide them in their decisions and best serve the country. By upholding the values of Curiosity and Compassion, politicians can seek to understand society’s needs and act accordingly. With Humility, they will be able to reflect upon the responsibilities they accepted and their role to serve on behalf of the greater good of all people. Through Courage and Integrity, they can build trust through honesty and speak up for what is right. Altogether, enabling them to have a positive Impact on the people they serve. As the world and society continue to evolve, I urge everyone to reflect on the impact they have had, wish to make, and the legacy they want to leave behind.

 

“I believe I have a personal responsibility to make a positive impact on society.”

— Dr. Anthony Fauci

 

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