Episode 333 – Ethics in finance with Dr Kara Tan Bhala

Kara Tan BhalaStudents of finance don’t typically expect to be grappling with theology and philosophy. But over a long career in Wall Street, Dr Kara Tan Bhala has collected many fascinating real-life stories that demonstrate just how central an understanding of ethics is for a career in finance.

She’s also shown that it’s possible to write about complex ideas in a clear and straightforward way, using stories rather than abstract theories. (Parable, as she points out, is simply an ancient name for case study.)

A fascinating topic, and an equally fascinating conversation with a groundbreaking woman. 



Seven Pillars Institute website: https://sevenpillarsinstitute.org/

Kara on LinkedIn: https://www.linkedin.com/in/drkaratanbhala/

Palgrave Macmillan book page: https://link.springer.com/book/10.1007/978-3-030-73754-2

Alison on Twitter: https://twitter.com/bookstothesky

The 10-day Business Book Proposal Challenge September 2022: https://pi-q.learnworlds.com/course?courseid=proposal-challenge-sep-2022

WriteBrained: A 28-day exploratory writing adventure: https://pi-q.learnworlds.com/course?courseid=writebrainedcourse

The Extraordinary Business Book Club on Facebook: https://www.facebook.com/groups/1447064765612358/

The Extraordinary Business Book Club bookshop: https://uk.bookshop.org/shop/extraordinarybusinessbooks

Alison Jones: I’m here today with Dr. Kara Tan Bhala, who is the president and founder of Seven Pillars Institute for Global Finance and Ethics, which is the world’s only independent think tank for research, education, and promotion of financial ethics. She has nearly 30 years of experience in global finance, much of it gained through working on Wall Street.

She’s written numerous books, book chapters and articles, and her latest book Ethics in Finance: Case studies from a woman’s life on Wall Street won Best International Business Book at the Business Book Awards earlier this year.

So welcome to the show firstly, and congratulations secondly, how does it feel?

Kara Tan Bhala: Thank you so much Alison for having me on the show.

How does it feel? It feels amazing. My husband and I actually went to the book award ceremony in London. We travelled there on short notice because I told my husband, this is the Oscars of the awards. So we’re going to the Oscars dear, so he said, yes, we are going to the Oscars.

Alison Jones: And that’s wonderful, actually, because very often of course, because the award ceremony is based in the UK, very often the winner of the International Book Award by definition isn’t resident in the UK, isn’t usually there. So has to do their sort of acceptance speech by Zoom or something similar.

So it was wonderful to be able to have you in the room. It was quite an atmosphere, wasn’t it?

Kara Tan Bhala: Yes, it was a wonderful atmosphere and it was so inspiring to be with all these writers who are so motivated to write and so into their topics. And of course I’m so honoured to have won because I know the competition is really stiff. There are tons of great writers and to have won once again, it’s amazing and actually quite unbelievable.

Alison Jones: It is terrific. I’m so delighted that you won. And it’s really interesting as well because it isn’t, it’s not an obvious topic and it is very interesting, so I wanted to talk to you about the structure of the book and the way that you bring all these different sort of threads together. But tell me first where it came from, you know, where was the sort of itch to write the book?

What prompted you to put it together?

Kara Tan Bhala: I think there were several reasons that prompted me to write it. The first is that you know, I used to teach Financial Ethics at a college in America. And when I taught it to the BBA students who are the Bachelors, who major in business, and I was telling them all about ethics in finance, they just basically, you could see them mentally rolling their eyes…

Alison Jones: It’s an oxymoron.

Kara Tan Bhala: …like why, you just make money? And you know, so I was looking through all the books and material that I’ve had to teach this topic because it’s a new discipline. And Seven Pillars Institute is I would like to say on the forefront of pushing this new discipline called Financial Ethics, very little is written about it and stuff which is written about it is so dry. It’s so theoretical and it’s all made up.

It’s like, I can’t even feel any connection to these cases, you know? So I said, I’m just going to take all the experience I’ve had over 20 years working on Wall Street and believe me, there are tons of experiences with ethics issues, just from the very simple to the very complex.

But I would have to say most of the ethics issues are very daily, you know, and people confront them every day. So I wanted to have a case book that people could use, they could engage with and they could feel that they think oh, yeah, I kind of get it because this is something that normal people face.

So I wanted to have a kind of an aggregate of a memoir with an explainer. Now, the memoir is all my stuff, the experiences I had over 20 years on Wall Street. And the main reason for the memoir beside using it as a teaching tool was I wanted my daughter to read it when I’m long, dead and gone, dust in the sand sort of thing.

And she’ll say like, oh, this is what my mum was doing, between serving breakfast in the morning and cooking dinner at night and what she was doing before I even came into the world. So it was for my daughter. And of course, as I said, it was for my students and for the young people entering finance.

I know that they enter finance, a lot of them, with a cynical view. That it’s all just about them, it’s all just about the money. But I know too that there are good people entering finance, young people entering finance. And I wanted to give them a little aid just to say, like, this is not unusual. This is how you figure things out. And this is the right thing to do.

And you know, a lot of cynics of course say, yes, you can’t teach ethics in finance. But I figured that if I reached at least, even just one person, it would’ve been worth it. So I’d love to tell you little story too of why I wrote this book because I go to a lot of conferences and I say, oh, I teach ethics in finance.

And then you know, the first thing that people say, oh, isn’t that an oxymoron? And they say, you can’t teach ethics in finance. You can’t teach… First of all, they are so broad, they say you can’t teach ethics. And so my rejoinder to that is: so you just let your children grow up feral? You know, you don’t teach your children ethics because it’s not possible to teach ethics?

And that kind of makes people think that you can teach ethics. So I wanted to make it approachable. I wanted to make it engaging. And the best way to engage people is to tell stories. I mean, how do you teach people? All through history, you know, like in the Bible, parables, parables are just an ancient way of saying case studies.

So that was my vision. And I had been having it, you know, for a few years, and I said, Dang, I’m just going to write thing. I’m going to find a publisher who’s dumb enough to publish it. And I’ll just…

Alison Jones: Careful because Palgrave Macmillan is my old company as well. I used to work with them. Love Palgrave Macmillan.

So I want, there’s so many points there I want to dig into all of them simultaneously. So I’m going to have to just work through. Firstly, there’s a feminist reading of this, and it’s really interesting that you wrote it for your daughter, because it’s not just your daughter, is it? It’s also, there’s not enough women in finance and the ‘woman’s life on Wall Street’, I think that was really telling. So we might go onto that.

The other thing is that point about the storytelling and the way that you use a story to introduce the concept, but as you say it’s quotidien, this is what, the things are you face every single day. And these are some of the ways that you deal with them.

And then you bring in some really very substantial theory. So there’s theology in there. There’s lots of philosophy, there’s, I mean ethics I suppose, is a philosophical trait and it’s not something I imagine most business students ever thought they were grappling with.

And then the third thing, which I think is the direction I’m going to take you, is why do we need, why is it important that people into finance and why is it quite a new discipline? I think I know the answer to this, but I’m just really interested in your view on it.

Kara Tan Bhala: Well I started the Institute in 2010, two years after the great financial crisis.

Alison Jones: The crash.

Kara Tan Bhala: And that great financial crisis really shook me, I must say, because when I worked in Wall Street in the late nineties and early in the late eighties, I don’t recall it being so greedy, or so self-interested.

Alison Jones: Which is interesting, because the eighties were always seen to be about the greed, weren’t they? But you think it’s got worse?

Kara Tan Bhala: The reason it just got worse is the theoretical underpinnings for that I believe is basically the profit maximization credo, that shareholder value takes primacy. And also, you know, the Friedmanite view that self-interest is great because it drives markets, it’s efficient. It’s just, you know, it’s just crescendo now that view of valorization of self-interest. And I want to take people a step back and say, look, why do you valorize self-interest and profit maximization? It’s not the truth. It’s not like absolute, you know, code handed down from heaven that this is the way an economy is run. It’s just a conventional, dogmatic view, predominant view of this age.

Alison Jones: And it has been discredited in the wake of 2008, hasn’t it?

Kara Tan Bhala: And definitely there is an expiration date to this. So I want to say look this is how we can do it and still be efficient-ish, you know. And this is how you insert ethics into finance and you just use these theories. And I know it’s a little bit heavy duty, heavy in terms of the theory and philosophy. I try to make it as simple as possible, as approachable as possible.

Like I talk about, of course I talk about Kantian ethics, very heavy-duty deontological works, but then basically I’d say it boils down to what is the principle behind this act? The principle is, do not steal. And are you stealing? If yes, you’re stealing, then it’s wrong. You know.

So I try to make it as simple as possible, but you can go as complex as you want of course. So I wrote it so that I could walk that line between the practitioner, as you said, and the academic who wants a little bit more theory and the practitioner who wants to, so what do I do.

So I hope I achieved that, sort of .

Alison Jones: Yes, no, I thought it was fascinating and I know this is why it won the award. This is what the judges were saying about it. It was some incredibly chewy content, but packaged in a way that made it accessible and made it relevant. And I think that that balancing point which is what Palgrave do so well, is that point between the academic and the practitioner. Stuff that you need to know to have a really rigorous underpinning for your profession and the stuff that you need to use when somebody comes to you and says, will you book me a high-end prostitute for the night? You know, that kind of, one of the great stories in there, but you know, these things about, what do you do in response to that? And how do you argue for the route that you take? I think this is really important.

I’m guessing that most students going into financial studies, wouldn’t necessarily pick ethics as their first choice. What do you see as people start to grapple with it?

Kara Tan Bhala: Well, first of all, it’s also very interesting in my classes, I taught financial ethics for four or five years in college and then I started the Institute. But it was very interesting, finance is very much a male-dominated class. I would say 80% of people who take finance classes are male.

Women tend to get scared off a little by it. I’m not sure why, but that’s the experience I had with this college that I taught at. And it’s interesting, like the high-end prostitute case that you’re talking about, a lot of women are of course connected immediately with it. And thought like, it was like, it’s horrifying.

Whereas men, they are like, yes, I’d just do it. I’d connect them. And they see nothing wrong. But the thing which drives most people in the bad decisions ethically is the fact that they’re so worried about being fired because they said no to an unethical request. So that’s where I give suggestions, like, you know, find a group of people, like-minded group to support you, talk to your family, talk to your friends, usually family, unless they’re you know, different. Most family will support you when you say like, I don’t want to do this unethical thing. I know that I would support my daughter if she said, oh, my boss asked me to do this. And I said, definitely don’t do it. So you have support from your family. You have support from friends and then most people get support from your colleagues as well.

And you know, when I went to talk to my boss about this case, I actually rehearsed it in front of my colleagues for a while, my speech that I was going to give to the boss and I was so shocked and they say, oh yes, okay. Okay. I get it. You know, the thing is you never know, some bosses are good and some bosses are bad, but I’m not saying that ethics is easy, but I’m also saying that it’s not an impossible situation that you’re in.

Alison Jones: Yes, and the more people I think who are going into the industry, as you say, who are prepared to grapple with this, who are prepared to see it as part of what they do, the better for the world.

Kara Tan Bhala: Yes.

Alison Jones: Would you like to introduce your cat to us? If you’re watching this on video, we’ve just been pet bombed. Very, very beautiful.

 I want to talk to you about the writing as well, because you write, obviously you’re an academic as well as a practitioner. So I’m guessing you’ve done a lot of writing as a professional and a lot of writing as an academic. How do you switch between the two? What’s the difference? And how did you calibrate this book between the two?

Kara Tan Bhala: Well, you know, one of my role models in writing is actually Isaac Asimov…

Alison Jones: Oh…

Kara Tan Bhala: …science fiction writer…

Alison Jones: …wow. Yes, I did not see that coming.

Kara Tan Bhala: Yes, I read a lot of books by him and he writes, he wrote half of his you know, was science fiction and the other half was actually nonfiction. And it was a lot of it was about writing.

And the thing I admire most about him is his clarity. And he always said, you know, there are two types of writers, one, those who write in plain simple English and those who write in European English, like to impress Europeans. And he said, I’m writing so I’m clear, sometimes I write to impress Europeans, but not all the time, meaning that you use all sorts of metaphors and you are kind of flowery.

Yes. So I like to write clearly. I prefer short sentences. Of course you can’t have short sentences all the time and you have to intersperse it. But I think clarity is a real virtue in writing. And even if I wanted to be pretentious and flowery in my writing, I don’t think I could be.

So I write with my own voice and that’s my own voice and people who have read the book and who know me, they said like, Kara it’s like talking to you. This is how you would talk. You know? So I think I’m definitely in need of more refinement and practice in writing. And as Asimov says, the best way to write is to write more, practise writing. To keep writing. And I think that’s a great truth about writing. And I do enjoy writing but only about things that interest me, right. I have no interest in writing about things that are of no interest to me.

Alison Jones: What I noticed from that as well, and you were talking about writing with clarity, not writing pretentiously, writing as you speak. None of that means that you can’t write about really difficult subject matter, really dense, chewy, but you can write about it in an accessible, conversational way.

So you don’t have to dumb down the content. You just have to write about it as if you were speaking to someone about it. I think that’s a really important point because I think people think when they’re writing conversationally, when they’re being accessible, that somehow means that they have to lighten the content, you know, it doesn’t, does it?

Kara Tan Bhala: No and I think it was Einstein who said that if you don’t understand something then you will not be able to write clearly about it. So you have to have a really thorough understanding about it, to write clearly about it. And, you know, I might have the wrong understanding of it, but I think I have an understanding of it but, you know. So it’s important that, and I’d like to eventually, practise more writing, of course, but I would also like to take my writing towards fiction and particularly science fiction, of course.

Alison Jones: How interesting. Oh, well, you have to come back when you’ve done that. That would be a real, that would be a great leap.

I always ask my guests, Kara, to give me their single best tip for an author who’s just starting out. Now I’m imagining most of the people listening to this probably haven’t got that kind of academic career behind them, but the act of writing is the act of writing, right?

So what would you say to somebody who’s just starting out on this journey? What’s your sort of one best tip that you wish you’d known before you wrote yours?

Kara Tan Bhala: I think there’s three things. Write about what you like, write about what you know, write clearly and write engagingly. I wrote, the other thing is… there’s four things already, but the thing is a certain discipline because funnily enough, I wrote this entire book in 2020 during lockdown in quarantine. So it gave me something to do, but I sat down between 11 and 2 every day. I wrote a page or two and I, you know, except weekends and by the end of the year from, I mean literally, from January to December, I wrote something every weekday for this book. So discipline obviously is necessary, love of the subject, knowledge of the subject.

Alison Jones: Do you miss that now? Do you miss that routine of writing each day?

Kara Tan Bhala: I kind of do, that’s why I’m sort of looking for a new book project. I’d like to promote this book more, of course, because I put a lot of myself in it. But I’m already writing a new book proposal, which I think is actually not as good as this book, but you know.

Alison Jones: You still have to submit it to the awards, of course, to the Oscars of the business book world.

So, I always ask people as well to recommend a book. Now it doesn’t have to be a business book, it can be any book that you think is worth reading by a business book author.

I’m really intrigued as to where you’ll take this, given that you’ve already given us Asimov.

Kara Tan Bhala: You know, I had to do an interview with Richard Thaler about his new book. So I did read it and he’s a Nobel Laureate and he’s a behavioural economist. So I read his book. I actually don’t read that many business books, dirty little secret, but his book Misbehaving: The making of behavioural economics, I think is really fascinating. And it has a lot to do with my topic, which is financial ethics, because ethics has to do with values.

And he’s kind of like debunking the economic view that human beings are just pure rational when it comes to economics. And he’s saying no, actually human beings are quite irrational when it comes to financial and economic decisions and that’s when they misbehave. So I think it’s a good read and I think is a good addition. I use behavioural finance a lot when I talk about ethics in finance because we are both looking at human values and how to insert them into something considered positive, you know, i.e. Economics.

Alison Jones: That’s a fascinating recommendation. I’ve heard of the book, but I’ve not read it. So thank you. I love when people recommend one that I haven’t come across before, or haven’t read before. Brilliant.

And Kara, if people want to find out more about you, more about the work that you do and more about the book, where should they go?

Kara Tan Bhala: You can go to sevenpillarsinstitute.org, which is the website for the think tank. And you can read more about me under the staffing page and you can always contact me through LinkedIn, Kara Tan Bhala, or Kara@sevenpillarsinstitute.org. And the book is available in every store, you know, Amazon but if you want a thorough synopsis of each chapter, I would go to the Palgrave Macmillan website and just look up Ethics in Finance: Case studies from a woman’s life on Wall Street and you would have a very good synopsis of each chapter free of charge.

Alison Jones: They do great metadata, wonderful.

Well, so interesting to talk to you. I think this is such a fascinating topic. It’s not one that really we’ve covered much on the podcast before. So it’s brilliant to just step back and dive into the kind of the, as you say it, it’s so many different disciplines sort of colliding, isn’t it? And so much theory and how it plays out in the real world.

So yes, I have to say, it feels like something that isn’t that accessible, the way you have written it makes it very, very accessible. So I would really recommend it to people.

Kara Tan Bhala: Oh, thank you very much. And one last thing about a point about writing is don’t be deterred by people who say there’s no market for what you’re writing. You would not believe how many people have told me there’s no market for what you’re writing. So if you write what you like, you write what you know about, it’s of like Steve Jobs. If you build it, they will…

Alison Jones: …they will come.

Well, I’m not sure that’s true for everybody, but certainly financial ethics. You are, everybody has woken up to this over the last 12, 14 years or so. And yes, it’s a really valuable contribution to the literature.

Kara Tan Bhala: Thank you so much.

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