[MUSIC] Welcome to the second video of the sixth week of our course on unethical decision making. In our previous session, we discussed the impact of time perception on decision making. In the session of today, we would like to share with you some thoughts on the power of institutions over decision making. So, in this session you will get familiarized with the sociological concept of institutions. You will learn how institutions drive behavior. And you will understand the importance of institutions for our concept of ethical blindness. Let me start by telling you a joke. Two tuna fish swimming in the ocean meet a dolphin. Hi guys, says the dolphin. How's the water today? The tunas remain silent. When the dolphin is gone, one of the tuna turns to the other one and asks what is water. Often we are not aware of the most important things that shape our context. We take it for granted. We depend on it, but we do not even realize that its there. We are born into a context that's an observation that we owe to Aristotle. The Greek philosopher Aristotle who said that we are, in principle, a zoo-political, a social animal. We are born into a community. The community is there when we arrive, with all its traditions, and habits, and rules. So, our context determines, to a certain degree, what we do, and what we believe, and what we strive for. The founding father of sociology, Emile Durkheim, he brought us some, some more evidence about the power of context of our decisions. At the end of the nineteenth century he was examining the phenomenon of suicide. So he was asking, why do people kill themselves? And as you might imagine, there is a variety of reasons, of individual suffering, that leads to suicide. Love sickness, depression, poverty, pain, and so on. So we can make statistics about types of individual motivations across the cases. And you can examine them scientifically. But Durkheim made a strange observation. And this is the beginning of our understanding of institutions. What he observed was that between 1856 and 1878, the suicide rate in France doubled, not gradually but in a big jump. However, the proportions of the individual motivations remained exactly the same. From poverty, to jealousy, to pain, whatever. [SOUND] And this was statistically highly improbable. So he started to dig into the data. And he what he found was very surprising for him. The number of suicides radically differed between Catholics and Protestants. Between men and women, between summer and winter, between married and single. So it seems that in a lot of cases suicide could not be explained by different, by individual motivations and traits, but by the social categories to which people belonged. And this went beyond the understanding of, of motivation of and action of that time. In his book Suicide that Durkheim published in 1887, he called those forces social facts. So, social facts are reasons that drive behavior coming from the context in which we are embedded. Why does that happen? Why are individuals driven by such large and shared norms and beliefs and values? Where do they come from? About 2,500 years ago, the Greek philosopher Heraclitus argued that we can never step into the same river twice. The reason's obvious. Next time we step into the river, the water will be different, and we will be someone different. Because you might have changed over time and the water continues to flow. So life moves forward. Every moment is different from the previous one. Every experience is different from the previous one. Even if this difference might be very small, reality never stands still. Experience thus forever is in motion. And therefore, behavior is so difficult to predict. The challenge is, how do we make decisions in a constantly changing environment. We need some predictability, some stability to know what we should do next. Somehow we have to freeze the world around us when we make decisions. We have to find patterns of similarities in the sea of change. We already discussed that we dis, dispose of cognitive scripts, of frames through which we interpret the world. We develop them in organizations, as individuals. But, we develop them also on large scale, in large scale social context. Whole populations can share the same or similar mental maps to align their behaviors and beliefs in order to make social behavior possible. And these large scale mental maps can be called institutions. We argued already that ethical blindness results from the too narrow perception of reality. This tuna of perception can be reinforced through various context of the situation, the organization, and the overarching institutional context in which we are embedded. And this is what we want to talk about today. But what are institutions? Let me propose a definition for you. Institutions can be understood as the norms, values, beliefs and practices that we take for granted in the various larger social contexts in which we are embedded. You must imagine institution like an iceberg. What you can see on the surface is the behavior. What you find under the water, invisible to us and often unconscious, is the values and beliefs that drive that behavior, and that make that behavior legitimate. How do these institutions emerge? Well, following Aristotle, we get socialized into a context. Imagine yourself as a little child. When you're sitting on the table and eating with your parents, and you spill your soup all over the table, you will learn that this makes your mom and dad angry. You spilled the soup again? You understand that parents get angry every time when you spill the soup. And then you learn that even other people get angry, if you spill the soup. You will learn that you better don't spill the soup. On the table. So a specific observation in a specific context, you and your parents, is transformed into a generalized attitude. One does not spill soup. And over time, this sinks down in your unconsciousness. You become a non soup spiller. It's taken for granted. And every day, reality is built of myriads of such taken for granted routines that we learn over time and forget. Two sociologists DiMaggio and Powell applied this idea to modern organizations. How do shared beliefs and values and practices emerge in context where organizations enact their decisions. What we normally assumed, in particular, if you look at corporations, is that they try to be different. They try to be different from the others, to beat them in the competition for customers. However, in reality what we can find is that corporations in the same industry tend to be very similar, same belief systems, same values, same practices. Institutions, are broadly shared among those organizations. They build up what might be called an institutional field. So individual organizations that enter into such a field, they have to adapt to the rules of the game. They copy the behavior and the values and the beliefs of the others. Why do they do this? Well, they reduce uncertainty. They create legitimacy for what they do. The [INAUDIBLE] call this adaptation process as Isomorphism. And they differentiate between three types of isomorphism. Coercive isomorphism, which means we are exposed to formal pressure by legal rules for instance. An organization or corporation might publish and annual financial report because it is simply the law that ascribes, prescribes it. Or mimetic isomorphism. I'm the newcomer industry. I don't know the rules of the game. I have uncertainty. To reduce uncertainty, I adapt to the behavior of others. Just think of all these websites that popped up at the beginning of the 2000s when the new economy started. Everyone had to have a website. And third, there is normative isomorphism. We are trained to have the same beliefs and values and behaviors. For instance, in the business codes where we learn what, what corporations have to do and what managers have to do when they make decisions in corporations. We learn, basically, that they should maximize profits. So. People in particular contexts, let's say managers in a particular industry like banking or mining. They tend to show the same patterns of behavior and mindsets. But, you can apply this to all kinds of organizations, doctors in hospitals, people living in New York, school teachers in Italy or China. Coherent patterns appear across the behavior of different people who share the same field. And these strong institutions they do not just guide us. They put us on a track. They impose specific behaviors on us. They define what is right and wrong, appropriate, inappropriate. They define the rules of the game. What we said about ethical blindness so far is very much aligned with having the pressure to show a particular behavior across three types of contexts. Immediate context, organizational context, overarching institutional context. Think about the fairytale we talked about in our first week. The institutional context here might be the authoritarian structure of the absolute monarchy that we have in this, in this empire. Or the dominating feeling of fear that is there everywhere in this, in this kingdom. As the tuna fish in the joke that I told you at the beginning, the citizens in this empire, they're may or, ma, are very much aligned in their mental maps about the world, what they can see, what they cannot see. Combine this with the organizational context. So the hierarchy in the castle, for instance. Who gives the orders? How is the process eh, of commands? At the immediate situation, you are the Prime Minister. You're in front of these two crooks. You have to make a decision right now. You have to say yes or no, what they see the closest or not. So strong context can be created across these three types of, of forces and they can make us blind for broader reality. The overarching institution context can become overwhelming. It can be so strong that there's really nothing else we can do but the one thing that is prescribed for a specific decision making situation. We would call such an institutional context totalitarian. It leaves no space for alternatives, no space for critique, no space for interpretations. It turns into dogmas and ideologies. So, institutions can switch off reason by turning into ideologies. And ethical blindness becomes highly probable if we are surrounded by dogmas about our larger social context. In our course, we focus on corporations mainly, and people in corporations. So the powerful ideology that we see around corporations is the one on maximizing shareholder value. We will analyze this context, this particular ideology in our next session, and we believe that this is necessary to understand why scandals happened in the last 10, 20 years in modern corporations. Let me conclude by giving you three insights of this session. First, what we believe and what we do, is under the strong influence of the institutions in which we are embedded. Institutions therefore set behavioral and cognitive limits to us. And as a result, they might reinforce situational and organizational pressures that drive us towards ethical blindness. [MUSIC]
