Building an ethical business

A few years ago, a girl named Chiyako typed a short message into her phone, and it traveled from Singapore, all the way across the Pacific Ocean, to Oregon, where I was at the time.

And it was perhaps the most flattering thing I’ve ever been told:

We were talking about you with some friends tonight, and Harry said, “Niko’s the kind of person who would do the right thing, even if nobody was watching.”

Getting that message felt better than any notification I’ve ever gotten about a successful sale, product launch, deal, etc. And, interestingly enough, it often motivates me to live up to the kind words.

That message also planted a question in my mind:

Can I get people to say this about my businesses, too?

Can you imagine someone saying, “X is the type of company that would do the right thing even if no one was looking.”

That's a company I want to buy from.

That's a company I want to own.


Breaking promises sucks

When I’m in the San Diego area, my friends who live around there often get annoyed at me because I won’t commit to any kind of social gathering.

I don’t commit to them because I don’t like to be locked into doing something, or to look at a calendar more than a few times a month.

“You’re such a flake,” they’ll say.

I’m quick to correct them: “You see, I’d only be a flake if I promised to go and then didn’t show up!”

You can’t completely avoid making promises, though. Sometimes you have to make them. And if you don’t deliver, you’re gonna look like a piece of shit, and you’re going to disappoint people you care about.

Notably, you cannot make money without making promises.

If I pay $5 for a coffee and don’t get it, I’ll be pretty annoyed. That wasn’t the deal. I gave you money because you said you’d give me coffee for it.

Where’s my coffee?

Make promises, make money

We’re left with a simple process for making money:

  1. Promise something of value
  2. Get paid for it
  3. Fulfill the promise

At NativShark, we promise users they will learn Japanese through our platform (#1). They give us money (#2). We teach them Japanese (#3).

An insurance company promises me they’ll give me money if I get in a car accident (#1). I pay a monthly fee (#2). They give me money when I get in an accident (#3).

It sounds really simple, but it’s extremely easy to mess this up. And when it does get messed up, everybody can start playing the blame game.

Customer: You said this shampoo would reverse my balding, but it’s only gotten worse!

Business: No, we said it does that for some people. Not everyone.

Customer: Where does it say that?

Business: Right here, in this tiny paragraph of text on the back of the bottle. We also hired the world’s fastest auctioneer to mention it right at the end of our TV commercials.

Customer: I’m never buying your product again! Boycott! Bad reviews! Curses upon you and 70 generations of your kin!

Breaking promises is mighty tempting

In January 2019, we ran a sale on Lifetime access to NativShark.

This was before the initial release of the product, so it was essentially a pre-sale.

And we made a lot of money from it.

But during the sale, we said time and time again that we would never be discounting Lifetime access ever again. Never again.

Fast forward 10 months, and we’re a little short on cash, and we reallllllly need to run a sale that injects the business with some capital.

We know that a Lifetime sale would make us the most money because people ask about it all the time, and it’s the highest priced offering of our product.

Shit.

I’d be lying if I said we never wavered, even for a moment. If I said we didn’t even consider discounting Lifetime again.

But at the end of the day, that would mean breaking a promise we had made.

And as long as you’re not knowingly* breaking your promise to the customer, you’ve got an ethical business. A business you can be proud of.

*I say “knowingly” because inadvertently breaking promises happens all the time, like when you accidentally phrase something in your copywriting in a way that leads customers to think they’re buying something different than what they’ll get.

What is unethical? A case study

In 2013, Google added tabs to Gmail.

Now when you logged in, you wouldn’t just see a single inbox.

Instead, messages got separated into categories like “Social” and “Promotions.”

On the surface, it might seem like Google was doing this for altruistic reasons. “You won’t get inundated with emails because we’ll organize them for you.”

But is that really the reason they set up these tabs?

When you first create a Gmail account, there are ads that look like emails at the top of the Promotions tab, for example (last checked November 2020), so there is an obvious financial incentive for them to have these tabs.

Whatever. I won’t say that Google shouldn’t be able to put ads in Gmail. Nothing’s free, so it makes sense you’d be paying for Gmail in one way or another.

The problem with these tabs is that they were created so that it would be more difficult for marketers to reach their customers via email. (And I would welcome someone trying to convince me otherwise.)

If you can’t reach your customers by email, how do you reach them?

Ads.

How does Google make most of its money?

Selling ad space.

The same thing happens with social media. Facebook won’t show all of your business’s posts to all of your followers — people who asked to get updates from you — unless you pay for ads.

The reason it’s unethical for Google to impede the delivery of emails is that they are breaking the promise made by the product that is Gmail.

“Use Gmail, and you can receive your emails.”

If you’re getting an email from a business, then you requested to get that email. If you didn’t request it, you can throw it in the spam folder. If this happens enough, they will always end up in the spam folder for everyone.

Let’s look at the process once more:

  1. Promise something of value
  2. Get paid for it
  3. Fulfill the promise

First, the promise is that you will receive your emails.

Second, Google gets paid for it a number of ways — data collection, ads embedded in emails, promotion of other Google products within Gmail, etc.

Third, the promise is only sort of fulfilled. “Yeah, you can receive your emails. But we’ll make some of them more difficult for you to notice so that we can make more money.”

Does it increase revenue? Probably.

Should they be proud of it? No.

I certainly wouldn’t be. And I’m not surprised that 2/3 of people go to the trouble of figuring out how to disable these tabs, which is a hassle to do.

And maybe it could be argued that this business practice, while questionable, might not be “unethical.”

But if you’re at the point where you have to ask if something’s ethical — the point where it is highly debatable — maybe that’s a sign that you shouldn’t do the thing.

Instead, why not just do what feels like the right thing? Even if nobody’s looking.

Customers are happy when you keep your promises. And they’re not gonna stick around for very long if you start breaking them.

(For more on the interesting problem of email, I highly recommend listening to the episode “Paying for stamps” on Seth Godin’s amazing podcast Akimbo.)