Principles Matter But Rules And Regulations Are Useless

I reread an article on banking last weekend. Paul Volcker on Conflicts, Ethics, and the US Banking Industry. It takes some thinking to discover its place in our world.

That place is much wider than the banking industry in the US.

Why do we need laws and regulations?

For one simple reason. We don’t trust each other. We certainly don’t trust our institutions any more. Banks being just one of many. It has been true for at least 50 years.

A comment from HR Haldeman regarding the “Pentagon Papers.” From the Nixon tapes, 14 June 1971:

“But out of the gobbledygook, comes a very clear thing: .. you can’t trust the government; you can’t believe what they say; and you can’t rely on their judgment; and the – the implicit infallibility of presidents, which has been an accepted thing in America, is badly hurt by this, because it shows that people do things the President wants to do even though it’s wrong, and the President can be wrong.”

Because we no longer trust, we must accept a less valuable substitute – rules and regulation.

It has always been so

Plato pointed out the obvious. An apparent condition we choose to overlook.

“Good people do not need laws to tell them how to act responsibly, while bad people will find a way around the laws.”

The apparent question is, what is the point of the law or regulation in the first place? To make politicians look like they are doing something?

Principle based societies

I dealt with the question of why have rules and regulations, five years ago. You can see it here. Rule Based Societies

I think nothing has changed for the better. There are now rules to govern almost every aspect of life. From building codes, to banks, to truth in advertising, to how dark a restaurant can toast bread. If I thought this lead somewhere good, I would support it but the current wisdom seems to be if 1,000 rules are good 10,000 must be better and 10,000,000 best of all.

Where it leads

Margaret Thatcher once made a point that is even more true today; “Politics used to be about trying to do something. Now it’s about trying to be someone.”

Governments to day are made up of politicians who have gone into the profession for the wrong reasons. Doing something to benefit everyone is now secondary to appearing to be a person who is caring. “Woke” The idea of woke presupposes the resources to make the vision work will be available and that fact is not in evidence. Society has a huge superstructure but the foundation of it is the ability to be self-supporting. An item lost in translation to the new way.

Trying to be someone leads to compromise where none is appropriate. Thatcher again, “To me, consensus seems to be the process of abandoning all beliefs, principles, values, and policies. So it is something in which no one believes and to which no one objects.”

On the need for consensus

As Margaret Thatcher pointed out consensus is a problem. Reasoned positions supported by experiment and evidence lead to better solutions. What do we know about agreement and disagreement? My first boss said it best I think. “If two people always agree, one of them is useless. If two people always disagree, both of them are useless”

Consensus continues to be a problem.

How do we fit the pieces of society together?

Maybe we just let people find their own way to fit. Bending society to fit everyone is an impossible task. There are too many factors to make it easy.

People do not understand “probabilistic combinatorics.” If we have factors we view as describing us personally and expect to intersect with society, we must realize there are too many. Consider a few factors. Race (5), sex (2), gender expression (many), religion (many), economic level, (5 quintiles), place of origin or ethnic background (many), age, (call it 5), ability/disability (many). Ten categories and if we make “many” worth 10, a low choice, there we are with 57 factors and 2,500,000 different people possible

You see the problem of having each person fit into a given society defined by rules. The working idea is simpler. Respect each other for their similarities to you and for their differences. No rules required for that so long as everyone agrees to play by the rule.

But recall Plato’s point above. Not everyone will participate that way. Maybe you have to ignore them and trust the people to defend themselves or ostracize the wrongdoer. Relying on the government to fix the problem is shortsighted. They already have many rules, regulations, and ideals they cannot, or don’t want to, enforce. Think bullying in schools.

In your family or business

Mistrust the power of rules.

“More than ambition, more than ability, it is rules that limit contribution; rules are the lowest common denominator of human behavior. They are a substitute for rational thought.”

Admiral Hyman G. Rickover

Rules get in the way. If the rule limits more than the behaviour you want to limit, or if you don’t know how to enforce it, don’t have the rule. It makes all rules suspect.

Teach everyone you can to behave based on well-founded principles.


I help people understand and manage risk and other financial issues. To help them achieve and exceed their goals, I use tax efficiencies and design advantages. The result: more security, more efficient income, larger and more liquid estates.

Please be in touch if I can help you. don@moneyfyi.com 705-927-4770

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