When you are investing your money, the big question should be, Am I doing this with bounded ethicality, or am I doing this with enlightened self-interest?
Understanding the difference between bounded ethicality and enlightened self-interest can help you make the right investment decisions. It will help you generate a higher return on your money than you might have otherwise.
Let’s examine these two approaches in detail to see how they differ and their implications for investors who take each approach.
What Is Bounded Ethicality?
Bounded ethicality is a person or group of people who only make decisions in their best interest with little or no concern for others and don’t care about how their actions will affect others. In some cases, bounded ethicality could be seen as an example of selfishness, while in other cases, it can be seen as an example of greediness.
What Is Enlightened Self Interest?
Enlightened self-interest is a form of morality that bases its view of right and wrong on the idea that people should act in the best interest of themselves and those around them rather than out of obligation or fear. Enlightened self-interest is not selfishness or individualism but a belief in cooperation while looking out for oneself.
The Difference Between the Two In Investing
Regarding investing, there are differences between bounded ethicality and enlightened self-interest. With bounded ethicality, you have an in-group you favor over everyone else. And with enlightened self-interest, you can profit from everyone because you don’t need to discriminate against any individual or group. After all, they all have the same value.
Other differences in investing include:
- Bounded ethics is more likely to harm outsiders while being altruistic inside the group. On the other hand, enlightenment self-interest is more likely to help outside groups if it helps inside the group at some point. There is also a difference in scope as a result.
- Enlightened self-interest focuses on profits from both sides. It would be difficult for someone who only invests locally to make money from their investments. They would need to focus on things that aren’t happening close by them which could include international deals. However, this investment does not focus on one side as enlightened self-interest does.
Considering different parts of our lives in terms of cost-benefit analysis, you can see how people might choose other methods depending on what kind of goal they want to achieve.
For example, if someone wants to invest in their children to get a better education than they had growing up, enlightened self-interest might work better. It takes into account many costs and benefits.
Enlightened self-interest is an approach that starts with the assumption that there are no universal moral rules and challenges the idea of a bounded ethicality.
Contrary to bounded ethicality, enlightened self-interest does not promote any moral obligations but instead focuses on the importance of looking out for oneself without consideration for others and without feeling guilty about doing so.
In essence, this school of thought promotes the idea that one should only do unto others what they would have done unto themselves.