S1E8 – B: Client based dilemma

The most critical relationship for any business is the one with its clients! we all know that the customer is King, but to which level? In this section, we explore typical ethical dilemmas that companies face while interacting with their consumers.

Phrases like “The Customer is King” or “the customer is always right” are common mottos within any company, it’s a kind of corporate culture that exemplifies the importance of pleasing the customer and recognizing it that the customer is the one that has decision to choose how it solves its needs.

In this section we discuss the love & hate relationship between the customer and the client. A relationship that can be seen in many variants, from as simple as ordering a pizza from the restaurant to as complex as getting a design from an architect. In specific will explore:

  • A dilemma based on a monopoly of a medicine and excessive pricing,
  • A dilemma on a company that doesn’t follows a staggered approach on product release to make more money out of consumers.
  • And a dilemma on a social platform and its ability to ban users based on their own criteria.

Unlike individual dilemmas where we explored the perspective of multiple agents on the same dilemma, in this episode we will focus our full attention to the business perspective, providing further observations at the end of each dilemma.

The Expensive medicine dilemma

Let us begin with the first case of an exaggerated pricing from a pharmaceutical company. This story is inspired by the famous example of “pharma boy”  Martin Shkreli. For anyone unfamiliar with this case, Shkreli was the CEO of a pharmaceutical company called Turing, this company got widely criticized when it obtained the manufacturing license for the antiparasitic drug called Daraprim and raised its price by a factor of 56 (from US$13.50 to $750 per pill)

The drug’s most prominent use was as part of the treatment for both AIDS-related and AIDS-unrelated toxoplasmosis, hence the drug can be considered a critical medicine for many patients. After the price increase, Turing received heavy complaints from doctors, hospitals and even government senators. Martin Shkreli defended the price hike by saying, «If there was a company that was selling an Aston Martin at the price of a bicycle, and we buy that company and we ask to charge Toyota prices, I don’t think that that should be a crime.»

The Dilemma

To begin the process let us summarise the dilemma as: should a pharmaceutical company with a monopoly on an important medicine aim to have the highest profit price or the most accessible price?

Phase 1  – Evaluation of Injuries

1.1 Introduction of standpoints:

  • Standpoint A – To price the drug to the maximum profit possible, making it less accessible to customers.
  • Standpoint B – To price the drug at a more accessible price point. Creating less profit for the company.

1.2 Clarifying role and stakeholders:

The key stakeholders are the clients, the Employees, the shareholders and the Government representing society.

We could as well include insurance companies and hospitals, but that would make things a bit confusing about who is paying and who is getting an injury, lets’s make it simple with full attention to the clients being the ones affected.

1.3 Role Expectations in jeopardy:

Is important to highlight that employees’ salaries and shareholders’ expectations are based on the marketplace situations, people use other companies’ returns as reference. If everyone is making a 10% return then lower than that might be considered an injury.

1.4 – Estimating Injuries.

  • Standpoint A (maximize profit)  – Normally this kind of pricing doesn’t cause injuries, as this is a common practice in the marketplace and kind of expected. However, in this case, there is a monopoly on the product, increasing the sensitivity as there is no other choice. In addition, this product is critical for the health of the patient, exuberating the need for it. With this in mind, label this option a critical injury for the clients (patients) and depending on the quantity of them we could even call it a serious injury for society. This option is critically unethical.
  • Standpoint B (accessible pricepoint). Here there are no injuries towards clients or the government, however, there is an opportunity cost towards the employees and shareholders as the company doesn’t get “the money they could have had”. I explained earlier that money injuries for companies are not that critical hence in this scenario this option is uncomfortably unethical or perhaps serious depending on how far is the profitability form the market average.

Phase 2  – Decision Taking

2.1 Ranking of injuries and legal

The option with the lowest injury is standpoint B, to provide the medicine at an accessible value.

2.2 Legal aspect

We will assume that both options are legal.

  • Beyond expectations

Medicines are expected to be offered at “reasonable” prices, where the company makes a decent profit and the price is not considered exaggerated. “going beyond expectations” could be considered a sign of altruism, which is in a way what we are doing in standpoint B. As this option is preventing a critical injury, this would be supported by the DREMSI theory.

2.4 Conclusion and Observations

The best decision is to go with Standpoint B and offer an accessible price point. It is still unethical as it purposely delivers below expectations returns, so the argument can be made to find a “reasonable” spot where the shareholders and employees get the industry standards.

I considered this scenario relatively easy as one can intuitively feel that the pricing was wrong. Two important observations at this point:

  • Monopoly business – The reason this situation became a problem was because of the monopoly on the product, the clients didn’t get any chance to find a decent alternative. Any monopoly on a product increases the client’s sensitivity to the business’s actions.
  • Reasonable pricing – in an industry where patents and exclusive rights are common, there are as well “reasonable” profit margins expected by multiple stakeholders. The government knows that you will behave within thresholds and shareholders know what kind of returns make sense in such a market. Using the industry as a benchmark we can understand how 56 times the previous price would be considered an exaggerated price, one that not even shareholders would be expecting to get.

Staggered products for the sake of continuous revenues

Let’s move into a more complex situation. The second dilemma to analyse has to do with “product updates” and in particular is inspired by the strategy from mobile providers to launch products in a staged matter, with every year launching a small upgrade that feels like a purposeful effort to collect more money from consumers. Does this sound familiar? iPhone 10, 11, 13, 14 with minimal innovations year after year? Many of the products in the market operate this way, but is it ethical?

The dilemma to discuss is pretty simple, should a company use a staggered approach for the release of their products or should they do one update with everything every five years?

Phase 1  – Evaluation of Injuries

1.1 Introduction of standpoints:

  • Standpoint A – to provide a product that is valid for one year, holding up technologies from the consumer and affecting them monetarily as next year they have to buy it again.
  • Standpoint B – A reliable product that lasts five years, missing the opportunity to generate more profit for the company.

1.2 Clarifying role and stakeholders:

The key stakeholders are the clients, the Employees, the shareholders and the Government representing society.

1.3 Role Expectations in jeopardy:

In the formation of the expectation towards a business, clients use as reference other similar companies. In this case, because the majority of mobile providers use the one-year mobile update approach, then the expectations from the consumer is for this practice to be acceptable, hence is up to them if they buy it or not.

  • The clients, want to have a reliable product that does what is advertised. Some clients expect the latest technology and others expect a functioning mobile that lasts 5 years.
  • The government expects the company to “play by the rules” and not cause any social discomfort.
  • The employees expect to get paid by the company as per their contract agreement, if the company is not profitable they are less likely to get paid
  • The shareholders expect the company to make a profit so that they can get a return on their investment.

1.4 – Estimating Injuries.

  • In standpoint A (updates every year) – When we began it looked like this practice would injure the client, as the client has to buy a new phone every year, but since the consumer is already “expecting this behaviour” and has the freedom to choose among competitors, then this option can not be considered an injury. This is option is ethical.
  • In standpoint B (update every five year)–  the shareholders might suffer an uncomfortable injury as the company purposely reduces the profitability. This is uncomfortably unethical towards the shareholders.

Using the client’s expectations of products and the freedom to choose among options, we conclude that Standpoint A is ethical; however, if a company were to do something shady to stop consumer freedom, like forcing the user to buy the product as the previous one no longer works, then we could argue there is an injury.

Phase 2  – Decision Taking

  • Ranking of injuries and legal

The option that causes the least injuries is Standpoint B (regular updates).

  • Legal aspect

Both options are ethical.

2.3 Beyond expectations

It is possible to go beyond expectations and provide the ultimate upgradable phone. So long the internal injuries to the business (in profitability and shareholders’ return) are within the uncomfortable intensity, this would be a valid proposal as altruistic or even social change behaviour.

2.4 Conclusion and Observations

The most ethical of the options is Standpoint B, to provide updates every year. This option only works because the industry already operates like this, the consumer has the freedom to choose and is not forced to update their mobile year after year.

The freedom for the client to choose what they want becomes a driving force to determine what can one expect from companies, and ultimately what can we consider unethical behaviours. In the case the clients believe is wrong to have a phone that doesn’t work after one year, they simply don’t buy from that provider and work with another that offers better service or product quality. This freedom to change is what minimizes ethical injuries in the marketplace.

The situation would be entirely different if there was a form of manipulation from the company, a concept known as Dark Patterns where the business actively uses deception activities to trick the consumer to have to buy or renewing the product every year. A perfect example is unfair contracts that renew year by year without one even knowing it happened. The more a company manipulates the client the more the ethical injury.

Platform-based dilemmas – The Trump-Facebook Dilemma.

Unlike the previous dilemma where there was a freedom to choose, we now enter a more limited and complicated discussion of Social media platforms. Such platforms operate in a “winner takes all” format, where a platform is good as they exclusively gather as many users as possible, in other words, we use Facebook because we know most of our friends are there and they only use this platform.

We all know social media platforms, the phenomena started in 2004 with Facebook, with Instagram appearing a few years later Instagram and nowadays TikTok taking the top spot. Social media platforms provide a place where users share ideas, multimedia and experiences. They operate on a business model in which users get something for free by exchanging data, in addition, users get shown advertisements from other companies with the objective to drive sales.

With all the controversy around social platforms, it is only natural that we have a look at how the DREMSI method would apply to them. We will not focus on data privacy as this one is already heavily regulated and there is a big field of Data Ethics constantly revealing how users can get injured by data. We will instead focus on the power social media platforms have on their users.

The dilemma to discuss is if it is ethical for platforms to ban users from their services. In principle, it looks like a very simple dilemma, as the company has the freedom to do as they wish in their spaces, just like a restaurant can kick out a client If they misbehave. However, Social Platforms are different from restaurants hence is important to explore a bit deeper the little details..

To make the story more tangible, in 2021 Facebook and Twitter banned Donald Trump from his social platform, although both platforms have banned users before this is the first time they banned such an important public figure. The reason was that it was believed that Donald Trump’s comments were instigating violence, which ultimately led to the storming of the capitol. That sounds like a pretty reasonable reason to ban him, but let’s look at the facts.

To put the dilemma in simple words, should facebook ban users from their platform if they consider them a danger to society?

Although it sounds easy, The reason why this a tricky dilemma is four-fold:

  • First, Facebook and Twitter are not banning the user for causing damage in their platforms, but outside their platforms. They do it on the belief of what is best for the community.
  • Second, in this example, we work under the assumption that the government didn’t support this ban or didn’t actively request a ban (after all, it was the president)
  • Third, these social platforms hold a “monopoly” of business, in which if you are not in one of them, is practically impossible to find another solution that would have the same reach. Hence this is a serious injury towards whoever is banned.
  • Fourth, freedom of speech is so highly valued in America, that banning a person from the number one platform to express one’s opinion, makes the injury even more critical.

This context makes the situation tricky as the injury is much larger than one could initially conceive and the justification lacks support from the government.  Without further discussion let us begin.

1.1 Introduction of standpoints:

  • Standpoint A – Ban Donald trump from the platform, causing serious damage to Donald Trump’s ability to express and share messages.
  • Standpoint B – Do not ban Donald Trump, letting potential damages happen in society.

1.2 Clarifying role and stakeholders:

Here is interesting because social platforms have clients (companies that pay for advertisement) and users (people that join and share data), separately. So we have to add users to the common pool of stakeholders. As such we have The Users, The clients, The Employees, The shareholders and the Government representing society.

1.3 Role Expectations in jeopardy:

  • Towards the users, who expect to be able to use the social platform to express themselves.
  • Towards the clients, who expect to have a reliable platform to get the users’ attention
  • Towards the government, who expects the Social platform to take measurements that prevent social unrest
  • Towards the employees, who expect that the company remains profitable, pays them and doesn’t cause damage to society.
  • Towards the shareholders, who expect the company to make a profit so that they can get a return on their investment.

1.4 – Estimating Injuries.

  • In standpoint A (Banning him), this is totally within the rights of the platforms as space owners however because of the monopoly in user audience this represents an injury to the freedom of speech. Of course, there are other platforms, such as TV, government press..etc, so even if its an injury, I wouldn’t call it Critical as the government still had the TV media to make communications. For this reason, I will label this standpoint as Seriously Unethical to Donald Trump.
  • In standpoint A – Letting him be, has been argued that has the potential to cause damages, such as the storming of the capitol, hence there is a risk of critical injury to society. This position hence comes with a high risk of being Critically Unethical towards society and potentially towards facebook’s customers which might get affected by the hit in reputation.

Phase 2  – Decision Taking

2.1 Ranking of injuries

In Standpoint B we have a risk of being critically unethical, with a fresh precedent that confirms the risk is quite high, while on Standpoint B we have only a seriously unethical option, making it the one that causes the least damage.

  • Legal aspect

Both options seem to be legal.

  • Beyond expectations

The platform could choose to behave “beyond expectations” and truly prioritize freedom of speech above society’s safety, however, this could lead to critical injuries and hence is not supported by the DREMSI Method.

2.4 Conclusion and Observations

Taking everything into consideration, the best option is Standpoint A, to ban Donald Trump from the platform in the prevention of critical injuries.

Three observations that are worth reviewing:

  • Space predetermines rights. Platform ownership. Mi casa – my rules” is an understandable expectation for companies, very common in restaurants if a customer misbehaves. So the fact that facebook can do this to their users.
  • The monopoly of service leads to higher sensitivity to damages. Social platforms tend to monopolize users, hence the damage of a ban on a user is much bigger than the average restaurant ban. Any form of monopoly will increase sensitivities towards the users and in the case of social media we can argue that these platforms have higher responsabilties
  • Companies deciding the good for society. I am not in favour of Companies setting an agenda of what is right and wrong in society, however taking actions to prevent damages that society already classifies as injuries is a valid practice that applies not only to companies but to all members of society. If companies were to propose a new definition of injuries not supported by the current society, for example taking actions to segregate by race because they believe this is the best for society, then this would be a big problem with a high risk of critical injuries.

Concluding remarks

After reviewing all these different dilemmas, it has become clear the freedom of choice by the consumer sets the tone for how the marketplace handles seemingly unethical practices.

So long as the consumer has options to choose from and is aware in advance of the consequences of their choice, then it becomes hard to argue that this is “breaking social expectations” and subsequently an injury. In the case the client feels discomfort, they can simply swap providers and make it known that they are not happy with a certain business, limiting the opportunities for the business to continue operating.  In this context, on one hand, Monopolies increase the chance of injuries and call for a review of the situation, it doesn’t mean it is unethical but the sensitivity increase. On the other hand, any kind of manipulation of the consumer choice would be considered an injury, with the chance of being critical depending on the intensity of the manipulation.

With this, we conclude companies-clients dilemmas and we can now look at the larger picture of Greater good dilemmas.

NEXT S1E8 – C Greater good dilemmas

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