Ethics in investing is a topic that I’m interested in. This is one that I’ve written about before, both in the press and here in this blog . It’s one that I don’t think gets enough airplay – but the lessons of ethics and investing are the subplot to many of the other ideas and strategies that I write about on this blog.

Here are five discrete thoughts that have emerged from experiences that I’ve written about recently.

• Honest investors are fearless investors: I have a lot of philosophical reasons for being honest, but I also have a practical one: I’m not clever enough to keep a web of deceptions straight in my head. That’s too much work. And as I tried to show in yesterday’s post, a deception which one commits doesn’t disappear. Ever. It sticks around; you can’t un-ring a bell. But honest men have no fear of such things.
• Ethics is good business: Honesty, truly, is its own reward. Honesty is the foundation of relationships, and relationships are the foundation of business. Honest business people can at times feel that they’re at a disadvantage (how can you break even if you never screw anyone but others screw?) but it’s my observation that the world doesn’t work like this. The short term gain that one may achieve through some slimy deception or half truth rarely translates into a long term gain.
• It’s ok to evangelize ethical behavior: And that means pointing out unethical businesses. When I run into a dishonest player I tell the world about it. I try to use the same respectful, measured terms that I use when I write – but I don’t pull punches when laying out the facts. Side note: a great key to persuasive communication is to lay off the adjectives. Write a review on Angie’s list. Send a letter to your local Better Business Bureau.
• Ethical investors avoid bad deals: A while ago I wrote about a fraud scam whereby investors were sucked into overpaying for rental properties. The consultant convinced them that tenants were lined up and ready to go, and all they had to do is sign on the dotted line for their zero down loans. Of course they got tricked – and most of them ended up being foreclosed. But the full story shows that the papers which these investors signed were full of fabrications and exaggerations regarding the investors’ financial situation. While it’s true that the consultant was the one who concocted the whole confusing scheme, the investors themselves surely knew that something fishy was going on. But the investors convinced themselves that it was the consultant’s dishonesty on those forms, not theirs, and they turned a blind eye. And it was the investors, in the end, that ended up getting hammered. Bottom line: if you smell something fishy then it’s probable that the entire deal stinks.  My grandmother used to say "if they'll crook with you then they'll crook on you."  Smart woman. 
• The benefits of unethical behavior are outweighed by the risks: We read a lot about lawsuits and malpractice costs running rampant in the healthcare field, but there’s a subtext that a lot of people aren’t aware of. Bad doctors aren’t the ones who get sued. Doctors who get sued are the ones who are rude, arrogant, and dishonest. Even with matters pertaining with one’s health most Americans understand that honest mistakes happen, which means that most patients aren’t on the hotline to the nearest ambulance chaser when something bad happens. But...if the doctor was a jerk...they’ll pick up that phone in a flash. There’s no reason to assume that real estate is any different. The goodwill that you generate by treating people in a transparent, respectful manner is good insurance against getting dragged into court if something goes wrong in the future.