Ken Shotts

The David S. and Ann M. Barlow Professor of Political Economy
Ken Shotts
Ken Shotts
Companies talk about their good intentions. I’d much rather have good institutions than good intentions.
April 14, 2022

In 2011 Ken Shotts found himself in a predicament. After eight years at Stanford GSB teaching courses within his wheelhouse of political economy and business-government relations, he had been recruited to teach the MBA program’s required ethics class. It was not going well. “It’s a very hard class to teach,” Shotts says, then adds, with characteristic deadpan honesty, “and I sucked at it. I bombed in the class for a while.”

At the time, the ethics course was a bit of an eye-roller for students. If you ask students what courses draw them to the GSB rather than, say, Harvard Business School, Shotts says, “they’re not going to be, like, ‘Oh, it’s because we can take a class on ethics.’”

And Shotts, at least on paper, wasn’t an obvious fit for the course. He’d made his career crafting elegant game-theoretic models of electoral accountability and policy choices, not deep dives into Immanuel Kant or John Rawls. But 10 years later, the course — now rebranded and revitalized as Leading with Values — has a passionate student following, and Shotts has just published a book of the same title, cowritten with his co-instructor, GSB professor of political science Neil Malhotra.

One of the through lines connecting Shotts’s research to his teaching, in both his technical models and his work on ethics, is a deep respect for humans as fundamentally rational decision-makers with unique values. “Good people can legitimately come to different conclusions about the right thing to do,” Shotts and Malhotra write in Leading with Values. It’s “easy to beat up on democracy,” Shotts says. “It’s really easy to assume that politicians are stupid or crazy, and maybe some of them are, but you might want to start with the assumption that they’re actually smart, they’re savvy. Their goals are different from yours.”

Shotts brings the same sensibility to the classroom. “Professor Shotts focuses on creating open space for all perspectives in the classroom and specifically aims not to impress his own ethical views on to others,” says first-year MBA student Louise White.

A primary takeaway Shotts hopes students and readers will gain from the course and his new book, one with particular relevance to present-day America, is the importance of structure and strategy in implementing values-based systems. “There’s all this talk about good intentions in the world,” Shotts says. “We as individuals talk about our good intentions; companies talk about their good intentions. I’d much rather have good institutions than good intentions.”

Shotts has spent the last year trying to create exactly the sort of institution that he describes. The GSB’s Business, Government, and Society task force, which he co-led with TPG Capital founding partner Jim Coulter, MBA ’86, studied how to prepare students across the school for a world where businesses are increasingly expected to act in ways that benefit their communities. “It’s the idea that business is double bottom line or triple bottom line, not just about the financial returns but also about its social impact, its environmental impact,” says Valerie Shen, MBA ’19, COO of G2 Venture Partners and an alumni representative on the task force.

Combining Values with Strategy

A Bay Area native, Shotts earned his undergraduate degree at Stanford and his PhD from Stanford GSB in 1999. His dissertation modeled policy outcomes in the House of Representatives resulting from majority minority districting, with unique takeaways on the Gingrich Revolution of 1994. “Not a very business-school-y sort of topic,” he notes, “but the underlying thing that I found interesting is how people’s interests get represented in policymaking processes.”

Breakthrough papers in political economy defined the first stage of Shotts’s career. Alexander Hirsch, a professor of political science at Caltech and a former PhD student of Shotts’s, says his former adviser “helped establish a field” with his 2001 paper, “Leadership and Pandering: A Theory of Executive Policymaking.” The models that Shotts and his coauthors, Brandice Canes-Wrone and Michael Herron, developed offered a richer picture of political accountability. “It was one of the earliest works,” Hirsch says, “to give a fuller definition of what it might mean for politicians to pander to voters that didn’t rely on a story about voters being stupid or not understanding what was going on.”

Shotts wrote “Leadership and Pandering” while teaching at Northwestern during a brief Midwest sojourn. When a faculty position opened at Stanford GSB in 2003, Shotts returned.

“Talking about values or ethics without thinking about strategy is just the road to irrelevance.”

His research has continued to expand the theoretical analysis of political accountability. He has examined the response of politicians to different types of incentives, modeled mainstream and alternative media and their effects on the policy process, studied gerrymandering, and looked at whether policy outcomes represent the liberal or conservative leanings of the electorate. His work also has fundamental insights into the nature of leadership. Do politicians “act as leaders and use their expertise to the benefit of voters?” Shotts asks. Over the past 20 years, he has written a series of papers on the use of information by politicians and “whether they do that in ways that serve the public interest.”

When Shotts and Malhotra changed the name of their course to Leading with Values, they were making a carefully crafted statement about both leadership and ethics. “Leadership is about core values,” they write in their book. “People are inspired by leaders whose decisions are based on a core set of values that resonate.” And the other side of this coin is no less significant: Without the leadership required for its application, a set of values is an empty promise. Shotts fears that academic discussions of ethics tend to take place hypothetically, detached from real-world implementation: “Talking about values or ethics without thinking about strategy is just the road to irrelevance.”

For individuals, this means choosing careers and employers that match and reinforce their values. “If you want to be someone who doesn’t pay bribes,” Shotts says, “don’t say, ‘I’m going to go work for a company that’s known to pay bribes’ and expect that you’re somehow going to be different from your coworkers.” People respond to the context in which they find themselves, he notes.

For a corporation, this means translating values into concrete policy. “If a leader of a company says, ‘We expect the highest standards and values of people at our company,’ that’s all well and good, but it’s also a matter of actually having the incentives in the company to encourage people to do the right thing,” Shotts says. High-stakes performance rewards without systems to discourage cheating inevitably push a work culture into ethical gray areas, no matter how much verbiage a CEO devotes to values.

Shotts does not expect business to solve the world’s problems alone. “It’s important to have public policy and rules and institutions to create the incentives for companies to do things that are good for society.” Yes, the regulatory process will be maddeningly imperfect. “I expect,” he says, “a lot of the time it’s not going to be effective enough, or it’s going to be too burdensome.” But that shouldn’t make us “lose sight of the fact that if you don’t have it, that’s going to be bad. I don’t like the techno-utopia attitude that all of our Silicon Valley wonderfulness is going to make everything great.”

An Interdisciplinary Approach

Though Shotts and Malhotra benefited from the experience and advice of a number of colleagues as they began to overhaul the ethics course, both single out Stanford GSB professor Benoît Monin, a social psychologist, as being particularly influential. “His insight,” says Malhotra, “was you should be teaching more psychology when you’re talking about responsible leadership in business, and that was inspirational because it showed us that this should really be a multidisciplinary approach.”

After they introduced psychology to the curriculum, Shotts and Malhotra kept going, adding anthropology, political science, and communications. Additionally, Shotts says, they “rewrote essentially every case in the class, wrote a series of summaries of philosophies for use in the class, reworked how we had discussions in the class, reworked how we related things to students’ experiences,” and configured the schedule so that students would spend more time in small group breakouts. “It turns out,” says Shotts, drily, “that the right number of people to have a discussion about values is not 72.”

The result is a focused inquiry into leadership, ethical systems, disagreement, and values tradeoffs, conducted employing a full array of tools from across the social sciences. The philosophers — Kant, Rawls, Nozick, John Stuart Mill — are there, of course, but with their concepts grounded in case studies and modern decision-making. When, for example, they tackle Mill’s consequentialism, they do so with a close analysis of the e-cigarette maker Juul’s argument that its product’s smoking-cessation benefits outweigh its risks to children. And with findings on human decision-making imported from psychology, they can more rigorously investigate executive actions for in-group bias, self-serving rationalizations, confirmation bias, or moral credentialing. “It’s a class that I have a lot of pride in,” says Shotts. “The students like it, and it’s intellectually serious.”

Over the past decade, Shotts and Malhotra, as well as assistant professor of political economy Greg Martin, who has recently joined the teaching team, have formed a close working partnership — Shotts figures that they could probably walk into class and teach off each other’s slides. For the book, which Shotts and Malhotra chose to write as a general interest book rather than a traditional textbook, they jointly crafted a single, conversational narrative voice that blends their personalities and priorities.

Malhotra credits Shotts with being unusually broad-minded as they expanded the reference frame of what would become Leading with Values. “Many economists would not be willing to do that,” Malhotra says. “They’re very rigid and close-minded, but he’s actually more similar to the great behavioral economists, people like Richard Thaler, who understood if you really want to understand human behavior you have to look at it from multiple points of view.”

The future of business and society is no abstract matter for Shotts. His daughter is about to turn 14 — she’ll be living in the world that, in part, he and his students create. Not that this impresses her. “She has a lot of quips,” Shotts says, laughing, “like, ‘No one would want to take your boring class.’”

Fortunately, his students don’t agree. Shotts hopes they will approach the future with a degree of open-minded humility. “They are people with a lot of power, and that brings with it the responsibility of understanding their role in society and how fortunate many of them are, and then thinking about that in a way that engages everyone.”

Photos by Drew Kelly

Ken Shotts
The David S. and Ann M. Barlow Professor of Political Economy
Livermore, California, USA
PhD, Political Economy, Stanford GSB
BA, Political Science, Stanford University
Academic Area
Political Economy
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