Doing Well By Doing Good

Earlier this week I read a surprising article in the Wall Street Journal on Bill Gates and "creative capitalism". Apparently, Mr. Gates has rethought the virtues of capitalism, concluding that the unfettered pursuit of profit might not solve the world's problems after all. Fancy that.

"We have to find a way to make the aspects of capitalism that serve wealthier people serve poorer people as well," Mr. Gates will tell world leaders at the forum, according to a copy of the speech seen by The Wall Street Journal.

OK, it's easy to be cynical, but come on! this is Bill Gates we're talking about. The man has clout. Wouldn't if be interesting if he really means it?

The article also mentions some of the people that have influenced Gates lately, including C.K. Prahalad and Hans Rosling (the sword-swallowing infographic master). This is another reason to put cynicism aside. He's rolling with a smart crowd, and that has to count for something, right?

But there is another side to all of this. "Creative capitalism" is being challenged by many who don't buy the argument that doing good for society translates to good business overall. It isn't the job of the firm, they say, to make society better, protect the disadvantaged and generally make the world a nicer place. Plus, there isn't any research that really supports the claim that doing good is good for profits (and some firms actually have suffered as they take on more corporate social responsibility initiatives).

If companies need to be vigilant about the limits of CSR, the same applies even more to society as a whole. A dangerous myth is gaining ground: that unadorned capitalism fails to serve the public interest. Profits are not good, goes the logic of much CSR; hence the attraction of turning companies into instruments of social policy. In fact, the opposite is true. The main contribution of companies to society comes precisely from those profits (and the products, services, salaries and ideas that competitive capitalism creates). If the business of business stops being business, we all lose.

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I hope this is wrong. I hope for a future in which doing the right thing makes business sense and ethical sense. Things generally seem to be moving that way. Social entrepreneurism, "creative" capitalism or whatever else it is being dubbed is a good thing that we're hearing more and more of. I know that sounds blissfully ignorant, kind of superficial and overly optimistic, but it's what I believe.

Oh, one final thought. If you haven't been reading Umair Haque's recent posts on why the current model of capitalism is heading down the creek, make sure you take the time to do so. He's an economist with a deep understanding of this stuff. His arguments are essential reading for anyone that believes that social media, networks and communities might ultimately represent something much more meaningful to all of us than a Zombie invitation on Facebook.

I've been talking a lot on bubblegen lately about the ability for 2.0 to massively solve exactly the problems Billg talks about - poverty, hunger, disease, etc.

Why?

Because the economic institutions of capitalism - firms and (financial) markets - alone can't solve these problems.

No matter how much money we throw into them, at them, through them - they are solutions for very different problems; economic problems dominated by equilibrium solutions and a limited number of homogeneous players.

The new economic institutions of hypercapitalism are different: (new kinds of) markets, networks, communities - and the radically different firms that power them.

Comments

[Charlie Gower]

Hey Dino, some interesting thoughts in there.
Di you see this piece?:
http://www.economist.com/opinion/displaystory.cfm?story_id=10533974

I've just done some csr presenting for Nike. It's such a nightmare for these big companies run by accountants.

[Dino]

Yes, that's The Economist article I mentioned in the post :)
I suspect that most companies will only be pushed to take this seriously when it can be linked directly to the bottom line. Sad, but probably true.
That's why I like where Umair is coming from. Apart from ethical/political reasons, he's tackling it from an understanding of the economic implications of new markets, networks and communities, and how they are throwing into question the DNA (his term) of corporations in a range of industries, from health care to media.

[Gavin Heaton]

Great post, Dino. Companies that think that they can operate and succeed within a system that is supported by us all, yet bear to responsibility for the maintenance and advancement of it is ridiculous and small minded.

I am pretty sure that CSR does not claim that profits are bad. It is precisely because of profits that CSR can exist. Well planned CSR can not only deliver broad benefits but can, indeed, provide many economic benefits -- improved morale, lower staff turnover (and all the benefits of this including reduced training costs, retention of knowledge etc), good PR (reduction in costs of customer acquisition etc). (Sorry ... should make this a post myself -- great stuff!)