#49SGS: A powerful push for purpose

The 49th St. Gallen Symposium is taking place right now (and ends tomorrow 10 May). The focus is "Capital for Purpose" and I've had a chance to be there today with a great many others, coming together from across generations to explore the way forward for people and planet.

Swiss Re has been closely tied to the St. Gallen University for many years and recently I got to meet with the Symposium organizers when they came to meet with us in Zurich for a bit. This fantastically energized bunch of young people has now pulled it off - it's done, it's running - and from everything I've seen today, it's a big success - kudos, all! I was there to listen in on a few sessions, among them a keynote and chat with Professor Niall Ferguson, then a conversation with the Deputy Prime Minister of Singapore, Heng Swee Keat - and then, of course, the panel discussion with my big boss, Swiss Re Group CEO Christian Mumenthaler.

The panel, simply titled "On capital and purpose", featured Audrey Choi, Morgan Stanley's Chief Marketing Officer and Chief Sustainability Officer, University of Oxford Professor Prof. Colin Mayer as well as Christian - the session was moderated by CNN's Nina dos Santos. In this post I'll share a few thoughts and snippets - in the meantime the full video has been posted, you'll find it here - and also embedded at the end of this post.

A generation of skepticism

The session began with a video sequence with several international HSG students sharing their thoughts on capital and purpose. There was an understandable degree of skepticism by these young people and one student said, "The move from shareholder primacy to purpose primacy is essential – unfortunately it may take a crisis to get us there."

I had a sense that there was a great deal of insight there. They've seen things, they've experienced things, they've been shown, from Enron to the latest financial crisis, that there's a great deal more "me" than "we" in the system - and that trust was abused time and time again. At the same time they know that the challenges facing the world are monumental and that the real power resides where the money is. But is that in the cards? Can the capitalist system be enlisted? Is there more "we" than "me" these days? ... Or is the purpose of a company really to simply make as much money as possible for its shareholders?

From Me to We

Luckily, we seem to move beyond that traditional notion. It's not just that the younger generations have a much stronger focus on purpose, shareholders also care more and more about where their money is invested – and companies discover that following purpose is a sound long-term way to be successful. You know the Mark Twain saying that "history doesn't repeat itself, but it often rhymes"? I'm with Niall Ferguson on this, we can, most often, learn a great deal from history. On the notion of purpose I'd just like to mention the "HP Way" - I'm paraphrasing but basically the founders of Hewlett Packard said that "We're not here to make a profit. We're making a profit in order to do what we're here for, and that is to make a contribution to society." I often think that we could use more of that old "HP Way" thinking again ... and it looks like it is indeed making a comeback.

A survey by the SGS' Leaders of Tomorrow revealed that many think that companies are still focused mostly on their traditional priorities such as profit, driving efficiency and producing goods and services. What this next generation sees as companies' responsibilities is something else - it is improving society, developing new products and services, innovating and generating new ideas, as well as generating jobs and provide employment.

Christian said that every company has a purpose, but very few explicitly formulate it. That purpose, he says, cannot be profit. In the case of Swiss Re it is simply this "We make the world more resilient." As me, Daniel, a reinsurance layman, I see this every day at Swiss Re - in how we help around the world after disasters, in how we help to predict risks and prevent bad things from happening in the first place ... pretty much every risk you can think of, Swiss Re is trying to mitigate, to prevent and to protect ... and that does make the world more resilient ... ours is an excellent purpose, it really is.

Audrey Choi explained that investors are shifting - that they have understood that the challenges such as climate change, poverty, gender inequality, etc. affect the bottom line. When the moderator asked her about the dreaded short-termism, Audrey agreed - that often does stand in the way. Apparently the reality is that 70-80% of a company's value is based on long-term projects ... and yet, she explained, when CFOs were polled they opted against investing in a long-term project if it mean they'd miss their next earnings estimate even by a penny ...

The purpose of business

Professor Mayer said that there is a realization "that the purpose of business is not to produce profit, but that the purpose of business is to produce profitable solutions to the problems of people and planet. And in the process it produces profits." He said that this is what successful businesses recognize - they don't profit from producing problems for people or planet, they solve them.

They talked about where change needs to come from and it seems pretty clear that fundamental change will not come about without the power of industries. While some governments have come forward with enlightened policies, the real push must come from investors with trillions of dollars in capital markets. Christian explained that Swiss Re has been at the forefront of addressing climate change issues for decades and that the company has helped politicians for many years to understand the climate change issues – and to persuade them into action. But while advocacy had been successful, it wasn't enough and some of the climate change consequences cannot be averted. Swiss Re helps adapt and mitigate the risks – for individuals, for companies, for governments. But Christian shared his concern that there is a lot of high level talk but it doesn't yet add up to a truly global plan. That's something Swiss Re actively pushes for - in the meantime, there's a great deal companies can do. In the case of Swiss Re Christian shared that we shifted our assets into ESG benchmarks and that we're no longer reinsuring coal power plants in developed countries.

For a moment, it felt as if Professor Mayer was giving the conversation a philosophical twist when he launched into his thinking about "doing good, doing well – and doing bad" – It turned out to be entirely down to earth and very much at the heart of the conversation about profit and purpose. He said that there's something inherently wrong with the saying "doing good by doing well", because it implies that if a company doesn't do well (i.e. make profit) that they then shouldn't do good (i.e. execute on their purpose). He argued that it's easy enough for a company do good in profitable times but for him the central question is "What happens if times are not profitable?" He wasn't nearly as hopeful as his co-panelists, saying that real impact investing around the world is still very low. He expects that, while leaders may think more about purpose, their actions will remain constrained by investors.

"To my mind it is important to think of purpose as being about solving problems." Professor Colin Mayer

They also addressed something that's near and dear to many of us – people, more concretely, employees! They agreed that one of the main purposes of business is to ensure that its main assets, its human assets, are ones that are going to deliver those purposes. And as automation changes the nature of employment, companies can have two responses, Professor Mayer said, "they can either lay people off – or they can think about how they can retrain/reskill people to be able to provide the different types of services going forward."

Acting purposefully into the future

I remember once giving a presentation to a thousand HR people in India where everyone was worried about losing their jobs to automation – that was two years ago. I told them exactly what Professor Mayer today shared about the example of the banking industry. It would either be fully automated – or companies could rethink themselves and return to providing human relationship-style engagement. I agree with him – it would open vast opportunities for new and meaningful employment, it would give people a chance to really connect and be really interested and invested in a customer. The professor argued that, in the age of automation, the real opportunities lie in supplementing automation with real relationship-management.

He mused that this might even help some companies to discover a new purpose. I've long held this idealistic notion that the most successful companies of the future will be the most human ones. This can become a virtuous cycle that'll have us all act purposefully into the future.

... looking forward to #49SGS tomorrow!