Do the right thing
Matthew Dashper-Hughes
Global talent acquisition | Leading international operations | Empowering growth and performance through coaching
This article offers a perspective on why having purpose that goes beyond 'merely' making money is not only good for society and the environment, but also good for business.
It’s not ‘wrong’ to want to make money.
The acquisition of wealth and status is, for many people, a valid benchmark. Oftentimes its tied up with personal definitions of ‘success’. Money is not the only benchmark, true, but it’s certainly a tangible one.
However, when the relentless pursuit of money for its own sake becomes the only goal and primary guiding force -either for an individual or for an organisation- the negative unintended consequences, particularly in the long term, can be catastrophic.
The Infinite Game
The Infinite Game is a concept you may be familiar with from Simon Sinek’s book of the same name. It was a phrase originally coined by James P. Carse and it refers to the idea that there are two types of games: finite and infinite.
Finite games have a clear beginning, an end, a winner and a loser. They also have ‘set’ participants and predictable variables.
Infinite games, meanwhile, have no clear end, are played for the continuation of play, and have a constantly shifting set of variables, participants, and rules of engagement.
In the context of business and leadership, the concept of the infinite game is used to describe the idea that organisations and leaders’ best strategy is to focus on creating a long-term vision and plans that will allow them to continue playing and competing in the market, rather than focusing solely on 'winning' in the short term.
This involves creating a culture of learning and adaptation, building strong and lasting relationships with stakeholders, and being willing to make sacrifices in the short term to achieve long-term goals.
Since the focus is on the continuation of play, not the outcome, the players in an infinite game are not competing against each other but are working together to keep the game going.
In ‘traditional’ business models, focus is on finite (often very short-term) goals – quarterly or annual results, for example.
The Infinite Game provides a different perspective on how to approach business and leadership, and it is a way of thinking that can help organisations and leaders to create more resilient and sustainable strategies.
Finite Games
Traditional business models are predicated on ideas of ‘pure’ (or ‘laissez-faire’) capitalism.
This type of capitalism typically leads to a concentration of wealth in a small group of individuals or corporations. Unchecked, or untempered by social and environmental considerations, it can result in economic inequality and lack of access to resources for many people.
Additionally, without government regulation, there may be little oversight to prevent monopolies, fraud, or other forms of economic exploitation. It can also lead to economic instability and recessions.
Before I go any further, and this article starts to read like a socialist manifesto, I want to reiterate my opening line … it’s not wrong to want to make money.
Capitalism, at its best, promotes economic freedom and efficiency through competition and the market forces of supply and demand. It allows for innovation and progress. Individuals and businesses are free to pursue their own economic self-interest (which does not necessarily have to be synonymous with selfishness). This innovation and progress accounts for much of the higher standards of living we enjoy in our society.
Capitalism encourages entrepreneurship and the creation of new businesses, which can create jobs, stimulate economic growth, and bring out the best and brightest elements of human creativity and problem-solving ingenuity.
But...
At its worst it can also lead to income inequality, financial instability, and environmental degradation. Some argue that it necessarily prioritises profit over social welfare and can lead to exploitation of employees and the concentration of wealth in the hands of a small elite. Additionally, capitalism can be prone to boom-and-bust cycles, and financial crises that can cause significant harm to the economy and to individuals. It can lead to overconsumption and overproduction, as companies are incentivised to sell as much as possible, regardless of the environmental or social consequences.
The difference between the best and the worst extremes can, perhaps, be found in ‘finite’ vs. ‘infinite’ thinking, and certainly within the self-orientation (selfish self-interest) of key stakeholders.
To explain the pervasiveness of ‘finite’ thinking it’s helpful to talk about its most influential exemplar, Milton Friedman.
If you’ve not heard of him before, Friedman was an American economist and statistician known for his strong advocacy of laissez-faire economic policies. He was a professor at the University of Chicago and a recipient of the 1976 Nobel Memorial Prize in Economic Sciences.
Clearly, in many respects, a very smart person, Friedman was a leading figure in the field of monetarism and his ideas have had a major influence on the development of modern economic thought.
Milton Friedman is often quoted as having said "there's no such thing as a free lunch", (one of his basic principles being that it is impossible to get something for nothing).
[Sidebar… it is not exactly clear when he said “there’s no such thing as a free lunch” although it was quoted in his famous book ‘Capitalism and Freedom’ from 1962, where he discusses the idea of government intervention in the economy and the idea of ‘free’ services provided by the government. Despite it often being attributed to him, it was probably not originally his phrase.]
Milton Friedman's economic philosophy, which is often referred to as Friedmanism, is based on the idea that the money supply is the primary determinant of economic growth and that governments should focus on controlling the money supply to stabilise the economy.
Friedman advocated for a free-market economy and limited government intervention in the economy. He believed that the best way to promote economic growth and prosperity is to allow market forces to operate freely, with minimal government regulation or intervention. He argued that government policies that attempt to redistribute wealth or to regulate the economy will only lead to inefficiency and economic stagnation.
However, whilst against excessive governmental regulation, Friedman believed that inflation is caused by an increase in the money supply, and that the best way to control inflation is governmental intervention. He argued that monetary policy, such as adjusting interest rates, should be the primary tool used by the government to stabilise the economy.
If you look at a lot of monetary policy in the UK today, you can see that Friedman’s influence is still enormous. His theories were influential in the shift towards monetary policy as a primary tool for managing the economy, particularly in the UK and US.
It is worth noting that Friedman's works and ideas are widely debated and studied among economists and, whilst his influence on economics and policymaking is undeniable, his theories and policies have both supporters and critics.
One criticism is that Friedman's ideas about monetary policy do not consider other factors that can affect the economy, such as government spending and taxation. Additionally, some argue that his emphasis on monetary policy alone can lead to a lack of government intervention in other areas that may be crucial for economic stability, such as labour markets and financial regulation (Friedman believed there was a natural level of unemployment in any economy that no amount of government intervention could change).
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Bigger criticisms are levelled at his ideas about the role of the government in the economy being too laissez-faire, and that (as noted above) this can lead to economic inequality and a lack of oversight to prevent monopolies, fraud, or other forms of economic exploitation.
This is all, to some extent, ‘finite’ thinking, and the biggest criticisms levelled at his philosophy are related to the way it sees business, itself, as a ‘finite game’.
The most damning and, to my mind, troubling example of this ‘finite’ thinking is his argument that the primary social responsibility of a business is to increase its profits and drive shareholder value.
He stated that the only “social responsibility of business is to increase its profits" in a 1970 New York Times Magazine article.
This phrase was echoed, in a bitingly satirical form, by the character Gordon Gekko, played by Michael Douglas, in the 1987 movie ‘Wall Street’, “Greed, for want of a better word, is good”.
Friedman argued that companies should focus solely on maximising profits, and that any attempt to consider social or environmental concerns would be a waste of resources and would harm the company's ability to create wealth for its shareholders. He believed that by increasing profits, companies would also be contributing to the overall wellbeing of society, as economic growth and prosperity are the main drivers of social progress.
This view is now widely recognised as being too narrow and, whilst well-intentioned, it suffers from its na?ve conception of how human psychology works. It overlooks the negative social and environmental impacts that companies can (and do) have when their principals are not structurally incentivised to focus on their principles.
With a huge role in how our society works, companies have a responsibility to consider the broader impact of their actions on communities and the environment, and they can do this whilst also driving shareholder value.
Arguably, shareholder value is in fact- more sustainable when shareholders are treated as the last-in-line of all the business’ various stakeholders (including staff, customers, suppliers, community, environment, media etc).
The triple bottom line (“TBL”), Environmental Social & Governance (“ESG”), and Corporate Social Responsibility (“CSR”) are examples of more holistic approaches to measure and report the impact of companies in a broader way. Philosophically, these attempt to incorporate some level of ‘infinite game’ thinking into business strategy.
TBL
The triple bottom line (TBL) approach is a framework for measuring the sustainability and performance of an organisation or business. It evaluates the economic, social, and environmental impact of an organisation's activities.
The TBL approach encourages organisations to consider the long-term sustainability of their activities and to consider the impact of their actions on people and the planet, not just on their bottom line. This approach is used by companies, governments, and non-profit organisations to evaluate their overall performance, and to help them identify areas where they can improve their sustainability.
The TBL approach also helps organisations to report their sustainability performance in a way that is more transparent and comparable to other organisations. This allows stakeholders, such as investors, customers, and regulators, to better understand the organisation's overall performance and impact.
The TBL approach can be profitable for a business because it allows for a more sustainable and responsible way of doing business, which can lead to long-term success. Additionally, companies that prioritise social and environmental responsibility have proved themselves able to attract and retain customers who are conscious of these issues, as well as employees who are motivated by a sense of purpose. Additionally, regulations and laws are becoming stricter in some countries to respect the environment and society, following TBL can make companies more compliant with these regulations.
There are many big businesses that prioritise the TBL approach in their operations. Some examples include:
These are just a few examples of big businesses that prioritise the TBL approach in their operations. There are many other companies, both large and small, that are committed to sustainability, social responsibility, and environmental stewardship.
ESG
ESG stands for Environmental, Social, and Governance. It is a set of three criteria that are used to evaluate the sustainability and ethical impact of an investment in a company or business.
The Environmental criteria evaluate a company's impact on the natural environment, including issues such as energy use, waste management, and pollution.
The Social criteria evaluate a company's impact on society, including issues such as labour practices, community engagement, and human rights.
The Governance criteria evaluate a company's management and leadership, including issues such as transparency, executive compensation, and board diversity.
ESG criteria are used by investors, including institutional investors, to screen and select investments, as well as to engage with companies to improve their ESG performance. Many investors use ESG criteria to identify companies that are well-managed, with a positive impact on the environment, and a commitment to social responsibility. Additionally, many investors believe that companies with strong ESG performance are better positioned to perform well in the long-term, and they see it to manage risks.
ESG investing is becoming increasingly popular, as more investors are considering the long-term sustainability and ethical impact of their investments, and as companies are becoming more transparent in their reporting of ESG data.
CSR
CSR stands for Corporate Social Responsibility. It refers to the ways in which a company considers the social and environmental impact of its business operations and interacts with its stakeholders. CSR is a broad concept that encompasses a wide range of activities, including philanthropy, community engagement, environmental sustainability, ethical sourcing, and workplace diversity and inclusion.
The goal of CSR is for a company to operate in a manner that is both socially and environmentally responsible, while also remaining profitable. This can include initiatives such as reducing carbon emissions, promoting fair labour practices, and supporting local communities.
CSR can be voluntary or mandatory. Many companies choose to implement CSR initiatives on a voluntary basis, as they believe it can help them to build a positive reputation and to attract and retain customers, employees, and investors. Some countries and regions have laws and regulations that require companies to disclose their CSR activities and performance.
CSR is becoming an increasingly important issue for companies, as consumers, investors, and employees are becoming more aware of the social and environmental impact of business operations. Many companies include CSR information in their annual reports, and some even publish separate sustainability reports.
What does this all mean to you?
This is relevant to you if you are thinking about:
Factoring in ‘infinite’ thinking for these, and similar, decisions, gives a valuable additional lens through which to look at your options and sometimes can provide a differentiator that you might otherwise miss or not weight heavily enough when making your choices.
Trustee, Specialist Consultant and Mentor for Not For Profit Sector Leaders Covering: Fundraising, Strategy, and Evaluation.
1 年Great article Matthew Dashper-Hughes
Certified Business Psychologist | Coach | Speaker | Using psychology to create high-performing leaders, cultures, and teams #HappyBeesMakeTastyHoney
1 年The Friedman viewpoint is so engrained that the idea of 3BL might conjure up some sort of hippy commune. There's a strange irony that organisations that trade more ethically tend to be (i) more profitable; (ii) more attractive to investors; and (iii) have improved innovation (Kiron et al., 2022). It's a key reason that ESG results now sit in many annual reports and Chairmans' statements. CSR, ESG and 3BL are not just some sort of afterthought. They're an update to the antiquated views of Friedman, Welch and co. Reference: Kiron, D., Nina, K., Martin, R. and Eugene, G. (2022) The Benefits of Sustainability-Driven Innovation. MIT Sloan Management Review, 54(2), pp. 69-73.