America, the champion of capitalism, is at a crossroads. For starters, the recent elections have shown us that a large part of the younger generation is looking toward socialism to solve inequality. At the same time, despite the rise in corporate philanthropy and purpose-driven rhetoric from leading CEO’s, the COVID-19 crisis has thrown us back into the darkest version of the Milton Friedman maximize shareholder value ethos. The top six U.S. airlines and Boeing have spent more than $90 billion on share buybacks in the past decade only to conduct significant layoffs and ask for a multi-billion bailout. In addition, nearly 24 million Americans are engaged in low-wage, high-contact work that puts them at risk with minimal support from their employers. Our current version of capitalism is not working. When we rise from the ashes of this great pause, the question of the moment is: What does it look like to build back better?
Companies serve society when they align purpose and profit. This means the strategy and business model of the company are linked to both financial gain and social impact. They are purpose resilient: When the going gets tough, the social purpose of the company stays. For example, Ready Responders, an on-demand home healthcare company predominantly serving Medicaid patients, has seen customers and revenues grow since the outbreak. They are moving into cities in need like New York, Baltimore, Washington D.C. and Los Angeles. That is alignment. It is not enough to simply add a few more bucks to your company’s charitable funds and return to business as usual. (Full disclosure: I have a personal investment in Ready Responders.)
This is the moment to rethink and reform business to create people-first organizations.
The rise of high churn, part-time gig work gives companies an excuse not to invest in their people. Yet building lasting human resource foundations are critical to growth. This means providing upskilling, mentoring, and benefits support to employees. Innovative companies like Guild Education, which helps companies upskill their employees, and BetterUp, a distributed coaching business, are all emerging to help companies invest in their people. Starbucks was the pioneer of the “pay for college” movement, and we need more big companies to follow suit. These practices create loyalty and help talent build a solid foundation of skills and economic stability to support themselves in a time of crisis.
Smart companies hire those who are driven by moral motivations. While businesses used to assume that individuals were primarily selfish creatures, we now see that people are driven by not just self-interest but by a need to care, and a new capitalism has to be built around this larger anthropology. A recent survey showed that 90 percent of Gen Z believe companies should act to help social and environmental issues. Young people want to bring their whole selves to work. So, while many businesses have followed the rules and shuttered their doors during this crisis, morally motivated teams and managers have found ways to play a proactive role. These include Australian clothing designer Scanlan Theodore which has repurposed their factories to build protective healthcare gear and Isinnova, an Italian startup focused on sustainability and innovation, which began 3D printing ventilator parts.
Government partners with — rather than bails out — purpose resilient companies. They know how to hire and train diverse talent seeking jobs, find valuable ways to complement governmental policies and make products and services that serve the social needs of the population. For example, Biotech startup Moderna, which is working on a vaccine, last month sold $500 million in stock to finance its drug development. CityBase, a civic technology company, is providing their products free to state and local governments to help residents complete tasks online, reducing the need for a commute or waiting in line to access government services.
We, as consumers, must follow suit.
Businesses cannot survive without a user base that makes similar choices about the products and services they buy. We have to move from a culture of consumption based on “want” and “now” to a culture of exchange based on “need” and “value.” We have to ask ourselves how much we align our values with our purchases.
In his book “The Meritocracy Trap,” Daniel Markovitz points out that society has assigned market value to certain things that may not account for their societal value. For example, the market values investment bankers over nurses. As a collective, we have the ability to question and change this value. It is time to use our power to consume in a way that creates long term profit and purpose.
Reimagining capitalism is about a revolution in the mind combined with the resilience to implement meaningful incremental change.
At the end of my life I hope to see a stock market that integrates purpose into the value of a company. Just imagine how different this crisis would look.
Business has the opportunity to see things anew and serve the needs that are suddenly so obvious around us. So now is the moment to choose what kind of capitalism we want to create.
Blair Miller is a venture capital investor — most recently founder of NextWork — and senior fellow at Yale’s Jackson Institute, lecturing on Profit & Purpose. Her recent focus is on the future of work.