Bill Gates wrote a story for this week’s issue of the magazine about creative capitalism—his phrase for applying market forces and business know-how to solve the world’s problems, like mass poverty. It’s one part corporate social responsibility (caring about “stakeholders,” not just shareholders), one part Fortune at the Bottom of the Pyramid (poor people become profitable if you sell to enough of them), one part cause-related marketing (buy my company’s stuff and I’ll give money to people you want to help), and one part goodwill (praise from government, NGOs and the press for do-goodery that ostensibly pays off in increased brand equity).
Accompanying the story is a beautifully designed (thanks, Cindy!) timeline, which I wrote. Yes, I know, a timeline. My career is really taking off.
The reason I suggested we do something to give a little context to Gates’s piece is because many of his ideas, taken on their own, aren’t new. In 1889, Andrew Carnegie wrote that rich men should give away their fortunes to endow libraries and universities, which poor people could use to better themselves (he proceeded to give away 90% of his money). In 1914, Henry Ford doubled his factory workers’ salaries to $5 a day in the hopes of turning employees into customers. In 1976, 23 Minnesota companies, including Target’s parent, started The 5% Club, pledging to donate 5% of pre-tax earnings to charity. That same year, Muhammad Yunus began lending to the rural poor in Bangladesh, kicking off the microfinance movement. A decade later, the Robin Hood Foundation, founded by hedge fund manager Paul Tudor Jones, birthed the era of venture philanthropy, bringing the metrics of business to evaluating the efficacy of charities.
[The really good stuff is after the jump, so click on “Read full entry.”]
Since the 1930s there has been a tradition of academic debate over the purpose of the corporation (i.e., whether companies should even be doing this stuff). It started with the law professors Adolf Berle and Merrick Dodd and took its most famous shape in Milton Friedman’s 1970 New York Times Magazine essay The Social Responsibility of Business is to Increase Its Profits. (Justin recently wrote about Michael Jensen and William Meckling’s contribution to this conversation.) Outside of the academy there is a long history of debate, as well. When Ford bumped up his workers’ salaries, the New York Times called the idea “distinctly utopian” and “foredoomed to failure,” while the Wall Street Journal accused him of having “committed economic blunders, if not crimes” and using “spiritual principles where they don’t belong.”
None of that is to say that Gates hasn’t brought these ideas together in a new way, or that Gates, being Gates, might break intellectual ground or get mainstream traction in a way no one has before. But I think it is important to realize that the notion of business leveraging its abilities in order to do social good has a long, arguably cyclical, history. In 1962, David Rockefeller, president of Chase Manhattan Bank, gave a speech to the American Philosophical Society, saying:
“[T]he old concept that the owner of a business had a right to use his property as he pleased to maximize profits, has evolved into the belief that ownership carries certain binding social obligations. Today’s manager serves as trustee not only for the owners but for the workers and indeed for our entire society… Corporations have developed a sensitive awareness of their responsibility for maintaining an equitable balance among the claims of stockholders, employees, customers, and the public at large.”
That sounds great. But do you think it’s how the past 45 years have played out?
Whether or not creative capitalism will change the world, I don’t know. I guess like with most things the right approach is to hope for the best but prepare to be disappointed. One thing that swings me more to the hopeful side of the ledger is that practically every executive I talk to these days says that to hire top talent, they’ve got to explain what their companies are doing to help the world—the corporate social responsibility routine, often with a hefty bit of eco-awareness thrown in. Young people today, they say (and so does Gates), want more out of a work experience than making money. They want to give back, to know that all that effort contributes to something beyond the bottom line.
As one computer executive, addressing a management-training session, said:
“I think many people assume, wrongly, that a company exists simply to make money. While this is an important result of a company’s existence, we have to go deeper and find the real reasons for our being. As we investigate this, we inevitably come to the conclusion that a group of people get together and exist as an institution that we call a company so that they are able to accomplish something collectively that they could not accomplish separately—they make a contribution to society, a phrase which sounds trite but is fundamental.”
That was Dave Packard. In 1960.