Socially Conscious Capitalism

Last week we took a little end of summer trip to Cabo for some final fun in the sun before we get caught-up in the whirlwind of the back-to-school schedule. We had a big group with us—3 other families—consisting of 8 kids and 8 adults. Yes, it was chaotic at times but we stayed at a family-friendly place—perhaps not a first choice for all the adults but still very nice—and made the best of it. As parents, what else can we do. Thankfully, we all had a blast.

While we were there something happened though that got me thinking about capitalism and how it often manifests in exploitative ways. Look, in so far as the owners of capital are able to get rich from the profits earned by but not shared with labor, Marx is probably right that capitalism is per se exploitative. Don’t worry, I haven’t turned to communism or even socialism! Putting aside the whole question of inherited wealth for now, what I perceived for the longest time as fundamentally unfair—the fact that some people have capital and some don’t—I have come to believe is really just a reflection of a feature of human nature. When it comes to risk, there’s this big sliding scale where some people are comfortable with things like the responsibility of ownership and the uncertainty of risk and some are not. I think it’s ok for some people to earn outsized profits so long as things don’t get too out of control.

I digress.

We stayed at one of those all-inclusive quasi-luxury brands with properties all over the world and, of course, they were selling time shares. To make a long story, short, one kind, selfless couple from our group agreed to go on the sales pitch tour so that we could all get free massages. When they returned after several hours of what must’ve felt like pure torture, they described a scene that felt, well, gross.

The pitch was an ingenious, Frankenstein process involving the best of the most effective but morally dubious sales tactics. Think: car sales meets ultra-luxury leather goods meets vulnerable vacationers drinking champagne for breakfast. It was something like: “I’ll pretend to be super interested in your life for a half hour, apply some not-so-subtle group social pressure designed to make you self-conscious about your financial status publicly all so I can sell you something that will cost you a ton of money and lock you into a set pattern of vacations for the rest of your life. Oh and by the way, your group can get free massages.”

At the end of the day, they were asking people to make an incredibly consequential financial decision, in many parts of this country as big as purchasing a house. When my friend challenged them about the 14% interest rate on the loan, which was deliberately hidden by some overly complicated points system, they said, “Oh don’t worry, you can just get a cheaper loan when you get back to the US.” Right…

While I don’t think there’s anything wrong with time shares, I do think there’s something very wrong with these kinds of aggressive sales tactics, especially when selling a product that’s been deliberately designed to prey upon an increasingly financially illiterate population.

I’ve been thinking a lot lately about the idea of socially conscious capitalism. My creative work with Profit+ and the podcast seems to be leading me more and more in that direction.

I keep thinking about how I can best serve my community and what kind of contribution to the welfare of all I am best suited to make. What feels right for me these days is to pursue business as a force for good.

What does that really mean though?

Unfortunately, these days, so much of the conversation around socially conscious capitalism has gotten caught-up in the politics of the ESG debate. In my mind, there’s really no question that one of the ways in which capitalism has been really exploitative is in the treatment of our environment. Essentially, for years we’ve allowed businesses to get away without having to pay much of anything for what amounts to a huge negative externality. Now, the bill is coming due.

Anyway, while we have been debating whether climate change is real and, if so, whether we’ve had anything to do with it, we’ve lost sight of the fact that there’s actually a lot more to socially conscious capitalism than dealing with environmental externalities. What’s happening with these time share sales practices is a perfect example. In truth, our system is rife with shady business practices.

The best articulation I’ve come across for what it means to be a socially conscious business comes from another old, must-read book—“Small is Beautiful: A Study of Economics As If People Mattered” published in 1973 by E.F. Schumacher.

In modern times, we have come to worship at the altar of material prosperity and believe it can solve all our problems. All we have to do is get enough economic growth and everything will be ok. Or so the story goes. Schumacher argues convincingly that this is a false promise based on 3 false propositions:

1. That universal prosperity is possible

2. That its attainment is possible on the basis of the materialist philosophy of “enrich yourselves”

3. That this is the road to peace

There’s a logic here that feels almost undeniable. Is there every really going to be enough to go around? Unless the techno-utopians are right, the idea of unlimited economic growth ignores the truth of things like scarce resources and environmental limits. And how absurd is it to say “everyone can be greedy and envious until we’ve grown big enough for everyone to be prosperous then we can all be good again”? What about the fact that it is simply not good for society to cultivate greed and envy in human beings. Aren’t these things fundamentally damaging to the human condition? As Schumacher argues, even if you do get economic growth, people will feel increasing frustration, alienation, and insecurity and then eventually growth itself will stall out because of a “creeping paralysis of non-cooperation, as expressed in various types of escapism.” Pretty much sums up our world today, doesn’t it?

What’s more is that in believing in the promise of prosperity we’ve made a huge mistake when it comes to how we think about work. We have come to glorify consumption and leisure so much that we treat work as a kind of disutility. Nothing could be further from the truth. Work isn’t something we should avoid but rather something we should embrace wholeheartedly, for it’s work that gives us a chance “to utilize and develop our faculties, “to overcome our ego-centeredness by joining with other people in a common task” and allows us to “bring forth the goods and services needed for a becoming existence.”

Schumacher is no disillusioned pessimist though. He argues that there’s a better way to organize our economy and run our businesses. Fundamentally, it’s about switching perspectives. Instead of trying to maximize for the sake of maximizing, we should seek to optimize and our metric should be human well-being rather than raw material prosperity. He wants us to flip the whole consumption thing on its head. Instead of seeking unlimited GDP growth, our economic goal should be to maximize well-being while actually trying to minimize consumption. Our civilizational focus should be the “purification of human character not the multiplication of wants.” Our businesses should be focused on producing goods and services that improve the well-being of customers, while at the same time providing a dignified, people-centered work environment and not doing undue, un-paid-for damage to the environment.

If you take Schumacher’s vision seriously for second, clearly we have some problems in our economy. We produce and sell things like, oh, guns, advanced weapon systems, porn, drugs and alcohol, unhealthy food, exploitative financial products, and, yes, time shares. It’s hard to argue that these things support human well-being, right? At the same time, we consume scarce resources without reservation and regularly damage the environment. We allow owners and managers to exploit workers and tolerate all kinds of workplace toxicity.

While I’m not ready to completely renounce all this—e.g. I think there is a place for things military spending and responsible alcohol consumption in our economy—I find Schumacher’s focus on optimizing human well-being and considering workers as well as consumers both compelling and inspiring. This could be a very good framework for how we approach things like entrepreneurship, investing, and even business regulation going forward. It’s tricky, of course, because we might argue about how to define something like “well-being,” but just in framing the challenge of business this way I think we’ll see some better results.

I, for one, am ready to commit Profit+, the Nick Halaris Show and Metros Capital to the high standards of a socially conscious business. For these 3 ventures at least, if they cannot promote human well-being, they probably shouldn’t exist. And I cannot imagine focusing on anything more important!

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