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gary-hamel-and-polly-labarre's picture

Reimagining Capitalism—as Principled, Patient, and Truly Social

While the global financial meltdown and its aftershocks have unleashed a flood of indignation, condemnation, and protest upon Wall Street, the crisis has exposed a deeper distrust and implacable resentment of capitalism itself.

Capitalism might be the greatest engine of prosperity and progress ever devised, but in recent years, individuals and communities have grown increasingly disgruntled with the implicit contract that governs the rights and responsibilities of business. The global economy and the Internet have heightened our sense of interconnectedness and sharpened our awareness that when a business focuses only on enriching investors, managers view the interests of customers, employees, communities—and the fate of the planet—as little more than cost trade-offs in a quarter-by-quarter game.

It’s time to radically revise the deeply-etched beliefs about what business is for, whose interests it serves, and how it creates value. We need a new form of capitalism for the 21st century—one dedicated to the promotion of greater well-being rather than the single-minded pursuit of growth and profits; one that doesn’t sacrifice the future for the near term; one with an appropriate regard for every stakeholder; and one that holds leaders accountable for all of the consequences of their actions. In other words, we need a capitalism that is profoundly principled, fundamentally patient, and socially accountable.

This isn’t a new challenge, but it’s more urgent than ever—not just as an effort to escape reform and regulation from the outside, but to restore the public trust, to repair the moral fabric of the system, and to unleash the innovation required to tackle the world’s most pressing and important challenges.

That’s why we’re eager to announce the third leg of the Harvard Business Review/McKinsey M-Prize for Innovation—the Long-Term Capitalism Challenge. With this challenge, we hope to accelerate the shift toward a more principled, patient, and social accountable capitalism—one that’s truly fit for the long term.

Specifically, we’re looking for Stories (real-world case studies) and Hacks (boldly original ideas) that offer up the most progressive practices and disruptive ideas that tackle the challenge of making our organizations more:

PRINCIPLED
Capitalism degenerates into narrow self-interest without a strong ethical foundation.

  • How do we focus the entire organization on a higher purpose and embed such virtues as generosity and selflessness into everyday interactions, evaluations, and reward systems?
  • How do we measure the ethical or moral climate of a company, and what is the dashboard?
  • What does it mean for individuals at all levels to act as wise stewards of organizational values, resources, and stakeholder well-being?
  • What kind of a forum or process could we create that would allow individuals to freely share and discuss ethical dilemmas?
  • In what ways might extreme transparency preserve and promote the highest purpose of the organization?

PATIENT
Vision and perseverance are critical to value creation-- and highly vulnerable to short-termism.

  • How do we stretch management timeframes and perspectives?
  • What does it mean to articulate and instill a vision compelling enough to inspire sacrifice, stimulate innovation, and hedge against expediency?
  • How might we rebalance compensation and measurement systems to provide incentives for long-term value creation along with short-term performance?
  • What tactics or capabilities might we develop to earn some slack from investors?
  • What kind of incentives and measurement systems could we devise to encourage internal entrepreneurs and nurture a varied portfolio of opportunities?

SOCIAL
Capitalism cannot operate in a social vacuum and profits and shareholder return can no longer be the only measures of a company's value-added.

  • How do we eradicate the pervasive zero-sum mentality in business and embed the positive-sum view of stakeholder interdependence into operations at every level?
  • How do we build the consideration of social return into every conversation and every decision at every level in the organization?
  • How could we embed social goals into an organization’s innovation agenda and processes? In other words, how might we encourage not just social responsibility, but social entrepreneurship?
  • What kind of measurement and reward systems would give significant weight to social impact created by individuals and the wider organization?

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anna-maria-olori's picture
Where are the "round pegs in the square holes" able to shape the future, inspire and push the human race forward while making changes happen?

The stepping stone of their creative social innovation should be MAN's uniqueness, with his desires, needs, fears; the final goal must be to make sustainable changes in human and social life to address human desires, needs, fears. 

But in order to move beyond they have to search the "inner truth" as exhorted by Augustine "Do not go outward; return within yourself. In the inward man dwells the truth" (De Vera Religione XXXIX: 72 "Noli foras ire, in te ipsum redi, in interiore homine habitat veritas, etsi tuam naturam mutabilem inveneris, trascende et te ipsum".
stephen-achilles_1's picture
Another very interesting read in the MIX.  While capitalism has delivered incredible benefits to the world it is not perfect.  In any economic or political system there must be standards for all who participate. There are an infinite number of decisions that are made every day.  Standards that frame decision making in the three areas: Principled, Patient and Social are critical.  If decisions are based only upon self-interest society will devolve as it has done throughout the history of mankind.  For me, this article highlights the greatest leadership challenge of our time.
dan-robles's picture
The so-called "invisible hand" of Capitalism is responsible for the creation of great prosperity. Unfortunatly, classical land, labor, and capital have become constrained.  Capitalism as we know it is entering a phase of scarcity.  The solution is that we need to shift the factors of production to abundant assets.    
 
The Internet, Social Media, and the knowledge economy have effectively transformed intangible assets to a state where entrepreneurs allocate social, creative, and intellectual assets.  "Land" is no longer relevant, a unit of "labor" is a almost archaic, and "financial capital" is constrained by debt.  
 
The Ingenesist Project  ( http://ingenesist.com ) has specified a new class of business methods called The Value Game.  The Value Game starts and ends with Money, but all Value created within the game are intangible.  Eventually, the need to convert to cash will no longer be necessary
 
The most importand element is called The Knowledge Inventory.  This is an application where social, creative, and intellectual capital are expressed in the form of an asset.  
 
Where outcomes can be predicted, a project can be "capitalized".  Where a project can be capitalized, a representative currency can be securitized.  This is the essence of capitalism that retains "the Invisible Hand"
 
The result is that nothing will change and everything will change.  Social Priorities will drive Wall Street priorities instead of the other way around.
 
Please visit The Ingenesist Project.  There are several short videos that explain how the New Value Capitalism may be formed. The Value Game, Gamidox, Zertify, and exoquant are related applications that need to be developed.  The Value Game is currently deployed to a funded start-up called Social Flights http://socialflights.com
 
Please review the 4 videos on our home page: ingenesist.com.  Then feel free to review our YouTube channel: Ingenesist.  Then please review our site map for 450 articles on this and related subjects. 
 
Please contact us and help us build the new value capitalism. 
joy-poland's picture
Great Blog - great insights - it is all good - we need to reinvent everything!  Our Business systems, our Education system, our Political System, our Healthcare systems, -  we even need to reinvent ourselves - all of our systems and our beliefs are being challenged now - they are literally being "upgraded" and re-wired - that is what this time in history is all about.  What we are experiencing is an intervention that a strategic systemic therapist would use to treat a dysfunctional family - deliberatly "unbalance the system" so it can re-stabilize at a higher level of complexity.  That comment on Emotional intelligence and Dan Goleman's work is right on - we are moving from the head intellect - into the heart - and it is that "energy" that is driving all of this.  This is an amazing time - when anything is possible - it is creative and expansive in a way that is far different than growth and profit - expansive in a way that is all about empowerment.  Individual and collective empowerment that is the new "profit center" that is the new "currency".  Empowerment and new systems on all levels - and it  will be through these venues, thought leaders, the human Spirit and through entreprenurial business that will propel us there - the new model is a  Prosperity driven model.  Profit + People = Prosperity -   Great work- keep it up!!! 
   
tajudeen-bakare's picture

The extent to which different markets are free,as well as the rules defining private property,is a matter of politics and policy,and many states have what are termed mixed economies.A number of political ideologies have emerged in support of various types of capitalism,the most prominent being economic liberalism.

salvador-pastor_1's picture
Totally agree, we need to reinvent capitalism.
As you know, for many years we have talked about social innovation and social entrepreneurship here in Europe. But also as you know, we Europeans talk too much but are very bad executors.
I'm sure we can move forward in this faster if Americans also raise awareness on the need to socialize businesses in the sense indicated in this post.

Probably one of the worst limitations for companies is that they constantly look for "growth", instead than for "prosperity".

This ever-growing feeling affects our body, our social life and utlimately our planet too.

Just two ideas of possible stories that could fit in this  challenge:

Radical Transparency, as defined by by Daniel Goleman in his book Ecological Intelligence.
http://en.wikipedia.org/wiki/Radical_transparency

Downshifting, as a social movement that helps people escape form radical materialism.
http://en.wikipedia.org/wiki/Downshifting

ken-polotan's picture
Gary and Polly, this post is spot on!  In light of the economic meltdown, the word "capitalism" has been exclusively and unfairly associated with "Wall Street."  Is the real solution here the re-imagining of capitalism?  Or is it going back to real capitalism?  Some may argue that what we take for granted as American capitalism has been co-opted and transformed into crony capitalism.
 
And to Charle's point above: is democracy necessarily incompatible with capitalism?
 
Kudos to both of you!
charles-ehin's picture

Very simply, capitalism and democracy without a strong sense of community will inevitably lead to self-interest and greed!  http://www.cominghomethebook.com/