Ideas
Kim Soko Schaefer

Experimenting on Purpose: An Introduction ... How to Fix Capitalism: Part One

Burgess COMMENTARY

Peter Burgess

Experimenting on Purpose: An Introduction

In 1928, a struggling scientist working to find a cure for bacteria became frustrated with his work and decided he needed a break. This was not the tidiest of scientists and instead of properly cleaning up, he simply left his dirty petri dish in the sink. Of course, when he came back days later he found what we’ve all discovered in our college kitchens, a petri dish full of mold and bacteria. But luckily for this up and coming scientist he also noticed that the bacteria in his dish were not growing where the mold had formed. His name was Alexander Fleming and he accidentally discovered penicillin.

That’s the beauty of experimenting — finding the expected in unexpected ways. This is possible because experimenting is a ‘safe space.’ Failing is not just accepted, it’s expected — it’s a part of the process. Experimenting allows us to tinker, to help us get to where we’re going.

I’m an amateur social scientist, and by that I mean I have no qualifications whatsoever, just a sincere interest in studying how humans think, act and behave both on our own and together as a society. In real life, I’m a purpose-driven strategy consultant. My work (to date) is built on the hypothesis that the best, most successful organizations in the world are driven by a deeply held purpose. So I figured it was time to test this hypothesis.

This series is my journey to experiment on purpose. To test my assumptions, to see perspectives from different angles, to research and learn more about a topic that goes beyond pure interest. It is my sincere belief that living a purpose-driven life, both at work and home, leads to better outcomes. By honing my skills on this topic I can help people and organizations make a more meaningful impact on this world.

I can’t guarantee the outcomes, but I’m sure I’ll learn wonderful, inspiring, valuable things along the way. And my hope is that you to do, too.

1.1 Definitions

If there’s one thing I remember from my APA style papers in university it’s that you need to start with a good definition. So like all good researches, I started with Google...

Moving forward I’ll use Type 1 purpose to refer to organizational purpose, or as Google claims, ‘the reason for which something is done or created or for which something exists.’ That leaves Type 2 purpose for personal purpose or, ‘a person’s sense of resolve or determination.’

The focus on this series will be on Type 1 — organizational purpose — because personal purpose blurs into a messy conversation about religion, the meaning of life, and other philosophical avenues, which are interesting but too complicated for this budding scientist to examine. I’ll mostly refer to personal purpose in the career sense … or how having an individual sense of purpose manifests as a unit in a larger organization and the need for alignment to make that work.

Now let’s dig in to Type 1.

1.2 Type 1: Organizational purpose

As a management consultant, the second place I went looking was HBR and McKinsey Quarterly. Listening to Porter talk about Rethinking Capitalism and reading about McKinsey’s views Redefining Capitalism, it became clear that the problem according to them wasn’t necessarily that companies aren’t focusing on purpose, but rather that they’ve been too narrowly focused on profit.

These pieces both talk about the need for companies and their leaders to consider how organizations affect the societies in which they operate. They both go on to claim that organizations …

• with a long-term view,

• that operate in a way to create shared value in society (for all stakeholders, not just shareholders),

• and that are focused on things beyond profit

… are the most successful.

This is what I’ve thought to be true over the past few years and is in fact the basis for my original hypothesis. So let’s see if it’s true. Let’s look at two companies — one with purpose beyond profit, and one without — and see how that correlates to their performance.

I’ve picked two car companies, and to control for national culture we’ll pick two American car companies. Let’s use Ford as the control, an example of the current status quo, and Tesla as the experiment. Let’s start by looking at how they communicate their purpose.

Ford says:

Ford

To be fair, this is just the cover of their 2014 Annual Report… if you dig deep down you’ll see that in 2007 they set their ‘one goal,’ or purpose, as: an exciting viable Ford delivering profitable growth for all. Ok, so it’s really pretty much the same. Ford is focused on profit.

Next up, Tesla:

Tesla

Ok, that’s different. No mention of profit at all. It doesn’t get much clearer than that: Tesla’s purpose, or ‘mission’ as the company calls it, is in plain English, jargon-free, at the top of the page, in font at least double that of everything else, not buried in some documents on their website. As for the criteria we set out above:

• a long-term view — CHECK: reaching sustainable transport in the world is definitely a long-term view

• that operate in a way to create shared value in society — CHECK: hopefully we all agree that having sustainable transport is good for everyone in society

• for all stakeholders, not just shareholders — MEH: not sure if we can claim this by its purpose statement alone, but we do know Tesla is at least working to support customers and community in addition to shareholders

• focused on things beyond profit — CHECK: see below

Now on to performance. Tesla went public in 2010 so that’s as far as we can go back. How have our two companies fared since then?

shares

Ouch! I assume we don’t need a chart to understand that Tesla has won this battle.

Organizations that have purpose beyond profit outperform those that don’t.

As if it were that easy. But remember, I’m not an actual scientist — this study of n=2 is not statistically significant, and we are only at the beginning of our journey. So let’s move on for now and get into personal purpose.

1.3 Type 2: Personal purpose

To learn more about personal purpose, I went exploring in some areas that I usually avoid … I sought the advice of an evangelical pastor. I went to my nearest public library and picked up a copy of the bestselling The Purpose-Driven Life by Rick Warren — because millions of people can’t be wrong, right (who knows, because honestly, I couldn’t get past the dedication page)?

As much as I believe we all have a purpose in life, I don’t believe it was handed down to us from a white guy on a cloud. In fact, I’m much more a fan of Robert Wright, the evolutionary biologist who argues that natural selection and cultural evolution are in the process of creating a single global consciousness, a connected higher power, an all-powerful, all-knowing organism (we are creating god, he did not create us). But I digress.

The reality is, whether you believe a god designed your purpose in life, or whether you are who you are as a result of evolution and natural selection (or both, or neither), the reality is — you are here. And the sooner you figure out why that is, the better you — and all of us — will be as a result.

“The two most important days in your life are the day you are born and the day you find out why.” — Mark Twain

To put things simply, purpose is the ‘why’ in life.

As children we were purpose experts, or at least experts in experimenting on purpose, but as we grew up, we stopped asking the tough questions. We figured we knew all the answers, or if we didn’t, it didn’t matter. But sometimes a good ‘why’ session is order. I think Simon Sinek has proved this with his 23+ million views of his infamous TED talk.

By identifying your purpose for existing in this world you can determine how to apply the skills you’re best at, towards doing what you think is most important. To Hunter S. Thompson, this means that in order to live a meaningful life: “a man must choose a path which will let his abilities function at maximum efficiency toward the gratification of his desires. In short, he has not dedicated his life to reaching a pre-defined goal, but he has rather chosen a way of life he knows he will enjoy. The goal is absolutely secondary: It is the functioning toward the goal which is important. And it seems almost ridiculous to say that a man MUST function in a pattern of his own choosing; for to let another man define your own goals is to give up one of the most meaningful aspects of life  —  the definitive act of will which makes a man an individual.”

I think this is partly true, and I imagine if I read more of Warren’s book I’d be more inclined to think that your personal purpose must lead to some greater good for humanity. The reality is, my current view is somewhere in between, stolen like all good ideas from One Project. Personal purpose is the sweet spot between work that helps humanity thrive and work that helps you thrive.

Don’t know your purpose? Don’t worry, there is a shortcut. I think that the purpose of each of us is to be the best we can be.

We just have to try our very hardest not to leave this world worse off than we found it. We must progress, become smarter, more efficient, less wasteful, improve humanity in some tiny way. Net positive.

1.4 My purpose

As a strategy consultant I’m overly concerned with identifying objectives, being crystal clear on goals and understanding why it is we’re doing what we’re doing - to what end? If every person, every entrepreneur, every organization in the world had a unique, clear purpose, my job would be obsolete. Because with a clear purpose, the objectives, goals, key decisions you make in life, increasingly become more obvious, more intuitive.

This is why organizations with a strong purpose are doing so well in our complex world. They have a shortcut to decision making that allows them to be more nimble, adaptive and resilient and STILL be moving in the right direction. Because they’re very clear about where they want to be.

My personal purpose is clear  —  I pursue happiness. It is the profit I aim to maximize for myself, my family and my community.

I believe that in order to most impact the world, I have to be the best me, and I preform at my best when I’m happy. So I suppose I’m following Thompson’s advice. It’s not so much the goal, but the journey to get there, it’s the way I live my life that most effects its outcomes.

Every time I have a tough decision to make, I think back to my purpose. I’ve turned down jobs that were 6 times my salary and 2 levels above my position (honestly) because I knew it would not only decrease my happiness, but more importantly my family’s, and as an outcome of that, the community in which I belong would be worse off. By focusing on optimizing happiness I can limit a whole range of options in life.

I didn’t get here lightly. I’ve researched a lot about happiness. I know the things that researches say lead to greater happiness in the lab, and tinkered with what fills me with happiness in the real world. The list is long, but at the top are (1) deep, meaningful relationships with the people I love most in the world, (2) exploring and learning new things, (3) maintaining my physical and mental health and wellness, and (4) knowing that the work I do is contributing in a small way to create a better world for all living things.

So that’s what I do. What do you do? What is your purpose?

Next week

I’m also a big-picture thinker (shocking, I know), so next week let’s go macro and think about the role of purpose in the economy in general. Economics is also my favorite branch of the social science tree, although I find my version of economics is more closely related to the moral philosophies and psychologies than the hard sciences of engineering and physics. After all, we’re talking about how humans most efficiently distribute resources, not robots.

Stay tuned …

This post first appeared on LinkedIn on August 26, 2015.

Kim is a purpose-driven consultant. She works with entrepreneurs, non-profits, social enterprises and conscious companies to improve their ability to create positive impact in the world. Her expertise lies at the intersection of management consulting, social sciences and creative thinking.… [Read more about Kim Soko Schaefer]

How to Fix Capitalism: Part One September 27, 2015 by Kim Soko Schaefer

Bernard Faerman, 90, repairing a vintage cash register | Image credit: Sarah Kate Kramer

Related: The Next Economy,Business Models,Finance/Insurance/Investment ,

This is the second post in a short series on purpose. If you missed the first one, you should start here.

I’m not going to pretend to have all the answers, but I think I’ve at least become better at understanding the problem. Capitalism has lost sight of its original purpose and is too narrowly focused on profit at the expense of society. There are very simple things we can do as citizens to help get things back on track, but we’ll need the help of policy for the heavy lifting.

We often hear a lot of doom and gloom in the media that capitalism is ‘broken,’ that our current system doesn’t work, and that we need new solutions. I agree that capitalism isn’t functioning at its full potential, but I also believe that the proper use of efficient markets is one of the best inventions of modern civilization.

After living in a mud hut in rural Uganda I decided to go to business school, above all other graduate programs, to figure out how to solve the problems I saw all around me. Maybe it was because I grew up in a pro-business home or because I saw how inefficient most non-profits and government agencies operated, but something told me that business was the best lever for change.

I’m also not oblivious to the current health of our economic system. I was unemployed like many others when the last global financial crisis hit, and I’ve been watching my investment accounts erode over the past few weeks as the world turns anxiously towards China. I know that we can do better.

If you look at its roots, capitalism began as a potential solution to society’s moral failings, not as a means to get people rich. Adam Smith, the father of capitalism, was as you might recall a moral philosopher, not an economist (that profession didn’t yet exist). He thought of his studies as a solution to the inefficient distribution of resources that was common during his time. The purpose of capitalism then was to create a more equitable society, not to increase profits as many people view it today.

“No society can surely be flourishing and happy, of which the far greater part of the members are poor and miserable.” — Adam Smith

He saw too much wealth in too few hands and thought there must be a better way. His most important contribution to modern society was an attempt to understand how each of us (the ‘agents’ in an economy), can work independently towards our own individual purpose, which should result in the best outcomes for everyone in society.

That is the religion we bought into — that our government, economy, society is built on. That is also what I personally believe to be true. Unfortunately, in reality that has not been our focus — instead it has been on the exclusive drive for profit at the expense of all else. And there is enough research to fill a library of books to support that our singular focus on profit is not helping to achieve the original goal: the fair distribution of resources in society.

To further highlight this, it’s important to remember that America, one of the most capitalist cultures in the world, is also one of the most unequal societies. The growing research shows that the more equal a society, the better its citizens fare. On this measure, America is worse off than almost all other OECD nations. In fact, if you account for taxes and other transfers, the US ranks #31 of #34 countries in terms of income inequality. Only Mexico, Chile and Turkey are below us. That’s pretty pathetic for a ‘world leader.’

So what?

One of my all time favorite books is The Spirit Level by sociologists Richard Wilkinson and Kate Pickett. They go through major social ills — such as mental health and drug use, teenage pregnancy rates, violence and crime stats — and compare how it correlates to income inequality. And when they combine them all to create a single metric, this is what we see:

It’s pretty shocking if you’re an American, but not if you have ever traveled extensively to the rest of these countries. You’ll be hard pressed to find a homeless person on the streets in Japan or Sweden. We’ve all heard the rumors that life in Europe’s north (outside of the weather) is pretty easy, and those of us that put on a backpack during or after college find out pretty quickly how ‘unfair’ it is that we’re stuck paying hundreds of dollars a month in student loan fees when few of our traveling cousins on this map pay a dime for their educations.

This is the problem I’ve been grappling with after traveling to over 40 countries: America might be home to the world’s most innovative companies, producing the world’s favorite products and services, but we’re doing so at the cost to our society.

Let’s take a look at the main elements of capitalism: supply and demand, utility and price, and the key measurement tools of success (profit) and see if we can figure out where we’ve strayed from capitalism’s original purpose and how we might try to get back on track.

Supply and Demand

The entire ‘invisible hand’ theory that Smith is famous for is mostly related to supply and demand. The basic idea being that the price of anything in a market will stabilize when we produce the optimal amount to reach the amount of people that want it. This means that in theory, diamonds are expensive because there are few of them, but many people want them. Whereas, your water bill is low because we have a seemingly endless supply of water and so the price is cheap.

But neither of the above statements is actually true. The few companies who monopolize the diamond industry actually have been stockpiling diamonds in a vault to artificially reduce supply for years, creating the illusion of scarcity and the increase in price. In reality, diamond production is estimated at about 130 million carats per year! I couldn’t find out what percentage of this is stored vs. sold, but we do know that the retail diamond industry is currently around $72 billion / year, and many recent fiancés can tell you that the going rate is not about $550/carat. When you compound that over the years it becomes obvious that there are plenty of diamonds intentionally not in the market.

As for water? Every living thing on the planet requires it to survive. Demand could not possibly be higher. But no one ‘owns’ water (in theory). It is a natural resource and thus most of our local governments sell it directly, or via a privately held utility, to its citizens. And because it’s so necessary, they keep the price low, often subsidized so that everyone can have as much as they want.

But the truth is, that in many parts of the world and a growing number of locations in the American West, are starting to run out of water. If this were a true capitalist market, then the price for water would go up with scarcity, which would cause us to use less, and the problem would fix itself. But that’s not happening. Instead, we take advantage of a cheap resource, waste it, and then complain at the very thought of the price of our food going up.

Capitalism in these markets is completely broken. We are overvaluing something with very little utility in the world (diamonds) and undervaluing one of the most essential things in our world (water). How do we fix this?

Well to start, if you have a problem with supporting an industry that has been tied to government corruption, murder, rape and the stockpiling of billions… THEN DON’T BUY A DIAMOND [Full disclosure: I own a few diamonds and love them all, don’t judge]! Need a symbol of love and fidelity in an exchange for a lifetime of happiness? Buy a garnet, topaz or any other arbitrary gemstone. The reality is that our collective demand is contributing to the problem, and I admit, I’m a part of that problem.

As citizens, our greatest tool to help fix capitalism is to spend our money on the things we want to support. Does it upset you that organics cost more than traditional produce? Buy more organics and tell your friends to do the same. The sooner more of us buy organic (increased demand), then the sooner more companies will enter the market and create more (increased supply to meet demand), and the sooner the price will drop (due to increased competition and economies of scale). Don’t enjoy the pollution in your local stream from the chemical company down the road? Don’t buy products that contain the chemicals they produce (reduce demand).

Yes, I know that is easier said than done. And no, I don’t expect anyone to perfectly align their values and their shopping habits, but I do expect everyone who cares to try and improve where and how you spend your money. In a system where everything is driven by supply and demand and when you can’t control the supply, vote with your dollar and control the demand. It’s your best weapon.

Now on to water: This one is a little trickier because there are ethical concerns involved with increasing the price of water to the point that low-income people can’t afford it. But low-income people aren’t the biggest users of water — industry is. So increase the price of water to the companies who need it to cool their buildings, grow produce, make paper, and keep their machines from overheating. Yes, that will result in higher prices for nearly everything at the store, but that is the true price of those goods that are produced in areas with a limited supply of water. It’s more likely that a company would move (if possible) to an area where water is plentiful and cheap and solve the problem that way.

My point is that some government regulation is necessary.

Government is the only institution with enough power to prevent companies from artificially adjusting the market, from having monopoly power, to ensure that everyone can afford the basics in life, to preserve our natural resources for generations to come. There always have been and always will be certain situations where agents in the economy have an opportunity to pursue their own self-interest at the expense of society, not to its benefit. It is then government’s role to step in and artificially correct the market so that it operates again in the best interest of society. Will our GDP suffer as a result? Likely. Will the CEOs of the companies involved make less money? Probably. Will that mean smaller returns for those companies that are publicly held? Possibly. Will be better off as a society? Absolutely.

This brings us to our next point … utility and the price of everything. But I think I’ve reached your attention span for the day so we’ll pick up this lesson in Part Two.

This post first appeared on Medium on September 2, 2015.

Kim is a purpose-driven consultant. She works with entrepreneurs, non-profits, social enterprises and conscious companies to improve their ability to create positive impact in the world. Her expertise lies at the intersection of management consulting, social sciences and creative thinking.… [Read more about Kim Soko Schaefer]