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Can there be anything better than shareholders’ interest?

Abhijit Bhaduri | Updated on November 07, 2019 Published on November 07, 2019

Enlightened capitalism means thinking of employees, suppliers, community and environment

Let us play a small mind game. Imagine you are sitting with a friend and I give you the power to distribute a sum of money between the two of you. You can decide the percentage and make the offer. Your friend can either agree to the distribution or reject the formula. If the friend rejects the formula, neither of you gets the money. I will get to keep it. What percentage would you keep for yourself?

In several groups where I have done this exercise, people start off with an equal distribution until one person decides to keep a larger share for himself or herself. The other person accepts it reluctantly until the distribution reaches a percentage where it gets rejected. When people know that their unequal distribution is rejected, they distribute the money more equitably.

Human beings have two competing drives — the drive to get along and the drive to get ahead. The cave man realised that there was safety in numbers. Even the bravest fighter needed the safety of numbers while fighting beasts. As soon as we are safe, the second drive takes over. We want to compete with others and get ahead.

The normal distribution curves

Sports are a celebration of the human need to compete. The Olympics motto exhorts us to be faster, higher and stronger. We celebrate the good feeling that comes from getting ahead.

We all desire to be the ones to get ahead. What comes in the way is that our capabilities are not uniform. The runner may run faster than others but may not be the one who is the strongest. For everything human, we tend to be distributed along a pattern. In every tribe when people were stack ranked, people fell into a large group that was much like the others. At the extremes was someone who was significantly better or much worse by far, than the average.

The normal distribution curves explain the hierarchy in most things human. But not all. The king was disproportionately more powerful compared to the population he governed. One powerful earthquake or epidemic could wipe out a country. We call it the Power Curve.

The Power Curve is dangerous

At the start of 2019, Oxfam released a report at the World Economic Forum that said, “Billionaire fortunes increased by 12 per cent last year — or $2.5 billion a day — while the 3.8 billion people who make up the poorest half of humanity saw their wealth decline by 11 per cent.” That is the Power Curve for you.

To put it more starkly — the 26 richest people in the world now have as much wealth as the poorest 3.8 billion people.

That may well be the difference between the capitalist system and a system that attempts to minimise the disparities. What tilted our world view to say the Power Curve is the way things are going to be?

Technology is the new disruptor

Most tech firms today hold more power than several heads of state. The large corporations have the power to shape laws and debates. Almost 70 per cent of digital ad spending goes to Google, Facebook, Amazon. The market cap of the top 10 tech firms is 2.5 times that of the leading ten global banks, according to Financial Times.

As the firms grow in size and stature, their impact is growing disproportionately. Alibaba has some 730 million customers in China. To put it in perspective, entire Europe has a population of 738 million. The CEO of Alibaba wields disproportionate power over millions. Each month, more than 197 million people around the world get on their devices and visit Amazon.com. That is way more than the population of Russia.

In the digital world, the lawmakers are outwitted by the 30-year-old CEO of Facebook whose customer base is bigger than the combined population of the African Continent. Zuckerberg convinces an awestruck group of lawmakers that he believes in free speech and the only test of free speech is to let the customer decide which paid political ad is factually incorrect. These are problems that are not violating the law, but a moral code.

Tech that drives efficiency enough to make the workers irrelevant can also help build skills for the future. When employers have the choice to shut down a factory to drive efficiency, must they also think of investing in the reskilling of the population that would be made redundant?

The CEO must grapple with the question whether taking a lower rate of profit can justify investments in training and development of the impacted employees.

Tech has created a world which only the minority in a Power Curve can fathom. They are making the rules. They are breaking rules. Innovation comes from the desire to challenge the status quo. The same desire drives Elon Musk to tweet about things that get him removed from leadership. In human beings, the extremes are problematic. Having no ambition makes one a free-rider. Too much of it also causes deviant behaviour.

Being under-confident is as challenging as being arrogant that comes from over-confidence.

Beyond stakeholders

If technology is going to create mass scale joblessness, shouldn’t the corporations volunteer to invest in improving skills to keep the employees relevant in the new world order?

When power gets consolidated in the hands of a few, it stifles competition. It is hard to get large-scale funding for a start-up in retail since it will compete with Amazon or get bought over by Amazon. That, in turn, limits innovation to what the incumbent sanctions.

In the analogue world, the large firms were encouraged to look after shareholder interest.

Then came a phase where enlightened capitalism meant thinking of employees, suppliers, the community and the environment. Uber and Lyft are spending $60 million to ensure that the drivers are not classified as employees so that they are not eligible for healthcare, insurance, etc. Imagine if they spent the same amount on providing at least basic healthcare for all.

It moves the debate from doing well to doing good. That requires a change of heart — not the mind.

 

Abhijit Bhaduri helps organisations transform their leadership, talent strategies and culture to succeed in the digital world. Follow him @abhijitbhaduri

Published on November 07, 2019
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