In pursuit of a non-zero sum world
Currently reading my favorite TV historian: Niall Ferguson’s seminal book on the rise of the West and a recurring theme through the pages was the role exploration (or exploitation in my book!) played in ensuring the dominance of European or European-inspired societies (such as the US). A key reason for the ascendance of Europe was the continent’s role as a colonialist that ensured cheap products to advance its own resource-constrained societies. For example at the middle of the last millennium, the average height of the Asian and European populations were about even but this situation changed in the later centuries as the Europeans typically had a much larger calorie-rich diet, which was in turn made possible by their colonial activities. Throughout human history - from the Persian civilization, to the Roman and the modern-day American & British empires – it seems that the rise of a people has almost always involved the subjugation or exploitation of another set of people or the environment. The rise of mining brought us useful metals but destroyed pristine lands, the rise of textile technology raised western standards of living but depended on slave-picked cotton from the antebellum southern United States and the list of zero-sum scenarios goes on.
It is therefore refreshing to see that many business executives and policy makers have begun to view business and development through a non-zero sum lens and have begun to put in place policies that ensure that all stakeholders can all benefit from growth. This movement has taken on two parts: 1) Shared Value and 2.) Social Impact Investing, which I believe are equally important concepts that should be embraced or at least considered by all.
The Shared Value concept is been popularized by no less an eminent figure than Harvard University Professor Michael Porter (of the 5-forces fame) and it is at its core a new framework for evaluating business decisions that gives due consideration to social and environmental issues. This is not some feel-good CSR department that sprinkles a few dollars on “noble causes” to obtain pictures that look nice and endearing enough to be published on corporate websites and annual reports. Michael Porter is advocating nothing short of a fundamental rethinking of the corporate business model and has highlighted various success stories such as GE’s launch of affordable, hand-held scanners that have proven effective in boosting healthcare delivery in India while delivering robust profits to GE. Closely related to the concept of Shared Value are concepts such as “greening of the Supply Chain” (i.e. reducing environmental impact of corporate supply chains while reducing costs and serving customers at the “Bottom of the Pyramid”. Central to all these concepts is the emerging thinking that doing good by society and also making money need not be diametrically opposed. Michael Porter’s insightful article about shared value can be found here.
The second related concept is that of Social Impact Investing and it involves a not-so- new concept that investors can strive to achieve a double bottom line of social prosperity and market-rate financial return. This concept isn’t new as organizations such as the IFC (the private sector lending and investing arm of the World Bank Group) have been incorporating social and environmental considerations in its activities for decades and it is yet to record an annual loss since its founding. In an attempt to make this more mainstream and adopted by many more investors, institutions such as the Rockefeller Foundation, Clinton Global Initiative, JP Morgan etc have come together to form the Global Impact Investment Network (GIIN) to agree on a set of common standards for the sector. This evolving field has great potential for growth as the funds in the global investment community is exponentially larger than the global philanthropy community can muster.
Although I fully support the growth of both of the above-mentioned sectors, I still have major doubts about their usefulness. These involve where the line will be drawn between “good works” and “filthy lucre”: at what point will investors sacrifice extra profit to achieve higher societal impact? Secondly, how much of the Shared Value initiatives will companies make anyways because they are financially compelling and are we just giving a fancy name to business as usual?. Anyways while there are legitimate doubts regarding the impact of these initiatives, one thing most people can agree with is that they are directionally correct in gradually moving the world into a non-zero sum state. And that I am happy about!
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