Do We Really Need an Alternative Form of Capitalism?
In my view, entrepreneurship has always been the ultimate embodiment of capitalism, and quite synonymous with free enterprise. Yet I find that more and more young entrepreneurs are uncomfortable with the term “capitalism,” somehow thinking that it places money above all else. They are looking for a business model that makes the world a better place for humanity.
One step in that direction is the trend to “conscious capitalism,” as exemplified in the recent book by Whole Foods co-founder John Mackey and professor Raj Sisodia, Conscious Capitalism: Liberating the Heroic Spirit of Business (Harvard Business Review Press). These authors argue that capitalism is simply misunderstood, and businesses run by ethical people create value and prosperity based on voluntary exchange, while reducing poverty.
In a recent blog, “Capitalism: Alternative Realities?” Scott McIntosh, an avid angel investor friend and champion of conscious capitalism, makes the case that true capitalism is powered by entrepreneurs who are driven, only in part, by profits. They're also motivated by the simple desire to make a difference in the world.
We shouldn’t let greedy or misguided people derail this. Here are two increasingly used options for doing good by way of running a business:
- Promote “Conscious Capitalism” as capitalism re-branded. Socially conscious capitalism, per Mackey’s book referenced above, adds four requirements to every business enterprise – focus on a higher purpose, stakeholder orientation, conscious leadership, and a conscious culture and management.Model business examples today include Whole Foods, Southwest Airlines, Costco, Google, Patagonia, The Container Store, UPS, and dozens of others. These set the model for aspiring entrepreneurs to achieve their dream of a good business that is also good for society as a whole.
Related: 4 Ways to Dip a Toe into Social Entrepreneurship
- Adopt the B-Corp as a new conscious business model. To more strongly support startups who want to give top priority to socially conscious solutions, eleven states, including New York and California, have passed legislation allowing incorporation as a Benefit Corporation (B-Corp). Other states are close behind in this effort.A benefit corporation is a new corporate form designed for for-profit entities that want to consider society and the environment in addition to profit in their decision making process. The B-Corp status is meant to reduce investor suits, and gives consumers an easy way to spot genuine social commitment, without assuming it is a non-profit.
Some say capitalism would burnish its reputation if the government stepped in with more regulations. Others, including McIntosh in his article referenced above, argue that a way to improve capitalism is to reduce regulation and limit the power of government -- letting market forces work their proven magic of the past 200 years in free economies around the world.
But what about the truly greedy business folks? We need to let market forces work and force them out of business. Those who truly abuse the system need to be held accountable rather than allowing a system of cronyism to provide undue protections.
Personally, I’m not a believer that any government can regulate morality, respect for the environment or concern for the common good. These have to come from the heart, and I’m happy to report that the entrepreneurs I meet are leading the charge. If making money is your primary motivation for starting a business, be prepared for a long and lonely road. Following your passion to change the world is a lot more fun.
What's your take on capitalism? Think it's all bad or just misunderstood? Let us know with a comment below.