By Richard Copland.
This is the last in my Californication series that has looked at the influence of California on our new radical technologies. The thought pieces considered the beginning of the counter culture and its growth into a global phenomenon, before asking whether it had become a capitalist dystopia.
This piece will draw the series to a close with potentially a more positive view of some of the latest disruptors by considering a potential swing back to Hippie 2.0, with the emergence of more organisations where profit and purpose were on an equal footing.
Millennials, the global guardians of capital
As explored in the first piece Californication and the radical technologies , Hippie 1.0 has strong links to the summer of love and found its roots in places like Haight-Ashbury in San Francisco. My original plan for this piece was to set up and explore the rise of the new Millennials and how some of the traits and behaviours they exhibited may in some way exhibit similar values to the original counter culture or Hippie 1.0 community. A good portion of this effort has been covered by my fellow Future Shapers Cris and Lena with their respective pieces Generation Z deserve Organisation Z and Millennials and Entrepreneurship. Building on these pieces it is also important to note in addition to the character traits and drive for entrepreneurship and innovation a recent report from UBS has identified that they are set to benefit from the biggest wealth transfer ever seen. By 2020, global millennial wealth could stand at USD 24trn, around one-and-a-half times the size of the whole US economy in 2015. Inheritance, entrepreneurial activities, and income growth are expected to power this wealth accumulation.
The report notes demand for using private wealth for public good is also rising across generations. Individuals are increasingly demanding innovative means by which they can tackle problems of social inequality as technology and extreme connectivity throw light on issues across the globe to more people. The research projects that corporations, governments, and non-governmental organisations will progressively drive innovation and develop solutions that meet this demand and marshal capital (both financial and human) into purposeful projects.
Profit maximisation cannot be enough
This rise of purposeful projects is increasingly evident in Silicon Valley as an increasing number of top executives are making a move to create more socially balanced entities. You could make a valid argument that making a business succeed is hard enough on its own. Why saddle it with loft aspirations of changing the world, social responsibility, environmental stewardship, employee satisfaction, community and other niceties that are ancillary and not directly tied to the bottom line?
Nobel Prize-winning economist Milton Friedman argued that “there is one and only one social responsibility of business – to use its resources and engage in activities designed to increase its profits.”
The compellingly simple algorithm of maximising profits and shareholder value has become conventional wisdom ever since. As the time-horizon for measuring profits has shrunk to a myopic focus on quarterly earnings, the modern interpretation of Friedman’s theory is one he himself might not recognise. Aspects of this potential unrest are unpacked in the supporting thought piece From counter culture paradise to capitalist dystopia.
While appealing in its simplicity, short-term profit maximisation has been mistakenly equated with creating shareholder value and often comes at the expense of sustainable value creation for shareholders and stakeholders alike. In February 2016, BlackRock CEO Larry Fink, the world’s largest investor with $4.6 trillion in assets, called out the short-termism bug in this prevailing algorithm. He declared that “Today’s culture of quarterly earnings hysteria is totally contrary to the long-term approach we need.” The global economic crisis of 2008, a sluggish recovery since, pollution, an escalating climate crisis and growing income inequality are ubiquitous and undeniable evidence that the pursuit of profit maximisation at any cost has come at a great cost to the planet and to our humanity.
Early warning signals for future generations
Millennials are the canaries in the coal mine for much of what ails our way of life and work. Despite the substantive protected wealth transfers one of the subtleties with the UBS report is that this change will not be equally distributed. This extreme level of inequality will amplify the challenges for those already saddled with student debt. They are unable to find work at twice the rate of those over 30 years old and twice as many live in poverty as in the 70s. The unstable nature of the world they are inheriting – and the knowledge that many of them will not share the opportunities their parents had – has led them towards an existential crisis. In the UK, millennials’ average disposable income is just a third of that of pensioners, with home ownership a distant dream.
As a result, millennials are making explicit our universal hunger and innate desire to contribute to something bigger than ourselves. The most socially and environmentally conscious generation ever, they have become humanity’s conscience and self-correcting mechanism. They insist on a purposeful connection with companies they buy from, work for and invest in. They want to know why a business exists, what it does, how it treats people and the planet. Potentially representing the true Hippie ideals that somehow lost their way in the 70s.
Nine out of ten believe that success should be measured by more than financial performance. For them, the idea of going to work with the singular goal of maximising profits and shareholder value is pointless and abhorrent. They’re willing to put their money where their mouth is: more than half of millennials have ruled out working for an organisation because of its values or standard of conduct. More than half have “chosen not to undertake a task at work because it went against their personal values or ethics”, according to a 2016 Deloitte survey.
Birth of Hippie 2.0
This Hippie 2.0 generation are shaking up the way companies do business, and speaking up about the way we’re working, when it’s not working. A 2013 Gallup poll across 142 countries discovered that only 13 per cent of employees are “engaged”. In the UK, it’s 17 per cent – a staggering revelation that work is a dispiriting experience for most of us. And yet, increasing meaning at work remains one of the most potent – and underutilised – ways to increase productivity, engagement, and performance. According to The Energy Project, employees are more than three times as likely to stay in a job, are twice as happy and are more energised when their work is meaningful.
It would be easy to dismiss this as the naïve ideology of youth, were it not for the fact that many of the world’s most successful, admired and enduring companies are purpose-driven. Contrary to conventional wisdom that purpose is a tax on the bottom line, companies such as Dannon Group, Patagonia, Starbucks, Southwest Airlines and Whole Foods are demonstrating that purpose-driven enterprises have an inherent market and profit advantage giving them staying power. This is not exclusive to large enterprises who have gone long on Corporate Social Responsibility you are also seeing companies such as Rebel Kitchen who right from the get go have built these traits into their dna right from the get go.
The swing back
The swing back in Silicon Valley is now about mission-driven versus mercenary-driven companies, acknowledging that both can be financially successful. Mission-driven companies that walk the talk tend to be better places to work, breeding an intense sense of loyalty with employees and customers. But companies must back it up as, those which style themselves as mission-driven by merely talking the talk leave a trail of cynicism and mistrust in their wake.
Profit and purpose are force multipliers that reinforce each other. Two synergistic halves of a whole where the sum is greater than the parts. Reid Hoffman, co-founder of LinkedIn, said that profit was structurally tied to LinkedIn’s mission to create economic opportunity for every member of the global workforce (whether that remained under Microsoft is still to be seen). Ev Williams, co-founder of Twitter and founder of Medium, unapologetically wants both to change the world and to make money. In his view they are clearly complimentary. “It’s strange that people see them as a dichotomy,” he says. “It’s best if you have both. It would never be satisfying to me to build something that was successful in either of those dimensions, but not both. Profit allows you to reinvest in purpose.” Williams’s co-founder Biz Stone describes Twitter’s purpose as “giving voice to the voiceless” and says that “Top talent is drawn to Silicon Valley because it’s the place where they think they can maximise profit and purpose.”
Great companies aren’t great just because they make lots of money. They make lots of money precisely because they’re great. This is becoming self-evident now that star managers and the millennials are putting these lofty hopes and ambitions within reach. Imagine a world that understands aligning purpose and profit is the art of business, and that this is the most powerful and authentic expression of free-market capitalism. Imagine a world that unlocks the higher side of our nature because we are working toward a higher purpose that is worthy of our life effort. Imagine a world where businesses compete on being best for the world, and where that is precisely what makes them the best in the world. This vision and these California ideals were very much the founding principles of counterculture that led to incredible innovations, radical technologies and some of the most icon brands of our time. They might have been corrupted along the way in part, but they are still alive and well and will continue to be instrumental in delivering the next generation organisations.