Adonis Diaries

Your fathers’ Capitalism needs modifications

Addressing major social problems as part of core business strategy.

Wealth gap has steadily increased since 1990.

In 2014, the average salary of a CEO is 373 fold that of an average regular employee.

Most middle-class Americans are barely $400 short of diving to a lower class (like a leaky roof investment)

In 2014 ,corporate profit margin climbed to 11.5% compared to 6% in 1990.

In 2014, share of company income going to employee decreased to 56.5% compared to 64% in 1990.

Delivering returns to only shareholders on short-term span is no longer sustainable. The new responsibilities of doing business have to add the stakeholders too (employees, customers, communities…)

Raising the bar on corporate conduct toward the environment, social and governance indicators is the new motto for long-term competitiveness.

Tending to social changes while making small profits is the way for sustained profitability.

Throughout history, addressing acute wealth gaps were resolved by higher taxes, revolution (civil war) or waging external wars.

Higher taxes didn’t work: the higher the tax bracket the worse is State inefficiency in spending generated revenue. And the higher the sovereign debt…

Deepak Chopra stated: “I have been going to Occupy Wall Street meeting. I saw the rage but failed to see any solutions

Short of these alternatives, a more “peaceful and step wise” solutions have been suggested and applied in the last decade.

A few of the new trends have code names such as:

1. Compassionate Capitalism (Marc Benioff)

2. Conscious Capitalism (John Mackey)

3. Just Capital (Paul Tudor Jones)

4. Shared Value Capital (Michael Porter)

5. Inclusive capital (Lynn Forester de Rothschild)

Actually, all of these reforms are corollaries to the Conscious Capitalism applications

1) Michael Porter claimed that it shouldn’t be a Zero-Sum game anymore between the two purposes of profit and social degradation.  He uses two examples:

1. Jain Irrigation, a micro irrigation system or drip-watering. Founded in 1988, it improved the livelihood of 5 million rural Indians small farmers who witnessed a  3 fold increase in agricultural production. It is currently the second largest seller of this system in 1 16 countries.

2. Novartis bypassed traditional distribution systems for delivering medication. It brought basic medicines to fight diarrhea,  parisites, nutritional deficiencies and respiratory ailments to rural India.

Novartis also brought in physicians and raised awareness of the critical need for hygiene in preventive infection.

2) Conscious Capitalism is promoted by John Mackey through the Whole Foods Market chains shelving 25,000 organic items.

To be certified as an organic producer, the farmer has to satisfy guidelines on energy conservation, waste reduction and farmworker welfare.

Mackey position is that the dominant capitalist business theory of profit maximization has been a toxic ideology. Sure, if a business does not make profit it dies, but it does not follow that the purpose of a business is to just make profit.

The motto of Mackey: Create a pathway for people to follow and things then go a lot faster and easier.

Being impressed by Raj Sisodia “Firms of Endearment“, Makey launched a small market in Detroit with fewer items at low prices. This was a success story and small markets are rolling out from to Newark to Chicago South Side (areas where 40% live below poverty line)

3) The billionaire Paul Tudor Jones discovered that socially responsible investing (a $6 trillion industry) existed for decades. His purpose is to create a stock market Index that would drive capital to companies that treated well their employees and communities.

He founded the non-profit Just Capital to list 1,000 companies in 2016 according to a set of indicators. A short list of indicators would be: just pay for employees, giving back to communities, ethics of the top management, environmental sustainability, quality of product, transparency, flow of information…

A list of companies will be submitted to 40,000 consumers to rank according to their preference.

How Just Capital can be sustained? By selling software tools to companies in order to analyse their potential inclusion and top ranking in the list, and get a decal.

It is assumed that competition among companies to be listed will be driven by Main Street people instead of the short-term returns to shareholders of the Fortune companies.

Paul Tudor Jones  believe that higher taxes increases the known inefficiency of government in spending additional revenue.

He regret that the USA in in the bottom of the developed nations in quality of life, life expectancy, literacy, social mobility, sustainable income…

4) Another alternative is adopted by Swedish Cevian Capital, a $15 billion hedge fund managed by Christer Gardell. Gardell invests in viable underperforming corporations and acquire enough shares to install his people in the board of directors in order to act on decisions that satisfy conscious capitalism requirements. The investment are not for the short-term but for 5 years at least.

So far, 70% of the investment are in the USA, 15% in Europe and 10% in Asia-Pacific.

Note 1: In addition to the previous examples of Novartis and Jain Irrigation, I selected a few other corporations emulating the Conscious Capitalism trend:

M-Pesa (Vodafone and Safaricom): Michael Joseph made it possible for people lacking bank accounts to use their smartphone to save and transfer money, receive pensions, pay bills… Over 17 millions in East Africa (Kenya), India, Roumania and Albania use M-Pesa facilities to connect to the global economy. For example, 40% of Kenya GDP is transacted via M-Pesa system

M-Kopa: Provided 200,000 households in East Africa with solar-powered machines that generate electricity and that do not require installation or a bank account. And using M-Pesa Pay-as you-go facilities.

Novo Nordisk: This Danish drug-maker is targeting China 100 million diabetics (capturing 63% of China market share). It invested heavily in training thousands of physicians, in educating patients and investing in local manufacturing

Ecolab applied its 6,800 patents to aid major corporations reduce their water usage and reach a sustained water consumption. Saving 2.5 billion gallons of water last year. Note that it is forecasted that by 2030, the world will experience a 40% water shortage.

Ecovative relies on mushrooms, using mycelium roots from fungi to make biodegradable packaging for Dell and Steelcase.

Kickstarter enrolled 9 million audience to fund 100,000 art projects

Note 2: Mackey turned vegan and abstains from processed food after many inputs to consumers who challenged his intake of milk and animal products.

Here is a typical Mackey dinner: Homemade salad, oil-less, vegan Caesar dressing on the side, local summer corn, sweet potatoes, tofu, mushrooms, broccoli, tahini, avocado chocolate pudding with Vitamix, oats..

Note 3: Makey is currently a perennialist, which means believing, Not in faith and dogma, but that beneath all religious traditions there is a universal truth founded on spiritual experiences.

I share that feeling and contend that to claim to have faith without witnessing a personal spiritual experience is a faked faith.

 

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