Lead image: Devon D'Ewart (CC BY 2.0)
“Because that is where the money is,” was his reported reply. Though rather simplistic, the logic of his answer has guided millions of aspiring entrepreneurs both before and since, and is even the basis of “Sutton’s law” which reminds us to first consider the obvious when making a diagnosis. Willie Sutton died in 1980 after notching a life-time haul of just over $2M and netting himself a half-a-lifetime in jail, plus a published memoir – aptly titled Where the Money Was. Without the penitentiary interludes, Willie might have spirited away as much as $5M in lifetime “earnings” – he seemed to be quite a good bank robber, as far as bank robbers go. But all of Willie Sutton’s ill-gotten gains and outsized legacy seem but a drop in the ocean compared to another stack of money that was recently thrown in an entirely new direction – some $6 trillion USD. For comparison, the world’s third largest economy is Japan, with an estimated 2018 GDP of $4.8 trillion USD.
Like all good sleuths who “follow the money” to encounter both miscreants and motives, the business community recently received a stunning clue for where the money trail leads in the future. When Larry Fink, the CEO of BlackRock, which manages that $6 trillion of investors’ money, suggests that, “society is demanding that companies, both public and private, serve some social purpose,” it earns a great deal of attention. Not all of the attention has been favourable, which makes this moment all the more significant.
Recently, there have been some other important signals that suggest we are approaching Malcolm Gladwell’s heralded “tipping point” in the rapidly evolving role of business in (at least Western) society. One such moment came when the then CEO of GE tweeted, “Industry must now lead and not depend on government,” and joined a chorus of other business leaders in response to President Trump’s announcement that the US would pull out of the Paris climate accord. Another such moment came with the numerous resignations from the President’s business council after he failed to denounce the white nationalist agenda after the death of Heather Heyer in the racially charged riots in Charlottesville. Another came when Patagonia filed a lawsuit to try to stop the government’s plan to shrink Bears Ears National Park in Utah. These events – and many others like them – heralded a break with the traditional role of business. Social impact is no longer just in government hands. Not anymore. Now social impact is becoming the business of business.
Few events over the past decade have the import or long term significance of Larry Fink’s declaration, not necessarily because the man who said them is powerful and important, though that is true, but rather because of what his voice represents. This is the sea-change moment for business as an organizational form. It is being transformed. Mr. Fink’s words mark a profound shift in the way business relates to society – a shift long in the making, and about which I’ve been writing about for some time, including in my book For Goodness’ Sake: Satisfy the hunger for meaningful business. Few words have as much weight or potential impact as these of Larry Fink. While we can expect to endure the usual debate over whether Milton Friedman – the godfather of capitalism as we know it – may still be right, even though reality suggests that businesses are being increasingly challenged to put “doing well (financially)” in service to “doing good (for the world)”. It is about time.
Just as the ATP cycle produces energy in every mitochondria of every cell of our human bodies and most other living things as well, so a business – simply defined as selling something for more than it costs to produce – must produce profit if it is to survive, let alone thrive. Lions must hunt to eat, farmers must farm to harvest, yet each does so as a means, not an end. Only in business have we got our means and ends so horribly jumbled up. Fortunately, a growing number of ‘capitalists’ are starting to do the work of straightening out the means and ends of capitalism, and the businesses of which it is composed. Instead of putting blinders on and driving them mindlessly to the task of piling up gold in bigger and bigger barns in some frenzy of Midas-Madness – and for what reason exactly? – we are starting to put them to use to benefit society and solve our problems. A triumph of rightly-ordered means and ends!
I wish that I knew what path of discovery Larry Fink took to arrive at his life-giving conclusion, but I can imagine that something quite personal inspired it. Why else would a thoughtful man, in a position of considerable influence, put forward a conclusion so bold and with such implications for his field? I do not imagine that he shared it lightly, or without long and painful consideration. Great courage was required to do what Mr. Fink did, and so he must have experienced what I have come to call “metanoia” – a change of heart and mind so profound and significant that nothing is or can be the same again. One CEO of another business described such a personal moment as, “a spear in the chest.” With Larry Fink’s letter to businesses who receive investment from Blackrock (and any who might in the future), the aim of business has shifted. We are now accelerating toward businesses that deliver value for society, not just returns to their owners. This transformation is far from complete, but the momentum now may be unstoppable. This a movement that I call “telosity.”
I am grateful to Larry Fink for his courage, and wonder if, perhaps now, there is a voice and an argument strong enough to replace for good the shareholder value model popularized by Milton Friedman. I trust that the world will not be the same. Perhaps now is the best time to heed Willie Sutton’s advice, and to go where the money’s going – to businesses that change the world for the better. It is high noon on Wall Street, and the future of society and business hangs in the balance!