A new story of business

17/09/2014 § 2 Comments

Charles Eisenstein says that the world we see around us is built on a story (you can see an inspiring video illustrating his talk here). Every culture answers the fundamental questions about who we are and what it means to be a human being in different ways – the story is what holds it all together.

The part of our shared story (in the rich West at least) that I have become especially interested in is the part that says that businesses are motivated primarily by profit. I choose not to “buy” that story (in a consumer society, buying something is the primary way in which we engage with it!). I think it is as misguided as the now debunked notion that we are all “homo economicus” – making choices designed to maximise our financial returns. We are far more complex than that. And so is a business. A better way to think about it is as a field of forces – the directing minds of the business need to balance the interests of customers, staff and investors if they are to succeed. What’s more, the more powerful the business, the more it needs to serve the needs of less visible interest groups – their community, the planet and future generations.

The idea that businesses are motivated primarily by profit is a part of our accepted story that is extremely harmful. It justifies all sorts of predatory behaviour that results in environmental degradation, social fragmentation and unhappiness. As someone who doesn’t choose to buy this story, I feel obliged to tell a different story whenever I can. So I intend to write a few blog post about this alternative story over the coming months. I haven’t written a blog post for quite a while – it was summer, and a lot of my energy was going into a book which, not surprisingly, is all about this alternative story. But the book is taking some time and I don’t feel like rushing it. Besides, writing blogs about it helps me think. I hope you will join me for story time 🙂

It started with a gift

07/11/2013 § 2 Comments

I am advising several start-up ventures these days. This includes a wide range of organisations including small professional practices, ambitious social enterprises and networks of creative individuals looking to combine their resources and so become more powerful together.

One common theme I have noticed is that all these ventures are started with a gift,  or indeed many giftleonardos.  There is the original gift of the idea, the inspiration, the burst of energy that moves the person (or persons) in a particular new direction. Then there are all the gifts that the universe subsequently sends their way – free advice (not all of it useful and some downright harmful, but gifted nevertheless), support, a listening ear, money even, perhaps simply a word of encouragement. It is gifts that enable the project to gather initial momentum, to break away from old patterns.

There is something magical about the exchange that happens when a gift is made. As Shakespeare noted in the Merchant of Venice about one form of gift, mercy, it blesses “both him that gives and him that takes.” The world of buying and selling, for value given and received, operates under different rules. The principal difference is that bargaining power comes into play. If you are really thirsty, you will pay a lot more to a seller of water than if you have recently drunk – in the market, if you don’t have enough to feed your family, you will  accept a much lower price for your goods at the end of the day than you would at the beginning). Thus there is a very different tone to the exchange and there can be exchanges where both parties are left feeling worse off. This never happens with a true gift.

Many traditional communities operate purely in the gift domain, sharing freely of what they have without demanding anything immediately in return. They have learned to trust that their turn to receive will come and they take pleasure in the gift. The non-human world also works in this way – trees give freely of their apples, their leaves and their shade without question. “They give that they may live, for to withhold is to perish” as the poet Kahlil Gibran observed.

It may be that in some future age our society will rediscover the joy of a gift-based economy.  That time is not now, and all businesses getting started need to learn to work with our dominant money-based system where value given must, more or less, equal value received. The move from operating on a gift basis to money-based system is a challenging and sometimes perilous time for any business. If the business has relied on volunteer contributions, and then starts paying one former volunteer, all the others will start to wonder whether they should not be paid too. People treat you differently if they suspect that you are motivated primarily by commercial gain (whether you are or not) and the flow of gifts dries up.  Yet in our society this is a necessary part of growing up – for most organisations at least.

Conscious organisations, I believe, must learn to dance between these two different types of economy, as many communities have done throughout history. If within their own boundary they can establish a true gift economy where sharing freely happens, whilst engaging lustily in exchange and barter with the outside world, they have a decent chance of reaping abundant rewards.

A convenient falsehood

08/01/2012 § 2 Comments

I am not really motivated by money. The things that I prize most highly can’t be bought. So long as I have enough to provide me a reasonable standard of living, I don’t really think about money. I work for the satisfaction I get, for the challenge.  Does this make me unusual?

Some would say so. I had an exchange by email recently with Financial Times columnist Luke Johnson. He had written that entrepreneurs are willing to give so much energy and go through all the emotional ups and downs of creating a business because, among other things “they want to make lots of money when they sell their company.” Interestingly, he went on to say that when they finally sell the business, and get to sit back and spend their money, they start to miss the bustle and excitement of business life and realise that large amounts of money are no substitute for this thrill.

I wrote to challenge his statement, the one in quotes above. I asked “Do you think the entrepreneurs you are describing would take a safer, duller path if they didn’t have the prospect of getting really rich at the end of it all?  Or is it simply that society has conditioned them into believing that this is their right, that we live in a world of winners and losers and that if you are one of the 1% of winners you get really rich, if not, tough.”

I added: “I suspect that with different conditioning most entrepreneurs would be happy taking the same risks knowing that their reward will come simply from the joy of doing the work, of serving others, of living on the edge, of testing themselves at the extreme, of finding out who they are. But maybe I am a romantic. What about you?”

He wrote back saying; The profit motive is very powerful and widespread.  Moreover profit is necessary to reinvest and grow a business. Most entrepreneurs do not get rich, of course.  But that spur and possibility is a vital part of the psychology.”

I have been reflecting on this exchange. I can see that my question was rather naïve. In effect I was asking: “If the world were different, do you think that people would behave differently?” The only answer possible is “Yes” and the rest is a matter for conjecture.

Still I think his statement, that all entrepreneurs are motivated, in part, by the prospect of getting very rich, is worth examining. It is, I believe, a convenient falsehood.

It is convenient because it justifies our winner/loser society. It justifies someone like Bill Gates being worth $56 billion (let me spell that out, since it is easy to miss how huge it is: $56,000,000,000. This is more than the GDP of Tunisia, with a population of 10 million people). It justifies the CEO of a state owned bank in the UK earning £10,000,000 per year, while nurses working in intensive care units earn £25,000 per year. Who has more stress? Who contributes more to society?

It is convenient because it allows those holding the levers of power, such as politicians and members of remuneration committees, to sit on their hands and watch this going on. And when the politicians leave office and obtain consultancies and directorships for huge fees, they tell themselves that all is as it should be. If they weren’t paid so much, they wouldn’t do such a good job.

And this assumption helps explain why recent proposals by the government, and also by the opposition, to curb excessive executive pay, are so half-hearted. They worry that if they take away the financial incentive, people won’t perform.

Yet it is a falsehood. Study after study has shown that people are not motivated by money – at least, not when the work they are asked to do involves even a slight degree of complexity. It turns out that I am not so unusual after all. Most people, it appears, are motivated by autonomy (self-direction – having the freedom to choose how you work), mastery (becoming really good at something) and purpose (having something meaningful to do). But not by money.

I know this because I saw it all on an excellent video by Dan Pink – to see it, follow this link.

Ironically, the video is published by the RSA (the Royal Society of Arts). And who is the Chair of the RSA? The aforementioned FT columnist (and former entrepreneur) Luke Johnson.

So, just in case you missed it, Luke Johnson, chair of the RSA, is publicly asserting the importance of the profit motivation while research published by the RSA convincingly and emphatically rules out the importance of the profit motivation.

But then, Luke Johnson is a wealthy man (net worth £110,000,000), a result of his entrepreneurial activity. Thus it is convenient for him to ignore research that suggests that people might take on such activity without the prospect of gaining excessive rewards.

I hope this doesn’t sound like I am envious of him. I am sure he worked hard and well at Pizza Express, that he gives lots of money to charity and does really good work at the RSA, an organisation I admire. I just regret the sad view of humanity we have, and that we retain despite credible research proving that it is not true.  And I regret that we allow systems to prevail that share the benefits of our joint work so unevenly and so unfairly.

the paradox of richness

14/01/2011 § Leave a comment

It is bankers’ bonus season again in the UK. £7bn is expected to be paid out to our senior bankers – not bad at all, at a time when the economy is suffering and businesses and government departments across the land are cutting costs and jobs.

The funny thing is that the bankers genuinely seem to believe they have earned these ridiculous amounts. According to them, their contribution to society is so valuable that it justifies them being paid twice as much in a year as a teacher, an intensive care nurse or a soldier fighting in Afghanistan will earn in a lifetime. Who are they trying to kid?

But I am not here to bash bankers, fun though it may be. I am really only interested in underlying patterns. I want to know what is going on in our society that allows such disparities of wealth to arise. And I think I have an answer.

It seems to me that the bankers’ bonuses are a classic symptom of a society plagued by the “paradox of richness”. The paradox of richness, as explained to me by a botanist friend, is a counter-intuitive phenomenon in nature, where if you increase the fertility of soil, you tend to reduce the biodiversity. So for example among the most beautiful and species-rich grasslands in the UK are chalk downlands, which can have 50 or more different species in one square metre. Yet chalk downlands have very poor soil – just a very thin layer of topsoil and below that chalk, which contains little that plants can feed on. If you increase the fertility by applying fertilisers you will end up with lots of lush growth but a vastly reduced species variety – perhaps 15 species per square metre. It seems that when the soil is poor, there is a chance for every plant species to find its niche and show its beauty. But when the soil is rich, a small group of species become very strong and crowd out the others.

Now apply this to our society. In the last 40 years or so there has been an explosion in the availability of money. There is simply much more money around than there ever used to be (this phenomenon is due to a number of technical reasons I won’t go into here but that James Robertson explains brilliantly – see his website http://www.jamesrobertson.com). The consequence of this application of excessive fertiliser, in the form of money, to our society is that a few species (bankers, lawyers, accountants, Tesco) have tended to thrive, and become fat, metaphorically at least, while other species (teachers, public servants, nurses, small shopkeepers), that are not designed by nature to flourish in such rich soil, become marginalized or wither away.

Superficially the field that has been fertilised looks healthy and attractive – it is deep green and lush. But a closer look reveals the truth – there are far less flowers, far less insects, far less birds.  What’s more,  the wide diversity of species in the poor soil ensures that, whatever the weather conditions in a year, enough species will thrive to ensure a healthy ecosystem – biodiversity brings resilience. By contrast in the rich field, with just a few species, unusually harsh weather conditions can do far more damage.

So where are our farmers in all this? Surely they can step in and do something? Sadly our farmers in recent times (named variously Thatcher, Major, Blair, Brown, Cameron plus their teams of helpers) have based themselves in farmhouses that are rather too close to the factories where the fertiliser is produced and rather too far from the fields. They spend their time in the company of the fertiliser producers and convince themselves that all is well, relying on distant reports that judge only quantity and make no mention of quality.

If they would only step out into the field and leave their advisers and lobbyists behind, they might see what is really going on. That the world is simply not so beautiful without the corncockle and poppy, the quaking grass and cowslip, the meadow saxifrage and yellow rattle, and all the other beautiful wild flowers that we are slowly driving out of our pastures (the equivalent in our society being the small shops, the small building societies, the teachers – or at least the status of teachers). What’s more, unlike the pampered and overgrown dominant species that require large applications of fossil fuel based fertilizers every year, the wild flowers grow happily, without external aid, year after year. All they need to flourish is a level (playing) field. In such an environment, each species learns not to fight the others but rather to find their niche so that nature’s rich bounty of air, light and water can be freely shared. In effect, they cooperate.

So what’s the solution? You can’t take back the money that has been put into the system, otherwise the whole economic machinery will seize up. What we need to do is make that money less valuable relative to things that have real value (like fertile land, and human endeavour). This is the solution outlined by economist Richard Douthwaite in his contribution to a recently published book “Fleeing Vesuvius” (to which I also contributed a section). Douthwaite suggests that, once we have taken back control of our money supply, we should allow inflation to occur. This should allow the price of assets to reduce over time in real terms, thus allowing us to return closer to balance.

This is not the path that our current political leaders are pursuing – instead they are attempting to slash costs, trying desperately to maintain the value of money. But never mind. Douthwaite believes, and I agree, that in the next few years time this will be taken out of politicians’ hands. He points out the close links between energy and money, and suggests that the coming energy crisis will cause the value of money to decline relative to things of real value. The task for our leaders then will be to help society negotiate the inevitable humps and bumps as we transition to an age where money is more evenly distributed, where small businesses thrive rather than being swallowed up or driven out by predatory larger ones, and where nurses can dream of bonuses as big as bankers. A nice dream…

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