From his slides for his recent talk at Yale.
Or is profit a simple epiphenomenon of doing the
right thing, and doing it well?
And if that’s true, why aren’t we reporting on what
the right thing is, where it is, and how it’s being done
well?
We don\’t and cannot report on what the right thing is rather than profit for making a profit is our signifier that we\’re doing the right thing.
In the short run, profit tells us almost nothing about whether a firm is ‘doing the right thing’.
But because the most profitable companies are often not the most profit oriented, in the long run, ‘doing the right thing’ is both revealed and rewarded.
Collins and Porras in ‘built to last’ addresses the issue directly by comparing pairs of more and less effective corporations in the same industry. They concluded:
“They have tended to pursue a cluster of objectives, of which making money is only one – and not necessarily the primary one”. (page 55).
So he’s right in the short run, wrong in the long run. And the sorting process requires markets which he loathes.
As in this case, Ritchie’s rhetoric demonstrates his anglo-socialist philosophy. Anglosphere socialism is primarily derived from puritanism, and thus they see the world, and the economy, in entirely moral terms, rather than in economic terms. That’s why we always talk past one another. Two entirely different, and incompatible, mental landscapes.
Lord, the mush and imprecision.
Slide 4 is just boring company law, in the UK and most other places, just with the addition of “civil society organisations” (what possible duty can a company have to a thinktank or an NGO?).
Yale what? Seems odd not to say who’s hosting or sponsoring the slide show – are we supposed to presume he’s the honoured guest of the university or the business school?
I’ll put “epiphenomenon” onto my banned list: it’s just the Pretentious for “by-product.”
Solving for profit and doing the right thing is usually tested by extending your time horizon. That’s all sustainability means – more profit over time. If in the long run an activity is not profitable, for a for-profit company choosing how to allocate resources and energy, it probably is a waste of time and not the right thing for that company.
The interesting problem is how to line up the matrix of countries, legal vehicles, applicable law, tax, accounting rules and regulators. The country bit isn’t the solution, necessarily, but it’s certainly part of the problem.