Looking beyond financial maximisation
Sharing his thoughts with The CA, Kickstarter co-founder Yancey Strickler talks about redefining profit and creating a more generous world.
At 36, Yancey Strickler is a young man on a mission: his book This Could Be Our Future: A Manifesto for a More Generous World is less a manifesto against the pursuit of profit, more a clear roadmap for a world where values such as community, knowledge, purpose, fairness, security, tradition and the needs of the future should be factored into the big decisions we face daily. It could help to restore trust in the business world and finance professions. And, he argues, if we start right now, this could be our future.
The world we live in doesn’t have to be the way it is. And while I don’t think the world is in a terrible place, I do think it’s in a challenging one at the moment.
The stock market is at an all-time high, yet prosperity is limited. Inequality is widening in the US and UK, and 42% of people can’t pay their bills. Why is this? Partly, it’s the result of a certain philosophy that emerged 50 years ago. In 1970, the economist Milton Friedman wrote in the New York Times that the social responsibility of a business was to maximise profit. Financial maximisation – the idea that the best choice in any decision is the one that makes the most money – charged in and changed the world for the worse.
Before financial maximisation, there were still rich people, but more money was distributed to public services. That wasn’t considered radical. What is radical is the Friedmanesque mindset we have now. However, a belief in financial maximisation is just that: a belief. It’s not an organic truth or a fact. And as our self-interest grows, so should our responsibility.
We need to acknowledge the reality of emotion, but we now need to solve problems in a non-emotional way. We need the accountants and lawyers on board to do this.
Simply, we need to look at success differently. We need to see the bigger picture; to get to a place where social values are not simply seen as charitable, but as profitable investments, without directly financial outcomes. Real success would be if the B Corp model could take over from the classic C Corp model. We shouldn’t want being the B Corp to just be the indie feelgood hit. We want it to be mainstream, the stadium hit.
But how do we begin to create a highly defensible argument for creating nonfinancial value? For one, thinking about the wellbeing of every employee is vital. And then there is a question of how far you extend with civic community. These are all ways businesses functioned in the past but which fell out of vogue because they weren’t revenue producing. But if there’s a market based pressure, that can change.
Millennials and Generation Z have woken up to a world that feels on free. It’s clear that continuation of the status quo is not the answer, so they feel a responsibility to try to shift the course. They aren’t waiting for the baton to come to them – they’re taking it.
Older generations will be slower to give up power but Gen Z is going to demand changes in how companies operate. Maybe some companies won’t want to hire these people; they may start organisations of their own, or they may make their voices heard in family-run businesses which could easily say they are purpose led and care about profitability. Not everyone agrees, I know – it doesn’t surprise me to hear that hedge and PE funds are resistant as this is a direct threat to how they operate. The biggest challenge today however is the climate crisis, which is dramatically reordering all of our decisions. If the weather is wiping billions of dollars off economic value on any random day of the year, then we will have to look at the world differently. A few years from now I imagine CO2 emissions will be part of business reporting; a transition happening from the moral state to the rational state. As far as last summer’s Business Roundtable statement, I’m not sure any earnings call will go differently in the immediate future. I would love accountants to have really honest conversations about this stuff – these are exactly the kinds of minds that are needed to solve a lot of these problems because they are logical. We need to acknowledge the reality of emotion but we now need to solve problems in a non-emotional way. We need the accountants and lawyers on board to do this.
How could you create a highly defensible argument for the profitability of investing financial value into creating non-financial value? Right now, any idea is only going to get the green light it if creates a finance return filter.
For us at Kickstarter we [moved into the rational] by becoming a public benefit corporation and creating a charter laying out 15 commitments to which we were legally accountable – expression of our non-financial purposes that guide us. That’s a legal document that we had to report on every year. The biggest obstacle to all of this is apathy, but I’m optimistic. I predict a cultural shift will happen: companies and brands will see the greater good in a way their predecessors do not, and it will become the new normal. Eventually, the idea we ever needed to articulate this will seem silly: “You mean companies didn’t always operate this way?”
This article first appeared in the February 2020 issue of CA magazine.