The Business Roundtable (BRT), one of America’s most influential business lobbying groups, surprised a lot of its unfettered free-market fans last week by issuing an updated “Statement of Purpose” that acknowledged that corporations have obligations beyond simply making money for stockholders, but also include benefiting customers, employees, suppliers, and communities.
Founded in 1972, the BRT is an association of roughly 200 CEOs, including many current tech stars like Jeff Bezos, Tim Cook, Bill McDermott, and Keith Block. The BRT lobbies for public policy that favors corporations — like limiting consumer protections, cutting corporate taxes, keeping a lid on labor costs, and opening U.S. markets to foreign investment. It has long adhered to the Milton Friedman notion that maximization of profits is the only driving force that matters when a company is making a decision.
This new initiative may sound like a big public relations stunt given urgency by the growing chorus of capitalism’s unhappy discontents gathering firewood and rattling pitchforks. And, of course, it could be that. More likely, it is one of those inflection points in the dismal science of economics that occurs every few decades when executives and politicians realize that capitalism of the rapacious kind now practiced in much of the world is losing its allure and that many young people are giving social democracy a harder look.
Greed has its limits. Remember the antiquated notion of a social contract with the unstated assumption of lifetime employment, the promise of retirement benefits, the sense of community and stability and shared purpose that gave millions of people their meaning? All that went away in the 70s and 80s when the Wall Street finance guys arrived with their junk bonds and funny money and started gobbling up every slow-moving elephant in sight. Goodbye retirement lunches. Adios, gold watch.
Tom Wilson, CEO of the Allstate Corporation and chairman of the executive committee of the United States Chamber of Commerce, which has three million members, wrote an op-ed called Save Capitalism by Paying People More, in the New York Times, last week. In it he wrote:
Sure, the unemployment rate is near a record low, but that figure masks the fact that many families are not financially secure. A 2017 survey by the Federal Reserve Board showed that 40 percent of Americans do not have $400 for an emergency. We all have relatives, friends and acquaintances who are struggling to keep up. Being broke while working is not an American value. Poor financial health creates stress, reduces hope and undermines capitalism. It is a cancer waiting to metastasize.
From 1980 to 2010, life expectancy for poor Americans declined, while the rich lived longer. The market mindset did not generate faster economic growth. From 1990 until the eve of the financial crisis, U.S. real GDP per person grew by a little under two percent a year. Meanwhile, CEO salaries grew 200x more than average workers during that period.
What’s it all mean for the technology industry?
We won’t really know what impact the Roundtable’s new statement will have on the American corporate landscape until we see some real concrete plans and budgets and find out how companies plan to reprioritize their agendas. One big question, of course, is what happens when social initiatives collide with bottom-line decisions.
With technology already positioned to be the biggest disruptor in the coming years, how will the tech industry respond to the changing priorities? Fortunately, two very bright guys at McKinsey & Co. have been researching this very question.
In an article called Can artificial intelligence help society as much as it helps business? Jacques Bughin, one of the three directors of the McKinsey Global Institute, the firm’s business and economics research arm, and Eric Hazen, co-lead of the firm’s Marketing & Sales Practice in Western Europe, set out to answer their headline question by using principles of welfare economics to simulate how technology adoption today could play out across the economy.
Their key finding is that two dimensions will be decisive—and in both cases, the business has a central role to play:
The first dimension is the extent to which firms adopt technologies with a view to accelerating innovation-led growth, compared with a narrower focus on labor substitution and cost reduction. The second is the extent to which technology adoption is accompanied by measures to actively manage the labor transitions that will accompany it—in particular, raising skill levels and ensuring a more fluid labor market.
To be successful, the authors urge business leaders across sectors to embed a new imperative in their corporate strategy, which they call Technological Social Responsibility (TSR) and amounts to a conscious alignment between short-term and long-term priorities. They wrote:
Both of these dimensions are in sync with our previous bottom-line-focused work on AI and automation adoption. In our research, digital leaders who reap the biggest benefits from technology adoption tend to be those who focus on new products or new markets and, as a result, are more likely to increase or stabilize their workforce than reduce it. At the same time, human capital is an essential element of their strategies, since having the talent able to implement and drive digital transformation is a prerequisite for successful execution.
What is most surprising to me is a growing disconnect between the priorities of the political class in many countries and global business leaders. While a number of politicians have moved toward authoritarian leadership and regressive policies in a doomed effort to turn back the clock, global business leaders are now tackling the tough issues like jobs, climate, inequality, and immigration. We are now in the strange position of looking up to business leaders as the adults in the room.
Technology has a part to play - just how has yet to shake out. For example, the contradictions between what AI might deliver to the individual and business stand ini sharp contrast with the perceived connotations of mass surveillance.