On Thursday, the richest man in the world made an impassioned plea at the annual World Economic Forum in Davos, Switzerland. He urges businesses the world over to adopt what he called creative capitalism as a way to sharply curtail abject poverty on a worldwide basis.
Gates was savaged on CNBC’s Kudlow & Company by an assortment of Wall Street cognoscenti. They accused Gates of forgetting his roots as one of the most accomplished capitalists in history and selling out to do-goodism.
A friend who saw Larry Kudlow and his incensed companions damn Gates emailed me, “In essence, they ridiculed tough CEOS who played “hardball” in building their companies and their assets, only to become evangelists for the importance of “doing good works” as part of the business platform, AFTER they’ve attained their market objectives. They see these CEOS as dangerous to the capitalistic values that made their companies great.”
While writing Firms of Endearment, my coauthor Raj Sisodia and I talked about controversy that could build around the book because it describes a new business operating paradigm. Old paradigms do not fade off in the sunset quietly. They die amid the shrieks and shouts and damnations of the old paradigms faithful.
We have all experienced the elevated temperature, quickening of breath, dryness of mouth, and quickening when someone has attacked one of our deeply held beliefs.
It all begins in our midbrain where sentinel posts are always on the alert to threat. Our beliefs are as much a part of us as our body parts. Our brain can react to assaults on our beliefs with as much a sense of dire jeopardy as to physical assaults. Just recall how violent people can in opposing others who disagree with them on moral, religious or political matters.
Philosopher Thomas S. Kuhn wrote brilliantly about scientists’ reactions to threats to their beliefs in The Structure of Scientific Revolutions. Published 45 years ago, it remains a best seller.
Kuhn pushed the word paradigm into mainstream conversations. He coupled it with the word shift, as in paradigm shift.
Kuhn rejected the common definition of paradigm as “an accepted model or pattern.” Instead, he argued that a paradigm is a bundle of cognitive processes directed towards the discovery of some truth.
For example, until relatively recently, the processes researchers used in studying intestinal ulcers assumed they resulted from stress. The processes they employed defined the processes directed toward the problem of ulcers. However, when research processes shifted away from behavioral contexts into the realm of microorganisms, it was discovered that up to 90 percent of intestinal ulcers are caused by the Helicobacter pylori bacteria.
As a paradigm gains support, its supporters begin erecting defenses against future threats to its existence. This, said Kuhn, is the main role of normal science – not to ferret out and prove the new, but to further define and protect the old. In other words, most science is devoted to preserving the status quo.
Back to the assault on Bill Gates’ idea that doing good while doing well in running a business is a good thing. Nobel economist Milton Friedman famously said in a New York Magazine article in 1971, “The only social responsibility of a business is to make lawfully profits for its owners.”
Gates, and growing numbers of other top executives including Whole Foods’ John Mackey, Starbucks’ Howard Shultz and now even Wal-Mart’s Lee Scott are saying that doing good whole doing well doesn’t mean shortchanging shareholders. In fact, Gates message was just the opposite.
Citing a book by renowned business guru C. K. Prahalad, The Fortune at the Bottom of the Pyramid. Eradicating Poverty Through Profits, Gates argued in Davos that lifting people out of poverty on a wholesale basis could be very good for shareholders. But such a process for building shareholder wealth is a new paradigm. So, Kudlow & Company, along with legions of defenders of the old Friedman-sanctioned paradigm to come, view Gates as having sold out to the dark side of human compassion.
However, the tides of a more compassionate exercise of capitalism are already too strong for what we call in Firms of Endearment “fundamentalist capitalist” to resist. Beat their gums as they may, Gates view will prevail.
DBW
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