Introduction

Good Is the New Bad

It’s midmorning and the temperature has already climbed above eighty degrees. I’m driving a rental car down a sun-drenched Florida freeway, the air conditioning cranked way up while a friendly Google Maps voice directs me past vast, car-dependent housing developments, giant-box retail outlets, Spanish Colonial–style multiplex cinemas, and tall groves of billboards proclaiming miracles of modern cardiology. The air is thick with humidity, the landscape watery, flat, and punctuated with palm trees, stretching for miles at what seems like a mere six inches above sea level. It occurs to me that this scene—with its infinite, built-yesterday sprawl—is the expression of centuries of human dreams and desires. For millions, this is paradise.

This being Florida, and South Florida in particular, it is also the end of the road. North America’s retirement mecca. I’m tempted to milk the scenario for some kind of ironic connection between an unsustainable way of life and the end of life. But it’s simultaneously the beginning of a new road, an extension of Latin America’s energetic, youthful optimism. There’s no clever metaphor here, I realize: this isn’t only how life is laid out in a subtropical peninsula known for its high proportion of retirees and immigrants. This is all of America, land of convenience and home of immediate gratification, and much of the world wants to get in on it.

Surrounded with this kind of accessible and reasonably low-cost abundance, it’s hard to imagine that attitudes and desires will ever change. For one thing, so much of the physical infrastructure of contemporary life seems permanently fixed. But the dreams and motivations that drove the creation of this asphalt and petroleum-dependent infrastructure are changing—and fast.

A new generation aspires to something different, and they’re making everyday choices in ways that defy traditional logic. They’re rejecting the old norms—because they can. They’re questioning everything from the notion of career consistency to the value of money itself. They’re hacking everything from government policy to the genome.

They are judging where and how their clothes are made, not just how they fit. They are creating and broadcasting their own media, expressing their points of view, and boycotting and endorsing companies based on their own values. They are thinking global but buying local and, if they can, fair trade and slavery free. They are using mobile phones to overthrow their governments. They are creating social enterprises and investment funds for social progress. They are spending their money and their time forming loyalties, casting votes, and even enjoying entertainment based increasingly upon their desire to make a positive impact on others and the world around them.

The once quaintly idealistic motivation to make a positive impact on the world has thrown off its unbleached, woven-hemp cloak of hippie self-righteousness. Today, enlightenment is downright sexy. It’s taken on an aura of forward-thinking chic, even as it’s becoming increasingly mainstream. From setting up a third wave coffee shop to founding a social enterprise to paving a rooftop with solar panels, doing good is the new status symbol—or, as a trendsetting hipster would say, at least at the time of this writing, doing good is totally badass.

This new generation believes they can and must make the world better, and they expect business and government to get with the program.

Let’s face it, in business it has long been smart, if not exactly nice, to exploit natural resources and low-cost workers for profit. Good business, more often than not, required a measure of bad behavior, at least from an environmental and social perspective. The strong business leader, willing to make the tough decisions, was typically or at least visibly unconcerned about anything but the bottom line, even at the expense of humanity and our planet. After all, there was always philanthropy to assuage any nagging guilt and whitewash a reputation. Backslapping (or backstabbing) cliches abound: good guys finish last, no good deed goes unpunished, you’re swimming with the sharks, don’t take it personally because it’s only business.

Business badness was more than profitable, it could even be admirable, as long as you didn’t get caught. Even celebrities—our collective role models—could be deliciously naughty, whether it was a certain iconic songster’s rumored connections to organized crime or a rock band’s legendary destruction of their hotel room. Bad behavior—and particularly, getting away with bad behavior—has long been a fertile source of value share. But the emergent culture, including increasing numbers of business leaders, has a different idea about what’s radical, edgy, smart, and valuable.

The visible and most obvious examples are legion. Here’s a back-of-the-envelope list:

• The global wave of young entrepreneurship is an indicator not only of an increase in personal self-belief and empowerment, but a sign of the growing optimism that there could and will be a better way to work, produce, and live.
• We are what we eat, and buying locally sourced and organic produce and meat is no longer solely the province of a niche segment of elitist customers—it’s one of the fastest-growing categories in food, while traditional fast food and sweetened carbonated beverages are seeing their profits stumble as they hit a plateau in developed markets.
• Our favorite celebrities make films about topical issues, rebuild homes in flood-ravaged communities, and stand up for urgent global causes, while promoting healthy nutrition.
• Social enterprises—organizations that have as their core purpose generating a healthy profit by innovating for the benefit of the greater good—are the hottest category of start-up today, attracting both private and public investment and top talent.
• Impact investing—which creates funds, frameworks, and financial instruments that put capital to work for the greater good while generating a competitive return—continues to gain momentum and clout in the financial industry.
• Mainstream media debate the role of humans—and by default, the role of business—in the seemingly endless spate of extreme weather.
• The next wave of mobile technology innovation is being driven by a proliferation of patents in biometric sensors that have the power to virtualize health-care diagnostic procedures, driving down costs and expanding health-care accessibility and efficacy.
• Companies manufacturing everything from apparel to microchips band together in industry coalitions that create and enforce codes of conduct to improve the health and safety of their workers and stabilize the communities in which they operate.
• Marriage equality spreads from state to state with the vocal support of companies that have long offered domestic partnership benefits to their employees.
• A proliferation of new web-based and mobile services enable regular people—amateurs—to monetize the empty passenger seats in their cars and the empty beds in their guest rooms, thereby maximizing the economic efficiency of limited resources like fuel and living space while creating value and building personal social relationships.
• The court of real-time public opinion stretches around the globe, with more people more empowered than ever before. Broad boycotts of companies because of the political views of their leaders—and heartfelt personal promotions of companies with values in sync with those of their public—spread across the social graph at the speed of one hundred forty per tweet.
• Microloans and crowdfunding enable new, often socially motivated businesses to sprout from anywhere, democratizing investment and entrepreneurship like never before. At the same time, they create virtual stakeholder relationships and shared accountability for results between individuals who formerly wouldn’t have had access to one another.
• Companies that make products and services that empower individual creativity and knowledge—Apple and Google—top the list in brand value, while the technology category overall is the most admired business sector.
• The idea of true cost economics has moved from an online manifesto to an academically endorsed concept to the driver of a new and fast-growing movement toward integrated financial reporting in the accounting industry.

Here’s the great news: this massive shift—in society, life, work, and especially business—offers an unprecedented opportunity for all of us to prosper, grow, find greater happiness, and transform the world for the better.

Here’s the harder news: none of us is ready for it. Business especially. And this is ironic, because it is we businesspeople who have catalyzed this change.

We are entering a moment of social and technological disruption that most businesses simply weren’t built to accommodate. Business as we know it is based upon a set of implied and in many cases explicit rules and principles, ensconced not only in years of business practice but also in academia and law. These are being upended by a value system, and the technology to support it, that has been steadily moving from the margin to the mainstream for decades. Indeed, we are reaching a tipping point in our evolution as a global society.

Accuse me of overstatement, but the rules and principles that have long underpinned our received logic of business, society, economics, and life are being turned upside down. The evidence is not only all around you. It’s in you. You wouldn’t be reading these words if you didn’t have a gut feeling that we’re living and working in a time of great disruption. Debates about the future viability of capitalism, the emergence of socially enabled media, entertainment, education, and even money, the increasing volume of concern that cataclysmic environmental consequences could be imminent if we don’t change our ways, rapid advances in artificial intelligence and robotics, the potential impact of genetic engineering, the way that smartphones are transforming how we do just about everything, food safety and food security concerns, dialogue about the future of the Internet itself and whom it’s really serving—contemporary life is full of big and real questions about the future we are creating for ourselves.

The old ways of operating an enterprise—from leadership to product and service innovation to talent management, marketing, sales, and distribution—are hitting their expiration dates. No matter how enlightened or progressive we may be as individuals and leaders, most business processes have fallen out of sync with an emerging value system that not only expects but loudly demands transparency, authenticity, democracy, collaboration, empowerment, and fairness—all while serving the best interests of individual human rights, healthy societies, and a thriving natural environment.

Meanwhile, for more people than ever before, business is a bad word. And we’re not just talking about the banking sector, which you won’t be surprised to learn is for most people the lowest of the low, mistrusted by 96 percent of customers around the world, according to a recent Futures Company global survey on trust in business. People increasingly express a deepening disappointment with business as an entire category of human endeavor. What you and I (and indeed even they, the mistrusting masses) do every day, all of our sweat and tears and often good intentions, according to a majority of people around the world, is little more than a necessary evil.

Of course, people not only depend upon but even fall madly in love with products that can only be created by big business. But these feelings don’t necessarily extend to the companies that make said objects of affection. And increasingly, how people feel about companies is having an impact on the choices they make. Company reputation and brand loyalty are more codependent than ever before.

Let’s admit that much of the ill will directed at business is deserved. The deep damage of financial crises, fatalities from unsafe factory conditions, and the long-term effects of environmental exploitation are more than valid reasons for mistrust and even rage. That old “me, the humble citizen” versus “they, the powerful businesspeople” dialectic is nearing the end of its lifespan.

“The corporation is just a machine,” a colleague recently said to me when I described an unfortunate work circumstance that left me personally disappointed. Despite my own occasional frustrations, I disagree with this oft-said and well-intentioned sentiment. To state the obvious, businesses of all sizes—even giant “faceless” corporations—are comprised of people and thus businesses are ultimately, and fallibly, human. Sometimes, when you put a lot of people together and the stakes are high, humans aren’t at their best. Many little mistakes get magnified into catastrophic consequences. Business failure is human failure.

Still, just as humanity is not inherently evil, neither is business. Indeed, if it has the power to hurt, it has even more power to help. The magnifying, exponential effects of large groups of well-intentioned human beings working in concert can be, and have been at many moments in business history, a force for good. In the mid-nineteenth century, some of the most successful and fast-growing businesses in Britain (and it bears remembering that at the time Britain’s economy was not only the largest in Europe, it was larger than that of the United States) were run by Quakers who, because of their religion, were excluded from much of elite society, and thus channeled their lives into enterprise where they could put their values into practice. Companies like Cadbury and Rowntree, for example, ran their businesses while offering what were at the time unparalleled provisions (housing, health care) for not only their workers but also the broader communities in which they operated. In the 1980s, companies like The Body Shop put the notion of cruelty-free production into mainstream consciousness. Broad business sanctions against South Africa helped put the final nail in the coffin of apartheid.

The role of business in driving positive change is set to increase. As Niall FitzGerald, former chairman and CEO of Unilever, stated in a report called The Role of Business in Society, “This challenge to business leaders—to identify with society in tackling the social and environmental problems of globalization, not just through philanthropy, but by using their innovative and creative capabilities to find business solutions that contribute to solving these problems—is the challenge of the twenty-first century. And it is a challenge to all of us engaged in the market economy.”

To what can we attribute this shift, this disruption, this next big step forward? We can thank technology, which really means looking in the mirror and thanking ourselves for not only creating but also enthusiastically adopting technology so wholeheartedly into nearly every area of our lives. The Internet has not only brought people closer together, it’s brought people and business closer together too. The world is not only more connected (and more crowded), it has become a far more intimate place than ever before.

Is this a blessing? Or does it present a more complicated set of operating circumstances for the enterprise? We can and do proclaim the wonders of deeper customer engagement, the freedom and productivity that mobility provides the enterprise, and the convenience of more efficiently distributed communication, but what’s also true is that this new intimacy is uncomfortable. We’re not used to it. Business as we currently conduct it, and business value as we currently create, measure, and report it, is not based on deep intimacy but rather on separateness. Opacity. But no, you’re thinking, we aspire to become more intimate with our customers. I’m sure you do; so do I. Rousing PowerPoint presentations and social media proposals extolling the virtues of closer connections between a business and its customers abound. You want to know everything about them, but do you want them to know everything about you? For example, do you want your customers to know what you’re really doing with what you know about them? After all, intimacy is a two-way street.

Frankly, whatever business wants, it has no choice but to be more open than is currently comfortable. The walls are coming down. The disintermediation, virtualization, and automation of the digital revolution have already swept through nearly every known business model. That was only the beginning of the transformation. The accelerating pace of social change, continuous economic volatility, wildly swinging extremes of consumer demand, and the subsequent redistribution of power from the few to the many: these phenomena are gathering pace as more and more of humanity come online. Whatever you believe about income inequality and the popular notion that wealth is being transferred into the hands of a smaller percentage of people, wealth is indeed a form of power. Some theorists, like Thomas Piketty in his critique of capitalism itself, argue that today it’s being concentrated in an ever smaller proportion of people at a historically unprecedented rate. Yet paradoxically—and in the long run, perhaps more significantly—more people have more choice, more agency, more information, more opportunity to participate, more ability to join forces with like minds, and an unlimited audience for their ideas and personal and political expression. This too is power. And it is spreading to more people than ever.

Think about it. Throughout human history, people were disconnected from one another and the wider world by vast spans of geographic space and travel time. The pursuit of global trade and the institutions that dominated it created connections around the globe, but until very recently this connectivity was slow, expensive, and accessible only to the elite. It’s easy to forget that being separate was simply an ontological reality.

Centuries of separateness—despite our growing global economic interdependence—put in place and ossified whole systems based on impenetrable boundaries. Boundaries of information. Boundaries of power. Business value and profit margin were not only based on supply and demand, but upon manipulating what information the buyer could access. The idea was to produce at the lowest possible price and charge the highest possible price. Logical. Because the buyer had no way of knowing the real cost of goods, and even if she had a way to figure it out, there wasn’t much she could do about it. Despite the notion that pricing is based on “what the market will bear,” in the short-term game of supply-side economics, value was set by the producer. Ultimately, value was dependent upon opacity.

So what happens when more of us are more connected to one another and to everything in real time than ever before? What happens when business opacity—like privacy—evaporates? Before we continue our well-justified love affair with connectivity, it’s worth pausing to consider just how profound this new reality is. Because in just a few short decades, ubiquitous connectivity has gone from a seemingly magical innovation to a basic utility, and it’s not slowing down—it’s speeding up.

For those businesses that adapt to this shift in values, the ones that address people’s hopes and expectations head-on and that truly deliver what people want and need (and isn’t that the whole point of business?) at this moment in time, what may look like a crisis is indeed the best opportunity we’ve been presented to innovate, create sustainable value, and grow.

Global interdependence—and the emergent values and expectations that such interdependence generates—is not just a here-today-gone-next-quarter trend. Nor is it a left-of-center or libertarian political movement or a set of unrealistic utopian ideals that are getting more than their fair share of airplay online. The conversation about the role of business in society is escalating across the political spectrum. Meanwhile, making a corporate commitment to generating positive social and environmental impact is no longer merely a nice thing for a business to do to improve its reputation; it’s becoming acknowledged as a future-friendly, pragmatic, and increasingly urgent business imperative. Prioritizing the common good as a core purpose—and the institutional transformation required in order to fulfill this purpose—is spreading through every realm of human endeavor, from politics to health care to international policy to finance. But it is business that will be both most affected and simultaneously the most powerful actor and influencer, because it’s business that has so much to gain from the opportunities this unique inflection point offers.

This inflection point, this cultural shift toward an economics rooted in the common good is a multidimensional phenomenon, encompassing individual motivations and beliefs, communal values, technological capabilities, scientific and biological evidence, and global geopolitical dilemmas. The converging shifts in these various business drivers herald the emergence of a new economic paradigm based on redefined ideas of utility, demand, and stakeholder accountability.

A word about corporate responsibility (there’s a whole chapter on it later). If you’re anything like me, you probably have mixed feelings about the word “responsible,” as in environmentally responsible, socially responsible. It’s patronizing and infantilizing and, frankly, unfriendly. Let’s aim instead to be sensible. As in environmentally sensible, socially sensible. It’s not sensible for businesses to pollute our precious water supply. It’s not sensible for businesses to put their workers and the communities in which they operate at risk. It’s not sensible to lie to customers, even if it’s a lie by withholding the truth. It’s not sensible for businesses to allow destabilizing political conflicts to fester and grow, inhibiting their ability to produce and sell.

Here’s an uncomfortable paradox that I by no means morally endorse: it might well be sensible in the short term for an individual to exploit resources and other people in his or her own (unenlightened) self-interest, if he or she is a sociopath or a power-hungry politician. But for businesses, which depend on healthy and financially solvent customers, market stability, and sustainable and steady growth, it’s simply irrational. Investors, who by definition must balance both the short and long view, seek evidence of longer-term stability and predictable growth against the backdrop of continuous volatility, so with growth in mind, it’s logical that a longer view must ultimately prevail without jeopardizing short-term profit and thus viability. But it’s not just about investors. Long-term viability is an increasing priority within the enterprise. Part of Unilever’s business, for example, depends upon sustainable fish stocks. So the business has partnered with the World Wide Fund for Nature (WWF) to ensure sustainability standards that aim to protect this natural (and, it must be said, business) resource.

A connected world is a smarter world, and a smarter world is an empowered world. As more of us become more closely linked to one another, to information, and to the realities around us—realities both challenging and hopeful—our awareness of our own impact on the world continues to grow. Over time, this growing awareness has become converted into action. We know we can’t let things keep going as they have been. We share an increasingly crowded planet, and its capacity to support and extend our current way of life is under strain. We know we can’t keep living and working as we have been. It’s unsustainable, and it’s not sensible. So we won’t do it.

A new era of real-time knowledge and pragmatic reciprocity is dawning. If we treat ourselves to the privilege of leaving cynicism behind for a moment, it’s not unimaginable that an age of near-universal and rampant profiteering from bad behavior, exploiting human beings and natural resources with abandon, could one day come to a close. After all, business is made of people and natural resources, and it is no longer sensible to extract margin from damaging that upon which we depend.

Brand loyalty and the value it delivers will no longer emanate from manipulating people into paying more, contributing to your margin by obfuscating the truth. No longer can business seduce hearts and wallets to open with false promises to fulfill fabricated desires. Authenticity and transparency are winning the race. New, truth-based approaches to brand building and engaging those who are most likely to buy your product will be core competitive advantages going forward, as we’ll see in both chapters 4 and 6.

Business has the most to gain by driving change, because government intervention compelled by populist movements (the rising tide of resentment of executive compensation, for example) could be a very scary thing indeed for businesses. Guardrails are good, but for those who believe in the power of the free market (full disclosure: I do), too much regulatory intervention demotivates business performance. At the same time, government and public institutions have a crucial role to play in protecting communities as well as property rights, and ensuring personal freedom. Government-funded innovation is a crucial component in human progress. The world’s most valuable innovations—the Internet being the most obvious but not the only example—simply did not emerge purely from the private sector. They were built on the back of systems and discoveries that were government funded.

Business may well have been the modern agent of many of the dilemmas we face. It will also be the most powerful agent in solving them. Because that which is valuable should be profitable. What could be more valuable than making life safer, better, and longer for all humanity? What could be more valuable than continually restoring the health and vitality of our planet, the only inhabitable home in the universe?

Every business wants to get ahead of the next big thing. This is it. Welcome to the Conscience Economy.