CHAPTER FIVE

When Capital Is No Longer Scarce

RULE #5
Culture Is King and Talent Rules

I find it useful to keep antique ideas around, as a reminder that how we see things today is not how the world will always see them.
—MARJORIE KELLY, THE DIVINE RIGHT OF CAPITAL

I WAS LISTENING to a presentation for new authors on how to market your book when someone made a clever suggestion: Take a photo of a pile of books that have influenced you, write a post about why each was important, and tag the authors to enlist their marketing help.

I quickly made up my list in my head. Lynn Stout’s book The Shareholder Value Myth was one; and works of Chip and Dan Heath, especially Switch: How to Change Things When Change Is Hard, would be on the pile. I recalled how Margaret Blair’s book Ownership and Control: Rethinking Corporate Governance for the Twenty-First Century practically leapt off the shelf of the bookstore in the lobby of the Brookings Institution, where I met Margaret during her fellowship there. I would also want to include Roger Martin’s Fixing the Game. But the top of the pile belongs to Marjorie Kelly, who published The Divine Right of Capital: Dethroning the Corporate Aristocracy in 2001, just as I was beginning to convene executives in dialogue about the role and purpose of the corporation.

They say that you can get most business books in the first 30 pages. In this case, I felt like I got my money’s worth in the opening paragraphs, in which Kelly asks, “Stockholders fund major public corporations—true or false?” and then answers her own question: “False. Or . . . a tiny bit true—but for the most part, massively false.”¹

Marjorie proceeds to dissect how public markets work and to remind us that the company receives its money at the initial public offering (IPO). That capital is used to invest in the business, as needed, and when times are good, the company pays a dividend to the shareholders of record. The stock market offers liquidity—the ability to buy and sell shares at will—and dividends, or returns to traders and investors, including individuals and institutions, such as pension funds, endowments, and other funds that invest on behalf of individuals. But after the original capital raising, for the company itself the public markets are of no direct importance. The company doesn’t benefit if the stock price goes up, nor is it directly affected if the stock goes down.

Most public companies don’t return to public markets to raise additional capital. Today, they do distribute most of the earnings to public shareholders, however, and in recent decades the distribution has exceeded 90 percent of profits. Some of the distribution, roughly 45 percent, is made through paying regular dividends. But most of it happens through the repurchase of shares at their market or trading value, so-called share buybacks. When the company buys up shares, typically they are then retired, which boosts the value of the outstanding shares of stock by simply reducing the number of shares outstanding.

As management gurus remind us, the most important assets of the company go home at night—or now, even work from home. Growth may not require any capital investment at all. For two companies we will consider in this chapter, access to the public markets made it easier for early investors to liquidate their shares, but no additional capital was raised for the company by going public.

Financial capital is no longer a scarce resource. Access to credit and equity investment is no longer as important a consideration as it was when the United States was growing as an industrial power with tremendous need of capital investment in plants and equipment and infrastructure. The decision rules that dominate finance classes—the capital asset pricing model and discounted cash flow—were designed for a different era. Success today is about culture—building and leveraging talent and the stewardship of relationships and nature.

Why do we assign capital markets so much power?

Marjorie Kelly wrote The Divine Right of Capital after years of publishing Business Ethics magazine, a readable digest of stories about corporate social responsibility. After years of studying businesses, Marjorie wanted more. She began to question fundamentals about how the corporation is created—what is it designed to do? Her subsequent books have explored the idea that ownership is key—the “original systems condition”—how intentions are first set and are sustained.

Marjorie was among the first to challenge the preeminence of the stock market, the idea that “capital is king.” The Divine Right of Capital was published as the implosion of Enron reverberated in the markets and demonstrated what is at risk when the return to shareholders becomes the central preoccupation of the company. Marjorie not only upends the importance of the shareholder but makes a fair case that someone who holds the stock today is the least important, not the most important, of its constituents.

Highly respected business managers prove her case.

General Robert Wood Johnson, son of the founder of Johnson & Johnson, authored the company’s famous Credo in 1943, while the country was just emerging from the Great Depression. When I visited company headquarters in New Brunswick, New Jersey, I was pleasantly surprised to find that the Credo I had heard so much about is literally carved in a massive piece of stone that dominates the lobby of the main entrance. One assumes that it was placed there as a testament to the founding values—but maybe also as a warning to future generations that you can’t just paint the Credo over.

When I reread the Credo in 2020, it seemed like it could have been written yesterday.

The opening line is “We believe our first responsibility is to the patients, doctors and nurses, to mothers and fathers and all others who use our products and services.” It references quality and good service and the need for business partners to earn a “fair profit.” The next paragraph talks about respect for and dignity of employees and the importance of a “fair wage”; it says that employees need support in their responsibilities to family and should “feel free to make suggestions and complaints.” The third paragraph is about the importance of the communities where J&J works.

The Credo concludes with this statement:

Our final responsibility is to our stockholders. Business must make a sound profit. We must experiment with new ideas. Research must be carried on, innovative programs developed, investments made for the future and mistakes paid for. New equipment must be purchased, new facilities provided and new products launched. Reserves must be created to provide for adverse times. When we operate according to these principles, the stockholders should realize a fair return.

Jim Burke was CEO of J&J from 1976 to 1989. In 1982, he managed through the crisis that ensued when seven people died in the Chicago area from ingesting Tylenol capsules laced with cyanide. Burke’s deft management of the situation, including the immediate recall of all the product sold, and how he took responsibility for the problem, became the gold standard for protecting a company’s reputation in crisis.

When I interviewed Burke a decade after he left the company, he spoke about the Credo as a living document. The values articulated, especially putting the patient first, meant his team knew exactly what to do in the moment. As a result, the damage to the Tylenol brand, to J&J, and to the stock price proved temporary.

Marjorie Kelly’s great contribution to the management literature links decision-making to corporate design. A decade later, in his provocative book Fixing the Game: Bubbles, Crashes, and What Capitalism Can Learn from the NFL, Roger Martin explored the logic of paying executives in stock.

Given the real function of the stock market, an after-market with strong currents of speculative and even algorithmic trading, how do you resolve the conflicts inherent in rewarding the executive in shares of stock? Can you sustain a customer-first or employee-centric culture if the chief executive is being paid first and foremost to align his or her goals with the shareholders—i.e., to maximize the stock price? (We will return to this question in chapter 7.)

WHAT IS THE PURPOSE OF PUBLIC CAPITAL MARKETS?

Capital markets today bring fresh examples to the narrative that now questions the shareholder-centric thinking that dominated the last three decades.

Spotify, the innovative music streaming program that fully disrupted conventions for listening to popular music, is Exhibit A. In 2018, the company, which was founded in Sweden but then moved its headquarters to the UK, “went public” in name only, eschewing the usual fanfare of ringing the opening bell at the NYSE and most of the conventions of an IPO.

The trading price of Spotify stock exceeded expectations in the early hours of trading—the customary measure of success—but the CEO had already made clear his real goal: a direct listing to match public buyers with private sellers. There was no investment bank in the mix to bolster the stock price as needed; in fact, capital raising for the company itself wasn’t the goal. Achieving a high price was nice for the sellers, but it wasn’t all that material for the company.

The day before the public listing, cofounder Daniel Ek spoke to the company’s goals:

Spotify is not raising capital, and our shareholders and employees have been free to buy and sell our stock for years. So, while tomorrow puts us on a bigger stage, it doesn’t change who we are, what we are about, or how we operate.

Normally, companies ring bells. Normally, companies spend their day doing interviews on the trading floor touting why their stock is a good investment. Normally, companies don’t pursue a direct listing. While I appreciate that this path makes sense for most, Spotify has never been a normal kind of company. . . . Our focus isn’t on the initial splash. Instead, we will be working on trying to build, plan, and imagine for the long term.²

This trend has been in the works for a long time, evidenced by the scholarship of individuals like Jerry Davis—an Aspen Ideas Worth Teaching Award winner from the Ross School of Business at the University of Michigan—who uses market data to point out that providers of financial capital are the least critical part of the stakeholder management matrix.

Data from Jerry’s book The Vanishing Corporation: Navigating the Hazards of a New Economy shows that the number of public companies declined by nearly one-half in the first decade of the 2000s. Jerry mines the deep decline in the number of publicly listed stocks to better understand performance of the stock market and our day-to-day reality and experience in the economy.

Financial capital is still important. Entrepreneurs still need venture money to get their companies off the ground, and value investors can support them through stages of growth, but overall, we are witnessing significant shifts in the purpose of capital markets.

PERFORMANCE IN THE STOCK MARKET VS. THE HEALTH OF THE REAL ECONOMY

A recent example makes the case. The stock market was turbulent as the consequences of COVID-19 became manifest in early spring 2020 but then began to climb again, even as a growing number of retailers declared bankruptcy, unemployment climbed to numbers last seen in the Great Depression, and Main Street businesses sent warnings about slow-to-no recovery after the crisis. Signs of a rocky economic future are abundant. The connection between the economic health of the nation and the performance of the stock market seem tenuous or nonexistent.

One theory about the disconnect has to do with the performance of a handful of companies. Facebook, Apple, Amazon, Alphabet, and Microsoft represent close to 20 percent of the overall market capitalization. The belief that they are not likely to lose ground in the pandemic—and could even gain market share—might explain the health of the market overall.

My colleague, Miguel Padró, explores a second rationale for the disconnect between a rising stock market and the health of the economy overall. The vast holdings in the market are highly concentrated; 1 percent of investors hold roughly 40 percent of the market value overall (the top 10 percent account for 80 percent of market holdings) and are protected from the severe economic dislocations felt by most Americans. The market may be a bellwether, but only for a tiny, wealthy core, which is also overwhelmingly white. More than 60 percent of white households own stock; only 30 percent of Black and Hispanic households do. The proportion of the stock market held by Black and Hispanic college graduates is under 3 percent.³

As observers of the stock market scratched their heads over the growing disconnect, Jerry was quick to tweet out a May 2020 article in the New York Times by Matt Phillips titled “Repeat After Me: The Markets Are Not the Economy.”

So why do public capital markets have so much sway?

Part of the answer is embedded in old, sticky ideas and habits from a time when access to publicly traded capital mattered a lot. At its peak, General Motors had one million employees on its payroll, all in the United States. The ongoing need for capital to invest in both facilities and labor was a driving concern of management.

UK economist John Kay writes about capital markets. I went to visit him after he was commissioned by the British government to study the causes of the financial market meltdown in 2008. In addition to reporting on the short-term behavior of market makers, he spoke about a widening gulf between equity markets and their original purpose: providing companies with growth capital and giving small investors and savers a piece of the economic pie.

At the conference of the Inclusive Capitalism Coalition in London in 2018, Kay asserted that the dual purpose of providing capital for growth and linking savers to the economic engine “has been forgotten.”

Kay is an economist, but also a business historian. He took us through the changes in business over the last 200-plus years, from the time when the Lloyds still owned Lloyds Bank and John and Benjamin Cadbury established the Cadbury Brothers chocolate factory, and then on to the turn of the last century when wealth-building financiers like J. P. Morgan and Henry Clay Frick stood behind John D. Rockefeller of Standard Oil, Andrew Carnegie and his steel factories, and Cornelius Vanderbilt and the railroads.

He also reminded us of the remarkable growth in business and wealth made possible by the creation of joint-stock companies that attracted new shareholders with the protection of limited liability. With professional managers and almost unlimited access to capital, family businesses like DuPont and Johnson & Johnson grew into global enterprises.

Kay fast-forwarded to the reality today that most financial capital is invested and managed by a set of intermediaries who have little or nothing to do with the actual management of the business. They are investing other people’s money and sit at a remove from the classic Ma and Pa investor. Many, even most of us in the market, are not able to say which stocks we own.

Today, the companies at the top of the market capitalization tables represent a different breed of enterprise with a different relationship to capital. If Apple, Microsoft, and Amazon are in a tug of war over who has the greatest market value, it is not clear why—it matters little to the companies themselves. John Kay uses Apple as a typical example of a fast-moving business of today: manufacturing is contracted out to a remote supplier, there are few hard assets, and there is a full-time global labor force of only 123,000—not that many, given the company’s market reach and influence. Kay continued,

And what of Apple’s $800 billion [$1.4 trillion in early 2020] market capitalization? So wedded are we to the idea that capital is critical to business, so much in thrall to the word, that we have invented new concepts such as social and intellectual capital to try to explain phenomena that are perhaps more clearly and certainly more simply described in ordinary language.⁴

Public markets offer an exit for venture capitalists and early-round investors, as in the case of Spotify, but the need for fresh capital to invest is modest to nonexistent. The evidence is the piles of cash on Apple’s balance sheet.

The disconnect between the role of the stock market and the path to value creation is also understood through how stock-based voting power is assigned today. When Snapchat, the photo and video sharing app, went public in 2017, it went even further than Google, Facebook, and LinkedIn, whose dual-class shares diluted the voting power of the common shareholders. Snapchat thumbed its nose at public market norms and offered no voting rights at all.

Snapchat’s decision was a radical departure from the norms of share-holder value, but it is a perfectly legal, and honest—if extreme—signal of how the company thinks about risks borne and the responsibilities of shareholders. Snapchat and Spotify may raise the hackles of some investors, but the founders are also acting rationally. Financial capital is no longer a scarce resource. Why grant it so much power?

Should we be concerned about these trends? Not according to Kay, who talks about the advent of the “hollow” corporation: few employees, little need for capital, basically a set of relationships and codependencies.

It is useful to recall a key tenet of The Shareholder Value Myth by Lynn Stout: The only thing shareholders own is the stock certificate itself. Shareholders still make waves, but they are no longer the powerful accountability mechanism or arbiter of real value creation that the myths about public markets would have us believe.

In order to understand the drivers of innovation and competitive advantage, the contributors to real value, we need to turn to other aspects of the business model—specifically, the culture of the enterprise and the clarity of intentions, rewards, execution, and accountability mechanisms that shape business decisions.

Deep changes in business culture are underway. The ability to attract and keep the best talent is critically important in growth sectors dependent on innovation and technology. The stability of the supply chain is another complicated management task for consumer goods and B2B suppliers. CEOs need the emotional intelligence that might be better associated with managing a complex social institution. For public companies, when the leadership succeeds at managing teams and relationships in this environment, a robust stock price should follow—it is no longer the organizing principle for decision-making.

CAPITAL MARKETS AND CORPORATE PURPOSE

Larry Fink’s 2019 letter to the CEOs of BlackRock’s portfolio companies landed at a moment that felt economically rocky and socially perilous in Washington, London, Paris, and around the globe—as he described it, a time of popular anger, nationalism, and xenophobia. He reminded business leaders, even those beset by quarterly expectations and the drumbeat of investors focused on share price, that their job had changed.

This moment required more from business leaders.

Fink posed a fundamental question: What might be possible if a company sets a direction that prioritizes social value—defines its public purpose—and then truly lives by it?

Fink’s platform and influence comes from overseeing the largest pool of capital on the globe, $7 trillion in assets under management in 2020. He continues to speak out forcefully on the public purpose of the enterprise. And his message is authentic; it makes sense against BlackRock’s own business model.

BlackRock is an asset manager with an array of products, but for the most part it is known as a massive index fund. Rather than moving in and out of stocks to capture upside gains and minimize losses, most of BlackRock’s assets are managed for small investors following the advice of financial gurus like Warren Buffett or John Bogle, the founder of Vanguard: over the long haul, you are better off betting on the market overall than paying someone hefty fees to try to beat the market by picking stocks. These individual savers, and the pensions that invest on their behalf, place money in an index fund to mirror the market, or a representative sample of the market, like the S&P 500 or Dow Jones Industrial Average.

Like its competitors, Vanguard and Fidelity, BlackRock owns a piece—a significant piece—of every public company. Index funds like BlackRock are also called universal investors; their success is tied to the health of the market overall, not the give and take of individual stocks. They can’t exit a stock without undermining the basic concept of investing in the index, and thus BlackRock has a keen interest in good management—and a healthy economic ecosystem over the long haul.

Like Larry Fink, Bill McNabb, chairman of Vanguard, advises executives to allocate capital in a way that builds for the long term. The conditions for economic health, and planetary health, are critical to Vanguard’s own vitality and near-infinite investor horizons.

How do you manage when the scale of the assets under management requires you to hold everything? How do you respond to the impulses of small investors on dicey issues like guns and labor conditions and climate, when your business model means that you can never dump a stock?

Welcome to the conundrum of the world’s largest investors. More like the world’s largest stock-sitters. Even with the financial power of a BlackRock or Vanguard, the influence of our largest investors in the public markets is significant but limited in scope. At critical moments, such as in a takeover challenge from an activist investor, their voting power is supremely important. Yet, with higher proportions of the assets in the stock market invested through index funds, we are experiencing another aspect of the decline of financial capital as the organizing principle of decision-making.

Fink believes in the markets, but he lives with their limitations. He commands the attention of company executives because BlackRock is typically their largest investor. Rather than issuing threats, Black-Rock’s real influence is derived by prodding CEOs to be good stewards of their companies—i.e., through strategic, disciplined, long-term management of tens of thousands, or even hundreds of thousands, of employees and through suppliers and brands.

DEFINING CULTURE

I don’t know how Larry Fink and Bill McNabb respond when asked for specific examples of companies that live up to their vision of purposeful business. As the world’s largest investors, they may need to dodge the question. When I am asked for the names of companies that take business purpose seriously—a question that used to begin with “Who do you have besides Unilever?”—I answer with half a dozen public and private companies that have been so consistent at living by long-term, employee-and customer-centric values, they almost fade from view.

Southwest Airlines, whose cofounder and long-time CEO, Herb Kelleher, passed away in 2018, is always on the list. Kelleher placed both employees (profit-sharing, respect, dignity) and customers (low fares, clean planes, “no stupid fees”) at the center of decisions. The investors who stuck around for the ride were handsomely rewarded. Kelleher managed the most financially successful US airline in history, and Southwest is a textbook case for whether high-road employment practices can earn a decent, or even superior, ROI.

With a 45-year track record, Southwest illustrates beautifully Fink’s call for a long-term plan and his conjecture that profits are not only consistent with purpose but inextricably linked.

The culture is defined by the allocation of capital and the operational protocols. For Southwest, a focus on employees is instrumental to the business model and long-term success. A superb customer experience is a by-product of the focus on employees. Service protocols are the airline’s equivalent of quality control on a factory floor. Good service requires walking in the shoes of others and caring about everyone who influences the customer’s experience.

Kelleher could have written these words at the end of the J&J Credo: When we operate according to these principles, the stockholders should realize a fair return.

Herman Miller is another example of a defining culture that becomes the organizing principle for value creation.

The company, known for the Aeron chair and for introducing modern furniture design to American households, opened its doors as the Star Furniture Company in Zeeland, Michigan, in 1905. D. J. De Pree began working there as a clerk in 1909 and purchased the company in 1923 with the help of his father-in-law, Herman Miller. D. J. stayed at the helm until 1969. Many of the decisions he made, including his support for design innovation and the introduction of an employee stock plan, had a lasting effect.

The culture of Herman Miller tightly weaves together respect for the talents of people who work at the company and the impact of the products they make. In the words of De Pree, “In the long run, all businesses and business leaders will be judged not by their profits or their products but by their impact on humanity’.’

Dozens of books have been written about the designers that Herman Miller supported and the modern design aesthetic it embedded in our world, but also about the culture instituted by its founder. Leadership Is an Art, by Max De Pree, D.J.’s son, is a classic of management literature; it was Bill Clinton’s bible on leadership. Max helped lead the company beginning in the 1960s, supporting the company’s growth by instilling a culture of inclusiveness and design innovation.

The company didn’t formalize its purpose statement until recently—it didn’t need to; the purpose was baked in: “At Herman Miller, we respect each other as we are, and who we will become. Our culture represents our collective attitudes, aspirations, ideas and experience of the people who work here.”

The bottom-up culture is evident in early and unstinting support for design talent, beginning with Gilbert Rohde—who was recruited by D.J. in 1930 and introduced the modern aesthetic and the first line of office furniture for which the company is known—and including George Nelson, Charles and Ray Eames, Isamu Noguchi, and a who’s-who list of design masters who have collaborated with Herman Miller through the last century to create classic industrial design.

Trusting the aspirations of your people and diversity of thinking go hand in hand. A culture based on respect enables cutting-edge thinking to take root. The ideas that emerged in this environment still shape the culture of today, from attention to quality (“reliability”) and human-centered design to sustainability. Bill Birchard’s book Merchants of Virtue: Herman Miller and the Making of a Sustainable Company tells how Herman Miller’s unique culture allowed the principles of environmental sustainability to emerge from its employees early on in the 1990s; the company still leads its industry on sustainability in design and architecture.

Herman Miller is a public company; former CEO Brian Walker talked about the company’s fiduciary duty to shareholders as a moral obligation. Investors, he said, entrust their money to the company for a return. Public companies like Herman Miller need to cultivate their shareholders—especially the long-term investors that are critical for support when activist raiders come calling. Long-term investors understand the external pressures and trends that affect performance, as well as the interplay of a resilient culture and the ability to stay competitive. The priority that Southwest and Herman Miller place on the human element is instrumental.

Consider Delta’s remarkable profit-sharing plan, created to appease pilots and flight attendants forced to take severe pay cuts when the company went into bankruptcy in 2005. Every employee of Delta, from the ground crew and gate attendants to the pilots and office workers, receives a check on Valentine’s Day representing a proportionate share of profits. In 2019, the year before COVID-19 wiped out the airline industry, the total distribution was $1.3 billion; for five years running, the number had exceeded $1 billion. For many Delta employees, the distribution approximated 14 percent of their salary.

CEO Ed Bastian describes the program as the foundation of a partnership—enabling a culture change and remarkable turnaround by the company. Delta has moved from strength to strength and today enjoys a superior reputation for everything from customer service to on-time arrivals—challenging Southwest at its own game.

What about the culture and priorities of New Economy companies?

One of the values featured in Salesforce’s mission statement runs against the grain of winner-take-all-style capitalism: equality. CEO Marc Benioff became curious about whether the company was achieving pay equity in its own ranks. The data was clarifying; a onetime investment was made to level up lagging pay for women and to close the gaps within pay grades. Annual assessments ensure that the equity standard is maintained.

The CEO of Microsoft, Satya Nadella, has become the most highly regarded chief executive in the country. He led a transformation of the company’s strategy but also its culture—breaking down silos, embracing collaboration, talking about the need for empathy and positive reinforcement, and thinking differently about everything from data standards to open-source technology to the company’s relationship with its home base of Seattle and the Puget Sound.

As Microsoft moved back to the top of the list of companies by market capitalization, it announced a $500 million investment to reverse the housing shortage and address homelessness in Seattle. Then, early in 2020, it pledged to not only radically reduce emissions but also invest heavily in carbon capture, in order to draw down from the atmosphere as much carbon as it has released since the company began operating and share the technological solutions with others. These moves reflect a culture that is concerned with the company’s contribution to the health of society. Microsoft flourishes in the embrace of both bottom-up and outside-in thinking.

When Royal Dutch Shell articulated clear intentions to achieve net-zero carbon emissions by 2050, it signaled a profound shift in culture. Because it is the largest energy company globally, these goals are particularly meaningful; they require radical change in the company’s footprint and operations and are even carried into the executive pay plan. Given the scope of their intentions, Shell will need to work with its customers to embrace the same goals.

TO WHOM DO EXECUTIVES LISTEN NOW?

Even with enlightened leaders, companies with public shareholders manage on a tightrope; they stay attuned to the noisy demands of the short-term investors and outright threats of some, while prioritizing the strategic investments needed to create value for those who are in for the long haul.

Larry Fink promises that BlackRock will back up companies that articulate their public purpose and then live by it—e.g., offer a fair wage for employees and contractors, and engage principles of management that allow the environment and the communities on which the business depends to thrive.

Corporate responsibility, sustainability, consumer trust—none of these are an end state. As with the pursuit of quality or excellence, it is a continuous journey. The path forward is complicated, especially in a company as complex as a Johnson & Johnson or Pepsi or Shell or Microsoft, even if the CEO seems supportive and the culture is conducive.

Within weeks of Microsoft’s announcements of bold commitments to address climate change and homelessness, ProPublica, an organization committed to high-quality, long-form journalism, released an exposé on Microsoft. The focus of the article was a decade-long program of tax avoidance. The article described complex negotiations involving the company’s tax adviser, KPMG; the IRS; and a Puerto Rican entity that the company engaged to transfer significant commercial value from a high-tax jurisdiction to one with low, or almost no, tax. The story reveals a lot about the murky domain of “transfer pricing” but also the underlying instincts and status quo thinking that persists in the best of companies, and the need for more integrative thinking at the highest levels of the enterprise.

The best leaders, including Satya Nadella of Microsoft and Ben van Beurden of Royal Dutch Shell, are on a journey—one that is not always clearly marked but is seen in the kinds of questions they ask, whom they listen to, how they spend their time, and the beliefs that guide their decisions and investments.

Southwest’s CEO, Herb Kelleher, wasn’t trying to save the world or “elevate the world’s consciousness” like WeWork’s colorful founder, Adam Neumann. Kelleher conducted his business with a simple purpose: to make flying affordable for the masses and fun for the crew. In doing so, he transformed an industry and improved the experience of his customers and the lives of his employees.

Microsoft is capable of doing the same and is demonstrating the interest and the staying power we need to tackle remarkably complex problems. As we will see in the next chapter, to make material change when a system is at risk requires a combination of leadership and willingness to collaborate and co-create with competitors—including government in the important role it has to play in setting the rules for fair competition.

In the nomenclature of sports, a healthy corporation is fit. Much like an elite athlete, the trustworthy corporation is never done perfecting its game. Real value creators are vigilant about trends and use goals to drive change and mark progress, but they never stop working to upgrade their skills and performance.

It’s about mindset, and about building a culture to embrace and absorb standards that are constantly evolving as the business context and public expectations change. As Indra Nooyi, CEO of Pepsi, was known to say, “The journey will not be easy, but important work never is.”

 OLD RULE 
Compete to win.

Competition drives innovation and growth.