Enhance ReadabilityNearly fifty years ago, Milton Friedman published a polemic, an article that altered the way many people think about corporations and their role in society. Countless writers have explained why it’s poorly reasoned, dangerous and wrong (including business school deans, Harvard Business Review and Fortune).
The simple message of the simple article was: “There is one and only one social responsibility of business – to use its resources and engage in activities designed to increase its profits…”
Friedman does add a parenthetical: “…so long as it stays within the rules of the game, which is to say, engages in open and free competition without deception or fraud.” But it’s clear that his emphasis is on the first part.
Businesses, he argues, should show no corporate responsibility, do nothing to further the goals of an ethical society, nor do anything to improve the lives of customers, employees or bystanders – unless these actions coincidentally maximize profits.
An interesting question that most people haven’t focused on is, why did this dangerous idea catch on and stick around so long?
Here it is 2017, and the Chairman of one of the largest pharma companies in the country is gleefully telling patients and the FDA to live with the costs of his profit seeking, at the same time he pays his CEO more than $95 million a year. Because he can, and, like many who lucked into top jobs at big companies, because his excuse is simple: he’s just doing his job.
If the idea is so wrong, if it leads to an erosion of the social contract and the deaths of innocent kids, why are we still discussing it?
Because it’s simple, it diminishes responsibility, and it comes with prizes and warm chocolate cookies for those in charge.
The simplicity of the argument matches up with its mendacity. There’s no need to worry about nuance, no need to lose sleep over choices, no endless laundry list of social ills to worry about. Just make more profit.
Do this, get that. A simple compass, a north star, a direction to go that absolves the employee/boss of responsibility for anything complicated or nuanced. People love mechanical simplicity, especially when it benefits them.
The official rules of baseball are more than 250 pages long. Why? Because working the system, cutting corners and winning at all costs long ago replaced playing by the spirit of the game. Since the league can’t count on people to act like people acting on behalf of the community, they have to create ever more rules to keep the system in check.
The problem is far worse in a supposed free market. When humans stop acting like humans and instead indicate that they have no choice but to seek every short-term benefit and cut every possible corner, we can no longer trust each other to act responsibly.
Off the hook feels like a simple way out. “I’m just doing my job, and not thinking hard about the side effects (or to be more accurate, the effects) of my actions. Not only that, but one of the things that’s part of my job is lobbying to have fewer rules. Because working the refs is good business. And because everyone is doing it, I have no choice but to do it, too.”
Of course, it’s difficult for us to solely blame poor Milton. Lots of us have bad ideas; I’ve certainly had plenty. No, we need to blame ourselves for letting selfish corporate officers get away with this reasoning. When we go to work, or partner with, or buy stock in a company that signs up for Milton reasoning, we’re rewarding people who have long ago stopped acting like people.
Profits are fine; they enable the investment we need to produce value. But almost nothing benefits from being the only thing we seek, and the pursuit of profit at the expense of our humanity is too high a price to pay.
Here’s a different version: A business is a construct, an association of human beings combining capital and labor to make something. That business has precisely the same social responsibilities as the people that it consists of. It has the responsibility to play fairly and to see the long-term impacts of its actions and to create value for all those it engages with.
This originally published on Seth’s blog.
