Businesses solve problems their customers have. What happens when your customer is a human? The possibilities are endless, wouldn’t you agree?
I started out asking myself the question: For what purpose does a business exist? In my journey to find an answer, I ended up with an MBA. Look at me establishing credibility.
If I had asked Milton Friedman this question in my youth, before his passing in 2006, undoubtedly I’d have learned about the Friedman Doctrine, a business theory derived from an essay he wrote in 1970. The social responsibility of a business and its raison d’ĂȘtre is to increase profits and maximize returns to shareholders. The CEO of a company is an employee of the company, and should do as the owners of the company desire.
Criticism of the doctrine is fairly sharp and points to specific examples where applying the Friedman Doctrine have led to economic decline (think 2008 financial crisis) or led to large-scale public health problems (look at the opioid epidemic). Other criticism states that if a company has legal responsibilities, it stands to reason it has moral responsibilities too.
So here we are 56 years later discussing the Friedman Doctrine. Corporate social responsibility is a way to increase profits and maximize returns to shareholders. I am under no illusion that it is the most effective method to increase a business’s profits, but at a certain point, throwing a couple million (or billion) dollars at a trending or long-standing social issue, regardless if every single dollar of that investment returns a profit, has the potential to provide a return on investment that checks the box of maximizing shareholder returns. Look at us, we’re doing good stuff. Buy our average stuff and other stuff will be better for everyone.
Corporate social responsibility has been practiced for many centuries before Mr. Friedman published his essay in the New York Times. Product in question? Beer. More specifically, Trappist beer. What better way to spread your influence than by building monasteries and brewing beer in those monasteries so people can gather and join in the communion by drinking your beer? It’s hard to imagine anything much better than that. I digress.
Despite both being a form of business expansion, one deals in money. The other deals in humanity. Both could very well be centered around the brewing of beer, but the purpose for brewing beer and generating profits differs. Whereas one must generate profits to survive in a competitive industry, the other must generate profit to better the community in which the monastery is located.
All right, so business exists to make profits. For what? What purpose is there a need to generate profit? To what end is all this excess needed?
What can you buy that makes you more human? We see all around us advertisements indicating that you’re not enough without the product that’s being sold. Where are the advertisements that reassure you that you are just right, without the need for some sort of transaction to grant you access to a better state of existence?
When you consider all the transactions that take place because of the choices you make, ask yourself if those ends justify the means. Perhaps at the individual level, an argument for an increase in quality of life suffices to provide justification to most premiums tacked on to a product. The desire to and satisfaction of providing support to small businesses regularly provides enough justification not only to premiums tacked on to a product but enough to compel some people into shopping exclusively at small businesses because of the moral benefit that comes with the act of supporting a small business. Some people have no other choice because the closest other-than-small business is an untenable distance away.
Consider the statistic that small businesses make up 99.9% of all businesses in the United States. Despite their numbers, they don’t stand a chance against the o.1% of businesses that are other-than-small and their respective ~55% share of the Gross Domestic Product.
Consider on the other hand a consumer who devises a way to maximize rewards for their chosen group of stores. When the consumer plans this, they may consider different rewards programs and decide which they already shop at most to weigh options. If they need to alter their regular lifestyle beyond a certain point to maximize potential returns on the rewards program, perhaps they wouldn’t choose that program before choosing something more familiar. But it is likely rare that someone is able to take full advantage of their credit card rewards program without some sort of lifestyle or buying habits alterations. Good enough typically suits the majority of consumers anyhow.
All these businesses exist because there is a demand for their product. In some way, shape, form, or accounting trick, that business exists because there is a financial benefit for someone, something, or some other business for its existence, its products, or its services.
Which business is in the business of making you a better human?
Athletics wear companies pay advertising companies money to place their eye-catching and thought-provoking slogans and mottos and logos all over the cities in which they’re dominant players in with the goal to entice people to buy their products. Outside these garish displays of brand-related ostentatiousness, it’s not hard to imagine the cool autumn mornings running with a group of people with nothing better to talk about in between breaths than an incredibly in-depth analyses of the way the shoe feels for the small fraction of a second it contacts the ground each stride they make.
Lifestyle companies, such as gyms dedicated to weight lifting or Brazilian Jiu Jitsu, sell their services. Predominantly in-person, those who consistently practice with the shared goal of improving one’s skills in that craft typically find a shared sense of community during time spent in the gym in which they’re collectively “embracing the suck”. This shared sense of community undoubtedly leads to friendships outside the bounds of the business transactions that brought them together in the first place.
I am not convinced that only through the act of purchasing their shoes I become a more capable, empowered, and athletic person. I do not suddenly gain digital organization skills or productivity skills just because I purchase a specific laptop computer. Sure, becoming a more capable, empowered, and athletic person sounds nice, but consistency, discipline, and fortitude are not skills that come with the purchase of a pair of running shoes. Consistency, discipline, and fortitude are less commercially available commodities and more strengths of the mind. Gaining digital organization skills and being more productive sounds nice, too, but what benefit is gained through honing my spreadsheet skills so much?
Chop wood, carry water.