A conversation with Colin Mayer: Profit from producing solutions, not problems

In an interview with Harvard Business School’s Institute for the Study of Business in Global Society (BiGS), Colin Mayer, Professor of Management Studies at the Blavatnik School of Government & Saïd Business School at the University of Oxford, sits down to discuss key concepts from his latest book Capitalism and Crises: How to Fix Them. Colin argues that the driving force behind capitalism has gotten out of line with what we as individuals and societies need. This can be fixed if businesses start existing to solve problems, not cause harm.
Interview highlights:
2:03: Why is capitalism failing us as a society?
Despite its profound impact, the driving force behind capitalism (profit) has yet to get in line with what societies need.
3:33: Capitalism vs. climate change
This generation has the opportunity to leave natural capital in a better state than it was found. This requires businesses to ensure that they sustain and restore the natural capital they use in their business activities.
6:01: What is holding business leaders back?
Companies profit from creating detriment which undermines the functioning of markets.
6:56: What is the role of regulation?
Regulation is important in laying down the accepted conventions by which business should operate however it creates deep controversy politically. Regulations won’t solve the problems. Companies need to have a purpose to profit from creating solutions, not problems.
9:03: Should company boardrooms be accountable?
They are currently not being held accountable however new frameworks will change the way reporting is done and will highlight companies that are profiting from creating problems and not solutions
10:02: What reactions are you hearing from board members?
Board members agree with the idea however they say, “The rest of the industry isn’t doing this”. This is a matter of ensuring the underlying principles are consistent, so companies know this is how they’re playing against each other
10:50: How do we address the issue of business needing to change?
Bring together those who recognize there is a problem, and a change is needed. Government also needs to play a role in this change.
12:37: What is the role of institutional investors?
They are recognizing that it is their responsibility to ensure that the way they are profiting is not through creating detriment to others, otherwise, it undermines the sustainability of the businesses they invest in.
13:37: What is the role of the media and financial analysts?
These are key players. Media and analysts are realizing that not just the investors care, but people like you and I are paying attention to the good and the bad businesses are doing.
14:45: How can we change the narrative?
1. Only a crisis produces real change- it is our duty to create new ideas until the politically impossible becomes the politically inevitable.
2. Realize it doesn’t take a revolution to change- it is ideas. Ideate a new way of business.
17:08: Did Milton Friedman get it wrong?
No!
18:17: Why did environmental, social, and governance factors (ESG) go wrong?
Most people are confused about ESG. There is the belief it is undermining the way business operates.
For more stories and Q&As on societal topics essential to business and the people working to resolve these issues, visit the BiGS knowledge hub: www.hbs.edu/bigs

[@yensteel]

AI training sources is a problem that every company is tip toeing around. Privacy issues, and security vulnerabilities are often overlooked as it is costly to maintain. Some companies stick to regulatory requirements, others are reactionary (Only respond when theres a controversy or breach), others are proactive. It costs consumers a lot. Companies should not only worry about potential lawsuits, criminal investigation, or loss of brand equity. Theres a few cost models for security breaches. There's even more for societal models.
YT algorithms are an example.of societal impact. They're the gatekeepers of what is recommended and watched.
Dynamic pricing was also shown to create new pricing norms and accelerate inflation. It doesn't matter if companies like amazon are cheaper (Part of their required agreement) if it encourages the raising of prices elsewhere. (Company: "Yes, it will be cheapest on Amazon, if it is more expensive elsewhere")
Eco problems like pollution is sadly.. not as discussed as it should. Isn't ESG supoosed to highlight this? ESG ratings are too complicated imo. Its easier to maintain a rating in in one way than another.

[@yensteel]

To further add to some concerns with ESG, it has to do with Goodart's law: Whatever becomes the gold standard or metric no longer becomes the most reliable metric.
Companies should focus on the philosophy of ESG instead of the rating, and the rating should at least be transparent and discussed. For example, there are research and case studies on green washing.
It harkens back to the type of credit ratings we got right before the 2008 financial crisis. The ratings don't matter if they don't reflect reality. The same applies to today's practices.

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