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Transcript
Rob Johnson:
Welcome to Economics & Beyond. I’m Rob Johnson, president of the Institute for New Economic Thinking.
I’m here today with a good old friend, Alan Murray, and be able to look at his new book, Tomorrow’s Capitalist: My Search for the Soul of Business. I think this is a very, very prescient book. As we’re kind of moving from the ideology of me to we, we’re seeing that the quality, the brand, the reputation, not only of executives but of their companies and the motivation of their customers, is depending on a different kind of imagination about our social responsibility. Alan, thanks for being here.
Alan Murray:
Yeah, it’s great to be with you. It’s an honor.
Rob Johnson:
Yeah, it’s my honor. So tell me, you write this very creative book. I see all kinds of beautiful endorsements of it on the back cover. I’ll leave that for your readers to be surprised by, but it’s a whole spectrum of people. What’s the origin? Where did it come from?
Alan Murray:
Well, Rob, you know because you’ve known me for a long time, I’ve been a journalist my entire life. Even now as CEO of Fortune Media, I still think of myself as a journalist. And I always thought of my role in the world as explaining what’s going on, not trying to change things, not trying to drive an agenda. But I think over the course of the last decade, I had lots of opportunities to talk to CEOs, people running large companies. And really after the great recession, I heard more and more of these CEOs just talking in a different way about their responsibilities, about how they ran their companies and what their goals were. And I heard more and more about social goals, not just financial goals. I started to hear people talk about moral leadership, about responsibility to society.
It was a big change in the language around running a large company, and I started to ask them, “Why? What’s driving it?” And I think initially the main answer was, “My employees. My employees want this.” Increasingly it became, “Customers. Customers want this.” Now more recently you’ve even seen it from investors. But I just got into it because I heard it. I was in a unique position to hear what was going on, and it seemed to me that it was a very big and important change.
Rob Johnson:
Yeah. The music changed.
Alan Murray:
It did.
Rob Johnson:
And now the dance steps do too.
Alan Murray:
Yes.
Rob Johnson:
Where you are looking at this… I mean, it seems like the specter of climate change is on the horizon, and everybody is being evaluated in the context of doing harm or getting ahead of the curve in that realm. Internal issues related to race and gender and so forth, what we might call social sustainability, seems to be another dimension.
Alan Murray:
Those are two big ones.
Rob Johnson:
Yeah, and the other one that I hear a lot about here at INET is the concern about investment and growth as distinct from stock buybacks, which are used to, I say, reward the people who’ve already been there, and that seems to be another frontier of exploration. But which ones triggered your imagination? Where did you find the most interesting dilemmas?
Alan Murray:
Yeah, I think they all kind of happened simultaneously. I really do see this very much as growing out of the great recession, as you know, because you were very much at the center of this, there was kind of a rethinking of the market economy. Saying, well what we thought, as John Kennedy put it, “A rising tide lifts all boats,” but he said, “Well, wait a minute. That rising tide isn’t lifting all boats the way we thought it would, and the market isn’t correcting the way we thought it would, and there are problems happening.” And that of course is very much a part of your journey. I think for CEOs, it was the same kind of awakening. You may remember that Bill Gates gave a speech at Davos in 2008, where he talked about the need for creative capitalism.
Rob Johnson:
That’s right.
Alan Murray:
And Michael Porter at the Harvard Business School started talking about shared value capitalism and John Mackey at Whole Foods talked about conscious capitalism. All of a sudden, everybody was putting a modifier in front of capitalism. There was an increasing sense that this system that they all believed in, these business leaders all believed in it, but it wasn’t working as well as they thought it could or should. And that was pretty much a crescendo through the decade of the teens, and I think has really come to a head in the last two years.
Rob Johnson:
Yeah. It does seem that people were almost wearing an armor. The market decides… They almost worship the market.
Alan Murray:
That’s right.
Rob Johnson:
As opposed to saying, “If I have desires, but I don’t have any wealth, the market can’t hear me.” Or, “If I have desires that are driven by the fear for myself or my children or what’s happening, then I’m sending signals to the market, which if you change the architecture, I might not be afraid and I might want something different.”
Alan Murray:
Yeah. And part of that market fundamentalism, the part of it that was most apparent to corporations, was what Milton Friedman said back in 1970, which is, “The social responsibility of business is to make a profit.” You obey the laws, you don’t commit fraud, but basically your responsibility is to make a profit. And I think a lot of business leaders who had been a part of that movement began to say, “Well, wait a minute. That’s not sufficient. Because first of all, if we don’t do a better job taking care of our employees, they’re going to leave us. If we don’t do a better job tending to their communities, their communities are going to blow up. And if we don’t do a better job paying attention to the planet, we’re all going to be on fire.”
So I think that sense… Part of it, by the way, is the failure of government. Some of these things were things that business leaders used to say, “That’s not my problem. That’s the government’s problem.” And I think over the last few years, they’ve said, “The government ain’t going to deal with that and it’s existential in the long run for us, so we have to step up. We have to do more.”
Rob Johnson:
When you say government does that, but then you unleash things with Super PACs and what have you, where the survivability of politicians or the enforcement of regulations or whether you prosecute antitrust depends upon your fundraising, what the SCC says they can patrol… There were studies, scholarly studies I’ve seen, that said companies that made lots of big donations didn’t get prosecuted like smaller groups. They wanted to make an example of what was honest and fair in the market, but they didn’t want to take on the donors, which refracted the entire process.
Alan Murray:
Yeah. I think that’s an interesting question is how responsible our companies and their lobbying actions of the past for the dysfunction of government. I don’t attempt to answer that question in the book. I think there are many things that have led to the dysfunction of government. But I do think you have a new generation of CEOs who say, “If we don’t step up, we may lose our license to operate.” When you and I were working in Washington in the 1970s and the 1980s, business kind of defined the right wing of the spectrum. The American Enterprise Institute, free market economics.
I think what has happened over time, and some of this is due to fundamental changes in the structure of business, which we should talk about… But what’s happened over time is that on issues of social justice and certainly on issues of climate, businesses move very much to the center. And now also finds itself without a political party to identify with, because on the right, you have this kind of populist, Trumpian, anti-globalization sentiment that’s very foreign to business, and on the left, you have a Bernie Sanders, an avowed democratic socialist, taking the momentum. And I think a lot of business leaders are saying, “We don’t play in this political system, but we have to figure out a way to address these very real problems if we’re going to continue to exist.”
Rob Johnson:
Well, the word sustainability. If you have a company that has really developed something great, then you could imagine making profit for as far as the eye could see. But if you’re going to go to war, if you’re going to have internal turmoil, revolutions, strikes, all kinds of things, then your good idea isn’t going to be realized financially as much as it could in a more stable environment. So tacking in a different direction, creating a contribution to social stability, a restoration of trust in expertise or confidence in leadership, can actually boost long term profitability.
Alan Murray:
I think it’s become essential. And the other thing that’s happened, Rob, and I know you look at this at the Institute, the other thing that’s happened is that the source of value in companies has changed. I mean, if you look at the Fortune 500 of the 1970s, and you look at their balance sheets and say, “Where’s the value coming from,” more than 80% of the value of the Fortune 500 was physical stuff. It was plant equipment, inventory on the shelves, oil in the ground, all stuff that had to be supported by financial capital, and so returns to financial capital became really important because that was how you built value.
Rob Johnson:
You also needed hands and legs to get it-
Alan Murray:
Well, and they were a little less aware of that. But if you look at the balance sheet of those, of the Fortune 500 today, more than 85% of the value is intangibles. It’s intellectual property, a trademark, copyright, software, all things that are tied to people. And so companies have been forced to become much more people-centric, to care about their employees, their customers, the communities they live in, and the planet, because that’s where their value comes from. And if they aren’t attentive to that, they may lose their best employees, or they may lose their customers.
Rob Johnson:
One of the areas that people talk about now is, “What is economic justice?” And in the traditional, I’m talking now about economic theory, you earn in the market your marginal product. So if you’re paid more than that, you’re subsidized. If you’re paid less than that, you’re exploited. And if you make your marginal product, then everything’s in balance. That’s economic justice. There’s a problem with that. When your marginal product is so low that you can’t sustain a life or a family or anything, people sort of, which you might call blaming the victims, are sowing the seeds of social discord.
But the other complaint that I often hear from people who have a little bit broader mindset like you’re describing with new executives is, your marginal product comes from the educational trajectory you’ve been on and the quality of healthcare you’ve had. So a healthy well-educated person has benefited from what you might call social platforms, and if you turn the arrows around, society is responsible for that marginal product, not being in a sustainable place, or is to be congratulated for doing that. We have to create the collective platforms so that people can have a sustainable life while not being subsidized.
Alan Murray:
I think that’s absolutely right. And what’s changed in the corporate world is a lot of big businesses are starting to take some responsibility for that. When you and I were in Washington in the eighties and nineties training, for instance, trade adjustment assistance, that was all seen as a government problem, a government responsibility. If people lost their jobs or didn’t have the skills they needed to get the jobs that were being created, it was the government’s job to help them and give them training.
And what I’ve been hearing over the last decade is more and more companies that say, “Well, we’re the job creators, and at the end of the day, in the long term, we’re the ones who need skilled workers to succeed.” And so you hear a lot of big companies coming up with very creative programs to skill under-skilled workers, not just their own workers. But there’s a coalition of large companies in Chicago, for instance, which has created apprenticeship programs in order to try and take people who weren’t part of their labor pipeline in the past, and to bring them into the companies and give them the skills they need to succeed.
I don’t think it’s happening on the scale that it needs to happen, but it is a change that companies are saying, “This is not their responsibility, the government’s responsibility, this is ours and we have to take it on.”
Rob Johnson:
And a lot of people, whether it’s in China or in the United States that I talk to among leaders, will say to me, “The failure associated with…” Globalization always has this free trade, everybody can be better off and nobody worse off. There’s an asterisk there. Provided you do the transformational assistance for the losers, then everybody can be better off. But if you don’t do that, then the despondency, the diseases, despair, the Trumpian enthusiasm… Trump used to come to Michigan and say, “The system is rigged. We got to band together to transform this society. The big three automakers…” He went to the Economic Club of Detroit and said, “The big three automakers should be ashamed of how they treated the people in this region.” That was music to the ears of these people until he was elected.
Alan Murray:
No, that’s right. The economists always said, as you said, that global trade would be good for everyone as long as you dealt with the redistribution and training problem. And clearly, in retrospect, we didn’t do enough.
Rob Johnson:
I once went to a thing at the Swedish consulate in New York, a little presentation. The now New York Times reporter Peter Goodman, I think it was his 2019 January, he wrote this piece called “We Love the Robots” in the New York Times. And what he was saying was, in Sweden people understood that automation, machine learning, robots, created a new set of possibilities, but they did so knowing they’d get retraining, a pension, healthcare, and children’s education. That none of those things were at risk, so they played as a team. What Goodman’s presentation was about was that in the world of Donald Trump in 2019, Americans don’t have that faith that they’re going to be included in the transformation.
Alan Murray:
Yeah, they don’t, they don’t have it. And there’s a lot of cynicism and the cynicism is understandable, and there are a lot of examples of corporate greed and corruption that feed that cynicism. But I’ll give you just one example, AT&T when Randall Stephenson was CEO. This would’ve been maybe three, four years ago. He quickly realized that the fundamental work of that giant telecommunications network, which was switching, was going to move to software. The whole thing. The vast majority of their workers were going to be gone because switches wouldn’t be necessary. It would be software-based switching. And so what he did was to say…
Okay, he made a deal with Georgia Tech and basically said, “We’ll provide anyone at this company who wants it the education they need to make this transition. We will pay for it. It’s online courses. It’s up to you. You can either take advantage of this education opportunity and come with us for the ride or not. But if you don’t, you have to recognize that at the end of the day, you may be without a job here.
And it was a very farsighted plan. That’s a corporate example of what you’re talking about. It’s not society taking care of them, it’s the company saying, “We understand that you have to be supported through this transition.” That, at the end of the day, can create more wealth, but we have to make sure you can participate in that.
Rob Johnson:
I’ve got a number of friends that work in the corporate sector related to renewable resources energy transformation, which seems to be an enormous agenda for planet earth right now. And one of them said to me, he was in West Virginia the previous week, and when he started talking about the need to stop burning coal and whatever, the people said, “So you’re going to take care of us just like you took care of Detroit and Cleveland in the old days, right?”
My friend came back to me and he said, “This is really important, Rob, because if you can mobilize that fear, you create resistance to change that we must make to meet all the IPCC criteria and so forth. We have to establish a credibility with the population that they can not only benefit from climate change and that dimension of sustainability, but they can be assisted as citizens for cooperating with the transition.” A lot of people who have long commutes in suburban real estate are afraid of the collapse of real estate prices if they can’t drive cars to work anymore.
Alan Murray:
Or the rise… Yeah. The rising gasoline prices either through taxes or other means to support the transition.
Rob Johnson:
That’s right. And so what you see is a world that’s yearning for the kind of leadership that you are digging out, finding in various places of corporate leadership, and making a positive example of that, which your book does, is absolutely great.
Alan Murray:
Yeah. And look, this isn’t yet a majority of corporate leaders, and it’s definitely not enough to replace action by government, but it’s notable. It’s worth paying attention to. I mean, you talk about climate. Just look at the number of large companies over the last two years that have made commitments to reaching net zero by 2050 or sooner. I mean, it has increased by several hundred percent. And now our polling shows that a majority of Fortune 500 CEOs either have made a commitment or are planning to make a commitment. Now, some people say, “Well, it’s easy for a CEO to make a commitment about doing something in 2050, because they’ll be long gone by the time that comes,” but you’re also seeing a new seriousness about putting intermediate benchmarks in place and really, really taking action.
And it’s starting to get pushed down the supply chain. I’ll give you one example. I had a conversation with Søren Skou, who is the CEO of Moller-Maersk, the big shipping company that runs ships all over the world carrying containers. And he has recently made a huge investment with Ørsted, the Danish power firm, to build wind farms way up in the north that will be used to manufacture hydrogen fuel. So it’s really a kind of a revolutionary at scale investment.
I had the opportunity to talk to him and I said, “Why are you doing this?” He said, “I’m doing it because I have to, because the people who ship their goods on my ships are calling me up and saying, ‘Hey, I just made this commitment to get all the carbon out of my transportation lines 10 years from now and you’re going to have to go with me on that ride or I won’t be able to keep my commitment.’” So the pressure is getting pushed down the supply chain. You have Walmart working with its suppliers saying, “What’s your carbon footprint and how do we reduce your carbon footprint?” That has an enormously powerful effect. So you’re really starting to see momentum build through these corporate actions.
Rob Johnson:
Well, it’s fascinating to me to see what I would say, those pressures and those responses at a time when people are in such despair. Because usually when you complain about things, you’re deepening the void. And the question is, you won’t regain trust, you won’t regain coherence in society, unless we fill the void. And when you start to see these beacons, which you’re amplifying awareness of in writing this book, I think that’s a healing gesture. I think you’re contributing, perhaps not only to the awareness, but perhaps calming us all down a little bit at a time when we’re pretty afraid.
Alan Murray:
I hope so. And also holding up examples of what the best companies are doing so that more and more companies do that. Trust in business, trust in institutions overall, as you know, has been declining for decades. But trust in business right now is higher than trust in government, trust in media, trust in NGOs.
Rob Johnson:
Yeah. Yeah.
Alan Murray:
Yeah. And I think that’s partly a result of the pandemic. A lot of businesses really stepped up for their employees during this unusual period. So whether companies can do enough to maintain that trust is one of the big questions that lies in front of us.
Rob Johnson:
When you got into this book, I know you, like you say, at Fortune you’re flowing through and you’re talking to people and all of a sudden this change in tone starts to gather momentum. Was there one episode or one threshold moment where you said, “I got to write this book?” Was there something that was just-
Alan Murray:
I’ll tell you where it really hit home for me. I mean, you remember what happened before the last recession. There was a bubble of… We’ve been talking about the environment. There was a bubble of corporate interest in taking action on climate. GE did its Ecomagination. Duke Power… There was something called USCAP, which is a coalition of companies that said, “We’re going to take corporate action to address climate.”
And you had two presidential candidates at the time, both of whom favored putting a cap on carbon emissions. John McCain on the Republican side and Barack Obama on the democratic side. So there was once before a bubble of interest, and then the recession hit and companies started looking at their bottom lines and seeing their finances deteriorated, and you could almost feel that concern about the environment going away. It’s like, “We’ll deal with this later. We have to…”
And so when the pandemic hit and the economy turned downward and every company was looking at sharp deterioration of its P&L, I thought, “Okay, this is it.”
Rob Johnson:
Here we go again.
Alan Murray:
Here we go again. Stakeholder capitalism is going on the back burner and everybody’s going to forget it. And what was remarkable was the exact opposite happened. I kept finding myself in conversations with CEOs who said, “Oh no, we can’t back off now. We have to double down because this is a stakeholder crisis. Our employees, the health of our employees, is in danger. The health of our customers is in danger. Now, more than ever, we have to pay attention to a broader array of stakeholders, not just financial shareholders.” So I think it was at that moment I said, “Wow, what’s going on here is not a fad, it’s something more permanent, more enduring, and it’s worth digging into more deeply.”
Rob Johnson:
No, business leaders are acting like broad-minded government officials. Do you think there might be a more, what I might call, peaceful collaboration between public and private sector?
Alan Murray:
Oh, I think the CEOs that I talk to, the CEOs of the largest companies, are dying for that kind of collaboration. They want the government to be more involved in thoughtful climate regulation. It would be a much… Because if you think about it, if the best companies are taking action and the worst companies aren’t, that creates a-
Rob Johnson:
A competitive imbalance.
Alan Murray:
A competitive imbalance, and they’d rather have the government come in and set some rules of the road. And you’re starting to see some of that. Look at what the FCC is proposing on climate disclosure. But on other things as well, on the training issue, that’s a perfect place for public-private partnership. The problem is, they don’t feel like they have anybody, a very small group of legislators in Washington, that they can talk to. You have a left that increasingly is turning away from capitalism in their view, and you have a Trumpian right that doesn’t share their social values or their environmental values. And so they’re dying to work with someone in government, but don’t have anybody to work with.
Rob Johnson:
Yeah. Yeah. It kind of reminds me when I was a child in Detroit, my parents worked, my mother with the Detroit Symphony, my dad was a physician involved in a lot of public things. And people like George Romney and Bill Milliken were what my parents… I remember in my kitchen, she called them noblesse oblige Republicans.
Alan Murray:
Yeah. No question. I mean, you started out by talking about Showdown at Gucci Gulch when you were working for the Senate Budget Committee and I was writing about the tax reform bill. And what you know about that period in Washington was, yes, there were partisans. Ronald Reagan and Tip O’Neill were as far apart as Nancy Pelosi and Donald Trump, but you had this whole group of people in the middle, which you were a part of, trying to bring those partisan impulses together for creative solutions. I think that’s what’s broken down.
And at the end of the day, business leaders are pragmatic. They’re problem solvers. That’s what they get paid to do. And politics in Washington at least has become less and less about solving problems, more and more about getting an edge in the next election. They don’t have anybody to talk to. There’s nobody trying to come up with… I mean, you saw a brief example of that with the infrastructure bill last year, a small group of senators from both sides put that together. But for the most part, that’s become way too rare.
Rob Johnson:
You’ve finished this book. If you said, “I got to write one more chapter that I left out,” what’s the next phase?
Alan Murray:
Well, you know how slow book publishing is? I had to submit my manuscript before the Russian invasion of Ukraine, and where we saw remarkable advance of companies into geopolitics. I mean, hundreds of companies of their own will withdrawing from Russia. I don’t think we’ve ever seen anything like that before. Some people have compared it to what happened with South Africa and the corporate revolt against the Apartheid regime. But that was a slow process that took 15 years and this happened in 15 days. So I would’ve liked to have included that in the book.
And then the other thing, I feel like there are some important limits, some important things, that haven’t happened yet that will need to happen if corporations are truly going to maintain and grow the trust that the public has put in them. One we’ve already talked about is taxation. I think too many companies still reflexively, and the lobbying arms of corporations still reflexively, fight to do whatever they can to lower their tax bills without taking account of the fact that if they’re going to be focused on their positive social impact, taxation is one of the ways they do that. And a zero tax rate is not a good thing.
Rob Johnson:
And check out more from the Institute for New Economic Thinking at ineteconomics.org.
