March 2010 / Book Reviews

Michael Stron’s Be the Solution –
How Entrepreneurs and Conscious Capitalists
Can Solve All the World’s Problems

by John Bunzl

be the solution coverAs the title suggests, Be the Solution argues that our planetary crisis can be solved through the flowering of responsible entrepreneurship along with a stakeholder approach to business known as Conscious Capitalism. “Focused entirely on entrepreneurial and Conscious Capitalist solutions to the challenges and opportunities facing humanity,” the flyleaf tells us, “Be the Solution shows how the entrepreneurial passion to create a better world, in combination with Conscious Capitalist business practices, can solve far more of the world’s problems than any other approach.”

In many ways, this book is an attempt to dislodge anti-capitalist, Green-meme tendencies and shift them towards a more responsible kind of capitalism; that is, Conscious Capitalism. It asserts that entrepreneurship and Conscious Capitalism can succeed where protest and government action have failed. In integral terms, then, the basic idea seems to be to encourage those still stuck at Green to embrace Teal (Yellow in Spiral Dynamics). And to that extent it’s a very worthy effort. But its rather overblown claim to be capable of “solving all the world’s problems”, and its attempt to present its approach as something genuinely new, should put us somewhat on our guard.

Essentially, the book focuses on the ability of individual entrepreneurial endeavour, and on the potential for more responsible behaviour on the part of individual businesses, to solve the problems of the developed world. Meanwhile, in the developing world, it focuses on the potential of individual property rights to solve the problem of poverty. The focus, then, is very much on individual consciousness and behaviour; that is, on the UL/UR quadrants.

There’s a lot to be enjoyed and appreciated in this book, especially that it doesn’t shrink from insisting that inner personal growth is fundamental to both a worthy life and to underpinning consciously capitalistic business practices. I was also pleased to be reminded of Hernando De Soto’s very important work (The Mystery of Capital published in 2000) on how instituting formal property rights in developing countries is one of the most important keys to solving world poverty. De Soto contributes a chapter to the book explaining how the lack of these rights and an excess of government bureaucracy together constitute the key barriers to mobilising the entrepreneurial potential of the poor. In the developed world, we tend to see the alleviation of poverty in the developing world in terms of foreign aid or in terms of help from outside. But de Soto shows how the existence of a properly functioning legal infrastructure, together with a reduction in governmental red tape and corruption, can unleash the creative entrepreneurial powers of the poor, thus allowing them to get out of poverty by themselves.

This approach is complemented by a chapter contributed by Muhammad Yunus, the pioneer of micro-credit and the author of Creating a World Without Poverty – Social Business and the Future of Capitalism. Micro-credit is the practice of making small loans available to the poor in developing countries to finance their fledgling businesses–a practice that has met with widespread success.

All of this was good and pertinent, and made for an inspiring read. But vital and insightful though individualistic, entrepreneurial, ‘property rights’ approaches are, Strong has something of a blind spot when it comes to its collective dynamics. He recognises that government is needed to confer and enforce adequate property rights, so releasing the entrepreneurial spirit of individuals. But in all other respects, he tends to take the view that government is the problem, and the quicker it gets out of the way, the better. In this sense the book takes a more politically right-wing, economically libertarian stance, and there is nothing wrong with that except, of course, that it’s partial.

Strong is obviously a gifted and innovative educator and describes at some length his frustration with oppressive, flawed and often counter-productive government education programmes. This perhaps makes it unsurprising that he now has little time for government and rather dismisses it. But that’s a pity, I think, because in doing so he ignores the collective dynamics of the market (LR); a market that all the millions of individual entrepreneurs and businesses (UR) are necessarily a part. While lauding the potential for consciously capitalistic entrepreneurs as individuals, or as individual businesses, to do well in the world, he assumes that because they are ethical as individuals, their aggregate behaviour will also be ethical. But this ignores that in large-scale markets where market players are both numerous and anonymous, a very different dynamic applies. For when multitudes of players compete in an often international market, no player has any way of knowing who all its competitors are, nor whether, or to what extent, they can be relied upon to apply ethical, “consciously capitalist” (i.e. stakeholder), principles. And it is just that radical uncertainty which is likely to lead to market players gradually abandoning or compromising their principles to ensure they stay competitive and survive. Or as businesspeople sometimes put it, “if we don’t do it, our competitors will.” Here, then, is where the book’s over-emphasis on the UL/UR exposes its fundamental weakness and partiality.

A more concrete example would be the chapter written by John Mackey, CEO of Wholefoods Market. Wholefoods Market is presented as an example of Conscious Capitalism and its stakeholder approach–and as a businessman myself, it seems like a very well run business. But like so many others who see Conscious Capitalism as “the solution”, Mackey suggests that traditional profit-centred businesses (i.e. businesses which adopt a “shareholder value” approach) would perform even better if they adopted a stakeholder approach. Ergo, if Conscious Capitalism were adopted by everyone, that would solve all the world’s problems.

Mackey thinks he is successfully rebutting anyone who has doubts by asserting “The real question is, how does a traditional profit-centred business fare when it competes against a stake-holder-centred business?” He then cites a study showing that stakeholder businesses generally out-perform profit-centred businesses over the long-term–and I have no doubt the study is accurate. But to my mind he is asking himself the wrong question. For to properly justify his premise, there are really two questions that need answering. The first is “Does the fact that stake-holder businesses generally out-perform profit-centred businesses mean that profit-centred businesses can and will shift to a stake-holder approach?”

On the face of it, the answer seems obvious. Of course they will! But the point Mackey and so many others overlook is that if we take a look at what’s actually happening out there in the world, we find that there is usually only one major company in any given market that makes a stakeholder or ethical approach the centre of its business model and brand image. In the UK cosmetics market, for example, there is only The Body Shop that takes this approach, and no one else. In the U.S. ice cream market, there is only Ben & Jerry’s and no one else. In contract flooring, there is only Interface and no one else. Why is this? If adopting a stakeholder approach results in improved performance, surely companies would be falling over themselves to emulate one another?

The reason they aren’t is perhaps because, while it’s doubtless attractive and profitable for one major company in a given market to make environmental and social responsibility into a profitable market niche, that may only make it harder, rather than easier, for competitors to follow their example. This is because the sums a competitor would have to invest to ethically out-compete an already-ethical market leader may be better and more profitably spent by differentiating itself and its products in other ways; by investing in superior product quality, for example, or in branding, in more catchy advertising, lower prices or superior customer service. As the widely respected expert on competition, Prof. Michael E. Porter, points out, “Competitive strategy is about being different. It means deliberately choosing a different set of activities to deliver a unique mix of value.”

So, this not only suggests that it’s doubtful the stakeholder model will result in others generally following suit, it also begs a second question, which is: “If two or more major stakeholder companies ever competed head-to-head in a given, large-scale market, would they be able to maintain their ethical stakeholder approach?” Or would they instead perhaps find themselves abandoning or compromising it as they encounter, not only each other, but also many others in the market who may have altogether different business values and practices? Would they end up abandoning it, in other words, in favour of a profit-centred approach as long-term ethical considerations were steadily sacrificed at the altar of short-term competitive survival?

The problem in trying to answer this is that, if I am correct about the first question; i.e. that one major stakeholder company in a given market makes it unlikely competitors will follow, of course we’ll never get an answer to the second question at all! And the fact that we won’t demonstrates the partialness of UL/UR, stakeholder approaches, whether it’s corporate social responsibility (CSR), the U.N.’s Global Compact, shareholder activism, triple-bottom-line accounting or any other. For all of them focus on the individual corporation and not on the collective dynamics of the market in which they operate. They fail to recognise that those dynamics are fundamentally different and that they are corrosive of any good intentions in the UR. Unless, that is, they are also addressed in the LL/LR.

This, then, is why Strong’s general dismissal of government is such a pity. Because the only way to ensure that all companies adhere to appropriate social, environmental and ethical standards is, and always has been, through government regulation and taxes backed up by a system of laws, courts and police. Only in that way can all market players be reasonably confident that competitors will adhere to appropriate standards (or can be sued if they don’t).

This is even more the case if we recognise the rather different dynamics that pertain in retail as opposed to the business-to-business sector of the economy. When we realise that people’s purchasing behaviour deeply reflects their personal values, it’s not difficult to see that the incentive to ethical behaviour is going to be far greater for retail businesses–businesses like Wholefoods Market. But retail businesses of course represent only the many tips of the economic iceberg. Meanwhile, below the water line in the massive business-to-business sector, those incentives are largely absent so other, more utilitarian, factors apply.

While UL/UR approaches could be said, then, to be the valid and necessary starting point for a sustainable world, virtually the entire course of human history has shown that ethical aspirations cannot be maintained or become enduringly and socially embedded unless they are complemented and completed by appropriate governance in the LR (mediated by its correlate level of collective consciousness in the LL). This is why, over the course of human history, economic markets, from their local beginnings to their now-global reach, have always eventually been complemented by their governmental (i.e. LR) correlate; that is, steadily expanding markets have given rise to steadily larger social holons which performed the function of governance–that is, a progression from families to tribes to Middle Age small-states to today’s nation-states. Or to put all this more succinctly, we could simply note that, to be equitable and sustainable, markets need matching governance.

So, not only did the book’s implication that Conscious Capitalism represents “the solution” seem unconvincing, the suggestion that it represents something new also rather grated. I mean, weren’t the great Quaker entrepreneurs and their businesses, like Cadbury’s chocolate in the UK, the original conscious capitalists 200 years ago already? (And we need only recall what just happened to Cadburys – taken over so recently by Kraft Foods of the USA!)

Another important plank in the claim that property rights can solve virtually all the world’s environmental problems is the proposal of the creation of environmental trusts. These would be bodies having a legal obligation to preserve in perpetuity specific environmental assets or species habitats, or even the entire global atmosphere. The idea is to ensure, not only that the trustees of the asset have a legal responsibility to protect it, but that any corporation or person can be charged for using the asset or can, if they damage it, be sued. In that way our impact on the environment would be priced directly into the goods and services we consume.

In principle, this is absolutely the right way forward. The best way to protect the environment is to ensure that environmental costs are automatically built in to the prices we pay, so giving appropriate signals that change our behaviour. However, what Strong and many others overlook are the potential adverse consequences if any nation acted alone. If taxes where shifted from income and wealth to a carbon tax in one nation alone, for example, or if environmental trusts were widely established in that country alone, many of its businesses could find their cost-structures increasing. And in today’s global market, that could make them uncompetitive with businesses elsewhere, so potentially resulting in increased unemployment and a deterrent to inward investment.

In a general sense, environmental trusts effectively mean conferring legal rights on the environment. But any country that depended on its natural resources would, by being alone to implement such trusts, risk making itself into something of a “cost and litigation hot-spot” compared to countries not doing the same. That is, it would make itself a country where corporations have to pay relatively more for their raw materials and a place where they routinely get sued for any abuses they committed. Any such country that acted alone, then, is likely to make its economy less competitive in the global market; distinctly less attractive to foreign investors and corporations. This potentially constitutes a powerful disincentive to any nation and may therefore prevent the widespread implementation of environmental trusts in the first place.

While conferring legal protections on the environment is the right approach in principle, then, these possible adverse consequences highlight that property rights are just one part of the overall equation. The other is that, whatever the economic context, governance has to be of the same scale as the market concerned. As the above potential pitfalls of nations acting alone demonstrate, if the market we have is global, which it is, then mustn’t governance, too, quickly catch up to operate at the global level if those adverse consequences are to be avoided and if global problems are to be solved?

In the world-centric economic context in which humanity presently finds itself, then, we see that the Teal, “flex-flow” worldview remains, in many crucial respects, rather nation-centric. Conscious Capitalism and property rights, in other words, tend to presume a national economic context where no international factors are in play. But in today’s global economy, we have no global governance worthy of the name; no global governance to enforce appropriate standards and wealth redistribution on a global basis; no global regulatory framework that ensures a level playing field for all corporations globally. And that, consequently, is where, today, Teal most obviously shows its partialness; its under-emphasis on the collective quadrants.

For in today’s world where so many of our problems–from global warming to global financial market regulation–result from an absence of global governance in the form of collective international action, it is the collective quadrants, and especially the shift to global consciousness and global governance, that require much more of our attention. That, perhaps, is why Ken Wilber and others have pointed out that only a Turquoise, aperspectival, world-centric worldview can ultimately disclose genuine solutions to global problems.

Be the Solution, although very necessary, welcome and useful in helping shift us from Green to Teal, is not, then, quite the whole solution it claims to be. If we really want to “be the solution”, more ascent, more depth, and a greater honouring of the collective quadrants seem to be needed.

About the Author

John Bunzl is a social entrepreneur and businessman. He is founder of the International Simultaneous Policy Organisation. Having conceived the Simpol idea in late 1998, he wrote his first book, The Simultaneous Policy – An insider’s guide to saving humanity and the planet (2001). In 2003, he co-authoredMonetary Reform – Making it Happen! with the prominent monetary reformer, James Robertson. In 2009, John completed People-centred Global Governance – Making it Happen! He has given talks at various organizations, including the World Trade Organization and the Schumacher Society. He was born 1957, lives in London UK, has three children, and is a company director.

Leave a Reply

Your email address will not be published. Required fields are marked *