Rare is the evening that someone brings up the 18th century Scottish philosopher-economist Adam Smith. Rarer still is when someone brings up Mr. Smith to speak not of the virtues of his laissez-faire doctrine—the view that business ought to do what it does free from the constraints of regulation, tariff, and subsidy—but of, well, the fellow’s other writings: the softer, gooier stuff like this:
All the members of human society stand in need of each other’s assistance, and are likewise exposed to mutual injuries. Where the necessary assistance is reciprocally afforded from love, from gratitude, from friendship, and esteem, the society flourishes and is happy. All the different members of it are bound together by the agreeable bands of love and affection, and are, as it were, drawn to one common center of mutual good offices.
And this (thank you, online Library of Economics and Liberty):
The wise and virtuous man is at all times willing that his own private interest should be sacrificed to the public interest of his own particular order or society. He is at all times willing, too, that the interest of this order or society should be sacrificed to the greater interest of the state or sovereignty, of which it is only a subordinate part. He should, therefore, be equally willing that all those inferior interests should be sacrificed to the greater interest of the universe, to the interest of that great society of all sensible and intelligent beings…
But such a rare evening, indeed, happened last night. I was pleased to be a guest at a dinner hosted by the Foreign Policy Association, where Dominic Barton, the global managing partner of McKinsey & Company, was receiving an award. In Barton’s brief and eloquent remarks, he reminded us of the wisdom of this other, less famous Adam Smith—the 36-year-old first-time author of The Theory of Moral Sentiments (1759), not the grizzled scribe of the seminal An Inquiry into the Nature and Causes of the Wealth of Nations (1776).
Barton rightly called Smith’s starter opus “very painful to read.” (I tried a bit last night before bedtime.) But Smith’s insights here are, if anything, more relevant to today’s society than those pressed forward in the Wealth of Nations.
We, in the realm of business, do need to understand and respect the connection we have to—and the impact we have on—communities local and global. We do need to consider how our own enterprises can best serve society at large. And Barton, a self-styled “Jesuit of capitalism,” offered three guiding principles for businesses to accomplish these worthy goals.
First, is that CEOs and other corporate leaders should truly manage their businesses for the long-term rather than the next quarter. Over the past thirty years, said Barton, “we’ve shifted much more to a short-term, less-inclusive type of capitalism.” Witness one McKinsey study that found that 55% of CFOs in the top 500 publicly listed companies would not make net-present-value-positive investments if it meant missing their quarterly earnings target by one cent.
As a ceiling-high pile of research has shown, companies that manage for the long-term outperform short-term thinkers in almost every measure—not only creating more revenue and delivering better shareholder returns, but also providing more employment for society.
Second, is that “business needs to speak out more about why the systems that we think work—trade, the free flow of capital and people (including immigrants)—is important to what we do.” And at the same time, says Barton, business leaders should be more “in touch with” and sensitive to those workers who are being dislocated and disrupted by technology and trade.
And third is that business—“which is uniquely qualified to deal with some of the broader, societal challenges that are out there”—should embrace these challenges as goals rather than run away from them.
I couldn’t agree more.
It was an inspirational dinner, I have to say—Adam Smith and all. Enjoy the weekend, everyone.
This essay appears in today’s edition of the Fortune Brainstorm Health Daily. Get it delivered straight to your inbox.