Good morning.
I began yesterday at the annual conference of the Shared Value Initiative, started by Harvard Professor Michael Porter and his colleague Mark Kramer to help companies find business opportunities in addressing social problems. Nestlé CEO Paul Bulcke was there, and addressed the issue raised in yesterday’s CEO Daily: how to reconcile the conflicting models of capitalism represented by Brazilian private equity firm 3G, which focuses on relentless cost-cutting, and Paul Polman’s Unilever, which puts “sustainability” at its core.
Bulcke clearly leans toward the Unilever model, and said it ultimately comes down to timeframe. “You can only create shareholder value over time if you connect positively with society.” While he didn’t criticize 3G directly, he said a strategy of drastic cost cuts may boost profits in the short term but endanger a company’s survival over the long term. Porter argued companies can’t trade the short term against the long term: “You have to pay attention to both…all the time.”
Later, I visited WeWork CEO Adam Neumann at his Manhattan headquarters, and heard a similar message about putting “passion and purpose”—as well as “people and product”—before profit. WeWork rents out office space to a new generation of businesses, and has convinced investors that it has more in common with tech companies than real estate companies—with a valuation of $17 billion in its latest fundraising. Neumann insists WeWork is neither tech nor real estate, but rather a “community business.” He believes its valuation is fully justified, saying “all our numbers are higher than Snap.”
I’ll let the markets sort that out. But Neumann, who was unfamiliar with the Shared Value Initiative, made an interesting argument during our conversation. He said Bill Gates might have had more influence in the world if he had used Microsoft’s market power to address social problems, rather than creating a separate philanthropy to do the same. He praised current Microsoft CEO Satya Nadella for being a different breed of CEO—“mission driven, purpose driven…he wants to make a difference.”
It’s no coincidence these kinds of conversations are becoming more common in today’s business world. As I’ve pointed out here before, an increasing number of leaders—young and old—are looking to reinvent or reinvigorate capitalism, and to rebuild public trust in business. That’s why at Fortune we are preparing for year three of our Change the Worldlist, which highlights companies that have made measurable progress in addressing social problems. (Last year’s list included both Nestlé and Unilever). It’s also why we, in conjunction with Time, are launching The CEO Initiativeto help highlight and encourage best practices in this area.
From the email messages that came in after yesterday’s post, many CEO Daily readers agree. I’ll share some of those messages later this week.