‘It doesn’t have to be quite so destructive’: A Harvard Business School professor reimagines capitalism

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Six months ago, Rebecca Henderson wouldn’t be able to share this with a mixed business audience.

But here goes: In American business, inequality is a liability—that is, the lack of a strong safety net carries a cost—and this realization is now front and center, the Harvard Business School professor says.

“I mean, maybe I’d say it really quietly at the end of a presentation,” she says. “But now”—and here, she shouts—”THE COSTS OF NOT HAVING A SOCIAL SAFETY NET ARE FRONT AND CENTER! And people [are] saying, ‘Yes.’”

Perhaps no one is more surprised how suddenly we’ve arrived at this reckoning than Henderson. The COVID-19 pandemic has given the ideas in her book, Reimagining Capitalism in a World on Fire, out today (April 28)—on the costs of inequality, climate change, and the duty of business to address those costs head-on—a perverse timeliness, making these issues not only relevant, but even appealing, to people who previously may not have touched them with a 10-foot pole.

The product of a three-year period of writing, the book emerged from her class at Harvard of the same name. The structure is intended to mirror that course, starting with a skeptical audience in mind—Henderson says her students, on arrival, usually are—and progressing to a full-throated attack on the belief that shareholder returns should be the sole, or even primary, purpose of a modern business.

In her course, by the time multiple executives of multibillion-dollar companies have trekked to her classroom to attest to the fact that their companies are, indeed, in the midst of this transition away from focusing purely on profits, “the students start to find that maybe there’s something here,” she says.

Henderson, a Brit, got her start in business as a management consultant, helping close down century-old companies in the North of England, before going on to advise executives at legacy companies in the midst of immense, often technological change.

She’s keen to stress that she is a fan of capitalism—”I teach at the Harvard Business School for a good reason,” she says—but has come to believe that the current style of mainstream American capitalism is not “given by God or economics,” and there are models for how to approach making a profit differently.

“It doesn’t have to be quite so red in tooth and claw,” she says. “It doesn’t have to be quite so destructive.”

It’s an idea that has gained ground in those same mainstream business circles in recent months and years. In August, the Business Roundtable—an association for the CEOs of America’s most powerful companies—rewrote its mission statement, putting value for customers and employees ahead of its previous priority: shareholder value, above all else.

While the costs of doing so were substantial even before the arrival of the coronavirus—”Reimagining capitalism is not easy or cheap,” she notes in the book—the pandemic has made it much more real to business leaders she speaks with, Henderson says. It has also driven home the point of what she considers her most controversial chapter: the idea that well-functioning capitalism can’t exist without a strong, healthy political system and public institutions.

“I thought no one would want to talk about it,” she says. “And the big thing that’s happened with the pandemic is now people are absolutely fine talking about it. They’re still like, ‘I’m not sure what to do,’ but it’s no longer some crazy idea.”

As many companies have turned their resources toward the common good, from finding or making medical and protective equipment to turning their technology and expertise toward research—as businesses did in Seattle, at the forefront of the virus’s arrival in the U.S.—executives have also realized that the vast inequalities among their employees and customers are part and parcel with their business risks, she says.

Before the pandemic, she says, many CEOs would express a “general concern” about inequality, “but didn’t really think it was their problem.”

Now, she says, that’s yet another thing that’s changed.

“I’ve come to believe that the whole deal is about changing the moral conversation,” she says. “That the effects of our system on the human beings who hold up half the sky are so negative.”

The weight of being the one to bring up that “moral conversation” has, as Henderson points out in the book, often been a gendered one. Lecturing onstage to executives, she writes that she frequently found herself tempted to couch her ideas about purpose and values in business with assurances of profitability—lest she be written off as a “simpering female” not focused on the bottom line.

But in the age of COVID-19, when businesses must make hard choices about the fates of their employees and suppliers while their revenues are evaporating, an unwillingness to have those bigger moral conversations suddenly feels like a level of denialism that verges on luxurious.

It’s a dramatic shift in perspective Henderson hopes executives will apply not just to battling the pandemic—but addressing climate change too.

“I’m super worried about maintaining the urgency on climate change,” she says. “We didn’t want to pay the upfront cost [of preparing for a pandemic], and I think, I hope, it’ll be easier to make the argument that let’s take out some insurance against the risk of climate change.”

But whether it’s referring to inequality, or climate change, Henderson is grimly surprised by how timely her book—and its title—have become in the three years since she began writing.

“I called it ‘in a world on fire,’ because I was trying to reach millennials,” she says. “And I thought, this is a bit ‘out there.’ Business people will think I’m a bit crazy. But now everyone says, ‘Whoa, that’s such a great title.’ How did you know?”

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