My great-grandfather, Fritz Hoffmann-La Roche, was a visionary entrepreneur. From 1896, he pioneered the nascent pharmaceutical industry, overcoming countless hurdles and challenges. By the time he died, he had built a multinational organization that still operates today as one of the largest pharmaceutical companies in the world: Roche.
I love to look back on this story. And yet there’s a problem with it. This story is too centered on the achievements of one person.
We often hear business success is the result of individual genius, entrepreneurship, and persistence. We know this myth not just from my great-grandfather but also from some of the world’s richest men of today, such as Elon Musk, Mark Zuckerberg, and other Silicon Valley luminaries.
But these mythologies, just like my great-grandfather’s, are misleading. Not factually, but they miss the bigger picture.
Fritz Hoffmann-La Roche was exactly as I just described. But he was also a child of his time and the world around him. To succeed, he could bank on several “capitals” that were uniquely available to him. These included the financial capital, which was given to him by his father, father-in-law, and other family members and associates. And they included social, natural, and human capital, all available in Basel, the city on the Rhine River where Fritz lived.
Social capital
When recounting the story of successful founders and companies, we tend to brush over fundraising as if it comes naturally. But getting access to it depends as much on one’s network as on one’s business ideas. Take Mark Zuckerberg, for example. In early 2004, Facebook received its first funding of $500,000 barely three months after its incorporation in a Harvard dorm room, and less than a year after the project was conceived. The money came from PayPal cofounder and venture capital investor Peter Thiel. A similar story played out at Google, Amazon, or Apple.
That immediately raises a second question: Where does financial capital come from? In the case of my great-grandfather and great-grandmother, their money came from the Daig families who controlled much of Basel’s economic development since medieval times and were an important constituent of Basel’s social capital. But if my great-grandparents succeeded in creating Roche, it was also in large part thanks to the city’s social capital. Fritz could acquire land near the city, hire both skilled and unskilled labor, and insert his new company in the trade and finance links the city had with the outside world, thanks to the social capital present in the city and his access to it.
Today’s leading entrepreneurs built their success in a similar way. They had access to similar networks and lived and worked in regions with an abundance of social capital.
The founders of Apple could lean on a former Intel employee for their seed capital, and took a page from a nearby company—Hewlett Packard—to start up their company from a garage. At Google, Larry Page and Sergey Brin stormed the tech scene in the 1990s, after having had their beginnings at Stanford University. As for Facebook, the network was made up of Harvard students, allowing it to lean on the social capital of the university. To become the company Meta is today, Zuckerberg also tapped into the social of Silicon Valley. Finally, when Jeff Bezos was considering where best to build Amazon, Seattle had already been transformed by Microsoft’s presence.
Natural capital
The most important natural capital is the natural inputs that go into their products (a company’s nature-related “dependencies”) and the effect their sold products have on the environment (nature-related “impacts”).
Roche has been producing Tamiflu since the late 1990s, generating billions of dollars in sales. At the origin of Tamiflu of course, an antiviral medicine to treat the flu and other influenza viruses, lies a costly research and development effort, in this case from Roche’s U.S. partner Gilead Sciences. But Tamiflu also has a very natural key ingredient: shikimic acid, harvested from the star anise flower, native to Vietnam and Southern China. The same is true for many other drugs and medicinal products, and not just herbal ones.
Nature is a crucial building block, or dependency, for virtually any company. Even the world’s most valuable company in 2024, Nvidia, could not make what it sells without silica, glass, aluminum, and copper, to name just a few of the inputs that go into its powerful GPU processors which power the most hyped technology of our time: AI.
Human capital
Human capital is about the individual talents and skills of the people who work in your organization. It is about a great manager, an inventive researcher, a talented sales representative, a factory worker with an eye for detail. My great-grandfather, and every generation of owners of Roche since, could count on each one of those, and more.
Roche became a better employer because of the Roche union. Today, more than 60% of Roche employees are members of the Roche Employees’ Association union. The union weighs in on salary policies, employee-friendly working arrangements, and aims to secure Basel as an industrial base. And it represents employees on investments committees, the employee profit-sharing and pension committees, and the safety and environmental protection committee.
I share the story of the “capitals” because they matter. Roche became the leading pharmaceutical firm it is today thanks to them. They are the foundations on which entire capitalist economies and societies are built, I would even say.
But if these capitals are not acknowledged, or even taken for granted, problems emerge. These capitals, like financial capital, can either grow or decline over time. Whether they do, and to what extent, depends on the contributions we all make to them, whether we accumulate capital, or spend them.
There is something quite special about natural, social, environmental, and human capital. They are valuable to all of us, so it is up to each of us to leave them in a better state than we found them. But they are vulnerable, and can be extracted, so we’ll always be tempted to consume them for our own benefit, rather than to invest in them. We must no longer let that happen going forward.
Adapted with permission from the publisher, Wiley, from The New Nature of Business: The Path to Prosperity and Sustainability by André Hoffmann and Peter Vanham. Copyright © 2024 by André Hoffmann and Peter Vanham. All rights reserved. This book is available wherever books and eBooks are sold.
