Welcome to Managing
Through Crisis,
the weekly webcast
featuring faculty
from Harvard Business School,
sharing insights on how
to navigate through
the COVID-19 crisis.
Each year for the past 20
years, the communications firm
Edelman Worldwide
conducts a study on trust
to gauge consumers' trust
in the media, government,
and business.
The 2020 report
published in January
revealed that 56
percent of respondents
believe that capitalism, as
it exists in the world today,
does more harm than
good, highlighting
a growing sense of inequity and
unfairness around the world.
Today we're fortunate to have
Rebecca Henderson joining us.
She is the creator of a course
in the MBA program called
Reimagining Capitalism.
And she has a book called
Reimagining Capitalism
in a World On Fire.
So we'll discuss what
that means for firms
in the age of the
global pandemic.
Rebecca, thanks for joining me.
Brian, thank you for
inviting me to be here.
It's a rainy day in Boston.
And we'll hope that
the rain doesn't
interfere with our signal.
There's so many people
that are on Zoom,
conducting meetings this way.
And I think that
the infrastructure
that we have hopefully
will hold true for us.
So we've got questions
that were sent in yesterday
from some of the folks that
follow us on social media.
We're going to get
to some of those.
But just reflecting back on
this Edelman trust barometer,
I'm wondering if you think that
that sentiment, that 56 percent
sentiment of people who think
that capitalism is doing more
harm than it is good
in the world today,
do you think that
that's justified?
I think there are very real
reasons so many people are
angry at capitalism.
I believe it's one
of the greatest
inventions of the human race.
And I think that
without capitalism we're
not going to solve the
problems that we face.
But I think for many people,
capitalism is not currently
working.
In the midst of
this pandemic, we
can see that the fact
that so many people don't
have enough savings to carry
them through a month or two
months is an
indictment of the fact
that we're not
sharing the wealth.
In the last 20 years, the
economy grew significantly,
but almost all that
growth went to the top 10
percent, the richest 10
percent of Americans.
And so I think if you're a
regular person saying, wait,
this isn't quite
working in the way
it's supposed to is an
absolutely reasonable response.
Do you think, given the
situation that we've seen
unfolding around the world--
we've seen this
unfolding first in China,
which has a communist system.
And then we've seen it
spread to places in Europe
and now to the United States
and other places where
they have a different system.
Is capitalism a
help or a hindrance
in the face of a
situation like this?
So capitalism is so
many different things.
When it's firms putting
their heads down and trying
to make as many masks as
they can as fast as they can,
then it's fantastic.
Capitalism is an incredible
source of innovation and drive.
But there are all kinds of
problems that it can't solve.
What the pandemic is showing us
is that for capitalism to work
for us, it needs
to be balanced by
a strong, transparent,
effective, responsive
government.
I mean, one of the things
that's making me absolutely
crazy at the moment is hearing
about the states bidding
against each other for
vital medical equipment.
I mean, what's going on?
The federal government
should be saying, OK,
we're going to lay our hands
on everything that's out there.
Then we're going to pass
it up to the states.
We're the federal government.
So we can drive
these prices down.
We won't let fly by
night distributors
jack up prices against us.
And if you had the government
balancing business,
if they were working
in partnership
to really address
these problems,
I think we'd be in
a much better place.
The CEOs I know are
working incredibly hard.
They're driving their
firms as hard as they can,
but we've become
comfortable with a world
in which government is
really a weak, second rate
partner, rather than a
force that can bring out
the best in capitalism.
We're certainly
seeing some examples
as this thing has unfolded, of
even micro examples, the two
gentlemen in the southern part
of the country of the United
States who bought
up all of the hand
sanitizers and the products, and
tried to sell those on Amazon.
And fortunately,
quickly, I think Amazon
took that storefront down.
But I think some people
might look at that
and say, well, that's
just capitalism.
They're just practicing what
good business people do.
What's wrong about
that statement?
So capitalism, as
I said, I think
is an amazing force for good.
But it has to be bounded.
There have to be rules.
And one of the rules
should be in a pandemic
you do not profiteer on
your fellow citizens.
That's like a good rule.
Another rule should be, just
to take something at random,
you don't throw pollution out
the window of your factory
at no cost.
I mean, at the moment we
have a capitalism which
is heating the planet, which
is pumping out greenhouse gas
pollution in
enormous quantities,
with almost no controls.
That's not a fault of
capitalism, per se.
If you tell a business person
that you can burn coal,
and it's cheap, and
yeah, it's dirty,
and it'll kill
millions of people,
but, hey, what's to worry?
Then they'll go ahead and
use the cheapest fuel source.
So again, I think
so often when people
say they're mad at
capitalism, what they're
mad at is an uncontrolled,
out of balance
capitalism at any cost.
And that's not a good
kind of capitalism.
There are many different
kinds of capitalism.
There's a rapacious, we will
do anything to make money,
we don't care kind
of capitalism.
And then there's a kind of
capitalism that we used to have
in the US in the
'50s, '60s, and '70s--
we did pretty well then--
where firms took care
of their employees,
where there was a
partnership with government.
It was a Republican
administration
that passed environmental
laws that could control firms.
We had minimum wage legislation.
And minimum wage has hardly
been raised over time.
This morning I was
teaching a course
on Handy, which is an
online platform which
matches people who need their
houses cleaned with cleaners.
And they pay over
the odds, but they
don't offer sick pay,
benefits, or anything, just $17
or whatever it is by the hour.
And now that the
pandemic is here,
people are turning to them and
saying, what have you done?
Your cleaners have
no protection.
They have no savings.
They have no health care.
And I think it's
legitimate for Handy
to say, whoa, whoa,
wait a moment.
We were just playing
within the existing rules.
I think what this
pandemic is showing
us is we really need
strong rules if capitalism
is to live up to its full
potential, which is amazing.
OK.
One of the things you've
written a lot about,
we've talked about a case
that you wrote on Walmart
not long ago that
really underscored
the fact that the
kinds of sustainability
efforts that companies
go to are not
done out of altruistic reasons.
In the truest spirit
of capitalism,
they're done because
they're good for the firm.
They're good for employees.
They're good for customers.
As you look at the
Walmart example,
are there other
examples like that
that you can think of where
companies could really
apply some of those same
virtues to the situation
that we're seeing today?
Tomorrow I'm teaching
a case called Mercadona
which is a Spanish
retailer, one of the most
successful firms in Spain.
And for many years
Mercadona has prided itself
on putting its employees
at the heart and center
of its business model.
So this is a grocery store,
nothing particularly special.
But they pay over the odds.
People have stable jobs.
The stores are
closed on Sundays.
People have a lot of
discretion over their work.
They're promoted
up inside the firm.
These are classically good jobs.
And I think what we're seeing
at this moment of crisis
is those firms who took the
time and trouble to make sure
that they were treating
their employees with dignity
and respect, that they
built business models where
the employee was at the
heart of the business model,
giving better service,
creating ideas as to how
to run the business better.
At Mercadona, they
were amongst the first
to introduce the little
bar codes in checkout.
They were amongst the first
to set up the supermarket
with a bakery store
and a fish store.
They are amongst the
cheapest stores in Spain,
because the
employees decide what
products to carry,
making sure they're
what the customer wants.
But it's a very limited range.
So the whole
structure of the store
is working in partnership with
incredibly empowered, decently
paid employees.
And so firms that
have set themselves up
like that, they're
able to respond
to this moment of
panic, to this moment
a pandemic in a very different
way, because they have levels
of trust and engagement
inside the organization that
allow them to be much more
innovative, much more creative.
To say to everyone in the firm,
OK, let's all take a pay cut.
Let's see what we can do
to take care of our people,
to take them through.
They have relationships
with their customers
which mean that when many
customers are looking
for ways to support
small businesses,
where are they going to go?
They're going to go to
the small businesses that
really took trouble and
really connected with them.
They're going to go to
the small businesses which
are well-run and are
doing a little bit extra.
We had several questions
from our listeners
asking about
sustainability and the role
that sustainability can play
in a situation like this.
Do you see a connection
between companies
that have found a way to sort
of invest in sustainability have
a better chance or maybe better
prospects of how to manage
through a crisis like this?
So I want to acknowledge
this is a really tough time.
There are firms that have
seen their revenue go to zero.
It doesn't matter whether
they're sustainable or not,
it's still super hard.
And there are firms that
are producing products
that people need right now that
may not be sustainably managed
and are doing great guns.
I do think, at the edge, at
the margin, those firms who
have really built the
trust of their customers
and their employees
are doing better.
I've spoken to a few
CEOs, and they've
talked about the incredible
commitment of their employees,
people working three shifts
in difficult conditions,
really trying to be in
service to customers.
And I think that's the
result of years of investment
in doing the right thing,
in having a purpose
beyond only making money.
Nothing wrong with
making money, but to have
a purpose beyond that as well I
think is often, paradoxically,
a better way to make money.
Sometimes when you show up
and you say to your suppliers,
well, we're just here to make
money, and any chance we can
we'll screw you, that's not
a great way to make money.
So for me, sustainability is
not about some airy-fairy, oh,
we have to do good in the world.
Although I do think we have
to do good in the world.
It's about acknowledging
that a business is
part of a much broader
system, and that taking
care of everyone in that
system is good for business.
A lot has been made
in the United States
in particular about the
Production Defense Act.
And why hasn't the president
been more forceful in telling
companies that they needed
to change their operations
to support fighting the crisis?
I think the flip side of that
is why haven't more companies
stepped forward and sort of
just done the right thing,
and kind of moved
in that direction?
And maybe they have.
I mean, I think we're all
getting different information
from different sources.
But just your
thoughts on something
like that, as we think about the
role of capitalism in society.
Do you need a
Production Defense Act?
Or shouldn't firms
just know by now
that they need to be
in this for something
bigger than just themselves?
I don't know enough about
the details of the Production
Defense Act to know
whether it's the answer.
I think it is the case
that what we need right now
are firms stepping
up and saying,
let's work together
to solve this crisis.
I think that's super hard
for an individual firm to do.
So what needs to happen is for
groups of firms to step up.
Some of that's
certainly happening
in the pharmaceuticals
and biotech.
I know that firms there
are working absolutely as
hard as they can
to find a vaccine
and to find better tests.
And they tell me at the
moment we're not thinking
about the boundary of the firm.
We're just working
together to make this work.
We're not worrying
about the legal details.
It's just all
about human health.
So I know that's happening
in some parts of the economy.
I think that the
government could really
help encourage that, that in the
war the government said, look,
we will buy what you produce.
But we won't it at an
extortionate price.
We'll buy it at a
reasonable price.
And we'll support you
all in working together.
And Lockheed, you
can build planes.
And General Motors,
you can build tanks.
And we'll sort of lick
this thing together.
And I think what we need is
some rediscovery of that sense
of communal effort.
I think it's tough to expect
individual firms to do it,
because, look, this is hard.
Suppose I'm running
a small business.
I want to take care of the
people who work for me.
But I may only have a
month's worth of cash.
And if I just give
it to everyone
while we're all sitting at home,
how am I ever going to reopen?
How am I going to pay
for that first month
once we're back at work?
So there are businesses
in very tough places.
But I do think there are
firms who have resources,
who have the capacity.
If we can find a way to
help them work together,
then we could make an
enormous difference.
You've spoken in the
past, and I think
in your class, Reimagining
Capitalism, one of the themes
that runs through that is
that of conscious capitalism.
We had a viewer write in
and ask if you would just
talk about some of the virtues
of conscious capitalism.
So let me talk first
about what it is.
I think it's easier if I talk
about an actual human being,
rather than in general.
So I want to talk
about my friend
Erik Osmundsen, who
is CEO of a garbage
company, a Norwegian
garbage company called
Norsk Gjenvinning.
And when Erik became
CEO of this company,
he discovered that the entire
Norwegian waste industry
was corrupt, that people were
lying about the waste they
were disposing.
For example, they were taking
a hazardous medical waste,
relabeling it, and shipping it
to Africa as ordinary household
waste.
They were dumping
chemicals into the fjords.
This is the Norway.
Dumping toxic chemicals into
the fjords, and, of course,
taking a cut.
And no one was enforcing
the laws in the industry.
And Erik had got into
the garbage business
because he thought it could
really make a difference
to the problems of the world.
So he was a little
bit starry eyed.
He thought really doing
effective recycling was
one of the most effective things
we could do as a human race
to make sure that we
have a livable planet.
But he was also a really
sharp business person,
because he thought there was
lots of room in the garbage
industry to introduce
recycling, and to take it
to a bigger scale, and
to really make a killing.
He's a very savvy
business person.
But when he discovered it was
corrupt, he faced a choice.
I mean, he could
have walked away.
That would have
been much easier.
He would have got
his money back.
It would've been fine.
Or he could stay and go public
about what was going on,
and try and transform
the entire industry.
And for me, conscious
capitalism is the decision
to stay and fight.
It doesn't mean giving
up on financial returns.
Erik had a very clear sense of
how he was going to make money.
But it took enormous
courage to go to the press,
to go to the TV, and
say, look, this industry
is run by organized crime.
He got death threats.
His children had to have
armed guards at school.
For a while it was touch and go.
When I ask him now, though,
if he regrets what he did,
he says, not in a million years.
Of course it was difficult.
And he didn't realize
it was going to be that bad.
But they've turned the
whole industry around.
And not completely.
Nothing is perfect.
No fairy stories here.
But they have made an
enormous difference.
And he's built a
profitable, growing business
using modern technology
to drive recycling
right across Scandinavia.
I mean, so that's what
conscious capitalism is for me.
It doesn't mean that we all
sit around and meditate.
It means that we
bring both our sort
of business side of our
minds and the part of us
that really cares about our
families, our community,
and wants to make a
difference, and builds
a business that can do both.
Why not?
That sounds great.
Sounds great to me.
One more question for you
before we let you go, Rebecca.
If you have sort of one thought
that you want to leave people
with today as they're
thinking about their firm
and what they might be able
to do in this situation,
is there sort of one idea
from Reimagining Capitalism
that you think should
really resonate with folks?
I think this moment has made
us aware how dependent we
are on each other.
We have, at our best, a feeling
of community and solidarity
that I think we haven't
had in some time.
And so if I were
a business person,
and I was thinking
what's on the other side?
How do we build
this back better?
I would think of two things.
The first is, how do I build a
business that at the very least
doesn't harm other
people, but a business
where people are proud to work,
products I am proud to sell,
customers I am
delighted to work with.
That's the kind of
business I want to build.
I think there's a
lot of research that
suggests that that will make
you more productive, more
creative, and more innovative.
And now is the time.
Now when people are
so emotionally raw,
you can really show that
you're in it for the long term,
that you care about
your employees,
and you want to
make a contribution
to this amazing world
in which we're in.
And the second thing
I would take in
is look around at the society.
Let's build a
society where we take
care of the most vulnerable.
That's a political problem.
But let's make sure we have
a political process which
isn't so full of
special interest money
that ordinary people's
voices can't be heard.
Let's get the money
out of politics.
Let's make it democratic
and responsible.
I'm not talking politics.
I'm talking civics.
Let's have a
political process that
works for all, so that we
have a health care system that
works for all of us, so that
we have minimum wage that
takes care of people.
I think businesses have
amazing, amazing voice
to play in that conversation.
So let's build it back better.
Let's build a truly amazing
society, which we could do.
That's a great parting
thought, Rebecca.
Thank you so much
for joining us today.
Thank you, Brian.
I really appreciate
the opportunity.
