Those who have followed my work know that I unapologetically believe business leaders should focus on generating and increasing profits. Pursuing other objectives, like prioritizing social goals, inevitably leads to confused policies, unnecessary inefficiency, and management distraction – which in aggregate, leads to loss of potential profits.
Of late, a major distraction from the focus of profits was the pursuit of social priorities via environmental, social, and governance (ESG) and diversity, equity, and inclusion (DEI) policies. I have been a vocal critic of such efforts, arguing that all of us pay for such distractions via higher costs and, for owners of the businesses involved, lower profits. I have actively fought against these efforts when I served on corporate boards.
The debate around the social purpose of business has been framed as a battle between shareholder value and stakeholder concerns. As I’ve written before, describing this dynamic as a tradeoff is counterproductive. In the long run, I don’t know any business leader who doesn’t incorporate stakeholders into his or her decisions. Who doesn’t want a clean environment, with fresh air and chemical-free water? Can any business survive for long by exploiting its workers?
To illustrate this point in action, let me share a bit about the Goodwell Foods pizza factory in Pittsfield, NH. While I don’t have any ESG objectives at Goodwell, I am regularly seeking ways to be more energy efficient. Why’s that? Because energy is a cost and as a profit-maximizing businessowner, I want to reduce my costs whenever, wherever, and however possible. And yes, I want to source local ingredients whenever possible, in large part because it lowers transportation costs. The impact, of course, is a supply chain with lower carbon footprint. I am focused on doing well, but in the process, I am doing good.
Or what about social objectives? I employ workers from all walks of life and ethnic backgrounds. If you walk into the break room during an ordinary day, you might hear Indonesia, Spanish, Nepali, or English being spoken and you’ll see people of every skin color working together. My leadership team has women running finance, quality, logistics, and other functions. Given that New Hampshire is among the least diverse states in America, you might think this is due to a conscious DEI effort to promote gender, ethnic or racial diversity. You’d be wrong.
The team that runs Goodwell Foods has been assembled because of a relentless and continuous effort to recruit the best available people—regardless of skin color, gender, or ethnic background. This is because I’m focused on generating and increasing profits, not a social do-gooder. (I like to believe there is social good that accompanies these efforts, but that’s an ancillary benefit).
Fundamentally, I’ve tried to make Goodwell a place of equal opportunity. Those who come work for us will be judged by their ability to contribute, regardless of background or identity. We’re trying to embody Martin Luther King Jr’s dream, where we judge teammates by the content of their character and work ethic, not the color of their skin. I would even go further and suggest that any approach that begins with identity (such as race or gender) before capability, is discriminatory (either racist or sexist) and counterproductive to social justice.
What’s the alternative? I suppose Goodwell could be a company focused on equal outcomes, where we use quotas to fill positions. I’m confident that would make for a less capable team and less opportunity for everyone over the long run. The company would hire fewer people, earn less money, and be a less compelling risk for financing partners. The future, for Goodwell and its employees, would be less bright.
For those that doubt the pendulum has previously swung between profits and purpose, I’d encourage you to read Nobel laureate Milton Friedman’s 1970 essay titled “The Social Responsibility of Business is to Increase Profits.” He talks about the distraction of social responsibility and how it had the potential to derail capitalism. As Mark Twain supposedly said, “history doesn’t repeat itself, but it often rhymes.”
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VIKRAM MANSHARAMANI is an entrepreneur, consultant, scholar, neighbor, husband, father, volunteer, and professional generalist who thinks in multiple-dimensions and looks beyond the short-term. Self-taught to think around corners and connect original dots, he spends his time speaking with global leaders in business, government, academia, and journalism. He’s currently the Chairman and CEO of Goodwell Foods, a manufacturer of private label frozen pizza. LinkedIn has twice listed him as its #1 Top Voice in Money & Finance, and Worth profiled him as one of the 100 Most Powerful People in Global Finance. Vikram earned a PhD From MIT, has taught at Yale and Harvard, and is the author of three books, The Making of a Generalist: An Independent Thinker Finds Unconventional Success in an Uncertain World, Think for Yourself: Restoring Common Sense in an Age of Experts and Artificial Intelligence and Boombustology: Spotting Financial Bubbles Before They Burst. Vikram lives in Lincoln, New Hampshire with his wife and two children, where they can usually be found hiking or skiing.
