Capitalism For Realists
The other night, I was invited to dinner with several wealthy and powerful people. This is not a normal thing for me. During appetizers and drinks I was a wallflower, but opened up over the first course when my dinner companions asked what I did.
“I just wrote a book,” I responded.
“Interesting! What about?” they asked.
“How the world was overtaken by the belief that the right choice in any decision is whichever option makes the most money,” I replied. “My book tells the history of that idea and what we should do instead.”
A mix of expressions greeted me. Some people leaned in with curiosity. Some leaned in with annoyance. Others were already looking for somebody else to talk to.
“The idea that all decisions are about money just isn’t true,” the group responded.
“Companies think about profits, sure. But profits are a result of good decisions, not the reason for them.”
At this moment a new person sat down to join us. He turned out to be the CEO of an outdoors company. Not the founder—someone from the private equity firm that had bought a controlling stake. After some pleasantries, I asked the outdoors CEO a question.
“If someone were to show you that the future prospects of your company and the way of life your product enables would greatly benefit over the long-term by investing in the sustainability of your products, and even things like planting trees, right now, could you see the case for that? Can you imagine doing that?”
Heads turned toward him.
“I know what you’re trying to do, ” he said with a smile. He went on to say this wasn’t his company’s job.
This response wasn’t unexpected. I was asking him to consider investing financial resources into creating non-financial returns. Any CEO would say no to this. There wasn’t a financial ROI. Still, I asked the question again.
“I hear that,” I said. “But you’re the CEO of a company that helps people enjoy the outdoors. Your whole product space could disappear as temperatures warm. Couldn’t the most profitable thing you could do in the long run be to make those investments now?”
“I see what you’re trying to do,” he said again, his smile tighter this time. “But the best we can do is to tell people what they can do on their own.” He went on to mention some of the charities his company supported.
Not wanting to be rude, I let the conversation drop. Soon after I made eye contact with the people who had debated the dominance of financial value with me moments earlier. I could see in their eyes that we were thinking the same thing: Here was a real-life example of our limited thinking about value.
Value and values
Though the words are basically identical, we think of value and values as distinct concepts. Value, singular, is what something is worth. Value means money. Value is an economics word.
Values, plural, is what’s worth something to somebody. Values means ideals. Values is a humanities word.
Both words relate to the goodness or importance of things, but differ in how they assess it. Value is a form of measurement. Values are a form of categorization.
We’re surrounded by economic value: prices, stocks, and other financial measurements.
We’re surrounded by idealistic values, too, but in less visible ways: honor, justice, and purpose.
Values are an ancient and powerful operating system. We don’t entirely understand how they work, but we can feel their influence. Values are what the angel on our shoulder says we ought to do. Why the right choices for us are what they are. Values shape who we aspire to be.
But as these descriptions suggest, values aren’t easy to identify. They’re even harder to measure.
This is the problem that the economic perspective of value alleviates. Unlike inner dialogues and philosophical debates about values, value in the form of price is something anyone can understand. Money is a globally relevant language. This is enormously convenient.
The story of the last 50 years is society’s shift from a focus on moral values (what’s right and wrong, what’s meaningful) to a singular focus on financial value (maximizing, optimizing). Our choices stopped being about ideals and became about money.
Our main metric for measuring value today, gross domestic product, counts something as valuable only if money is spent on it. GDP tracks how much is spent, but not why. GDP sees spending $1,000 on a family vacation and $1,000 on a divorce attorney as the same. According to GDP, an ideal citizen is someone who drives an SUV, has cancer (chemotherapy can be very GDP-positive), is getting divorced, and eats out every night.
This also means the only value that platforms like Google and Twitter provide, according to GDP, are the ad units they sell. Data-targeted advertising is very valuable, but the dissemination of knowledge isn’t. (Neither is verifying it, part of why platforms don’t do it.) The worst aspects of social media are what our current concept of value defines as its most valuable aspects.
It hasn’t always been this way. GDP and its predecessor, GNP, are less than 100 years old. But because of the power of measurement, we’ve come to believe there’s no higher form of value. This is how the outdoors CEO got stuck, and the rest of society along with him. The measured surpassed the not‐measured.
If I’d pitched the outdoors CEO on a new financial asset to securitize CO2 reduction, a cryptocurrency whose value would be tied to the growth of protected forests, or anything promising a financial return, he might have considered it.
But because I wasn’t offering financial upside, my thought experiment was out of the question.
Western society today revolves around the belief that financial value is the only rational form of value and that the best application of financial value is using it to make more of it. While these are rational and important goals, this limited perspective also stops us from seeing all the different ways of valuing that exist.
The economist Mariana Mazucatto argues in her excellent books The Entrepreneurial State and The Value of Everything that the way we think about value is all wrong. We use words like “spending” and “charity” instead of a more appropriate word like “investment” when describing government funding because we struggle to comprehend non-financial value. If we thought of government funding as investments into collective values like security, knowledge, quality of life, social cohesion, scientific progress, and so on, we’d better recognize their benefits. Instead, we treat non-financial values like they’re value-less.
We’re living through the results.
The stock market is at record highs and life expectancy in the U.S. is decreasing. In the richest nation in the richest time in human history, 43% of Americans can’t pay their bills. Many of our most significant societal problems are also, not coincidentally, extremely profitable industries (fossil fuels, junk food, prescription drugs, and for-profit prisons, for example). More financial growth won’t fix these things. We need to expand our dashboards to include non-financial values — like CO2 emissions, a person’s well-being, and social connectedness — to address them.
Imagine that value exists on a spectrum that goes from personal-rational values, like purpose and honesty on one end, to collective-rational values that aren’t measured, like community and fairness in the middle, to measured values like financial value on the other end of the spectrum.
To move a value from the personal side of the values spectrum to the rational side, we have to define it. To create maximum impact for that value, we may also have to learn how to measure it. This is the path of financial value.
Shifting to a post-capitalist world means expanding our collective dashboard beyond purely financial value (the “capital” in capitalism) to include other values as well. Financial value isn’t the only rational value that can be defined and grown—it’s simply the first. Other values (plural) can be transitioned into value (singular), too.
In the book that I told my dinner companions about, I share the story of how Adele used an algorithm that measured the loyalty of her fans to distribute concert tickets and prevent scalpers from getting in the middle and running up prices.
Adele balanced financial value by using a measurement that approximated another value, in this case loyalty. A value from the left side of the Values Spectrum was shifted over to the right. Adele’s approach wasn’t anti-capitalist, it was post-capitalist. Adele’s shows turned a profit while optimizing for a non-financial value.
In a post-capitalist world, financial value would still be a core part of our decision-making. It just wouldn’t be the defining consideration as it is today.
This would be a world where the outdoors CEO (and every other CEO) would be comfortable investing financial value to create non-financial value.
This wouldn’t happen by everyone adopting the same value set or getting equally woke. It would happen by defining new values, measuring non-financial ROI, and demonstrating that decisions based on the whole value spectrum are what will produce the outcomes that are truly in our self-interest.
Consummate business guru Peter Drucker surprisingly predicted a post-capitalist society would arrive around 2020 in his 1993 book, Post-Capitalist Society:
The new society — and it is already here — is a post-capitalist society. This new society surely, to say it again, will use the free market as the one proven mechanism of economic integration. It will not be an “anti-capitalist society.” It will not even be a “non-capitalist society.” The institutions of Capitalism will survive, although some, such as banks, may play quite different roles. But the center of gravity in the post-capitalist society — its structure, its social and economic dynamics, its social classes, and its social problems — is different from the one that dominated the last two hundred and fifty years.
Post-capitalism is not anti-capitalist or non-capitalist. Capital is still critically important. But our energy is focused on growing other values on top of and in addition to capital, rather than just capital itself.
In the book Sapiens: A Brief History of Humankind, Yuval Noah Harari writes about the moment when early humans learned how to cultivate wheat, and human life changed from hunting and gathering to farming. These early humans thought that they had tamed wheat, Harari wrote. But in reality, wheat had tamed them. From that point on, a huge amount of human energy went into growing wheat. We did whatever wheat wanted us to do.
It’s the same with money. We think wealth means we’ve mastered money, but in reality, money has mastered us. We live in a universe of infinite potential, and yet we allow financial ROI to define the limits of what’s possible. The good news is that while the belief in financial maximization dominates the world today, it won’t forever.
The shift to a post-economic future has already begun.
Yancey Strickler is the cofounder and former CEO of Kickstarter, author of the book This Could Be Our Future: A Manifesto for a More Generous World (Viking/RandomHouse), and the creator of Bentoism. You can find his writing online at www.ystrickler.com.