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Where Self-Interest Ends and Social Responsibility Begins

Editor’s Note: This essay is part of a Law & Liberty Symposium on Woke Capital.

Earlier this year, I had the opportunity to speak with Dan Granger, the CEO of Oxford Road, an ad agency which has helped launch Uber, Lyft, Dollar Shave Club, and many other companies. Granger didn’t have much use for the new “woke” capitalism that many companies were embracing. “Nobody’s going to these brands to ask, ‘How should I live my life?’” he said. “We don’t really want to be preached at by mainstream brands. And it really depends on how big a brand wants to be.”

For his part, Granger doesn’t have the luxury of embracing socially conscious advertising and marketing strategies. That’s because Oxford Road specializes in using “performance-based” metrics designed to create quick business growth for start-ups. This leads me to an observation that I’ll go ahead and call “Granger’s Law”: Wherever you see a company embracing “woke capitalism,” you will not find that same company is poised for dynamic growth.

Case in point: In January, razor manufacturer Gillette started airing ads about the #MeToo movement and “toxic masculinity.” With an unsubtle twist on the brand’s longstanding tagline, “Is this the best a man can get?” Gillette’s website declared, “we have a responsibility to make sure we are promoting positive, attainable, inclusive and healthy versions of what it means to be a man.” Suffice to say, consumers do not feel lecturing its customers is one of Gillette’s responsibilities. Gillette’s now infamous ad has been viewed on the company’s YouTube channel over 32 million times and the number of dislikes out number the likes on the video by almost 2 to 1, and even by YouTube’s low standards, the comment section is an angry goat rodeo.

It seems obvious that Gillette’s new ad campaign was a desperate bid to reclaim cultural relevance for a century-old brand that is failing badly at its actual responsibility—delivering quality razors and toiletries at an affordable price. In 2005, Procter and Gamble bought the company for $57 billion, but this past June, P&G took an $8 billion write-down on the company. “Initial carrying values for Gillette were established nearly 14 years ago in 2005…. New competitors have entered at prices below the category average,” said P&G Chief Financial Officer Jon Moeller.

These “new competitors” include Dollar Shave Club, which Granger helped launch. The eight-year old company is already worth billions, thanks to an innovative subscription business model, and grew its subscriber base by 10 percent last year. Their products are a good value, especially compared with Gillette’s offerings. And Dollar Shave Club is renowned for targeted, online ads that are decidedly entertaining, and certainly not hectoring.

Of course, not every company that has embraced woke capitalism is foundering. Some are quite successful, even if they’re more likely to be defending market share than growing exponentially. The fact they are so well-established allows them the luxury of indulging the kind of arrogance necessary to think pushing political and social agendas are good for business.

How arrogant you might ask? Earlier this summer, almost 200 CEOs of some of the country’s biggest corporations, including Apple, Amazon, Wal-Mart, and Bank of America, signed onto a Business Roundtable statement that attempts to redefine a corporation as something beyond a profit-driven enterprise. Henceforth, corporations will “Deliver value to our customers,” “Invest in our employees,” “Deal fairly and ethically with our suppliers,” “Support the communities in which we work,” and lots of other nebulous gobbledygook—all of which does little or nothing for the company’s actual shareholders.

As a PR operation, however, Business Roundtable’s statement seemed to be effective at a time when capitalism is increasingly becoming a dirty word. “It was an explicit rebuke of the notion that the role of the corporation is to maximize profits at all costs—the philosophy that has held sway on Wall Street and in the boardroom for 50 years,” noted The New York Times write-up on the Business Roundtable statement. “Milton Friedman, the University of Chicago economist who is the doctrine’s most revered figure, famously wrote in The New York Times in 1970 that ‘the social responsibility of business is to increase its profits.’”

Despite the implication of The New York Times, was Milton Friedman in any way wrong? Are job and wealth creation not essential to improving people’s lives? And aren’t the benefits of these tangible things far more immediate than toothless statements expressing concern about abstract notions of creating value and behaving ethically? While it’s true that there are certainly appalling examples of corporations maximizing “profits at all costs,” when applied to the business community generally, this is a bit of hyperbolic editorializing designed to divorce capitalism from its critical role in human progress.

This brings me to the other almost axiomatic observation about “woke capitalism”: The more “woke” a corporation is, the more hypocritical it becomes. When Friedman wrote that “the social responsibility of business is to increase its profits,” this wasn’t an opinion so much as an observation about the nature of corporations. Their entire reason for being is to create wealth, so the more they embrace social causes that work against that, the less effective they are at either thing.

In practice, this means that corporations are loudly outspoken when the stakes are low and curiously silent when the social and political costs are often urgent. For example, in 2015 when Indiana adopted a religious freedom law—a state law virtually identical to the federal law co-sponsored by Senator Chuck Schumer and signed into law by Bill Clinton—Apple’s Tim Cook and a host of CEOs got in line to threaten Indiana lawmakers economically.

But corporate America’s role here is not to be the enforcement arm of the Democratic Party’s preferred social policies, and ensuring that gay Hoosiers get their wedding cakes baked at the point of a gun is far from a pressing human rights concern. Gay rights are, however, a legitimately pressing human rights concern in Saudi Arabia, Indonesia, and a host of other countries around the world where people are imprisoned and even executed merely for being gay. Yet, Apple and many other companies regularly do business in these countries and have no plans to stop.

More recently, in October Apple yanked an app from its app store that pro-Democracy protesters in Hong Kong were using to coordinate and evade brutal crackdowns from China’s authoritarian communist government. (A government that somewhat ironically, given Apple’s opposition to religious freedom laws, currently has a million or so religious minorities in concentration camps.)

Of course, it’s true that Apple simply can’t exist in its present form without a heavy reliance on Chinese manufacturing. At least for now, overall economic benefits for Americans, and even the impoverished Chinese workers that Apple employs, might outweigh the more Faustian aspects of this deal. However, if Apple thinks it’s doing the right thing by making moral pronouncements about the supposed intolerance of Midwesterners, while ignoring the problems of violent and oppressive regimes internationally, the company should rethink this strategy.

They’re actually creating distrust among a significant percentage of their customers, and that’s not just bad for business. There might come a time when a corporation as important to America’s well-being as Apple has a real claim to lead on a technological issue of political and cultural significance. And when that time comes, Apple might find they can’t make their voice heard because voters and many of the country’s elected leaders decided they were untrustworthy when the stakes were comparatively petty.

Lastly, there’s a weird paradox created by “woke capitalism” that few want to address: Any public campaign to portray corporate behavior as being less self-interested, is itself a self-interested conceit. The Gordon Gekkos of the business world may be greedy, but they’re at least transparent about their intentions. The chairman of the Business Roundtable who conceived of and spearheaded the new statement about corporate purpose was Jamie Dimon, the CEO of JPMorgan Chase & Co., who presided over the financial behemoth when it received a $12 billion taxpayer bailout a decade ago for irresponsible corporate behavior.

Given the public image of Wall Street execs these days, you would be forgiven for thinking Dimon and his fellow Masters of the Universe have some perverse incentives for duping the press into spilling ink about how they’re no longer about “maximiz[ing] profits at all costs.” The truth is that Dimon and the simpatico CEOs that signed on to Business Roundtable statement are still about maximizing profits in one revealing way—their statement on corporate wokeness says nothing about exorbitant CEO pay, which is generally a hot topic whenever corporate responsibility comes up.

Now none of this is to say that corporations don’t have social responsibility—let’s not swan dive off some Randian cliff and celebrate the fact that, say, internet pornography has created a tremendous wealth in the last 25 years by giving the people what they want with remarkable efficiency. Even those who believe that business is over-regulated must concede there’s a role for the political process to keep free markets from devolving into social Darwinism. Similarly, business leaders have a role to play in informing and guiding public opinion.

But it seems obvious that capitalism, and the necessary regulation of it, works best when we’re all clear where self-interest ends and social responsibility begins. “Woke capitalism” is clearly blurring that line. If you think obscenely rich CEOs can be trusted to tell the average voter what’s in their best interest on toxic masculinity, gay rights, religious freedom, or any almost any other controversial issue, well, you’ll probably buy anything else they happen to be selling.

Reader Discussion

Law & Liberty welcomes civil and lively discussion of its articles. Abusive comments will not be tolerated. We reserve the right to delete comments - or ban users - without notification or explanation.

on November 26, 2019 at 07:32:20 am

[…] Where Self-Interest Ends and Social Responsibility Begins […]

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The Poverty of Woke Capital: A Law & Liberty Symposium
on November 26, 2019 at 07:32:33 am

Fascinating piece, and one I largely agree with. If businesses are paying lip-service to “inclusion” and “community” it is largely because they feel they have to or pay a different kind of price for being in sufficiently “woke”. But there’s an angle that Hemingway didn’t cover which is highly relevant to this discussion. For the sake of simplification I’ll call “right corporate wokeness”. If anyone’s looking for a handy definition, they can find it in Senator Rubio’s speech at The Catholic University of America under the title of “Common Good Capitalism”. There’s substantial overlap in language between those on the woke left and woke right and the thrust is pretty much the same: to be good corporate citizens, businesses should look not just to their quarterly bottom lines but “invest” in workers and communities and strive to keep jobs “at home” even when it hurts profits. And who’s the leading proponent of this right wokeness? None other than Donald Trump, who has launched a trade war with China that is hurting the bottom-lines of farmers, businesses and industries all in the name of protecting American workers and communities. We don’t know the full impact but, as a general proposition, this variant of “wokeness” usually tends toward making nations poorer and stunting their technological development over time.

There are some policy changes that, if we worked at them diligently for a few decades, might tend toward improving the situation but none of them are quick, woke fixes: family formation and maintenance; wage insurance for workers taking lower-paying positions when they lose a job to technology or trade; and worker transition accounts that provide resources for relocation or retraining following a layoff. These would all be a start on using the vast wealth our dynamic economy produces to build for the future. Bashing and bludgeoning corporations into sacrificing profits for the sake of illusory, short-term benefits - whether those benefits are extorted by the left or right versions of wokeness will only serve to make our children and grandchildren poorer than they might otherwise be.

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Brent Orrell
on November 26, 2019 at 08:23:47 am

I don’t concede there’s a role for the political process to keep free markets from devolving into social Darwinism. But then again, I don’t concede that Central America or the Middle East are a lot safer and more stable because of U.S. foreign policy.

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Eric Morris
on November 26, 2019 at 16:02:51 pm

"These would all be a start on using the vast wealth our dynamic economy produces to build for the future. " This takes a dive into collectivist thinking.

There is no "economy" that creates "vast wealth" that just lies around for the using. Individuals and groups of individuals create "vast wealth" by meeting the needs and desires of society better than others. That "vast wealth" belongs to the people who created it - the property owners. It doesn't exist for "society" or "government" to use to "build for the future". The original exchanges that created "vast wealth" ARE what builds for the future.

When Sens Rubio and Warren mouth essentially the same fascist ideas - that government has a role in directing how private property is "directed" - it's clear that both the Left and the Right care only about one thing - power...

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OH Anarcho-Capitalist
on November 26, 2019 at 16:06:01 pm

Agree - the bald assertion that free markets devolve into chaos is wholly unsupported.

There's a wealth of literature describing just how society would evolve institutions to protect property in the absence of government regulation...

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OH Anarcho-Capitalist
on November 26, 2019 at 17:56:49 pm

OAC:

Agreed - but with a BUT:

Would you not allow for certain "encouragements" via the Tax Code to (I hate the word, but - *stimulate*) certain key sectors, modalities or more particularly investments (venture & move-to-manufacturing) activities?
Perhaps, a better term would be - inducements via favorable tax treatment for venture capital investments in critical technologies (w/o the government specifically determining those critical sectors) AND also for capital investment in the "move-to-manufacturing (which may be as substantial an allocation of capital as the original R&D?

And again, Yes, DC factotems ought not to be determining HOW capital / property is used or the level of return on that capital outlay. However, "encouragement to innovate AND manufacture on a BROAD (non-gov;t defined) range of innovative technologies / manufactures is not, to my mind, inconsistent with a "free" market.

I think those that believe that the government ought to be completely removed from the market are subject to ideological blindness as it impels them to deny that which is readily observable, i.e., that the rest of the world, especially the ChiComms (and the EU) do not play by our "hallowed" and venerated Hayekian rules.

As V. I. Lenin asked "What is to be done." (just a joke - ha!).

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gabe
on November 27, 2019 at 01:01:53 am

[…] A Thought For China’s Muslim Uyghurs – Samuel Gregg, D.Phil., at Acton Institute Powerblog Where Self-Interest Ends & Social Responsibility Begins – Mark Hemingway at Law & Liberty Care About China’s Uighurs? You Must Be A White […]

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Secular News: Wednesday Edition – Big Pulpit
on November 27, 2019 at 01:44:39 am

I think that a fallacy underlies the title of this essay. Self interest and social responsibility are not exclusive and one does not begin where the other ends. Self-interest and social responsibility in fact exist within roughly the same borders; those in which responsible citizens go about living their lives among their neighbors while pursuing their own happiness according to their own values, and fulfilling their social obligations.

The quote from Milton Friedman is convenient to examine the point. If one were to paraphrase the thought to read "the social responsibility of the mafia is to increase its profits," one might expect some puzzled looks, or requests for clarification. Certainly, we have expectations of "business" that we do not associate with the mafia, and reasonably expect that the former provides a social benefit where the latter does not. Friedman was certainly correct that when people organize into corporations for commercial purposes, they are able to produce economic growth, efficiency and their attendant social benefits that are not possible otherwise. The reason why a utility company is a net societal asset and the Colombo crime family is not, is because corporate citizens, like private citizens, should observe certain social values and civilized norms. These are for the most part the values that should be taught in kindergarten: don't lie, don't hit. wait your turn, share, don't steal, etc. We may call these the "traditional values." That a company maximizes profit, by itself, is insufficient evidence to decide whether it is "good" or "bad." In short, the social benefit of corporations depends on whether they conduct their affairs according to those basic shared values that are essential to civil society: observing obligations, treating people fairly, cleaning up after themselves, etc.

What distinguishes the "woke" corporation is that "woke" values are not shared values. Prioritizing feelings over facts, equality over merit, dogmas over discourse, grievance over accomplishment, denunciation over respect, apocalyptic drama over reason, and other contrivances of the "woke" canon, are not shared, or generally recognized. Unlike the traditional values that have been part of civil societies for millennia, the newer "woke" values establish their relationship to virtue by proclamation. The goal of the "woke" is not to identify the virtues associated with common good, but rather to allow oneself to be outraged at things so as to create the illusion of virtue. Certainly, corporations can profess whatever values they wish. It is difficult to accept Milton Friedman's comment on profit and social responsibility, then complain that Chik-Fil-A puts profits over principles (which they apparently do. Not admirable, probably not smart, but unless they breach their social obligations, their prerogative). A corporation need not have an ideological agenda to make a positive contribution to the world. They must however conduct themselves with a measure of respect for society and society's shared values.

"Woke" values are not universal values. They are not substitutes for traditional values, responsible citizenship or personal integrity. In fact, it can be argued that there are no substitutes in a free society. It is where those values and personal virtues are discouraged that one finds fascism and tyranny.

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z9z99
on November 27, 2019 at 15:21:11 pm

I love your characterization of “wokeness”. Trump should use it in his speeches.

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C. Lynch
on November 27, 2019 at 16:41:03 pm

Z:

Great as usual! Let me modify one comment, however. It may be me simply expressing a fear that I have, BUT....

"“Woke” values are not [YET] universal values. They are not substitutes for traditional values, responsible citizenship or personal integrity. In fact, it can be argued that there are no substitutes in a free society. It is where those values and personal virtues are discouraged that one finds fascism and tyranny.

All of what you write above is true. However, it does not fully convey the danger that is becoming ever more real - that these "woke" values WILL BE UNIVERSAL.
In the past few days, I have hesitated to comment on a number of topics dealing with "wokeness", the Leaning Towers of the Academy, etc as it may strike some as tiresome hobby-horse rant of mine. BUT...
It is true that, as one commenter above notes, there is a certain (and growing) market for "wokeness" and a sense of moral purpose and satisfaction.
Why is it that millions of young people identify such moral standing with "wokeness"?
Simply because they have been subject to endless inculcation in the new religious catachism of wokeness / multiculturalism and equality of conditions. It is inescapable and carries the imprimatur, near Papal in some sense, of the teaching profession which still enjoys far more respect than is their due and far outweighs the credibility that their meager academic performance ought otherwise warrant. Kids LOOK UP to teachers - and PARENTS also defer to these 3rd rate regurgitators of academic gobbledygook.
An example from the Seattle area (Federal Way School District to be precise):

At a recent school board meeting the following was on offer:

1) We refer to then as "scholars" not students. This to describe children from 6-12 years of age.
2) This could be credible were there any Einsteins among these young lads / lassies.
3) However, in the same breath that the Education Dept functionary introduced the term "scholar" she also mentioned that there will no longer be any Advanced classes as it was disturbing to those who could not keep.
4) And also lamented the continuing substandard performance of "the most racially and ethnically diverse" student body in the state, which of course was, to her mind, a highlight and a major accomplishment of the District.
5)“ we must engage our scholars in mathematical discourses"

"we must enculturate our scholars in the productive struggle to learn”

Doubtless, the mathematical discourses will dwell on social Justice concerns (as she indicated) and the "enculturation" to learn will no doubt offer up a myriad of excuses why certain students are not learning.
(I could add more but even I tire of it).

Couple this with Tranny Days at local libraries and pre-schools and one may conclude that these children will also become "woke."

There is simply no stopping this unless sensible citizens take over the school boards starting, especially starting with K-12. By the time these kids enter university, they are already fully prepared to embrace the idiocies and inanities of Woke Culture.

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gabe

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