Patagonia produces bespoke fleece vests emblazoned with the names of America’s great financial houses, but now money isn't enough to procure them.
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.