Why Greed Might Do Us All a Lot of Good

Commentary about business and finance.
April 9 2012 10:14 AM

Greed for Good

Gordon Gekko was wrong. Greed isn’t good—but it could help solve some of the world’s toughest problems.

GE Chairman and CEO Jeffrey Immelt.
Can corporations be a force for good? GE's Jeff Immelt says "the era of free capitalism without consequences is over."

Chip Somodevilla/Getty Images.

Gordon Gekko was wrong, but not for the reason you think. It’s not that “Greed is good,” as the fictitious corporate raider famously intoned in the 1987 movie Wall Street. But it turns out that greed can be a force for good. In fact, there is reason to think that harnessing self-interest wisely is a necessary precondition for kick-starting the innovation revolution needed to tackle some of today’s most wicked problems like climate change, deadly pandemics, and the ongoing middle-class squeeze.

Consider two powerful forces with the potential to upend the global economy as we know it. The first trend is the dramatic transformation of the nonprofit world from sleepy, under-resourced, and inefficient to market-minded, well-funded, and eager to change the world. The second trend, driven in part by the first, is the emergence of the “philanthrocapitalist.” This new specimen of the global economy leads organizations that don’t fall neatly into either the for-profit or nonprofit worlds. Their companies are, in fact, a little bit of both. One example is Ashoka, a pioneering social-sector incubator that has helped hundreds of firms with hybrid business models take off. The new breed of market-minded “philanthrocapitalist” is also typified by New York’s Acumen Fund, which invests donor money not in old-fashioned NGOs but in social firms that have viable business models delivering both profits and social goods (like clean water or malaria protection). If companies like these continue to prosper, they could help the world tackle many of the difficult problems that governments and traditional businesses have failed to solve.

Even big multinationals are now acknowledging that the sort of profit-obsessed, short-term capitalism once advocated by GE’s former boss, Jack Welch—who earned the moniker Neutron Jack for sacking employees but leaving buildings standing—must give way to long-term capitalism that looks at the world’s wicked problems as opportunities to create sustainable new industries.

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This trend is surely to be applauded, but here is the dirty little secret: Nobody really knows what works and what doesn’t. In conventional business, what matters gets measured and what’s measured gets managed—but this is not yet true in the nascent field of social enterprise. Most just lump profit and purpose into one business model without developing any meaningful metrics for social impact.

Until recently, traditional business models assumed everyone was motivated strictly by economic incentives. Behavioral studies suggest that unless people are working on rote mechanical tasks, simply paying more money will not yield more productivity. Since much of the world now lives in the “ideas economy,” employers clearly need to consider other ways of motivating talented workers. As most Slate readers would probably agree, knowledge workers crave independence from bosses and relish being very good at their chosen jobs. Purpose can indeed motivate people as powerfully as profit, as evidenced by the willingness of many people with day jobs to spend their precious free time working on projects like Wikipedia, Linux, and other open-source, collaborative ventures without pay.

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