Seth Godin: Smart Bidness!

The smart CEO's guide to social justice

It seems as though profit-maximizing business people ought to be speaking up loudly and often for three changes in our culture, changes that while making life better also have a dramatically positive impact on their organizations.
Minimum Wage: Three things worth noting:

1. Most minimum wage jobs in the US can't easily be exported to lower wage places, because they're inherently local in nature.
2. The percentage of the final price of a good or service due to minimum wage inputs is pretty low.
3. Many businesses sell to consumers, and when they have more money, there's more demand for what they sell.

Given that for even the biggest organizations there are more potential customers than employees, the math of raising the minimum wage works in their favor. More confident and more stable markets mean more sales. Workers struggling to make ends meet are a tax on the economy.  (Consider the brilliant strategic move Henry Ford made in doubling the pay of thousands of his workers in 1914. The assembly line was so efficient that it created profits—but only when it was running, and high turnover made that difficult. By radically raising pay, Ford put pressure on all of his competitors (and on every industry that hired the sort of men he was hiring) at the same time that he created a gateway to the middle class, a middle class that could, of course, buy his cars, whether or not they happened to work for him). Also, consider this point of view...

Climate Change: The shift in our atmosphere causes countless taxes on organizations. Any business that struggled this winter due to storms understands that this a very real cost, a tax that goes nowhere useful and one that creates countless uncertainties. As sea levels rise, entire cities will be threatened, another tax that makes it less likely that people will be able to buy from you.

The climate upredictability tax is large, and it's going to get bigger, in erratic and unpredictable ways.
Decreasing carbon outputs and increasing energy efficiency are long-term investments in global wealth, wealth that translates into more revenue and more profit. 

Anti-corruption movements: The only players who benefit from corruption in government are the actors willing to race to the bottom--the most corrupt organizations. Everyone else is forced to play along, but is unlikely to win. As a result, for most of us, efforts to create transparency and fairness in transactions are another step toward efficient and profitable engagements.

Historically, when cultures clean up their acts, get more efficient and take care of their people, businesses thrive. It's not an accident, one causes the other. 

In all three cases, there's no political or left/right argument being made--instead, it's the basic economics of a stable business environment with a more secure, higher-income workforce where technological innovation leads to lower energy costs and higher efficiency. 

Wanted: Business partners who do well

Not only has CitySquare's experience over the past three years with PepsiCo and its family of companies been encouraging, it has demonstrated just how valuable for-profit/non-profit partnerships can be in a city.  When major corporations begin to understand what an important role they can play in taking community solutions to scale, the entire enterprise shifts.  I've been saying for a while now that companies should be encouraged to make a good return on their investments while engaged in projects and processes that result in clear, social good.  

The notion startles some folks, especially those on my side of the equation!  Non-profit leaders resist the idea of corporate profitability as a legitimate result of a company doing work to advance social good.  In my view we've got to shift our thinking in order to move toward sustainable solutions to the tough problems, challenges and issues that we face in urban America. 

Perry Yeatman, Senior VP at Kraft Foods, Inc and President of the Kraft Foods Foundation, gets it right in today's issue of The Huffington Post.  Read the essay and give me your reactions.

Doing Good and Making Money Can and Should Go Hand-in-Hand 

At an impact investing meeting at the US State Department last week, I was probably the only one in the room who didn't know that only 3 percent of the world's assets/funds were engaged in what's often referred to as "social innovation" or "impact investing." It's apparently known as the "97 vs. 3" dilemma. But whatever you call it, it was news to me and an obvious shortcoming to driving sustainable change, I think.

Why are micro finance funds, NGOs and foundations the only ones playing big in this space? How will we ever get enough of these great ideas and programs to scale if we only approach them as philanthropic endeavors? Let me be clear: I have HUGE respect for the groups that were in the room. We are in fact already partners with many of them! But, despite the good intentions and great work, the truth is that philanthropy -- in the broadest sense -- can rarely make the long-term impact business can. I think of it this way -- as the president of the Kraft Foods Foundation, I have about $100 million in cash and in-kind we can invest each year. But as Kraft Foods INC, my company has literally billions to invest in the things we need to buy. Effectively directed, what is likely to have a greater impact -- millions or billions? I think the answer is obvious. But clearly this point isn't obvious enough or that 97 percent of assets wouldn't be on the sidelines of impact investing.

That said, while it hasn't happened yet, I'm happy to say the tide seems to be turning and much of the world seems to be coming to this same conclusion -- including many of those here at Davos today. The discussion is gradually beginning to shift from "doing well by doing good" to "doing well by achieving shared outcomes -- outcomes that have both social and business benefits at the heart of their design." This may sound like mostly semantics to some of you but I think it's an important shift. I think it tells business that doing good is important BUT that it's OK to be transparent and upfront about what you need to get out of a partnership in order to make it work for your business and therefore be something you'd want to keep funding and growing. It wasn't that long ago that critics of big business would point to a program a company was funding and say, "but look, see what they are getting out of it" like that was a bad thing. I completely disagree. I think it's a good thing if a social outcome can be achieved while providing a business benefit, and I'm really glad others are beginning to come around to that point of view too. It's the ultimate win/win isn't it?

To read the entire essay click here.