6: Be Good
(EN: In all, this chapter seems to be more about following the recent trend in corporate ethics rather than out-thinking competitors. It's interesting material, but off topic.)
Corporations have a reputation for being evil, cheating others to line the pockets of their shareholders. And that reputation is well earned by many. Three or four decades ago, companies began to consider the importance of ethics, and engaged in "image" advertising to suggest that they cared about their customers, employees, and communities. But much of this was merely posturing and facade - caring about all stakeholders, and taking action to demonstrate that their concerns are genuine, is a relatively recent development.
Ironically, this has always been true: a company needs its employees and customers to remain in business. Small businesses, which have a great reputation, have always recognized this. Large organizations, where the management that sets policy never sees the customer face to face, have largely forgotten it.
The realization that being good is actually a sound business strategy arose from the ledgers: companies realized the cost to replace a customer or employee who has been "burned" exceeds the cost of treating them well enough to retain their business. The cost of lawsuit settlements and boycotts that arise from showing callus indifference to communities and the environment is less expensive than acting to maintain good relations.
Social media largely forced their hand, as a customer or employee can now tell the world about the firm's behavior, which replaces ignorance with awareness. Arguably, the media once performed this public service, but the media has long been beholden to advertising revenues, and the public has become (justifiably) wary of their objectivity.
In the present day, there is no longer an unlimited supply of unwitting victims for corporations to prey upon, and they have to treat others fairly in order to maintain a reputation that will enable them to gain and retain relationships that will sustain their business.
Being Good Builds Moral Force
The notion of "moral force" has military roots that go back, even as far as the Roman Empire. If the inhabitants of an area expect to be treated poorly by a conqueror, they will fight back with all the force they can muster and even civilians will join the fray or offer resistance afterward. If, however, the inhabitance believe the "invaders" to have positive intentions, and that their lives will be better off under the new regime, they will welcome their conqueror as a liberator: they will not fight back, they will even assist in the transition, and will be collaborative afterward.
The value of being good is difficult to measure with an accounting spreadsheet, but easy to measure with a marketing survey: people do business with firms they feel have good intentions toward them. An ethical firm can more easily acquire and retain customers, hire the best talent, enter into partnerships with other firms, garner the support of communities, etc. The connection may be indirect, but it's undeniable.
The author touches on neuroscience and the notion of "mirror neurons" that cause people to reflect the emotions of others. (EN: The theory has been debated, and the claim that mirroring is "automatic" has been thoroughly disproven. Moreover, the connection to this topic is tenuous, so I'll skip ahead.)
More to the point, people feel friendly toward others who share their values, and hostile toward others who do not. This happens with the people they encounter in their daily life, but the same phenomenon can be observed in regard to political candidates, celebrities, and even brands.
Building Followership by Being Good
The author mentions the curious behavior of a homeless man in Bangladesh, who spends his days marching, as a one-man parade. The reason has never been explained, and the man is quite possibly a lunatic - but people who observe his strange behavior tend to assume that he is "a saint" and follow him around because they believe it will bring them good luck.
The author's point is that a leader is a "dealer in hope." So long as a person appears benign, they will assume he has a purpose, and will project positive motivations onto him. (EN: It's probably also true that the behavior has to be unusual enough to draw attention. A person who merely walks the same route to work each day does not accrue a flock of followers because people likely don't even notice him.)
There are a few brief cases, more along the lines of anecdotes:
- Modern leadership is about appealing to followers: you do not command authority because of your personal qualities, but because people believe in what you are doing
- He mentions two brothers operating a garage firm that designs posters and t-shirts. Their "manifesto" of doing good was re-tweeted 100,000 times and it's implied that they "cannot keep up with demand" because people identify with their ideas
- Another firm was founded to give second opinions for medical diagnoses. To preserve its integrity, the firm doesn't provide healthcare services, just consultations. No details are provided, but it's mentioned that the firm has enormous esteem.
- Michael Milken, whose name is synonymous with financial scandal, has since become involved in healthcare and medical research, and one journalist suggested that when they find the cure for cancer, they'll call it "the Milken cure" and his financial misdeeds will be forgotten by history.
- Husk Power systems was a system that would provide electric power to rural villages in India. While it was not feasible to operate as a nonprofit, the founders developed a plan to make a go of the business, running on a thin profit margin - and won the financial support of numerous venture capitalists in spite of the low return on investment.
- An Israeli company that sought to create an infrastructure to support electric cars to reduce the world's dependency on petroleum has a business plan that won't be profitable for decades, and yet gathered enough support in funding to make it the fifth largest start-up in history.
Conclusion
The author points to the trends in ethical investing and ethical consumerism: people want to do business with firms that are "good" and will pay more to do so. Even major brands focus on charitable causes and practices that are in line with their brand, and win preference with stakeholders as a result.
(EN: What the author has failed to do in this chapter is compare these firms to competitors - and demonstrate how thinking ethically creates a competitive advantage. I expect there's good evidence out there, and examples where a "good" company defeated a less ethical one, but the author provides no such support, so all of this remains as conjecture and cheerleading.)