As published in Jackson Hole Economics
COVID-19 is ripping the veneer off society and exposing our ‘system’ as unprepared to provide appropriately for a large swath of the population.
The health considerations are pretty clear. As a nation, we are not prepared with a plan to mobilize what we need in an emergency: ventilators, masks, test kits, appropriate care for the sick. Similarly, we are not prepared to weather the oncoming economic storm. The Trump Administration and Congress are preparing to provide $1000 or more to many Americans. This may be a vital stopgap measure for families’ short term survival, but it should also serve as a warning flag about the real underlying danger of western capitalism. For all the hundreds of millions of people that capitalism has helped lift out of poverty world-wide, it has yet to demonstrate that as an organizing framework it can enable the broad mass of society to thrive.
I am an optimist, so my hope is that the COVID-19 pandemic can be the positive catalyst to force us towards a new kind of capitalism that really works for society at large.
Amidst the stories about the nice things companies around the world are doing to clean their offices, comply with government mandates, or encourage us to stay healthy by observing social distancing, there are a few companies and organizations that are thinking more broadly.
Because schools are closing around the country, Zoom has offered its platform for free to allow teachers to teach remotely. Harvard is giving free webinars on how to teach online for those who are forced to do something that was unthinkable for them. Spectrum, the broadband supplier, is providing free access and opening up WiFi hotspots to students that are anywhere near their networks. At least one bank, Huntington Bank in the American Midwest, is deferring payments for consumers and small businesses for up to 90 days and temporarily putting a hold on foreclosures and repossessions. Distilleries are offering to make hand sanitizer in quantity. These kinds of steps remind me of what we can do as a nation when disaster strikes – for example, the amazing transformation of the nation’s manufacturing capability from cars and refrigerators to bombers and patrol boats as the US entered World War II.
Why does it take a crisis for us to excel?
Companies have the ability to do great things when the going gets tough, yet for most of our history, our overarching objective has been for them to make as much money as possible. Simply, this is how we have defined success – in the public markets, in society, most everywhere. What if the new narrative was to do good things in the world? Would these same businesses also make good returns if they did the right thing? I believe we are about to find out.
Some business leaders seem focused on how to keep their executive bonuses in these trying times. Others are worrying about paying all their employees. Patagonia announced early on that they were closing their stores but paying all their employees in full for the time they remain closed. Will those employees be grateful for this unnecessary act? If so, will they be more loyal, more productive? Will customers be more committed to the brand as a result?
At my company, Cascade Engineering, we hope we will be allowed to keep our 1800 employees employed by being designated by the government as an “essential” business. It is, after all, difficult to work from home when you manufacture parts for the trucking industry, as we do. But if we are ordered to shut our business down, we are planning on ways to keep our employees whole. It is not an easy decision knowing that it will seriously impact our profitability, but it is essential that our employees not be penalized for situations beyond their control. Or put another way, it is the right thing to do, and the right thing to do is always the correct default compass setting in difficult times.
Too many Americans are on the edge financially. Upwards of 40% are living literally from paycheck to paycheck with no money in the bank to tide them over. This is not because they are profligate spenders, but because the way we practice capitalism is leaving them behind. The solutions for this situation are not likely to come from politicians, but rather from the voluntary actions of the corporate world.
There is a common saying, ‘a crisis is a terrible thing to waste.’ Well, this crisis should be the time corporate leaders lead the way to a better society.
From local business to corporate giants, it is how we behave as business leaders that can drive transformational change. If we lead by describing what is important to us – our employees, our communities, and how we benefit society – and if investors cared more about this then their short-term financial return, it is just possible that a new normal could be established in which doing the right thing might become the overarching measure of success. The financial returns would follow.
What then could we accomplish as a nation?