If Something Exists it Must be Possible

When I start to write an article for this blog I usually start with a trigger. It can be a sentence or a conversation I have heard on the radio or a comment from a friend or a student. The trigger can also be a blog post that has piqued my curiosity or taught me something new, or a chapter in a book, or in a magazine or a newspaper or even just a thought that comes to me as I walk down the street or lift a cup.

The trigger usually leads me to write one idea or one sentence. Then, as I begin with the second idea or sentence, I find that even more ideas are triggered. So I usually end up by referring to three or four different sources. If I gave myself totally free rein and the time available was unlimited I would probably refer to 300 or 400 sources of information or valuable ideas in each article.

This blog post is no different. I decided to write about Ray Anderson and his approach to sustainable business. As I wrote, Seth Godin came to mind, so I included Seth. Immediately after that I saw a comment made by a viewer, Chas Smith, on the TED site that hosts a video presentation recently made by Ray Anderson. I found Chas's comment very relevant. It reminded me of the no-nonsense comments that are often made by businessmen and even about my own post a couple of weeks ago about renewable energy and the jolly green job fairy.

But Chas's comment also made me wonder (again) whether Economic Value Added--EVA--or even EVD (Economic Value Destroyed) are the only measure for a company's success and it even led me to reflect on that old subject, "value": what exactly is "value"? The idea of "value" and the concealed cost to society of unsustainable innovation brought to mind the 19th century French economist Frédéric Bastiat. In his economic writings Bastiat lambasted politicians who did not take into account the hidden costs of every policy--especially the costs businessmen and politicians wanted to keep out of the ken of the citizen, the taxpayer and the consumer (usually one and the same person).

The amount of responsibility society assigns to businessmen (whether they want it or not) then popped into my thoughts and that subject reminded me of the book by François Bayrou I am reading at the moment. François Bayrou is the Head of France's centrist party, the "Mouvement démocrate" (Democratic Movement).

Wondering whether I would ever manage to finish the article, that I thought would only take me five minutes to write when I began it it, I decided to put it aside and go and buy the newspaper and have a cup of coffee. While I was walking into the centre of Magny-en-Vexin, a small, friendly town to the North-West of Paris, wondering which newspaper to buy (I eventually bought two, "Libération" and "La gazette du Val d'Oise") I realized that the fears Bayrou is voicing for France--that it will betray itself through loss of faith in the relevance of its own republican, egalitarian model of society--is in some ways similar to Ali A. Allawi's argument in his book "The Crisis of Islamic Civilization". Allawi argues that Islamic civilization, after just about throwing the baby out with the bathwater while trying to emulate the industrial achievements of Western European civilization through mimetism, will only be able to find its own way into modernity if it rediscovers its own wellsprings of knowledge.

Here is the article I finally wrote:

Last week I drew your attention to a TED talk by Seth Godin about his analysis of the new model of leadership, which in the world of social networking comes from finding and joining a group that yearns to be led.

This week, on TED - Ideas worth spreading I watched another presentation. This one will be of interest to students who wish to introduce more creativity to their organisations in the form of sustainable innnovation and sustainable development.

The talk is titled The Business Logic of Sustainability and is given by Ray Anderson. One of Rays' quotes about work in a sustainable way is, "The good will of the market is astonishing". Another one is, "More happiness with less stuff" and yet another "I am a recovering plunderer". He also quotes his good friend, Amy Lovins in the presentation: "If something exists it must be possible."

Ray Anderson attributes the beginning of his recovery from plunder to the reading of Paul Hawken's book The Ecology of Commerce. " Something clicked", said Ray Anderson. He realized that "with his company's global reach and manufacturing footprint, he was in a position to do something very real, very important, in building a sustainable world."

Here is how Ray is introduced on the TED site:

"At his carpet company, Ray Anderson has increased sales and doubled profits while turning the traditional "take / make / waste" industrial system on its head. In a gentle, understated way, he shares a powerful vision for sustainable commerce. Ray Anderson is the founder of Interface, the company that makes those adorable Flor carpet tiles (as well as lots of less whizzy but equally useful flooring and fabric). He was a serious carpet guy, focused on building his company and making great products.

The TED site gives viewers a space in which to comment, just below the videos.

Many of the comments about Ray'a presentation are laudatory, but not all. For example, there is this one from Chas Smith:

"Mr. Anderson's company has generated a total return to common shareholders of less than 1% annualized since 1994, the year of his epiphany. This "recovering plunderer" is not only failing to cover his risk adjusted cost of capital, he is donating his shareholders capital to the marketplace. His efforts to reverse the tragedy of the commons are only barely sustainable by any practical capitalistic standard."

Chas's comment about donating shareholder's capital to the marketplace reminded me of three thinkers, one of them Ludwig von Mises. Von Mises pointed out in many of his essays that it is competition between entrepreneurs putting their own money into their companies and new products, and often losing it, that drives market prices lower. Thus, if entrepreneurs are not given the chance to lose money in the hopes of gaining even more, prices will be higher for everyone.

The other two thinkers are French, one of them Frédéric Bastiat, wrote in the 19th century, and the other one the French politician François Bayrou. Bastiat wrote that if you looked at any situation you had to analyse "What is seen and what is not seen". Bastiat was writing in 1847-1850 about how big business uses government to protect its own interests, lobbying to put in place protectionist laws and monopolies that would enable it to "thieve legally" and cheat the consumer, the citizen and the taxpayer. But his perspective can also be used to see today how some businesses that refuse to innovate in a sustainable manner are legally thieving the finite resources of the planet.

It is not good to see shareholder capital being destroyed, even if it in the way of the world described by Schumpeter as "creative destruction". But it is only recently we have woken up to the negative impact on the planet of coal and petrol-heavy industries, which Schumpeter would probably name "Destructive destruction", as nothing good comes out of it in the long term.

In his book that came out last month "Abus de pouvoir" (The Abuse of Power) François Bayrou spends a couple of paragraphs revisiting the reason for the existence of companies, contrasting the now-popular idea that companies exist only to maximize shareholder value with the French ideal of companies as actors in the overall scheme of the egalitarian republic. Do companies exist solely to maximize profits for shareholders? What about the interests of all the other stakeholders and of the wider society in which the company operates, from which it draws its sustenance? Or do companies and the people who run them have a wider social responsibility?

François Bayrou reminds his readers forcefully that some of the business leaders who have recently been paying themselves five hundred or a thousand times the salary of their lowest-paid workers in France are neglecting their responsibility to the society in which they live. By turning their backs on the "social pact" that has held French society together they are in dereliction of their duty. On page 109 of "Abus de pouvoir" one can read, "This pact is broken. Managers of companies, whose role is to represent the general interests of the company, shareholders as well as employees, have been led astray. "Managers" have been inevitably brought over to the side of the sole shareholder.... The social pact is based on a shared understanding of the concept of justice. This is true of life in society and it is true of life inside a company. The imbalances that transform company managers into mercenaries in the sole employ of the shareholders and take them away from the task of being the guarantors of the company's future, federating shareholders with employees, are destructive."

Read the full biography of Ray Anderson