Author Q&A: Accountable: The Rise of Citizen Capitalism

POC: You argue that we’re all capitalists: corporations and the people who lead them and work for them, and the customers who keep them in business. More starkly, you write: “Capitalists, in their capacity as citizens, have an interest not just in avoiding the guillotine but also in living in a more equal, healthy, and sustainable world.” How do we take this idea that we’re all capitalists and use it toward the greater good?

MOL: When you learn about economics and capitalism, you’re often taught this principle of the invisible hand – that the economy is somehow moved by forces outside of us. As we were researching the book, we recognized all the different ways that the little decisions we all make on a micro level add up to these larger forces.

For example, one of the big movements within grocery stores over the last decade has been the push toward organic food. Today, the largest organic food retailer in America today is not Whole Foods, it’s Walmart, because we as consumers have started to demand organic food.

Corporations are just sums of our individual choices – as investors, but also as consumers, as workers, and as voters. So corporations aren’t imposing their will on us; we influence them every day by how we act. We are firm believers that capitalism is a fantastic system. But it’s also a system that left undirected by values can lead to some painful outcomes.

POC: Your values might be different from my values; Michael’s values might be different from yours. Whose values are we trying to get them to adhere to?

WV:  Our values are all different but what’s interesting is when it comes to values with regards to capitalism, we know a lot about our combined values. There is an independent nonprofit called Just Capital that polled over 100,000 Americans over the last several years and asked them “What would you like to see different about capitalism, what would you like to see corporations do a better job of?”

And the one thing that is loud and clear from those polls is that ordinary Americans want corporations to treat workers better. That is a critical issue in our economy, especially today, especially after Covid. I think we can all agree that climate change is also important issue, and there’s a handful of other issues. We may have different values on the margin but we can agree on a lot. To say that there are only so many things we can all care about is abdication of responsibility. Let’s focus on the things we can all agree on first and try to make progress there.

POC: One of the things Covid has brought to light is who is an essential worker and who isn’t. And certainly there is a disparity in many ways between who we say is essential and how we pay them. How can capitalism fix something like this?

WV: Fair treatment of workers is a complicated issue, and it won’t get solved by one silver bullet. Any real solution probably involves a combination of government and corporate action. I work for a business called Two Sigma Impact, and we’re trying show that investment in workers actually pays off over the medium and long term in terms of corporate value. But like everything else, to make an investment in workers, you have to spend money today and that could hurt short-term profits.

In our economy, if you build a factory or you invest in technology, that’s investment. But if you invest in training your workers or giving them fair pay, somehow that is just a cost. That’s the thing that we’ve got to combat in our economy if we want workers to have better jobs, and that’s why we need to remember that our choices as consumers and investors affect companies.

MOL: Just because there is a short-term trade-off doesn’t mean that there isn’t a long-term alignment between investing in your workers and having better returns as an investor.

POC: Michael, what can every individual do as an investor to help create accountability, to hold companies accountable, and to be a part of citizen capitalism?

MOL: They can look at how the companies they invest in perform against environmental, social, and governmental metrics and make choices accordingly.

The second thing is recognizing that a lot of investments that we have power over we don’t hold directly. It’s university students recognizing that the university endowment, this massive pool of capital that has so much influence in the financial world, ultimately is accountable to them. And it is the same thing with pension funds. This is one of the lessons of the divestment movement.

POC: Warren, your turn.

WV:  I’ve got a long list, but I’ll narrow it down to two. From the company side, there’s lots of things that companies can do to drive engagement. They range from setting better terms of employment, including sharing some of the gains of productivity with workers; to things like driving the mission at their companies. But perhaps the easiest place for companies to start is to look closely at training and career paths inside of their companies. There’s a lot of ROI to actually giving folks the tools they need to advance their careers and then giving them a clear pathway. Training and career paths are a critical part of the solution to driving better jobs at American companies and a critical way for American companies to be better employers, like they used to be.

From the worker perspective, one of the things that has a lot of promise is finding ways to have your voice heard better. It turns out that front-line workers actually know a lot about the issues that the company faces, particularly operational issues, and very often the CEO, the executive leadership of a company, doesn’t actually speak with front-line workers and doesn’t know some of the issues that are actually happening on the front line.

It’s not that leaders of companies don’t want to hear it, it’s that they don’t make time. Increasingly HR departments are trying to create processes to correct that. So, I think those two avenues have a lot of promise on the road back to making America a country full of good employers.

POC: One of the rationales that people use when defending companies whose mission, products, or practices might be questionable or in conflict with their own values is that those businesses create value. Is that that the right measure?

MOL: The way that we measure value in our society is by GDP. And GDP, income, or revenue – a lot of these miss a lot of the other impacts that companies are having on society. If you sell cigarettes that will contribute to GDP. So, will selling a healthy organic meal. Part of what the ESG conversation is trying to do is recognize that even if two companies have the same income, they might have drastically different impacts on society.

WV: There’s actually a project going on at Harvard called the Impact Weighted Accounts Initiative and they are working to try to ascribe dollar values to what Michael has described. For example, we don’t measure companies that are having a positive benefit on society. We do a really poor job of actually even just giving people credit for doing that. But just starting with measuring who is actually investing for the long run, who is actually having positive knock-on social effects and who is having the opposite – we should know those things. That kind of information is valuable, whether you believe capitalism is a great system or whether you believe capitalism needs to be reformed.

POC: Are those two separate ideas? At one point in the book, you say it’s easy to forget why capitalism is worth saving. Remind us.

WV: If you look back at the history of capitalism the report card reads pretty darn well. So in the three millennia up to 1750, GDP growth per capita changed almost not at all. The standard of living, life expectancy, how much food there was and wasn’t – all that stuff basically never changed for 3,000 years. And then, from 1750 until today, global GDP per capita has risen by 37 times. That is an enormous change that explains improved life expectancy, abundant food in many places, increased leisure time, better medicine, all kinds of things that we value today but in some ways take for granted.

Those change didn’t happen by accident, they happened by capitalism. So, we owe a lot to this system. But that doesn’t mean that we must accept capitalism on its past track record. We should look at capitalism and how it works today. And the truth is right now capitalism as practiced over the last 20-30 years in America has created some pretty distorted results.

Only one in three Americans today believes that they’re going to be better off than their parents. Basically from World War II into the early ‘70s worker wages moved up as productivity moved up. Then all of a sudden, in 1973, those two lines diverged. Productivity has gone up 250 percent since 1973 and worker wages have been basically flat. These are things that we think can be changed not just to the betterment of workers but frankly to the betterment of the broader economy, because broadly shared prosperity actually improves overall productivity.