Reimagining Capitalism in a World on Fire with HBS Professor Rebecca Henderson
by Lawrence L. Iliscupides
The month of August began with another exciting series of webinars brought to us by the Harvard Club of the Philippines and the Harvard Business School Club of the Philippines in partnership with the John Clements Leadership Institute. The first part of the series commenced last August 5, 2020, entitled ‘Reimagining Capitalism in a World on Fire with HBS Professor Rebecca Henderson’, with distinguished moderator, Dr. Alice C. Hill, immediate past president of the Harvard Alumni Association, and with esteemed panelists Mr. Jaime Augusto Zobel de Ayala, Chairman and CEO of Ayala Corporation, and Mr. Federico M. Lopez, Chairman and CEO of First Philippine Holdings Corporation.
Kicking off the morning’s program was Joel Schapero who gave his warmest welcome to the attendees and formally opened the event by sharing various HBS moments which were truly amazing to hear. Dr. Hill was then introduced as the moderator, who in turn welcomed Professor Rebecca Henderson.
Professor Rebecca started her talk with a question: “Why reimagine capitalism? Why not throw it out the window?” She then asked her students, “Is capitalism broken?”, and 50% of them, all young people, answered, “Yes.”
Genuinely free and fair, capitalism is one of humanity’s greatest inventions, an unparalleled source of motivation and creativity. Before, billions of people lived in poverty. When capitalism came, there were big improvements in basic education, illiteracy, democracy, as well as lower child mortality rates.
Capitalism is amazing, but today’s version is neither free nor fair, and it is creating awful side effects like climate change, massive threat of flooding, wealth becoming more concentrated, and widening divisions between minorities and dominants.
The world in which we are living and operating needs to be reimagined so that it will work for everyone.
Professor Henderson pointed out two factors:
- The puzzle of the shrinking fish — the puzzle is not actually about shrinking fish, but the fact that despite the trouble we are in, we still smile as if life is pretty good. Inequality is an issue but by thinking it is going to be alright, we forget to notice how bad things have become.
2. Losing our balance — According to various research in political science and developmental economics, a healthy, thriving society rests on three legs:
· Free markets, which is a crucially essential part
· Driving prosperity and well-being
· Accountability, transparency, responsibility, a capable government, and a strong civil society
A healthy society should focus on the ME and NOW, US and LATER. But we tend to lose focus on the long-term and the larger whole. We let our society get radically out of balance. We neglect that good government and free politics should balance the free markets. What can be done? We need a massive social and political movement to redress this imbalance.
Can Business Make a Difference?
Yes, through the pathway to Systematic Change.
1. Creating Shared Value — Share value opportunity, a combination of making money and solving big problems at the same time.
· Creativity, Innovation, and Risk Taking can be generated by purpose-driven firms. This enables leading firms to take advantage of these opportunities that can change the world. According to modern research in social psychology, “Firms that embrace authentic purpose can improve performance enormously.”
2. Building Cooperation — shared value can also lay the foundation for cooperation by industry and region, making the big problems “pre-competitive”.
3. Rewiring Finance — there is a need to embrace metrics to allow investors and firms to recalibrate, realize that doing right will build strong business, and why focusing on the long-term leads to profitability.
4. Rebuilding Our Institution — build a society that works for everyone, where capitalism is in partnership with the government, employees, and society to build a strong future.
5. Changing the Normative Frame
After Professor Henderson’s talk, Dr. Hill immediately gave the floor to Mr. Jaime Augusto Zobel de Ayala, Chairman and CEO of Ayala Corporation.
Mr. Ayala gave a series of short but meaningful points to Prof. Henderson’s talk. What struck me the most was what he said that in order for your business to thrive, you need to change your business models. His company moved from one product to five company products touching different price points: banking moved into microfinance, and telecom moved and developed into a prepaid sector. They also moved to areas of healthcare and education. The point is, try to disrupt models — there are ways to make models in the business sector more inclusive.
Another issue Mr. Ayala brought up was finding clearer alignment in their business goals, such as the United Nations that built sustainable development goals. As a corporation, they aligned themselves with those goals — broader engagement, more long-term, and a more holistic approach in doing business.
The last point he made, which really caught me, was about cooperation. Since we are in this time of crisis, both private and public have been engaged in working together instinctively and with the power of cooperation. “In these overarching problems, we need holistic solutions, which need cooperation not competition.”
Immediately right after, Mr. Federico M. Lopez, Chairman and CEO of First Philippine Holdings Corporation, gave his constructive points to Prof. Henderson’s talk.
Mr. Lopez agreed that capitalism has indeed brought about tremendous growth, creativity, and innovation, but as of this moment, too many are still left behind. Billions of people still do not have access to electricity, clean water, education, housing, work and income; political, social and gender equity; or even peace and justice.
He mentioned the rainbow-shaped Kuznets curve, where inequality rises and eventually falls as an economy grows, which is related in turn to the environmental curve. There was a similar environmental degradation relationship in the 1990s where pollution eventually got cleaned up as a country got richer.
Mr. Lopez said that we are living in a time that calls for great paradigm shifts if businesses want to thrive. They need to reimagine and redesign themselves in this new world. Businesses need to align themselves with resources and abilities to elevate everything — from customers, employees, suppliers, contractors, the environment, to communities. And of course, investors.
There is an urgency to go beyond incremental sustainability — transforming into regenerative forces that align profit engines with a need for a better world and a safer planet. Having creativity and innovative energy can unlock great opportunities and solve the world’s problems.
Lastly, Mr. Lopez emphasized FPH’s vision and mission: Decarbonized energy system, regenerative, and collaborative — which I realized can be helpful in sustaining our environment.
In conclusion, in these unprecedented times and beyond, we need to reimagine and redesign capitalism in creative and innovative ways. Companies must be purpose-driven and propagate cooperation to thrive and survive in this era and the future.
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About the author:
Lawrence is jolly, bubbly, and easy-to-be-with kind of person. He loves spending time at coffee shops to read his favorite books and going to places where there is good food. Instead of taking selfies, he tends to take pictures of beautiful scenery, food, and other things he finds #instagrammable. When he has spare time, he watches suspense-action series, romantic-comedies, and horror films. He also loves seeing and making time to socialize with his friends. In addition, his favorite pastime is listening to music, especially pop, R&B, and OPM, and sings along with the songs he plays.
