Ranjay and Ravi debate whether corporate purpose is real or just marketing. They argue most companies treat it as a CSR add-on, and that true win-win outcomes between profit and social good are harder than they sound. They propose a portfolio approach, using Etsy, BP, and Pepsi as examples of the tension.
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I myself got very confused because the word purpose has been hijacked. It's been hijacked by both extremes. On the one side, people say purpose of business is shareholder value, leave them alone to focus on making money. All this other stuff is a distraction and a tax on business. That's the government's job, you know, or regulator's job. Business's job is to focus on shareholders. The other extreme has come along and said purpose is anything but shareholder value. Shareholder value is bad. It's about making, doing good things for society, anything but profit. And then what happens is, so people start to do this purpose thing as a side hobby. It's the little tax on business, it's a CSR, ESG, get it out of there, call it a foundation, you know, whatever you want to do. I'll give you a day a month to go and do some volunteer work, you know, whatever, whatever, and it's a feel-good exercise. Actually, purpose is about both. It gets to the very core of your business. What's the economic engine you're trying to build? And how is that economic engine going to have a commercial and social impact? And I think that's where we have to take it. How does what we do make a difference in the world?
And Ranjay, what if— but if you're trying to thread the needle between both, there is that danger of becoming motherhood and apple pie, becoming all those mission statements that you put up before. That appease everything, but ultimately mean nothing. How do you make sure that you're actually just not doing that, and you're just drinking your own Kool-Aid, saying that I have purpose, but really you don't have deep purpose?
Thanks for calling that out. I dug myself into a hole here, so let me try to dig myself out of it, actually, because actually Ravi is right. There's another little wrinkle in this. People started to say, oh, so Ranjay, you're saying purpose is win-win, right? Win-win meaning? When you can do both social and commercial at the same time, right? It's that magical thread the needle where you've got both happening. You know, I'm lending money in microfinance to poor people in Bangladesh at 20% because the market banks charge, you know, moneylenders charge them 100%. So 20% is more than what they could get in the city, but they don't go to the city. So I'm bringing money to them at 20%, and I'm making money, and I'm doing a good thing. Win-win. Most of life is not win-win. It's really hard to get to win-win. So you end up— imagine a 2x2 of market impact and social impact, right, to use your language. And you say, well, I have some things that are purely social, I have something that are purely market, and I have a few things that are accomplishing both. Do I only do both? And I think that's not true. There are some things that are purely market and don't have a social impact, some things that are purely social that don't have a market impact. How do I manage that portfolio of activities? So you have to take a portfolio view of that and say not everything is going to be win-win, but I have to ask myself, what is that in aggregation? How are we going to make a difference, right? So at one level, you might say a company like an Etsy is, you know, commerce, making commerce human. It's helping sellers of crafts sell to buyers, so they create livelihoods and jobs. And so maybe there's a social element there, but ultimately they're a marketplace also. So how do we unpack and think about what's social, what is commercial, and how do I blend the two together? I think it's a very important question and not an easy answer because you have to justify the portfolio. And if you have a legacy business, you know, like look at British Petroleum, they want to get out of oil and gas, they want to be beyond petroleum, BP, but it's not going to happen overnight. So you have to find a transitional journey. Or your Pepsi trying to go beyond selling junk food and cola, you can't do it overnight. So how are you going to get there? So how do you balance that portfolio is the part that I think is not so easy. I call it walking on the razor's edge.
