Woke Capitalism and the "Sale of Indulgences" – Andreas Widmer at the 2020 PE Conference

When I finished my time as a Swiss Guard, I remember how during our last meeting, John Paul asked me to go out and be a witness to the world. I was inspired, but not really sure what that meant in practice. After moving to the States and attending school for about a year, I was hired by a tech firm and and I jumped into work. I loved the experience of a startup and was learning new things every day. Because of my background I was asked to lead the international operations and eventually Michel and I moved to Munich to open up our European offices. I was working like crazy and traveling all over the world. I literally worked 365 days a year. Then I joined a new startup and and moving back to the United States. Again, the same experience. It was exhilarating. My career was in full swing. It was like a dream. I was from this small Swiss village. I had gone to Rome for a two year stint in the Guards and next thing I know I had moved to the US and I was a successful high tech business executive. I was loving and I was living the American dream and I loved it. But the following year a lot happened that left me disillusioned with work, with business and with myself. The company continued to grow and soon we were bought out by a larger company. I was in my early 30s and a multimillionaire. Things couldn't be better. Or so I thought. Two months after we were acquired, the the whole thing fell apart. The Wall Street Journal reported that the company that bought us had lied and cheated on a massive scale. And days after the story broke, shares of the company dropped so fast that they were pulled off the market. A few weeks later, the company was forced into bankruptcy. We lost everything. I was angry and disillusioned. I was upset at myself, at the folks who bought us. And I began to question business and the market economy in a general way. Is the American dream a lie? Is our market system flawed? I set out to find the answers. I had a lot of criticism for the system as I experienced it. And I wanted to learn what others thought and most importantly, what the Church was teaching about it. What I first learned on my question is obvious. Our current system aims to produce a free and competitive market economy. For simplicity's sake, I will call it capitalism, as this is what commonly is done. But let me just mention that this is not an accurate name for it, but that would be a topic for another time. In any case, this economic system that we currently have is of course not perfect. But let's take stock of some important achievements. First, access to global Markets is generally a good thing for all countries. Export and imports have greatly improved the living standards of every country on earth. And this progress wouldn't exist without capitalism. Second, for thousands of years poverty was the condition of the vast majority of humanity. Thanks to capitalism, the number of people living in abject poverty is for the first time in human history down to around 10%. And for the first time ever, we have a realistic chance of bringing that down to zero percent. Now, now, I am not saying that this is the be all and end all because those lifted out of abject poverty still live in poverty. Still, anyone would prefer the latter over the former. A third result of the current system is that an increasing majority of countries are led by rule of law. Human rights and freedom of conscience are more prevalent than they have been at any time in human history. Fifth, and finally, human health and longevity are also at an all time high, notwithstanding the current Covid crisis. These positive developments are certainly the result of our competitive free market system capitalism, if you want to call it that, because they are. They mostly happened since the 1980s, during which time there was little else offered. So it seemed to me that our outlook should be generally positive. The state of the world, in spite of what you hear from the media, is better than ever because of capitalism. Even so, there are lots of call for change, for reform. Many are for specific versions of capitalism, shareholder capitalism, stakeholder capitalism, conscious capitalism, state capitalism and woke capitalism, which we are considering specifically during this conference. But why all these calls for change? There are a number of troubling trends that I see in the current market system, including the we are sliding in what many call crony capitalism, where there are those who are on the inside and those who are on the outside. This is especially apparent in the field of politics, finance and international conglomerates. The effect is that entrepreneurship is at an all time low. Small and medium sized companies are locked out of markets by too many rules and regulations and the financial market is skewed towards to favor a few. Beyond these observable effects, I believe we can go even deeper to the core criticism of our system. Notwithstanding the great achievements just mentioned, people seem to be disillusioned. Why the core of the criticism? What people really miss in our current economic system and business environment is humanity. A sense that each person counts. Even if it's not entirely true. This impression that the system is set up to serve the 1% needs to be addressed. We can't have an economy that only or mainly benefits investors. We can't have a system that doesn't care about those living on the margins of society. We can't have a system that sees profit as the ultimate and only justification of otherwise questionable business practices. These concerns are not lost on anyone watching our system in action. John Paul spoke of the culture of death and Pope Francis of an economy that kills. And finally, something clearly visible in the behavior and attitudes of the vast majority of employees is that we all long to have meaningful work. No one wants to simply be a number or a statistic, or a cog in a machine. I think if we are honest with ourselves, we'll agree that what I just described are some legitimate issues that ought to be addressed. All the proposals for reforming our system claim to address these issues, but in my reading, they ultimately fail because they focus only on one money. This is the great paradox, but maybe not surprising if you have a utilitarian approach to life. Money is the only thing that serves as our common measurement. In my experience, however, what makes the free market system great is not primarily money, but the freedom of creativity, the opportunity to become excellent in our economic and other life endeavors. Money and profit is of course a part of that. But profit is to business what blood cells are to the human body. I don't go around worrying about my white blood cells all day long, nor do I obsess about producing them. They are a vital byproduct of a healthy life. That doesn't make it bad. It makes it vitally necessary, but not an overarching concern. This obsession is what one could call the financialization of the economy. When we forget that the economy is made for man, not man for the economy. This is a foundational mistake. And none of the current proposals to improve our market system rectifies this. In my opinion, they all remain solely focused on on the financials. Second, the reformed vision of capitalism also lack a deeper understanding of work. Some focus on the objective meaning of work and push that slightly. But no one recognizes the sublime path of work, the subjective meaning of work that represents, according to a long church tradition, a profitable path to holiness. We humans are made in the image and likeness of the Creator. That's why we can create. It's a uniquely human ability. Other animals can't do that. Therefore, work is not just simply a physical activity, but when we work, we participate in God's creative power and we imitate him when we work. That is why when we work, we don't just make more, but we become more instead. Labor is seen by these proposals to change our current system simply as something opposed to capital. And per my previous point on financialization. This stands outside the center of concern. Work stands outside the concern of these proposals. The third point I found that all these proposals have in common is that I think they harbor a deep distrust of the human person, some even to the point of hostility. Look, it's easy to consider oneself as a member of the enlightened few and tell others what to do. And most impulses to improve the current system go a bit that way. I know from many years of leading companies and the classroom that it's of course much easier to force others to do something than to go through the trouble of having to convince them of the benefits and getting them to want the action on their own to in a sense, change their heart and become collaborators rather than people being told what to do. Because of this deep mistrust we have of others, we end up seeing those who disagree with us as intellectually inferior. And we therefore don't hesitate to urge them and manage them through fear and force. After all, we know what's good for everyone. It's us versus them. The problem is that game, the us versus them, sets up losers and winners, and that never ends well. The fourth common point among these proposals is ironic. Following from a system that was, according to Max Weber, born of the Protestant work ethic, a movement that explicitly separated the physical and the spiritual, the realm of work and the realm of morality, comes a demand that the culprits of business make amends to in order to be admitted or readmitted to good society. I'm talking about the demand of corporate philanthropy and businesses spending on non business related issues. This demand is a visible sign that what the company does and how it does it has moved into the background. In fact, we have seeded that space, the idea that business is itself a force for good. As soon as we start to come up with new halo inducing terms for things like B Corp, social entrepreneurs, non profits, triple bottom line companies and the sort the move made manifest that people apparently thought what people apparently thought all along, that business is a zero sum dog eat dog world. Beyond redemption From Alphabet Inc. To Zurich, insurance companies spend billions in pre tax philanthropy and are celebrated for giving back to society. But notice that donations don't require so called culprits to have a change of heart, only that they transfer money. There we are again at financialization. And come to think of it all, it strongly reminds me of the process of buying indulgences which I thought we dealt with over 500 years ago. Moreover, we need to debunk the idea that business is amoral or immoral, needing expiation through activism. We need to affirm that business is inherently good when it serves society by creating goods that are truly good and providing services that truly serve. We're discussing today the idea of woke capitalism. Its definition is of course fuzzy. Parts of it refer to racial justice and discrimination, other parts for business leaders to become social justice warriors. Look, I'm a white guy from Switzerland, so there is no way I'm going to lecture Americans about race. I have no credibility or basis to do that. What I will say is that in my opinion, racism does exist and it needs to be eliminated, just like other prejudices and injustices. The question how do you do that? There have been laws against a variety of discriminations on the books for years, and rightfully so. We ought to have laws that create a level playing field and recognize everyone's human dignity. But is that enough, you know, enough to change someone's heart, actual change. Change the culture, Change the system? I don't think so. Is the solution to be found in creating a word police, forcing people to say or do certain things publicly? I don't think so. But many reform proposals entail just that. Telling others what to think and do. To summarize what I found in my search for answers about how to change, how to improve the free market, the free market system I would say the purpose of an economy is the human person. Work is a key aspect of our humanity. It's one way we imitate God, one way we participate in his creative power. Work is also how we create value and thus earn a living. A person who personally flourishes and generates wealth in various ways is a prosperous person. That is the aim of an economic system, no matter what you call that system that creates it. Sustainable prosperity is the result of freedom, both political and economic. A freedom tethered to personal moral truth and action. That morality that is needed cannot be a relative morality, you know, as my friend Michael Matheson Miller likes to say, fashionable social policy is not business ethics. Of course it is difficult to live up to true moral standards. That's why we are ever so tempted to create a system in which we can pass the moral buck to someone else. We love to abdicate our moral responsibilities just so we can then turn around in shock and accuse the corrupt politician, the greedy shareholder, the career minded manager, the narcissistic CEO and anyone but ourselves. We then yell for the system to be fixed, for someone to pay their fair share, someone to clean up the mess, someone to change their behavior. Anyone but ourselves. And therein lies the crux of it. Instead of passing the buck or buying our way out of living a moral life, we ought to embrace it, embrace the challenge and take it on for ourselves, each one of us. Instead of telling others what to do, let's start doing it ourselves. How? Well, here's one idea. Begin with an honest reflection on how we all abdicate our moral responsibility on a daily basis. If we only realized that voting at the polls is less influential than voting without dollars. Aside from the fact that we only vote once every four years or so, but vote many times each day with our dollars. Imagine if you would only support products and companies that you feel express your actual values and conduct business accordingly. Take Disney, the NBA, Nike, or Apple, for example. All of them have questionable track records vis a vis business operations in and with China, and it's easy for us to turn a blind eye to that. But imagine your investment dollars go only to companies that behave in a way that align with your morality. The marketplace would change overnight. And think about it. That's what a marketplace is really for. It's about choice, competition, preferences. As soon as one is coerced, it's no longer a free market, isn't it? John Paul II was famous for telling his spiritual mentees, I cannot want for you. He meant that it is futile to force others into doing what we want them to do. They have to do it on their own volition if what we want is true change. Such change, he would say, comes not from coercion and force, but from attraction, from our seeing others whose behavior we are inspired to imitate. This is the kind of process that makes us form and live our conscience. It took me a while, but I did finally find out what he meant when he told me to go out and be a witness, and I invite you to be the same.