Hack:
Non-accumulative capitalism: social incentives as the 'new' end

By Carlos Largacha-Martinez - Humanist, Social Inventor, Consultant, and Professor at Humanistic Management Center & Maria Panela MUSIC

Co-Authored By Yuli Andrea Saavedra Serna, Melissa Sierra-Miguéz

March 30, 2012 at 2:00pm

humanistic management

reinventing corporations

life-serving economy

Moonshots

Embed the ethos of community and citizenship

Enable communities of passion

Transcend traditional management trade-offs

Summary

What if the majority of the companies where for growth but not for profit maximization? The motive behind entrepreneurship will be the social incentive and not endless accumulation. This will have positive effects: elitism eroded, cooperation increased, greedyiness reduced, jungle-type competition diminished (and corruption as well) and relationships preferred over transactional interactions.

Problem

What if the mayority of the corporations and small/medium companies where for-growth but not for profit (to say, only sharing their profits for the stockowners)? The misconception about the human being is that only material incentives motivates him/her to do entrepreneurship. This paradigm has toxic outcomes for social structures because it promotes (like symptoms):

1) endless accumlation--as something ethical [end result: greed]

2) jungle-type competition--as a fair game [end result: corruption]

3) elitist interactions--as a natural outcome [end result: discrimination]

4) transactional relationships--as the only one possible [end result: denigration]

Besides that, all these social constructions are embedded in logic and reason as the one-and-only intelligence where social institutions--like corporations--can be built. Emotional, artistic or spiritual intelligences are downgraded. The overall result is what we are seeing right now, which permeates the corporate world. The vast majority of the for-profit--and some of the non-for profit--present also the four symptoms with a different name:

1) Skyrocketing CEO's wages

2) unethical (sometimes ilegal) practices to 'kill' the competition

3) bureacracy and control to maintain top-management EGOs, and

4) humans seen only as 'resources'.

Once the organization converts itself, by the pressure excert by the jungle-style capitalism, into a profit-maximizing machine, then everything start to fall apart. Thus, the organizational structure start to develop several illness just to respond, as a blind machine, to what is ask to do, and only that: produce goods and services maximizing the profits to the stockowners. That's it.

This structure and approach generates wrong spillover effects, that can be summarized as follows:

Stakehodlers dimension is diminished, and only taken into account by social or legal pressure (in the vast majority of the organizations). It is not a secret that companies react to social responsibility, not pro-act.
Work-Family Balance is downgraded. Although every day more companies have family friendly practices, the reality is that when its time of 'diligence', the family goes to the toilet. This has several wrong consecuences for the company and for the society as a whole.
Infinite accumulation by the stockowners without any ethical conflict. Skyrocketing inequality is the new (old?) game in town. GINI coefficients, worldwide, have not had a positive trend.
Decisions are made against the well-being of the workers, since the ultimate goal is to maximize profits. This weel-baing includes: environmental, financial, social and human. More people each day have a instict feeling that they dont control their lives anymore (even if they do have a job).
Ideology permeates everything. Anything that wants to create a change in this reality is seen as comunist (evil-doers). Top-management thinks that the Corporation and the jungle-type capitalism is not the problem. it is just a problem of 'sincronizing' some forces.

Solution

"Fliping reality" is the solution, but that will take time and a paradigm switch too. By fliping we mean the first introductory line. Today, the vast majority of corporations are for-profit, lets say 90% while 10% are not-for-profit, or other related ownership structures (v.gr. governmental, cooperatives, etc). Hence, after the flip, the reality would be: 90% for-growth not-for non-ethical accumlation companies, and 10% for profit ones. These numbers are more figurative to send the message.

Little-by-little, changing the vast majority of for-profit legal status to a for-[social]-growth types. Social entrepreneurship and B-Corporations are a big step that has been happening right now, and we are very happy to see this social-economic trend). That is necesary, but it is not sufficient. Elitist mental models has to be changed. A good example that only changing the legal status is not enough is to see the realities of some NGOs (organizational culture and internal climate) and the salaries of some CEO's of non-for profit organizations. The four symptoms MUST be changed, not just one or two.

Practical Impact

We think that if this non-accu,ulative capitalism happens, a lot of good things will happen concomitantly. We can summarize this practical impact in the following themes (more could be written, but we focused in what we think are the more important):

Reducing economic (and social?) speculation: Economically speaking, it is clear that the 'invisible hand' is a fairy tale. The forces behind demand-and-supply are crisscrossed by the profit maximation motive. The speculation is also propelled by 'kill-the-other' type of competition. Speculation creates inflation that at the end produces a lot of problems. in the long-term, commodities prices will be reduced and global social inequality too.
Changing the paradigm: as some has written here at MIX, money does not generate long-term happiness. what drive us is not economic prosperity but passion, callingness, self-actualization or flow. The structural realities generated by profit-capitalism and competitive-corporations are not supporting a sustainable happiness. Changing this mindview will help achive the non-accumulative approach since materialism will not be and end in itself. Thus 'having' will be replaced by 'being'. In adittion, the "command and control" corporate paradigm will be changed for "sharing and renunciation" one.
Avoiding "killing" the competitors at "any" cost: since the ultimate goal is to accumulate, profit-maximation is a must. Hence, if my competitor is reducing my profits I will start doing non-ethical but legal actions. In marketing there are several stories about this. Good-faith actions go to the toilet. With the changes made, this will 'flip' as well, so companies will share since the social incentives are the ultimate goal, no to win a bigger share of the market.
Motivation comes from asking "who is the other": the workplace will be filled with participation, democracy and humanism. the non-accumulative paradigm will permeate the corporation and the CEO's mindset, so people will be intrinsicly motivate (on the majority of the times) and not extrinsicaly (material drivers). In adittion, people wont seek realization mainly in knowing who they are (individualism and egoism) but on knowing the other (cooperation, diversity).
FBSI vis-a-vis NYSE: This means, the 'Family Balance Social Index' is preferred to the 'New York Stock Exchange' (as a fun way to put it). Family, in a broad definition, is where deep emotional bonding occurs. Only in this space, values are ingrained, instill, learned, aprehended in the self. No wonder that we have this corrupted world. Since materialism is not the end goal, corporations are redesign to allow families to grow. Healthy bonding will be possible.
Equality is possible: non-accumulative capitalism is not a flatten society, although it tends towards a less hierarquical one. The stockowners are not looking for profits but for wealth creation and growth. But this wealth will be more equaly distributed. Savings will be redesign in order to have economic tranquility. Male-chouvinism will be part of museums.
Sustainability is possible: since corporations do not have to "kill the competitor" neither having "profit-maximazing" frameworks, investing in clean technologies will be propelled.

At the end, the proposal by Gary Hammel and Polly LaBarre ("Reimagining Capitalism") will be possible, since the practical impact of this hack is diminishing (eroding?) what they argue about the problems of capitalism and modern corporations (besides other positive outcomes that we show below, which also changes elitist and authoritarian attitudes):

Capitalism degenerates into narrow self-interest without a strong ethical foundation.
Vision and perseverance are critical to value creation-- and highly vulnerable to short-termism.
Capitalism cannot operate in a social vacuum and profits and shareholder return can no longer be the only measures of a company's value-added.

See the file "non-accumulative capitalism.pdf" with these and our insights.

First Steps

Supporting more social entrepreneurship laws all over the world. Social entrepreneurship is understood here as the type of company where the owners run it, but cannot share profits.
Taking corporations that produces goods that are non-healthy (tobacco, alcohol, oil, casinos, etc) and become non-for profit, but for growth. And not for accumulation.
Change the curriculum in schools so sharing is the new mainstream norm. Math is as important as playing the piano.
Sharing this ideas globally

Credits

Thanks to Melissa Sierra and Andrea Saavedra.

Documents

quantum_largacha_iese_v.2.5_video.pdf

non-accumulative_capitalism.pdf

Videos

http://vimeo.com/40681412

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December 8, 2012 at 12:18am

Frederic J.Leconte

Hello Carlos (and Melissa and Yuli Andrea) your story is inspiring. Many have dreamed about such approach for years but you get a point if we consider the times are being more receptive to a need for a move, eventually the expected flip. Way to go for sure, and many leaders to convince but vision is right. Of course, as you did connect through my Neutrinos and Entangled talents stories, you'll be nor surprised that I had lots of pleasure to read your helpful material. The 2010 Barcelona business case with the Quantum framework is on the same wavelength. The AreaLoft case is another connection as LOFT is the acronym and name of our "collective Intelligence" community within our company, also a cooperative created in the mid nineteen century. Keep going and thinking and acting.

June 4, 2013 at 4:11pm

Carlos Largacha-Martinez

Thanks Frederic. I dont know why I havent seen your comment. We continue with these ideas. Actually, our paper (workshop) with these ideas was accepted for the Academy of Management 2013 to be held in August (Orlando). So we'll see what trigers.