Visions: What limits us?

- Rohan Pai, PGHR 2010-12

This was the million dollar question that came up in our strategy class, thanks to the thought provoking session by our Business Strategy Formulation Professor, Dr. Harsh W Mishra. The question became even more interesting when the vision – ‘A World without Poverty’ - was discussed. When we were asked to imagine what such a world would be like, many of us expressed it as being “idealistic”, “utopian” or “difficult to imagine”. Of course we would like to live in such a world but given the economic, social and political scenarios prevailing today we find it hard to imagine such a world. It is not that our vision is limited but that we looked at the issue from a practical point of view.

Many questions blur our vision as we think of a world without poverty: Are there enough resources to fulfill this vision? Will there ever be equitable distribution of resources? Is the inherent selfishness of businesses the hindrance? Even if we close in on attaining the vision, will it be sustainable?

Let us consider the question on sufficiency of resources. The major hindrance we face in this regard is that growing population will keep demanding more and more resources and greater the population growth, more the probability that there will be a section of society that is not able to get enough. Consider that few decades ago we had a clear divide in the rural and urban India. But today the divide has reduced to the extent that people from rural India have migrated to the urban or more developed areas and many of these families are much better off than they were few decades ago. Similarly growth and development has percolated to many rural areas and many of these are experiencing a better standard of living. However, a majority of our population still lives below the poverty line because both the urban and rural population grew uncontrollably and the allocated resources didn’t reach all of them. So, concrete steps need to be taken on planning and creating mass awareness, especially at the bottom of the pyramid. Providing necessary control measures to check population growth will benefit all.

Next, the question was on equitable distribution of resources and the inherent selfishness of businesses. It is imperative that there has to be a collective effort on CSR as efforts and benevolence of individual personalities and firms would neither be all pervading nor a long term solution. Also what we need to understand is that the basic concept of the market is that the businesses out of their own selfish motives allocate and utilise resources efficiently for their own benefit and the output ultimately benefits not only them but also the economy. This is what economists call ‘the invisible hand’ guiding the process. The inherent selfishness of business might not be all that is to be blamed as it has provided growth to the private sector and ultimately the economy, without which there would have been much less growth, employment, output and many more poor people. So the Microsoft vision of ‘a PC in every home running Microsoft’ might be motivated by profit but it has benefited people and businesses worldwide.

The requisite growth has been achieved by our economy but have the generated resources over the years been utilised efficiently and have all of the resources allocated on social development actually reached where they were supposed to?

The next big question is about the sustainability of the vision. If the needs of all the poor are fulfilled and they are provided the basic food, clothing and shelter, will it be sustainable, considering the strain on the economies and the resources? Probably not. Just satisfying the needs of the poor is a short-term solution. Allocating a larger proportion of social development resources to empowering an increasing proportion of the needy to earn on their own through local employment or what we know as ‘dhanda’ might be a long term solution. And one day we might be able to envision ‘A World without Poverty’ without many doubts.

Controlling cannabis

The debate over legalising recreational use of drugs has been on for ages. The US state of California is set to vote on Proposition 19 -  the Regulate, Control and Tax Cannabis Act of 2010 - on November 2, and it appears as if economic considerations are outweighing ethical issues. One report that supports the economic benefits of legalising marijuana has been the new report from the International Centre from Science in Drug Policy, which suggests that current US policy has no effect on drug use or price. More from TIME Healthland:

While spending on federal drug law enforcement has increased 1,200% and marijuana arrests have risen 150% since 1981, the rate of marijuana use nationwide has bounced around, with no relationship to these efforts.

For the state facing a $19 billion budget deficit, legalising marijuana will help in cutting costs and increasing tax revenues.  However, there are concerns, as opponents have pointed out in The Washington Post:

They say the referendum would bar employers from firing stoned workers without proving first that they were impaired. That would mean school bus drivers, for example, could get high before climbing behind the wheel, according to critics.

Also, while the passing of the new Act would enable those over 21 to consume marijuana under California's laws, they would be in violation of the Federal laws in the US.

The economist Milton Friedman had some strong views on prohibition and drugs. Here's a link to an article written by him on the subject in the May 1, 1972 edition of Newsweek.

The Next Media Animation group from Taiwan has highlighted most issues as well as the repercussions of legalising marijuana by way of a rather funny video. If you don't understand the language, worry not for there are English subs.



So, will the increased tax revenues from legal sales of marijuana be nullified by corresponding decreases in sales of tobacco and alcohol products? Or will marijuana sales boost the sales of the rest? Also, will the big tobacco companies diversify their product line to include marijuana-based products? If California passes Prop 19, we may find out the answers in the years to come.

Please chip in with your thoughts on legalising drugs, and other related issues.

Conscious Capitalism

To be conscious means to be awake, mindful. To live consciously means to be open to perceiving the world around and within us, to understand our circumstances, and to decide how to respond to them in ways that honor our needs, values, and goals…. A conscious business fosters peace and happiness in the individual, respect and solidarity in the community, and mission accomplishment in the organization.
Fred Kofman, Conscious Business

The above excerpt is taken from the Conscious Capitalism Institute’s website, which states that the notion consists of three key elements:

1. Each company should have a purpose that transcends profit maximization.

2. Companies should be managed for the benefit of all stakeholders in their ecosystem, not just shareholders.

3. Companies should be led by evolved, conscious servant leaders who are dedicated to the company’s higher purpose.

The Economic Times featured a few articles on conscious capitalism over the last couple of days. One was an interview with Dr Rajendra S Sisodia, chairman, Conscious Capitalism Institute, and co-author of the book ‘Firms of Endearment’. Few highlights from the interview:

Companies that embrace conscious capitalism are transformed at a deep level. They redefine their purpose away from profit maximisation to something that is deeply resonant with the needs of the world and the passions of their stakeholders. They give up on the false premise of shareholder primacy and focus instead on win-win value creation for all — an approach that ultimately rewards shareholders with superior financial returns as well as the satisfaction of knowing that they are helping to impact the world for the better in multifaceted ways.

…

Companies that are truly conscious don’t need a separate CSR function, as they are responsible to society by definition. In our framework, the stakeholders are represented by the acronym SPICE: society, partners, investors, customers and employees. Society should be treated as the first stakeholder of any business, and every business must ensure that it is on the right side of society.

Also check out this feature on Indian companies that are pursuing conscious capitalism.

Finally, do watch this thought-provoking video. Slightly controversial, but it delivers a very strong message.

Thought for the day: As a lot of our left-leanings friends might ask, isn’t the term conscious capitalism an oxymoron?