Video Transcription:
Running A Business And Saving The World:
[Music] you know what i've learned [Music] the biggest changes in the world are never on the front page of the newspaper [Music] if you want to understand where the world is heading look into the ideas that are floating around look at beliefs and convictions [Music] if you watch carefully you see that people slowly change their opinions as to what is right and wrong for themselves and for society whenever there's a big crisis suddenly these changes happen very fast this is one of these moments when some of the ideas and convictions we used to have are changing super fast these changes will influence your life more than the coming u.s elections or the next iphone it's about to change the most important institution of the world the company this is what extreme cost cutting looks like i wish you didn't have to see this i sure wish i hadn't i sure wish it even hadn't come to this [Music] a clothing factory in bangladesh where they produce exactly the stuff you wear your t-shirts your sweaters nearly 1 200 people died because european clothing companies wanted to cut cost to the max we can talk about it all day but if you see what happens when the cost cutting goes too far it's different it was for me it changed my ideas about what an entrepreneur really is and you as an entrepreneur you have the responsibility to change something you have the power to change something you can't pretend anymore yeah and there were enough drops like throughout the last centuries um yeah so that was maybe the last drop that was needed for me or for us to say like no let's change that [Music] right now things are not looking good for a lot of companies loads of them are going bankrupt and even more are barely hanging on surviving on government support only and it's not just the small companies hearts has gone bankrupt the largest car rental company in the world one company after another from the chain of italian restaurants vapiano to the kitchen maker pogenpool is filing for bankruptcy and lots of really large and extremely successful companies like booking.com are surviving only because the government is giving them millions in taxpayer money companies that have made billions over the last couple of years cannot survive a couple of months in which people only bought the things they really needed what does it say about our economy think about that i think about that a lot we both do we are entrepreneurs ourselves just like him and him welcome and her and him we started very different companies but what we have in common is that we all at some point came to the conclusion that the current way most large companies work a pump also can maximizing profits for the shareholders as their main goal that this model no longer works there is a need for more inclusive capitalism [Music] we are not communists don't worry not even socialists we believe that companies are a great way to achieve something we're not monks we're not people who say we don't want anything [Music] yeah we are not against making deals and making money we just happen to think we found ways to take the positives of the company and leave the bad part behind so we can focus on producing sustainable products and services and build a better society at the same time sounds good this is the einhorn office part of it at least we make products for below the waist below the belly button want to see them yeah condoms you bang them open so you can start banging and tampons they say nazis out tampons in and menstrual cups and we also do big really big condoms they are called big do you short them around yeah yes normally for for maximizing profits we would expand to the us and do alternatives to the brand and make more designs but instead we do like big sustainability projects and because we see that you know what's what's the maximum level that you have on stopping the climate crisis and the and the social crisis that we are having and facing that is getting worse and worse and it's not selling more condoms i must really say but if we were driven by shareholder value that would be what we would be maximizing that's that i mean that's the [ __ ] riddle that we're in that we have to stop this but the system is forbidding us and that's why we decided to run our company in a different way happiness is not a kpi or like a good family life or what's your impact on the environment or how do people working with you feel or what's your personal development that's i mean that's not in your [Music] foreign foreign is [Music] you see this is how it often goes you start a company with great intention you want to make the world a better place provide for yourself and your family or at least not make the world a worse place than it already is but then along the way money starts to be more important than what the business was about we've seen it a thousand times remember what said before they sold to facebook the body shop before they sold to l'oreal whenever a company grows big and the opportunity for takeover or large investment comes up the values that the company had tend to fade away and the consumer feels betrayed happens over and over again because the shareholders want more money in the old days the ceo of a company used to know more shareholders by name they were family or local wealthy people but when more and more people started to buy on the stock market shareholders became more distance remember how i said that a crisis can speed up change [Music] at the start of the 70s there was an oil crisis and the large recession followed and around that time just one article in an american newspaper made the whole business world turn their head and do things differently in this article the american economist milton friedman argued that companies should focus on their shareholders getting them as much returns as possible [Music] as long as it was within the law friedman said all decisions within a company should be aimed at getting maximum profits suddenly ceos were thinking less about what the company was producing and more about ways to lower costs and raise the profits for their shareholders friedman's idea spread like the newest rage in an elementary school it brought us straight into the age of wall street where greed for lack of a better world is good [Music] it brought us into the roaring's 80s and 90s in which making as much as he could regardless of the consequence was the rule it was the birth of all the fantasy finance tricks that are being performed on companies to boost their share price like leveraged buyouts splitting companies outsourcing work to other countries what could go wrong right the age of total capitalism was born friedman's ideas about the importance of the shareholder in the company's decisions might have changed the business world radically the rest of the world hardly noticed most people just continued to work watch football took holidays and raised their children but for all entrepreneurs ceos and business consultants the world had very much changed the shareholder became the most important focus in all their decisions now we are in a super recession and companies are falling over left and right meanwhile the world is heating up way too fast and people are on the streets protesting for higher wages better environmental protection housing education and so on and at the same time the whole business community is starting to doubt whether this focus on shareholder profits is working out the way friedman had said it would [Music] find profit more important than people all major business publications from the wall street journal to the financial times run articles about the deeper issues with this focus on the shareholder and she wrote a book on where we all went wrong basically but we will get to that later i just wanted to show you this first [Music] [Music] [Music] [Music] you see to me it all comes down to ownership of a company and why is that it's something everyone takes for granted but the system of shareholders who own the stock in a company they never set foot in creates a strange position imagine working for somebody you've never even actually seen before usually it's almost coming up not everyone thought this whole idea of shareholder calling the shots was unsustainable you see these things go wrong gradually not immediately that's why you can't really see it in the news sure there were some issues but the whole focus on the shareholder went quite well throughout the 90s we didn't really see what happens in the long run if you decide to move production to asia because it's just cheaper and will bring your shareholders higher profits or if you ignore any environmental damage because ignoring it will bring the shareholders more dividend at first you don't really notice you can do it for a long time before things start to fall apart it's like not servicing your car you can continue driving for a long time but at some point it will start falling apart but there's another reason everybody jumped on this idea from milton friedman that shareholder value should be the focus of the company let's dive a little deeper with renowned economist and author mariana matsukato there's stories narratives discourses which mythologize some actors much more than others and that gets used to lobby for a greater share of the income and there's a whole theory that refers to shareholders for example as the residual claimants the idea is that everyone else in the system has something called a guaranteed rate of return so workers will have their salaries banks will have their interest rates and they have this guaranteed return and shareholders risk getting nothing so if you do have a lot of wealth created for example in a biotech boom the internet boom the clean tech boom that we're currently experiencing the idea is that shareholders in some ways have the right to that booty once everyone else has been paid their share because they were the biggest risk takers because they risk getting nothing and that's completely based on this false myth about what everyone's doing in the economy no one has a guaranteed rate of return so debunking the the shareholder value theory means debunking who value creators are and who the risk takers are and that requires an alternative theory based on collective value creation maximizing shareholder value means that all you really care about is for example short run reductions in cost or short run increases in profits are often related obviously as opposed to the investment in long-term areas whether it's the capital development of a company so the machinery whether it's research and development innovation that can take 15 to 20 years for a company whether it's human capital formation training of the workforce so all these long-run investments and people and machinery and new knowledge suffer [Applause] it's like the 911 of uh capitalism seeing that all those brands from all the different levels all produced there and um that their safety was so poorly designed and just taking like the risk to waste these people's lives only if you see events like that you really realize [ __ ] you can't you can't hide anymore you can't pretend that you didn't know [Music] we were like just thinking we have this kind of entrepreneurial spirit and power and we really want to build things but do we want to build them like that so that's like the end cause of it and then you do you look at your value chain and you optimize and optimize that's what we're learning you know doing the better marketing getting more money paying people less outsourcing going to other countries that's actually yeah that's what you learn in in business of course that's how globalized globalized topo capitalism works and we were getting better at that and then we saw oh that's that's the result of that i don't want to be a part in that that's weird that's i don't want to build this world or this company who does that that's weird um maybe you know instead of just demanding uh change and demanding new laws let's change the operating system of the companies and of our economy itself and we are just looking for fellow entrepreneurs who had the same kind of vision and then we met armin stroenard who started the purpose foundation brilliant guy he has come up with clever solutions for running a company without the downsides of capital and shareholder pressure you know if we want to save the world we somehow need to force these players that are currently partly destroying the world partly destroying our planet we need to we need to cage them in today we have all the big companies absently owned by big funds by fund managers that sit in hong kong that decide what the ceo in frankfurt or paris needs to decide and the co decides about whether manufacturing site is closed or opened in brazil and nobody feels what actually the consequences of its actions are so the fund manager doesn't know that his pressure on the ceo leads to people losing their jobs and family being destroyed in sao paulo because it's absentee ownership they are not there there is no difference in the law if you own a sack of potato or if you own a company you can sell it like this you can destroy it you can do whatever you want with it and that somehow felt super strange to me the the way how we allocate companies is very simple there's this one mechanism is exactly this you know what we call capitalism money equals power so the more money you put on the table the more power you get why should the people who give the money have the power the people who give the money should get a good return sure but why should they steer a company when they have never been there they're not the best people [Music] in denmark we have the proof that actually even for shareholders it's better if they don't have the power so the shareholders on the stock markets they have no voting shares on the stock market they cannot vote they cannot influence the company and these companies believe it or not make up 60 of the entire stock market of denmark companies like novo nordisk carlsberg [Music] this is [Music] [Applause] royal academy of science we have a from the operators of 200 um there's many forms of capitalism we call it the varieties of capitalism so in scandinavia companies aren't really maximizing shareholder value there's something called stakeholder value or in spain there's a whole region in you know the mondragon basque region where they have cooperatives in the uk where we're sitting today there's a very famous cooperative called john lewis it's a retail shop so even in any moment in time there's also many companies not maximizing their shareholder value and really i think what we have is that there hasn't been enough attention even to the actual practice of running companies in different ways so there hasn't been a proper discussion globally of what works what doesn't what are the disadvantages with companies that run their corporate governance simply through maximizing shareholder value what can we learn from companies that don't do that all i learned there was the standard way of doing business think of a business idea find investors grow the thing until on paper it is worth something and nowhere is this more visible than the world of digital startups becoming profitable is not the goal of an investor usually investors want to sell a company at a multiple of the value it has when they start investing and becoming profitable profitable is a long-term development and that doesn't make sense for them because they want like exponential growth and that's why you're not supposed to become profitable you're supposed to grow in revenues to grow in size to to go in different markets maybe acquire competitors but grow grow grow grow grow it sounds extremely familiar [Music] i started a non-profit computer security consultancy company so the way that it works is all of the profits you know from our company and when i say profits this is after everyone pays and everyone has gotten paid uh go to support charity and i'm not just talking you know five percent of our profits 10 percent of our profits i am talking all of our profits we have 40 staff members we have over 100 customers we are the first dutch preferred supplier for for google for governments uh law enforcement banks insurance companies hosting providers telcos software companies in the last six years not only have we built a successful business that is colonizing the security market in the netherlands but we have won many many awards and the european commission uh called me one of the nine most innovative women in the eu in 2019 business schools and everywhere else you know teaches us that again you know business has to be this vehicle for commercial shareholders but again you know it doesn't have to be this way we can re-envision business as being a powerful form of activism most startup boot camps this is what they are going to tell you that you have to do i mean as entrepreneurs we get of course the exponential curve kind of shove down our throat you need to scale you need to architect your startup in such a way that it can grow exponentially you need to come up with business plans that illustrate to investors how you are going to grow exponentially so we get this silicon valley model and everywhere wants to be like silicon valley but why in terms of uh gross domestic product gdp you know of a national economy of course you've got this curve and it always needs to be up and to the right yeah and what happens if the economy stops growing you know layoffs recession suffering but why is this the case we need to really ask ourselves the question are those exponential curves getting us where we need to go the reason why we cannot flatten the economy is because there is too much extraction and that extraction once again you know ipos mergers acquisitions stock buybacks dividends you know this is all what's pulling value out of the economy but the problem is though you know this growth this you know puts pressure on our environments this growth puts pressure on our societies and we know by now that it's no longer sustainable but because there is so much extraction from the economy it needs to continue growing just to maintain a steady state even in silicon valley themselves they can tell you that this whole model of entrepreneurship is not all that it cracked up to be if you go to san francisco or the bay area look around you there are homeless people all over the place there is incredibly obscene inequality you know there are so many people angry at the tech companies for the way that they have displaced people and destroyed communities so uh i think that being a non-commercial entity on the commercial market is a super powerful tool for example you know i with radically open security i put a completely non-profit security company on the security market and by the sheer presence of the fact that i am on the security market it means the commercial players have to compete with me they compete with with me for staff they compete with me for customers right now it turns out actually that ethics has market value it's the same thing with fair trade right i mean people can vote with their dollars or euros for the world that they want to live in and when you are a social vendor on the market then it allows not just consumers but also corporations and governments to vote with their euros and they've got a lot more euros than consumers do so basically they can make the world better by simply purchasing from this party rather than from this party it's good to see we are not the only ones there's more and more of us entrepreneurs who do want to set up a company but who don't want to fall in the trap of making money for the shareholders no matter what once you take on money in a venture capital case you get dependent on money it's it's like you're um you're like a druggie or and you cannot they don't want you to become profitable so you get dependent on money you have to get more funding more funding um and you can't like really set up an organically grown healthy company anymore and facebook i think is a good example also so google and airbnb um it started out really with an idea improving something airbnb the idea behind airbnb is great it's but what they actually then went through and actually destroyed um that has nothing to do i think with the original idea but you were put in a track as a founder and you couldn't because you were make you were made dependent on on investments um you just lost control of that whole uh vehicle or car um yeah and then too much money is at stake to lose it so you start fighting and it's i mean it's uh it's just not cool [Music] [Music] [Music] but now there are a lot of people starting companies in which they don't have to do bad things just to satisfy their investors like asking for government help while your company has made billions over the last years [Music] is my [Music] um um [Music] from the either breakers in platform that belonged from sophie marley vince mcdonald and hill under sword website on start and that voyage consumed foreign those companies that have done so well that they have been able to give out big dividend payouts for example to their shareholders and have had enough money to do these massive you know billion dollar kind of share buyback schemes i don't think they should have asked for help um i think it was wrong because it's obvious that if they had money to give to those shareholders of course they would have money to now at least for a period not give out the dividend payouts and use those funds to be more resilient and i think there was and is an opportunity to do it differently with what i call conditionalities so that the government bailouts the government's support be conditional on companies changing so for example uh in denmark they did pass legislation which said that companies that use tax havens and hide their profits in places like the netherlands which unfortunately is you know has a dysfunctional tax policy um you know would not be able to be eligible for the bailouts or in france i think macron was one of the clearest he said we're not here to save companies we're here to transform them so he put strong conditions on both renault the car manufacturer and air france the airline that they had to reduce their carbon emissions but also produce locally with french manufacturing capacity both for its industrial strategy but especially that green mission that was embodied in that conditionality was very ambitious [Music] 87 of all assets on the stock markets aren't owned by super rich aren't owned by states 87 are owned by pension funds insurance companies that means by you and me by all of us we are the ones and who who are sticking to the power the interesting thing is we give the money to a pension fund they give it and they say well you know we just need to maximize to give our pensioners a good pension we give it to the best fund managers but fund manager says well i need to maximize profits because otherwise the pension fund will not give money to me so we have created a super strange system i just cannot uh understand a system that really takes all our pension monies insurance monies and investors in a way that everybody is the slave of the of the other one and nobody feels free nobody can be a steward nobody can be responsible because only if there are people who say well this is my company and i don't want to put chemicals into this river because i cannot sleep well and i'm the one who can decide this only if we have people who have that kind of power we have companies who can be responsible if you have ceos who say well you know i'm not i don't want to do this but i have to do this otherwise i'm fired we won't save our economy we won't save our planet so to exit the system you have to exit shareholder value to actually do what you really have to do and we're trying to do what we really have to do but it's it's hard if you just follow the numbers it's much easier actually you know let's double next year we double what do we do next year well we double okay cool that's it's crazy but that's how it works if you say you have to invent a way how we could all live together peacefully in the future and not [ __ ] up our planet that's really a hard task that's much harder than doubling profits we like going to the us we would easy double what i found is there are some other models there are companies like bosch like zeiss who set up a certain kind of ownership which ensures that the company is owned in a new way it's owned by stewards by trustees by people who say well yes we are controlling the company but we are just the stewards it's not our wealth but at some point you kind of signed away the ownership yes last year 18th of december we sat here in kind of a weird yoga outfit because it was our christmas party and then the lawyers came and then we signed that um it's not ours anymore wasn't that a hard decision to do yeah it still is because it's the company it's also worth something so you basically you sign away the chance to yes to earn a couple of million euros yeah like or more i don't know tens it's weird yeah yeah you know you did the right thing but uh it feels weird i like nice cars and i like like nice things and i could have bought an apartment like this and put everything like i would have wanted it and not pay rent anymore and i don't know do the normal thing and now i can't so i won't be able to do that anymore and that's i think that's what but the um but giving up on that changes you of course because you can't be like you can't do it and and and you know that it's also wrong to do it it's not good to own so many things it's not good for the world because if ions can own like just building a company for five years and then getting 10 million or 20 million out of it that's just that's not how like real value is created it's not true and getting out of it like being doing the true thing but having grown up in the 90s is [ __ ] up in in the head of course because you always saw that it's cool to have a nice car and now you just you know it's wrong but it's still nice they still have these things you know yeah it's diff it's like a drug maybe [Music] yeah if we don't use this you know terrible crisis that we're still living through and that's causing so much human uh misery and tragedy and deaths worldwide as an opportunity for change we're just going to be setting up as we have in the past the next crisis if we don't use this as an opportunity for change of investing in you know global health systems in the capacity of the public service to actually be able to manage a crisis and steering our economy in a way that becomes less deep less financialized more sustainable so companies are actually reinvesting their profits but especially reinvesting those profits in areas that transform those companies that bring us on a growth path that's more inclusive and sustainable we're just going to go from crisis to crisis to crisis you remember milton friedman the economist who in the 70s wrote this article on why a ceo had to do all they could to maximize the shareholders profits and how everybody went with that it's where it all started remember the consequence of that idea is that companies aim for the short term and this worked well for almost half a century fast profits and whatever happens in the long run we don't think about that and you know what i came to think a couple of years ago that all of this focus on the shareholder prevented us from thinking about the future just focus on the profits for the coming quarter nothing else and that far away future we were not thinking about that future is now [Music] using the time to redecorate a bit you know that's actually the essence of a startup you know is actually this a kicker table or table tennis and that doubles the company maybe already for the shareholder because of the public image of course otherwise it's not new [Music]
TradingVortex.com® 2019 © All Rights Reserved.