Blake Borgeson, in blog form

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Posts Tagged ‘umairhaque

umair to business: be sustainable

with 3 comments

Whenever Umair Haque, whom I’ve blogged about here before, saves up some thoughts and posts them and titles them a manifesto, people take notice these.  There’s Fred Wilson’s post from a couple days ago promising to really digest the suggestions; there’s Michael Lewkowitz, whom I didn’t know until today, and who sounds like a sharp vc up in Canada; there’s me, writing this post.  Hey, I count.

I didn’t plan on writing two posts about this, but there was so much to think about once I got into the topic that splitting up the two big questions Umair brings up seemed like the smart thing to do.

I’ll get right to the point.  Here’s another link to Umair’s post, if you’d like to read it first: A Manifesto for the Next Industrial Revolution.  The end of his post gets into suggestions for big sustainable opportunities to pursue, which goes beyond what I think I can talk about in a single post.  This post is about how an existing business can think about sustainability.

How can Businesses Make the World Better?

This question assumes, as Umair strongly believes, that economic progress doesn’t appear to be lining up with improving welfare and prosperity for everyone, as many of us have either hoped or assumed (or for cynics, doubted) it would.

The world is getting phenomenally richer – but the costs of that wealth seem to be endemic poverty for vast swathes of the world’s population, the poisoning of the water we drink, the pollution of the air we breathe, and the fraying of the social and cultural fabric that binds us together.

I agree with him regarding many aspects, (including allocating environmental costs), but regardless I don’t feel like you have to agree 100% with the above statement to appreciate a discussion of how to improve a system that could clearly stand some rethinking.

Restructure your Thinking around Sustainability

The first way to make the world better is a DNA (philosophy, mindset, fundamental strategy in Umair’s vocabulary) shift to sustainability–not just environmental, but people sustainability and market sustainability as well.  Umair says below that technology alone will not achieve a sustainable economy, and I’ll give him that, though as he admits, technological advancement will continue to play a critical role making the world better.  He just calls the DNA shift harder, and he may be right, since it’s a departure from the present course of most businesses.

Even if we invent a magic energy or food source tomorrow, it does the world little good if it’s in the hands of a Bill Gates 2.0 – the amount of new value that’s created is minimized. Conversely, it also does us little good if it’s in the hands of a Ford 2.0, who’ll just push-market next-generation gas guzzlers that put us squarely back into an energy trap.

The real problem is that the industrial economy is riddled with incentives to rip your head off, sell you lemons, maximize so-called “profit” at all costs, and exert power against you – not for you. That’s why it seems that pain, suffering, and value destruction are deeply embedded in the very DNA of our rusting, industrial-era economic system itself.

And that means that though technology is necessary, it’s not sufficient. What’s harder – and what truly unlocks new value – is new DNA. The fundamental question new DNA must answer is this: how do we organize and manage resources so they’re not depleted, crushed, strip-mined, and slashed-and-burned?

We need company and organizational DNA to get reinvented with a long-term view towards creating sustainable businesses and a sustainable world.  For a terrific perspective on that idea, Yvon Choinard’s book about starting and running one of the most sustainable companies out there (patagonia) really opens your eyes to what kind of a shift in mindset Umair is talking about.

Why be Sustainable?  Is it a Moral Imperative?

One reason to go the sustainable route is if you believe it’s a moral imperative–that it’s actually unethical for a business to operate knowingly in a way that is not sustainable, even if it’s legal.  However, as one of the commenters on Umair’s post points out, I think it’s going to be difficult for businesses to come together to agree with that until a new generation of business leaders, raised with all this talk of sustainability, takes hold.  That means you’re putting yourself at a competitive disadvantage by being sustainable, which means that, until the government steps in and regulates industries across the board, allocating environmental and social costs more effectively, sustainable companies are going to be on the down-and-out.

Should businesses sacrifice themselves for the ethical opinions of its leaders, even when not asked by the law? That’s a tough question for a private company.  As for public companies, in the US, leaders get taken to court for acting counter to the interests of shareholders.  To me, this means that the moral imperative is instead for both companies and individuals to push our government to reform the regulatory environment as quickly as possible, towards more effectively lining up with the realities of life on earth as we understand them now.

Long-term competitive advantage.

So how should business leaders, investors, and entrepreneurs see sustainability in our current business environment?  As a source of long term competitive advantage.  Work with politicians, if possible, to help them understand the costs and concerns associated with your business that aren’t accounted for in today’s regulatory environment.  Educate customers as to what needs fixing in your industry, what you’re doing about it, and how they can help, by voting at the ballot and with their purchasing decisions.

And think long-term.  Allocate costs correctly yourself in preparation for the day, hopefully not too long in coming, when the regulators force companies to do so.  Brag about it to your customers.  When you know where the business environment is headed, you can swim with the current instead of against it, and prepare yourself to be at an advantage when things settle out.

What does this have to do with most companies?

Loads of companies, especially in the internet space, can remain blissfully ignorant of greenhouse gases, global warming, and starving people elsewhere in the world with no consequences.  What should these companies and entrepreneurs make of all this talk about sustainability?

I think sustainability in the broader sense, beyond the environmental sustainability most people discuss, is about being honest about what you know–with yourself, your employees, and your customers.

Here are a few standard dishonest tactics:

  • manipulation (hiding important facts for your benefit)
  • bait and switch (say, introducing a new opt-out advertising mechanism without warning, like beacon into facebook)
  • push marketing a product that you know destroys wealth or value in the long run (umair’s ford 2.0 example, though I know too little about ford’s history to point a finger specifically at them)

If you wouldn’t be comfortable explaining to an audience of friends and family why you made the strategic decision you did, to me that’s not a sustainable strategy.  To agree with that, you have to believe that in the end, the truth will out, and that trust matters.  This broader view of sustainability loops back into my previous post about employing “be good” as part of your company strategy.

In my next post I’ll look at the second big question Umair discusses: How should we go about solving the world’s big problems?  I’ve been thinking about it a lot recently, so it should be interesting to try to put into words.

Please comment if you like.

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Written by blakeweb

June 25, 2008 at 5:17 pm

paul graham and umair haque: be good

with one comment

Being good as a company is something I think about a lot. And since I just read these two interesting perspectives, I thought it was time to pull thoughts together.

Disclaimer: I want to make the point that I don’t agree with every single argument the authors make. I think it’s understood in the blogging world that when I link to someone else’s post, I’m not saying I agree with it 100%, but I just want to make sure. I’m just pointing to something you should read and digest for yourself. Hopefully soon I’ll be comfortable leaving this disclaimer out most of the time.

First is Paul Graham‘s most recent essay, entitled ‘be good‘. I guess he likes to write long blog posts, so he calls them essays so you won’t be turned off by how long it is–except that now it’s called an essay, which is equally off-putting to the people who avoid long blog posts. Anyway, I’m not familiar enough with YCombinator to say much as to what Paul Graham’s investment record is like with YC, but this essay (calling it that at least makes it sound more serious and sophisticated I guess) is very well written.

Overall Paul’s essay captures a lot of my own opinions on how valuable it is, to both companies and individuals, to be in the business of making the world a better place for everyone.

There’s a lot of external evidence that benevolence works. But how does it work? One advantage of investing in a large number of startups is that you get a lot of data about how they work. From what we’ve seen, being good seems to help startups in three ways: it improves their morale, it makes other people want to help them, and above all, it helps them be decisive.

He comes in at the end to reiterate that he isn’t just pushing the ‘be good’ mantra because he thinks it’s morally superior, and therefore the right thing to do in and of itself.

When you write something telling people to be good, you seem to be claiming to be good yourself. So I want to say explicitly that I am not a particularly good person. When I was a kid I was firmly in the camp of bad. The way adults used the word good, it seemed to be synonymous with quiet, so I grew up very suspicious of it.

You know how there are some people whose names come up in conversation and everyone says “He’s such a great guy?” People never say that about me. The best I get is “he means well.” I am not claiming to be good. At best I speak good as a second language.

So I’m not suggesting you be good in the usual sanctimonious way. I’m suggesting it because it works. It will work not just as a statement of “values,” but as a guide to strategy, and even a design spec for software. Don’t just not be evil. Be good.

Next, I’ve been reading Umair Haque’s blogs, bubblegen and his new hbs-located blog, for some time, and he is one of the most insightful writers I’ve found. He sometimes goes way beyond what he really means with sweeping statements and broad generalizations, but you get used to that and you realize he’s usually just in a hurry, which is why he’s often the first (I hear of) to make very original observations. In his most recent post on creating real value, he states very specifically that most of the ‘revolutionary’ innovation coming out of startups and venture capital these days is still focused on adding on useless features and providing new ways for people to waste time, despite some big problems in the global ecology and the global economy. As usual, he’s got some pretty harsh criticisms for the world at large.

The self-indulgence of today’s so-called revolutionaries in a darkening economic twilight is a recipe for strategic suicide.

So here’s my challenge. If you’re a revolutionary, then be one: put your money where your mouth is, and fix a big problem that changes the world for the better – if you really have the courage, the purpose, and the vision, that is.

At the bottom of it, both of these authors are talking about generating real value. The capitalism ingrained in the anglo-american core, at least for nearly everyone in the business world, tells us that the profit you make is the real measure of the value you’re creating. If enough people are willing to pay you more for something than it costs you to provide them with it, then congratulations, that’s value right there. You earned it, and now you get to buy stuff with it.

I definitely agree with that, as stated, but it leaves out at least a couple of considerations:

  • If the rules of the game (capitalism; the market) are drawn incorrectly (e.g., apportioning the costs of pollution or other environmental damage), and in such a way that you can profit more by taking advantage of that error or omission, are you really creating as much value as your profit says?
  • If you manufacture a sub-par or overpriced product, but you’re able to convince people to buy from you versus your competitors through manipulation (not presenting the whole truth), are you really creating value?

In the first situation, people look to experts and the government to set the rules correctly and adjust them as needed to keep value creation aligned with profit creation. Ideally that’s great, but is that a reasonable expectation, especially when people are saying that the government is owned by the companies, not by its citizens? In the second, you can always argue that your customers are responsible for their own buying decisions, and that obviously they’d rather have your product than the money they gave you–that’s why they made the purchase. In a world where full and complete information on companies and their products, sources, and practices is freely available and easy to use, I’d agree.

I think my main point is that, while it’s easier, in my opinion, to use profit as the judge of value in business, it can very often lead you to the wrong decisions. I think a better compass is impact, and by that I mean the change for the better you make in the world. And since that’s very difficult to quantify in full and think about in day-to-day business decisions, I think most of it is wrapped up in doing better than anyone else can for your customers and future customers and adding to their lives in a way you feel is really meaningful.

Written by blakeweb

May 2, 2008 at 7:06 pm

Posted in startups

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