IS THE FRIEDMAN DOCTRINE TO BLAME FOR TODAY'S GLOBAL ISSUES?

Sometimes I think the Friedman doctrine is what's wrong with the world today.

If you aren't familiar with good ole' Milton Friedman's eponymous Friedman doctrine, let me take a moment to elucidate you. 

According to Wikipedia…

"The Friedman doctrine, also called shareholder theory, is a normative theory of business ethics advanced by economist Milton Friedman that holds that the social responsibility of business is to increase its profits. This shareholder primacy approach views shareholders as the economic engine of the organization and the only group to which the firm is socially responsible. As such, the goal of the firm is to increase its profits and maximize returns to shareholders." (bolding is mine)

Prior to the 1970s, there was an idea that businesses were a part of the communities in which they reside and thus owe a responsibility to their communities and employees. Friedman made the case that a company has no social responsibility to the public or society, only to the shareholder.

Not surprisingly, the Friedman doctrine was deeply influential in the business world over the ensuing decades. The pendulum continues to swing back and forth between avowal and disavowal of the extremes of shareholder capitalism based on the values of the Friedman doctrine.

Up until this year, the modern business landscape had begun to turn away from the doctrine, at least on paper. Many companies, especially retailers or those directly interacting with the public, recognized that consumers favor companies that integrate some level of community social responsibility into their business models.

I say on paper because we have come to recognize greenwashing as a new corporate sin. Greenwashing is a marketing practice designed to make something look more environmentally friendly than it really is for the purpose of promoting sales or improving public opinion.

But notwithstanding greenwashing, consumers have made it clear that we favor companies that have missions that are broader than maximizing profits for shareholders.

That is what makes the current business environment so tricky. The new administration (Yep, I'm gonna go there) has caused the pendulum to swing, virtually overnight, back in the direction of (their version of) the Friedman doctrine. By using executive orders, leveraging federal funding and contracts, and threats of DOJ lawsuits, the Trump administration has all but outlawed community social responsibility.

In their version of the Friedman doctrine, any diversity is a threat to the meritocracy and therefore profits. In their version of the doctrine, any attempt to mitigate environmental impact is stealing from shareholder profits. In their version of the doctrine, business is a win/lose proposition, and everyone should lose, but the shareholder.

This kind of business mindset more closely resembles a raping and pillaging marauding party than a responsible corporate community member.

I think it is pretty obvious that I don't buy into the Friedman doctrine and definitely not the Trump administration's version of it.

In recent months, I have found myself in several conversations about the how and why behind my business structure. To the point that it really became a philosophical debate about the purpose of a business…back to the Friedman doctrine. I have found myself having to defend my decision not to maximize shareholder value (value to me as the business owner) and instead make decisions that serve the community as a whole, with me as just one of those constituents.

I have asked myself, WHY!? Per everything I learned in business school, I should design my practice to maximize shareholder value, shouldn't I? And if I don't, then I am just a dumb business owner, unskillful, unsuccessful…aren't I?

But everything in my soul screams, "NO!"

I refuse to build a win/lose business. I will either build a win/win/win business or I will burn it all down. I know that sounds a bit hyperbolic, but that is the level of emotion I felt about NOT building a predatory business.

I do not believe that in order for me to win as a business owner, other people have to lose. And, I have come to realize that everything I have done in my own practice, building LOTUS for other advisors and The Intentional Advisor, is about demonstrating that to the world.

The process of "defending" my ideas has helped me refine my thoughts, and I put together a personal mission statement that I hope captures the spirit of what I am trying to say.

My mission is to demonstrate that business can be a powerful force for good, enriching everyone it touches- by design.

I hope you won't mind indulging me as I break down a couple of ideas a little further:

1. Demonstrate- I will demonstrate through my own business and through the examples of advisors who implement these strategies that a business can benefit all constituents.
2. Force for good- We will measure the impact of our work by more than just profit. Families helped, stress alleviated, employees supported, causes impacted…
3. Enriching everyone- The beneficiaries of our work will be myriad: clients, employees, owners, business partners, and the community.
4. By design- The positive impact of our company will be reflected in how we do business, not an afterthought tacked on to make us feel better.

It took me many iterations to refine my mission statement to include all four of the components outlined above. Now, when I read it, I feel at peace. If I accomplish that mission, I know that I will have run a successful business and lived a truly meaningful life.

I want to encourage you to think beyond the Friedman doctrine and all of the ideas the business world tries to foist on us. As business owners, we have the freedom to define success for ourselves. I challenge you to exercise that freedom and write your mission statement that reflects the values that are most important to you!

I hope this serves you,

-Lucila

P.S. 

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