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Copyright © 2020 by Rebecca Henderson
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owned by the publisher. Library of Congress Cataloging-in-Publication Data
Names: Henderson, Rebecca, author.
Title: Reimagining capitalism in a world on fire / Rebecca Henderson.
Description: New York: PublicAffairs, 2020. | Includes bibliographical
references and index.
Identifiers: LCCN 2019045461 | ISBN 9781541730151 (hardcover) | ISBN
Subjects: LCSH: Economic policy. | Organizational change. | Capitalism—Moral
and ethical aspects.
Classification: LCC HD87 .H46 2020 | DDC 330.12/2—dc23
LC record available at
ISBNs: 978-1-5417-3015-1 (hardcover), 978-1-5417-3013-7 (ebook), 978-15417-5713-4 (international)
“WHEN THE FACTS CHANGE, I CHANGE MY MIND. WHAT DO YOU
Shareholder Value as Yesterday’s Idea 2
REIMAGINING CAPITALISM IN PRACTICE
Welcome to the World’s Most Important Conversation 3
THE BUSINESS CASE FOR REIMAGINING CAPITALISM
Reducing Risk, Increasing Demand, Cutting Costs 4
DEEPLY ROOTED COMMON VALUES
Revolutionizing the Purpose of the Firm 5
Learning to Love the Long Term 6
BETWEEN A ROCK AND A HARD PLACE
Learning to Cooperate 7
PROTECTING WHAT HAS MADE US RICH AND FREE
Markets, Politics, and the Future of the Capitalist System 8
PEBBLES IN AN AVALANCHE OF CHANGE
Finding Your Own Path Toward Changing the World
About the Author
Praise for Reimagining Capitalism in a World on Fire
Notes To Jim and Harry Explore book giveaways, sneak peeks, deals, and more.
Tap here to learn more. PROLOGUE I grew up British. The experience left (at least) two lasting marks. The first is a
deep and abiding love of trees. My family life was tumultuous, and I spent much
of my teens lying on the great lower limb of a massive copper beech,
alternatively reading and looking up at the sky through its branches. The beech
was toweringly tall—at least as tall as the three-story English manor house it
stood next to—and the sun cascaded down through its leaves in greens and blues
and golds. The air smelled of mown grass and fresh sunlight and two-hundredyear-old tree. I felt safe and cared for and connected to something infinitely
larger than myself.
The second is a professional obsession with change. My first job out of
college was working for a large consulting company, closing plants in northern
England. I spent months working with firms whose roots went back hundreds of
years and that had once dominated the world but were now—disastrously—
failing to grapple with the challenge of foreign competition.
For many years I kept the two sides of myself quite separate. I built a career
trying to understand why denial is so pervasive and change is so hard. It was a
good life. I became a chaired professor at MIT and something of an expert in
technology strategy and organizational change, working with organizations of
all shapes and sizes as they sought to transform themselves. I spent my
vacations hiking in the mountains, watching the maples burn and the aspens
dance in the wind.
But I kept my job and my passions in separate boxes. Work was lucrative and
fun and often hugely interesting, but it was something I did before returning to
real life. Real life was cuddling on the sofa with our son. Real life was lying
together on a blanket underneath the trees, introducing him to the world that I
loved. I assumed that the trees were immortal: a continuously renewing stream
of life that had existed for millions of years and would exist for millions more.
Then my brother—a freelance environmental journalist and the author of The
Book of Barely Imagined Beings, a wonderful book about creatures that should
not exist but do, and A New Map of Wonders, an intricate meditation on the physics of being human—persuaded me to read the science behind climate
change. I wonder now if he was hoping to wake me up to the implications of my
day job. If so, he succeeded.
It turns out that the trees are not immortal. Leaving climate change
unchecked will have many consequences, but one of them will be the death of
millions of trees. The baobabs of southern Africa, some of the oldest trees in the
world, are dying. So are the cedars of Lebanon. In the American West, the
forests are dying faster than they are growing. The comfortable assumption on
which I’d based my life—that there would always be soaring trunks and the
sweet smell of leaves—turned out to be something that had to be fought for, not
an immutable reality. Indeed, my comfortable life was one of the reasons the
forests were in danger.
And it wasn’t just the trees. Climate change threatened not just my own son’s
but every child’s future. So did rampant inequality and the accelerating tide of
hatred, polarization, and mistrust. I came to believe that our singular focus on
profit at any price was putting the future of the planet and everyone on it at risk.
I came close to quitting my job. Spending my days teaching MBAs, writing
academic papers, and advising companies as to how to make even more money
seemed beside the point. I wanted to do something. But what? It took me a
couple of years to work out that I was already in the right place at the right time.
I started working with people who had the eccentric idea that business could
help save the world. A couple of them ran multibillion dollar companies. But
most of them were in much smaller firms or much less exalted positions. They
included aspiring entrepreneurs, consultants, financial analysts, divisional VPs,
and purchasing managers. One was convinced she could use her small rug
company to provide great jobs for skilled immigrants in one of the most
depressed towns in New England. Several were trying to solve the climate crisis
by building solar or wind companies. One was giving his life to accelerating
energy conservation. One was pushing his company to educate and hire at-risk
teenagers. Another was hiring convicted felons. Another was doing everything
she could to clean up labor practices in the factories her firm ran across the
world. Many were trying hard to channel financial capital to precisely these
kinds of people: business leaders seeking to solve the great problems of our
All of them were skilled businesspeople, very much aware that the only way
they could drive impact at scale was to ensure that doing the right thing was a
“both/and” proposition—a means to both build thriving and profitable firms and to make a difference in the world. All of them were passionately purpose driven,
convinced that harnessing the power of private enterprise was a hugely powerful
tool to tackle problems like climate change and—perhaps—to drive broader
I loved working with them. I still do. They strive to live fully integrated
lives, refusing to wall off their work from their deepest beliefs. They struggle to
create what one purpose-driven leader I know calls “truly human” organizations
—firms where people are treated with dignity and respect and motivated as
much by shared purpose and common values as by the search for money and
power. They try to make sure that business is in service to the health of the
natural and social systems on which we all depend.
But I worried. I worried that this approach to management would never
become mainstream: that it was only exceptional individuals who could master
the creation of both purpose and profit. I was convinced that in the long run, the
only way to fix the problems that we faced was to change the rules of the game
—to regulate greenhouse gas emissions and other sources of pollution so that
every firm has strong incentives to do the right thing, to raise the minimum
wage, to invest in education and health care, and to rebuild our institutions so
that our democracies are genuinely democratic, and our public conversations are
characterized by mutual respect and a shared commitment to the well-being of
the whole. I couldn’t see how a few purpose-driven firms could help drive the
kind of systemic change that we would need to put these kinds of policies in
place. My students—by this time I was teaching a course in sustainable business
—shared my concerns. They had two questions: Can I really make money while
doing the right thing? and Would it make a difference in the end if I could?
The book you hold in your hands is my attempt to answer these questions—
the result of a fifteen-year exploration of why and how we can build a profitable,
equitable, and sustainable capitalism by changing how we think about the
purpose of firms, their role in society, and their relationship to government and
I do not suggest that reimagining capitalism will be easy or cheap. My career
has given me extensive firsthand experience of just how difficult it is to do
things in new ways. For many years I worked with firms struggling to change. I
worked with GM as it attempted to respond to Toyota. With Kodak, as the
conventional film business collapsed in the face of digital photography. With
Nokia—which at its peak sold more than half of the world’s cell phones—as
Apple revolutionized the business.1 Transforming the world’s firms will be hard. Transforming the world’s social and political systems will be even harder. But it
is eminently possible, and if you look around, you can see it happening.
I am reminded of a moment some years ago when I was in Finland,
facilitating a business retreat. It was the first and last time that my agenda has
included the item “5.00 pm—Sauna.” Following instructions, I showed up for
the sauna, took off all my clothes, and soaked up the heat. “And now,” my host
instructed me, “it’s time to jump into the lake.” I duly ran across the snow
(everyone else carefully averting their eyes—the Finns are very polite about
such things) and carefully climbed down a metal ladder, through the hole that
had been cut in the ice, and into the lake. There was a pause. My host arrived at
the top of the ladder and looked down at me. “You know,” she said, “I don’t
think I feel like lake bathing today.”
I spend a good chunk of my time now working with businesspeople who are
thinking of doing things differently. They can see the need for change. They can
even see a way forward. But they hesitate. They are busy. They don’t feel like
doing it today. It sometimes seems as if I’m still at the bottom of that ladder,
looking up, waiting for others to take the risk of acting in new and sometimes
uncomfortable ways. But I am hopeful. I know three things.
First, I know that this is what change feels like. Challenging the status quo is
difficult—and often cold and lonely. We shouldn’t be surprised that the interests
that pushed climate denialism for many years are now pushing the idea that
there’s nothing we can do. That’s how powerful incumbents always react to the
prospect of change.
Second, I am sure it can be done. We have the technology and the resources
to fix the problems we face. Humans are infinitely resourceful. If we decide to
rebuild our institutions, build a completely circular economy, and halt the
damage we are causing to the natural world, we can. In the course of World War
II, the Russians moved their entire economy more than a thousand miles to the
east—in less than a year. A hundred years ago, the idea that women or people
with black or brown skin were just as valuable as white men would have seemed
absurd. We’re still fighting that battle, but you can see that we’re going to win.
Last, I am convinced that we have a secret weapon. I spent twenty years of
my life working with firms that were trying to transform themselves. I learned
that having the right strategy was important, and that redesigning the
organization was also critical. But mostly I learned that these were necessary but
not sufficient conditions. The firms that mastered change were those that had a
reason to do so: the ones that had a purpose greater than simply maximizing profits. People who believe that their work has a meaning beyond themselves
can accomplish amazing things, and we have the opportunity to mobilize shared
purpose at a global scale.
This is not easy work. It sometimes feels exactly like climbing down a metal
ladder into a hole cut through foot-thick ice. But here’s the thing: while taking
the plunge is hard, it is also exhilarating. Doing something different makes you
feel alive. Being surrounded by friends and allies, fighting to protect the things
you love, makes life feel rich and often hopeful. It is worth braving the cold.
Join me. We have a world to save. 1
“WHEN THE FACTS CHANGE, I CHANGE MY
MIND. WHAT DO YOU DO, SIR?”
Shareholder Value as Yesterday’s Idea The real problem of humanity is the following: we have Paleolithic emotions; medieval
institutions; and god-like technology.
—E. O. WILSON What is capitalism?
One of humanity’s greatest inventions, and the greatest source of prosperity
the world has ever seen?
A menace on the verge of destroying the planet and destabilizing society?
Or some combination that needs to be reimagined?
We need a systemic way to think through these questions. The best place to
start is with the three great problems of our time—problems that grow more
important by the day: massive environmental degradation, economic inequality,
and institutional collapse.
The world is on fire. The burning of fossil fuels—the driving force of modern
industrialization—is killing hundreds of thousands of people, while
simultaneously destabilizing the earth’s climate, acidifying the oceans, and
raising sea levels.1 Much of the world’s topsoil is degraded, and demand for
fresh water is outstripping supply.2 Left unchecked, climate change will
substantially reduce GDP, flood the great coastal cities, and force millions of
people to migrate in search of food.3 Insect populations are crashing and no one
knows why—or what the consequences will be.4 We are running the risk of
destroying the viability of the natural systems on which we all depend.5
Wealth is rushing to the top. The fifty richest people among them own more than the poorer half of humanity, while more than six billion live on less than
$16 a day.6 Billions of people lack access to adequate education, health care, and
the chance for a decent job, while advances in robotics and artificial intelligence
(AI) threaten to throw millions out of work.7
The institutions that have historically held the market in balance—families,
local communities, the great faith traditions, government, and even our shared
sense of ourselves as a human community—are crumbling or even vilified. In
many countries the increasing belief that there is no guarantee that one’s children
will be better off than oneself has helped to fuel violent waves of anti-minority
and anti-immigrant sentiment that threaten to destabilize governments across the
world. Institutions everywhere are under pressure. A new generation of
authoritarian populists is taking advantage of a toxic mix of rage and alienation
to consolidate power.8
You may wonder what these problems have to do with capitalism. After all,
hasn’t the world’s GDP quintupled in the last fifty years, even as population has
doubled? Isn’t average GDP per capita now over $10,000—enough to provide
every person on the planet with food, shelter, electricity, and education?9 And,
even if you think business should play an active role in attempting to solve these
problems, doesn’t it seem, at first glance, an unlikely idea? In the majority of our
boardrooms and our MBA classrooms, the first mission of the firm is to
maximize profits. This is regarded as self-evidently true. Many managers are
persuaded that to claim any other goal is to risk not only betraying their
fiduciary duty but also losing their job. They view issues such as climate change,
inequality, and institutional collapse as “externalities,” best left to governments
and civil society. As a result, we have created a system in which many of the
world’s companies believe that it is their moral duty to do nothing for the public
But this mind-set is changing, and changing very fast. Partly this is because
millennials are insisting that the firms they work for embrace sustainability and
inclusion. When I first launched the MBA course that became “Reimagining
Capitalism,” there were twenty-eight students in the room. Now there are nearly
three hundred, a little less than a third of the Harvard Business School class.
Thousands of firms have committed themselves to a purpose larger than
profitability, and nearly a third of the world’s financial assets are managed with
some kind of sustainability criterion. Even those at the very top of the heap are
beginning to insist that things have to change. In January 2018, for example,
Larry Fink, the CEO of BlackRock, the world’s largest financial asset manager, sent a letter to the CEOs of all the firms in his portfolio that said the following:
“Society is demanding that companies, both public and private, serve a social
purpose. To prosper over time, every company must not only deliver financial
performance, but also show how it makes a positive contribution to society.
Companies must benefit all of their stakeholders, including shareholders,
employees, customers, and the communities in which they operate.”10
BlackRock has just under $7 trillion in assets under management, making it
among the largest shareholders in every major publicly traded firm on the planet.
It owns 4.6 percent of Exxon, 4.3 percent of Apple, and close to 7.0 percent of
the shares of JPMorgan Chase, the world’s second-largest bank.11 For Fink to
suggest that “companies must serve a social purpose” is the rough equivalent of
Martin Luther nailing his ninety-five theses to Wittenberg Castle’s church
door.12 The week after his letter came out, a CEO friend reached out to me to
confirm that surely he didn’t—really—mean it? My friend was in a state of
shock. He had based a long and successful career on putting his head down and
maximizing shareholder value, and to him Fink’s suggestion seemed ludicrous.
He couldn’t imagine taking his eye off the profit ball in today’s ruthlessly
In August 2019 the Business Roundtable—an organization composed of the
CEOs of many of the largest and most powerful American corporations—
released a statement redefining the purpose of the corporation: “To promote an
economy that serves all Americans.” One hundred and eighty-one CEOs
committed to lead their companies for “the benefit of all stakeholders:
customers, employees, suppliers, communities, and shareholders.”13 The Council
of Institutional Investors (CII)—a membership organization of asset owners or
issuers that includes more than 135 public pension and other funds with more
than $4 trillion in combined assets under management—was not amused,
responding with a statement that said, in par...
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