Compassion Is Good For The Economy
Also, proof that a Nobel prize does not guarantee wisdom.
Too much energy in your country is spent developing the mind instead of the heart. Develop the heart. Be compassionate. Not just to your friends, but to everyone.
~The 14th Dalai Lama
We in the U.S. are generous, according to the World Happiness Report. And generosity emerges from compassion, according to a study funded by the UK’s Economic and Social Research Council: We recognize others’ suffering; we empathize; we square up to the discomfort it evokes without turning away; we help. Generosity is the help.
For this post, therefore, I am shifting to the broader topic of compassion.
Yeah, Sure
Since many of our most important actions as a nation are achieved through government policy, one could argue we ought to consider policy through the lens of compassion. But in the U.S., we don’t trust our government very much, so it can be hard to imagine government policy as a conduit for compassion.
Sidestepping that debate for now, here are a few other areas in which the compassion message appears…
Military
Retired U.S. Navy four-star Admiral William McRaven, a SEAL, gave a speech viewed on YouTube over 30 million times. He lists ten “…suggestions that might help you on your way to a better world.” He asserts that “…it matters not whether you ever served a day in uniform; it matters not your gender, your ethnic or religious background, your orientation, or your social status.” Two suggestions resonate: “Respect everyone” and “lift up the downtrodden.”
The 1992 movie A Few Good Men contains a famous scene featuring Jack Nicholson as an angry Marine Corps officer in a courtroom (“You can’t handle the truth!”). But that is not the scene that I found most memorable. At the end of the movie, two young enlisted men have been convicted of behavior unbecoming a U.S. Marine, and one of them doesn’t understand. After learning they will be dishonorably discharged, he says, “We did nothing wrong!” The other, with an air of sheepishness, replies, “Yeah, we did. We were supposed to fight for people who couldn’t fight for themselves. We were supposed to fight for Willie.” They were in a position to help Willie, but instead took part in hurting him.
We make heroes of people who do the hard right things, not the easy right things, and certainly not the easy wrong things.
Business
Jeff Haden, in Inc. magazine, reminds us that happiness is not a mere pursuit; it can also drive productivity. In an article enthusiastically entitled “10 Scientifically Proven Ways to Be Incredibly Happy”, he points out that “[h]appy people accomplish more.” He goes on to write, “…[T]o make yourself feel happier, you should help others.” His point rephrased: Compassion leads to happiness, which boosts productivity and thus business success.
Consulting firm Vetergy works with petrochemical manufacturing plants to minimize ecological catastrophes and human deaths. They teach an incident investigation process that fosters organizational resilience. (Incidents are errors that may or may not result in accidents. For example, a valve did not get shut when it should have, but the oversight was detected by someone else before it caused a problem.) The heart of a good investigation is benefit-of-the-doubt, which opens the door to empathy and compassion.
It works like this: Assume, at least for starters, that whoever didn’t turn the valve thought it was a good idea not to — not out of laziness or belligerence. Why did he think that? What else was going on around him? Were there social pressures at play? It is tempting — and common — to blame the front-line valve turner, dock his pay, and move on. But a proper investigation usually turns up systemic problems that aren’t the front-line worker’s fault, like poor training or a supervisor’s tacit approval of corner-cutting. Even in a high-risk industrial setting, compassion can promote better results for the company and the wider community.
ESG
It is becoming popular to fold considerations of Environmental, Social, and Governance (ESG) effects into business decisions. It is also popular to be angry about it, calling it “woke,” implying woke is bad. Merriam-Webster, however, defines woke as “aware of and actively attentive to important societal facts and issues (especially issues of racial and social justice).” Which seems fairly civilized.
Merriam-Webster offers a secondary meaning for woke: “politically liberal (as in matters of racial and social justice) especially in a way that is considered unreasonable or extreme.” (Considered by whom? A reasonable and moderate person?) It looks like some of us — perhaps those uncomfortable with change — use the word with a sneer in the hopes that listeners will not take a moment to wonder if woke is truly a threat.
Anyway, if ESG is woke, woke appears to be good for business. There is a sea of papers, essays, and books attempting to sort out the relationship between corporate financial success and ESG along with CSR (Corporate Social Responsibility). A 2020 meta-study summarizes dozens of studies on the interactions between ESG/CSR and corporate financial performance. The bottom line is that ESG/CSR is generally good for finances, with the caveat that ESG may reduce a firm’s flexibility. That would make sense because it’s possible to be more flexible if we don’t hold ourselves accountable to ESG-related boundaries. So flexibility is best balanced with some deliberation.
The meta-study shows that ESG/CSR lowers risk — systemic, referring to the risk of complete failure; the risk of bad credit; and legal risk (meaning cost). Nine of ten studies analyzed showed lower risk in at least one of these areas. The tenth showed ambiguous results leaning towards lower. Two other studies examined idiosyncratic — meaning specific and circumstantial — risk with one indicating ESG/CSR causes higher risk of this type and one showing no effect. This is where the flexibility argument enters — ESG/CSR may place bounds on a firm’s options for reacting to unforeseen circumstances. Finally, according to seven of nine studies, ESG/CSR lowers the cost of financial capital; the other two showed ambiguous results with one leaning lower.
Economics
Nobel prize-winning economist Milton Friedman took a clear and dismissive position regarding CSR. In 1970, he wrote a New York Times article entitled “A Friedman Doctrine — The Social Responsibility of a Business is to Increase Its Profits.” His assertions still reverberate through our national dialog today: People who speak of corporate social responsibilities “…are unwitting puppets of the intellectual forces that have been undermining the basis of a free society these past decades.” CSR “…involves the acceptance of the socialist view…” (My boldface.)
This grown-ass Nobel laureate published a 3000-word rant about the evils of ESG/CSR. Even with the help of NYT editors, he had no more self-awareness regarding his unwritten assumption — fatal to his argument — than the unedited ranters of today. The wrong assumption is that ESG/CSR is a cost. It is increasingly clear, though, that ESG/CSR is a net benefit, even if we consider only finance and ignore wellbeing.
Next up: What science says about compassion and happiness.