By Tony O. Elumelu, CON
Last Friday, I was proud to be a speaker during the second annual Conference on Inclusive Capitalism in London, led by the visionary and irrepressible Lady Lynn de Rothschild. As I prepared my remarks for a panel held during the conference, I wrestled with the fact that capitalism that is deliberately “inclusive” is unnatural. In reality, the very idea of it represents a fundamental shift in the way a capitalist system traditionally functions.
Since time immemorial, the natural laws of supply and demand and markets and competition dictate that there be winners and losers, because regardless of sector, geography, technology or capital, nothing static can ever stay.
Schumpeter characterized this phenomenon as “creative destruction” – the notion that a new, superior process, product, or service will eventually mean the complete demise of the old or usual way of doing something. Never a painless process but a necessary one or we’d still be using rotary telephones and typewriters.
History is littered with examples of once dominant companies that created whole industries based on their ability to innovate and be more competitive than their peers, but were then eventually overtaken by another who learned how to do it better, faster.
What has changed, due in large part to this fundamental trait of capitalism to continuously improve or die, is the very nature of the world we now live in.
The 21st Century will be defined by one monumental shift in the lives of virtually every person on this planet – our ability to communicate and share information with anyone, anywhere, at anytime at very little cost. This new ability has led to our now globalized existence.
In our hyper-interconnected world, we have, perhaps unintentionally but irreversibly, created a system of unprecedented inter-dependence. Global supply chains have become truly global, fueled by the irrepressible drive to increase competitiveness
in the increasingly competitive marketplace. To voluntarily temper one’s ability to vigorously defend and increase one’s competitive position is to ultimately surrender to an up-and-comer who will not intentionally limit their capacity.
Therefore, the goal to create a capitalist system that is “inclusive” is to change the very nature of capitalism itself. We must recalibrate the notion of winner-take-all competition, which invariably creates “losers”. This type of fundamental shift is predicated on the need to inject and inculcate a set of values into capitalism’s bloodstream – values beyond the current, singular, myopic goal of maximizing profit, which is the sole principle that is shared by every typical business in the traditional capitalist system.
To accomplish this, we need nothing short of an effort that has universal buy-in; a broad consensus that a) the rules of the game must change; and that b) everyone must play by the same rules in order for it to work. Otherwise, the “enlightened” firm that strives to foster greater inclusiveness may, in their effort to govern themselves based on a broader set of values, put themselves at a competitive disadvantage relative to their peers who do not adopt those broader values in favor of profit maximization and at the expense of “inclusiveness”.
In Africa, this values-driven approach to capitalism is called “Africapitalism”, which is based on the premise that a system led by the private sector and governed by business-enabling public policy can result in higher and more inclusive economic growth and social development. Africapitalism not only calls for the private sector to have a much more formidable role on the continent, but it also advocates for a private sector that is rooted in a commitment to shared value that leads to shared prosperity.
Harvard Business School Professor Michael Porter, who is also a founding patron of the Tony Elumelu Foundation, pioneered the concept of businesses creating shared value, meaning the activities of the private sector can and should generate substantial financial returns for the business and its shareholders, but that this can be achieved in a way that also creates value for a broader group of stakeholders as well.
The logic of “shared value” has gained traction and, as such, when current World Bank President Jim Kim assumed his position in 2012 and subsequently reoriented the bank’s strategy, he built his approach around the goal of fostering “shared prosperity.” For President Kim, this means, for the first time in it’s history, the bank will strive not just to reduce and eventually eliminate poverty, but that it will also aim to address “global inequality” as well.
I believe in both of these concepts, primarily because they reflect my own values and business philosophy, but also because of the practicality of what they espouse, despite the fact that they are still considered by many as unconventional. With inequality increasing in developed and developing economies alike, capitalism is on a path to unsustainability at best, and social upheaval and chaos at worst, making systemic change imperative to the survival of the system.
The real challenge to the wider acceptance of this approach to capitalism is not the logic behind it, but the self-interest driven resistance among those vested in the current system who fear being the one to take that first, lonely step. No single business or government can hope to change our capitalist system on their own. Likewise, transitioning to a system rooted in a broader set of values such as “Inclusive Capitalism” and “Africapitalism” is not possible without agreement across sectors as well. Business and government, for example, must work together to create an enabling environment that unlocks opportunity and fosters growth.
To affect the kind of change we all hope to be a part of takes “shared purpose.” This implies not only an acceptance of Inclusive Capitalism and Africapitalism’s logic and overall merit, but also an equally important intent to act, and act in the letter and spirit of legitimate collaboration as opposed to unbridled competition.
I was struck by the unparalleled expertise, influence, and success of my peers who were in attendance at the Conference on Inclusive Capitalism. We have all been blessed. But heavy lies the crown and in our common success, we share a burden of responsibility that extends far behind our kin, our country, and our shareholders. We gather together to explore the limits of the system from which we have all benefitted, yet we are restless with
the knowledge that others – far too many – have not been nearly as fortunate. The burning question we should all be asking ourselves, therefore, is what are we prepared to do?
Following the close of the conference and as we all went our separate ways, whatever next steps taken by those in attendance may be based on that all-too-human trait of self preservation, either in the eyes of our vocal discontents or in the face of our God, but whatever our respective motivation, we must not merely accept the responsibility upon our shoulders as an unavoidable consequence of success, but embrace it as an opportunity to create wealth not just for ourselves but for others as well. This is the purpose and essence of Africapitalism.
The essential ingredient, therefore, in the mixture of what needs to change in order for the values embedded in Inclusive Capitalism and Africapitalism to influence change throughout the capitalist system, is leadership. We don’t need another study or forecast or strategy session in order to know what needs to be done. At this stage, all that’s required of us, each and every one of us, is the courage to act. To lead.
In the eyes of some, perhaps many, my own success story is an impossible one. Born into a loving family in Nigeria, albeit of modest means, I was endowed with an unbreakable commitment to excellence and an insatiable desire to succeed. Add a dash of luck and a large portion of guidance from dedicated mentors and my story becomes clearer. As I spoke to titans of global finance and industry, and to Royal Highnesses and Presidents at the conference, I reflected on what’s possible if together we collectively accept the challenge to lead.
None of us knows what tomorrow may bring. We don’t know what the future holds or what our role is in it. But with God’s continued grace, every day I will lead by example, and I will strive to inspire others to take up the cause of building a more equal and just society that benefits everyone and not just a few. All I ask is for you to join me and do the same. The real rewards are yet to come.
This article was first featured in The Sunday Independent (South Africa) on June 28, 2015.