In 1500, the field of astronomy was not unlike the modern field of economics. At that time, it was generally understood that the earth was at the center of the universe and that the celestial bodies in the night sky were revolving around us. Yet in attempting to explain the quirks of the motions of these bodies, the number of exceptions began to pile up. When Nicolaus Copernicus proposed his sun-centered, or heliocentric, model of the solar system, it presented a simpler, more coherent theory that replaced what had become a convoluted geocentric model entangled in countless exceptions to its rules and predictions.
The complexity created by the number of caveats, exceptions and deviations from economic rationality is similarly overwhelming. 165 biases have been identified by behavioral economists, even resulting in a Nobel Prize for Richard Thaler for his part in documenting many of them. It is high time to recognize these so-called biases are not merely exceptions to the rational, imaginary human mockingly called “Homo economicus,” but are instead based on a flawed model to begin with. True, in some cases, the cognitive biases are based on simply having far more incoming information than our brain can process. In many other cases, however, the so-called “irrational” decisions that we make can be explained with far fewer caveats when considered through the lens of evolution.
Centuries ago, when governments overtook religions as the dominant institutions on the planet, they also inherently took on the responsibility for the wellbeing of all citizens. Today, a combined list of the top 100 largest companies and countries yields a list of 63 companies and only 37 countries. Revenues at Wal-Mart would put it above the GDP of the entirety of Russia. Ditto for Exxon Mobil and South Korea. As business becomes an ever more powerful institution, it must similarly accept this responsibility for the wellbeing of all citizens.
Yet a recent Harvard study showed that 51% of Americans aged 18-29 no longer believe in the system of Capitalism. However, Capitalism and the Industrial Revolution is tightly correlated with an unprecedented decline in extreme poverty, with 85% of the world living on less than $1/day in 1820 falling to 17% in 2003 despite the global population growing from less than a billion to over 7 billion. So why the distrust? There is no doubt that while Capitalism and free trade has been good in the aggregate, it has not always been positive for all individuals. Unless we have inclusive prosperity, it will not be sustainable.
The good news is that businesses that do care for the wellbeing of all stakeholders and have a purpose beyond making profits are more sustainable AND successful. If we can evolve toward a more Conscious Capitalism, we can achieve more inclusive prosperity while also achieving the systems-level cooperation necessary to tackle the global issues we face.
No experiment has been running longer than the grand experiment of evolution. Over time, such a longitudinal study tends to reveal great truths.
For the LOVE of Business, Capitalism must evolve. What can it learn from the fields of cultural evolution and positive psychology to evolve toward a more "Conscious" Capitalism?
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