A New Model of Market Altruism
Historically, the for-profit business model has worked reasonably well at providing goods and services to the general public, as long as it was constrained by the forces of market competition. However, there are times when markets fail and traditional profit maximizing businesses create problems ranging from credit crises to pollution externalities. Perhaps then it is time to rethink the whole model of what a business should be.
Traditional businesses are generally for-profit entities. They assume as their primary objective the maximization of profit for their shareholders or owners. In theory, this should make them reasonably rational as far as agents go, as the enlightened self-interest of Adam Smith’s “invisible hand”, claims. However, in practice the nature of these objectives are obviously parochial and limited in scope. Such businesses thus tend to act in a very egoistic manner, maintaining a reputation of integrity as a means to profit maximization, rather than truly acting according to moral or ethical values. It should not be surprising then that the pervasive culture of business is overwhelmingly one that justifies egoism and denigrates altruism as folly.
But what should be the real purpose of business? Is it merely profit maximization for its shareholders? Or can there be an alternative justification for the existence of a business entity? Peter Drucker suggested just such an alternative. The purpose of a business is the provide value to its community. It is, to provide goods and services that meet the needs and wants of people. It is, in a word, to increase utility.
When you really think about it, that’s what a business is really for. A society has no reason to accept the existence of a business that does nothing but profit off the miseries of others. The implicit reason why society tolerates business is that they create wealth; they produce value that people appreciate and benefit from.
So if a business’ true purpose is to create value and increase utility, why not go a step further and make the purpose of a business to explicitly maximize utility not just for itself, but for everyone? Rather than being driven by the profit motive, how being driven by the greatest good? This is the model of what I shall call the Beneffective Business. It could also be called Utilitarianism Inc., but in practice, because the business is not actually an independent feeling person, it is effectively altruistic. Altruism Inc. may make sense to describe this organization, but it’s not a particularly catchy name, and people who don’t understand consequentialism may well become hung up on the details of that particular ethical framework. Thus, I propose a friendlier and more philosophically neutral term, the Beneffective Business. A business that combines genuinely benevolent motives and practical market-tested effectiveness is beneffective.
The Beneffective Business has some interesting features. First, while not driven solely by profit, it still tries to make a profit as a means to the end of being a sustainable entity. Its profits are generally redirected towards future investments, rather than being paid out to shareholders. Its shareholders ideally are every sentient being. In practice this means that the company is not publicly traded on the traditional markets. Instead the corporate governance structure is dominated by a constitution that spells out the algorithm of decision making for the business. Furthermore, since its stakeholders are everyone, anyone is allowed to attend and vote at the Annual General Meeting, with each person granted one vote.
How well does a Beneffective business perform in the market? Because it is consequentialist in nature, a Beneffective business actually cares about succeeding in the market, and so can be expected to perform adequately enough to survive and grow. It is competitive, because it behaves rationally, albeit in the long term interests of everyone, instead of just itself.
Now, keep in mind that the Beneffective Business is successful because it is consequentialist. If this were Kantianism Inc., it would not be so successful. Kantianism Inc. suffers from being exceedingly restricted by rules that are easily taken advantage of by the competition. Furthermore Kantianism Inc. lacks a cohesive central objective. It operates according to a bunch of rules drawn from the Categorical Imperative, but as far as anyone can tell, its only objective is to have a good will. In practice this means that it doesn’t aim for profits or utility, but rather obeys its rules without concern for consequences. Ultimately, such an organization flounders in the competitive market environment, where consequences matter.
The Beneffective business functions differently. Because it has ingrained in its DNA, the notion of maximizing utility, it actually considers its employees and customers as part of that equation. They are more than just human resources or prospective markets. They are the purpose of the whole enterprise.
Perhaps one might ask, why not just do what Effective Altruists do already, which is transfer money to where it’s needed most? Why not just earn to give and give to the best charities? Why start a business? The reason is that the redistribution of wealth, while essential to fix unfair inequalities, cannot be the only solution. There is only so much wealth in the world currently. If we equate wealth with money, there is currently approximately $75 trillion in the world (M3)[1], which seems like a lot, but if split equally among 7 billion human beings amounts to $10,714 per person. If we use another measure of wealth, such as GDP, world GDP is approximately $74.91 trillion, and world GDP per capita is $10,514.33[2]. That’s not actually a lot to live on. Thus, if we really want to solve the problem of poverty and suffering, we have to do more than just redistribute existing wealth. We have to create wealth.
How do we create wealth? We create wealth by mobilizing labour (human resources) and capital (artificial resources) to convert land (natural resources) into goods and services. That’s the traditional economic understanding anyway.
We can also think of this in a more directly Utilitarian way. Happiness is created by converting time and energy into positive conscious experiences. All sentient beings have a continuous stream of time with which their minds convert into either positive or negative conscious experiences, by combining with their sensory input of the state of the universe. Energy is required to change the state of the universe. Thus, in order to create desirable states of the universe and to experience those states, we need time and energy.
In effect, the process of generating happiness or utility requires at minimum, these inputs. Labour is essentially a function of time and energy, as human and animal beings convert time and food energy into labour. Capital is essentially stored labour and land, converted into the form of utility generating things. Land is the matter that we get energy from, as well as the raw materials for the creation of capital. Remember that from a physics perspective, Matter is just a form of energy. Fundamentally then, we have to find ways to convert these resources into utility, and good businesses do exactly that.
But what kind of business should the Beneffective business be? What sectors of the economy should it be involved with? Arguably, since its mandate is so far reaching, so should its business be diversified so to speak. But in practice, most businesses tend to do best when focused on a particular product or service, at least in the beginning anyway. Google did search. Apple made computers. But this doesn’t have to be that way. Berkshire Hathaway is a conglomerate holding company with stakes into a wide variety of industries. Nevertheless, few companies start off being massive conglomerates or holding companies. So it makes sense to start somewhere focused.
So what should be the initial focus of our Beneffective business? The answer is probably, what can allow the most rapid growth and creation of wealth. Historically, this has been game-changing technology. What kind of technology is needed most today that will have the most dramatic impact on the future?
The first is likely methods to increase human productivity. So many human beings today waste their potential due to things ranging from procrastination to depression. Solving the problem of wasted potential has enormous potential. This should be our first priority, because it is essential to giving the initial organization a competitive edge, and best mobilize the resources that we will likely begin with. What is needed is more than just a set of motivational techniques, but a full-scale ideological framework that can motivate individuals towards maximum positive productivity. Effective Altruism is the seed of this framework, and so, the first big thing is to make Effective Altruism comprehensive and practical. This will require work from a mixture of philosophers and the social scientists, including psychologists and economists.
The second is major advance is likely to create an alternative form of labour, that is to say, synthetic intelligence that merges labour and capital, allowing a company to build its workforce rather than hire it. This would also have the very important side effect of liberating human beings from all the drudge work that significantly reduces people’s time to actually have positive conscious experiences. Synthetic intelligence will not simply replace all human workers initially. Instead what will likely occur is that market competition between human workers and companies selling synthetic workers will have a levelling effect on wages. Ironically, while cheap human labour will probably survive for a while, it is likely that the more expensive salaries of the more technically skilled will be the first to fall to the synthetics, which have a high upfront cost, but lower maintenance costs. Over time as mass production reduces the costs of synthetics, more jobs will be displaced, and so in the long run, alternative socio-political arrangements may become necessary, ranging from a guaranteed minimum income, to something more akin to individual ownership of synthetics, such that every citizen is entitled to a surrogate synthetic which does work for them and ensures they have an income. All this will require work by computer scientists and engineers.
The third is to find a way to efficiently supply energy. There are two elements that are integral to an efficient and reliable energy supply. First, we need a reliable source, and second, we need a reliable form of energy storage. The sun already supplies us with a reliable source for the next few billion years, but the energy storage problem remains a serious one. Right now we use batteries that gradually discharge and lose energy, or we rely on fossil fuels that take millions of years in nature to create. Possible solutions include better batteries, and technologies like algae or cyanobacterial biofuel or metastable metallic hydrogen. This will require work done by physicists and chemists.
The fourth is to find a way to extend human life beyond its current limit, or at least increase the quality of life by eliminating the negative effects of aging. This will require work done by biologists.
The first thing to notice about all these different technological projects is that they require brainpower. They require that the Beneffective business acquire top researchers and engineers in various fields. A possible shortcut to this is to create synthetic superintelligence first, but that still means that the Beneffective business needs top researchers and engineers in the field of A.I.
[1] http://gizmodo.com/5995301/how-much-money-is-there-on-earth
[2] https://www.google.ca/publicdata/explore?ds=d5bncppjof8f9_&met_y=ny_gdp_pcap_cd&hl=en&dl=en