The Economics of Higher Purpose Read online

  A market exists to create and distribute wealth, and a state exists to create and distribute power. A covenant is not about the acquisition of wealth or power. It is about belonging and collective responsibility. While a social contract creates a state, it does not create an integrated system. A covenant brings forth a united society. Because Israel had a covenant society before it had a contractual state, it had a strong collective identity or culture. The collective identity could be maintained even in times of severe challenge.

  The notion of a covenant reflects the inclusive mind-set. Covenant and contract can exist in a mutually enhancing relationship. The United States is the only country, other than ancient Israel, that has the dual foundation of covenant and contract. In America, the covenant was established in the Declaration of Independence, and the contract was established in the Constitution. This dual foundation happened because the founding fathers understood that freedom requires both a state (based on contracts) and a society (based on a covenant).

  Rabbi Sacks said that today in America and in Europe the social contract remains, but the covenant is in decay. Collective identity is devolving to smaller and smaller groups of self-interest. The lack of a shared moral code does not allow people of different perspectives to “reason together.” The ability to listen to a person of a different perspective is crucial to the whole.

  The state cannot solve all problems, and those who believe the state can solve all the problems are prone to magical thinking. The far right dreams of “a golden past that never was,” and the far left yearns for “a utopian future that never will be.” As conflict arises, it gives birth to populism and the hunger for a strong leader who will solve all problems. This hunger leads to a tyranny where the right or left dominates and freedom of expression begins to vanish. Anger replaces reason.

  Rabbi Sacks said that the notion of covenant may be difficult to entertain in any country other than the United States because of its history: “We hold these truths to be self-evident that all men are created equal and endowed by their creator with certain inalienable rights.” He said that the good news in this time of conflict is that a covenant is renewable. Nations can renew and rebuild community. In a community you have real friends, people you can depend on, people who will care for you when you are in need.

  The Possibility of a New Economics

  Ricardo and Rabbi Sacks help us understand the covenant of leadership and the emergence of high-performing organizations. The covenant of leadership is a sacred agreement you make with your best self, your dynamic self, your growing self. It gives you the ability to pursue an authentic higher purpose. It gives you the ability to imagine the organization as having a social contract and a social covenant. It gives you the ability to recognize the necessity to continually renew both.

  When Shauri discovered her own authentic higher purpose, she made a covenant with herself to become her best self. When Alberto discovered as CEO the difference between his social contract to the organization and his covenant as a leader, it changed him and his ability to lead the organization.

  When you establish a covenant that guides the organization, you create an exception to the rule that is the principal–agent model. The covenant inspires employees to transcend the conventional mentality of financial exchange and become intrinsically motivated. It allows them to find a higher purpose in the work, and it alters how they behave. If farmers are harvesting crops only to make money for themselves, they are in an economic exchange. If they believe that in addition to generating profit, the people of their country survive because of their effort, then they may become intrinsically motivated.

  Similarly, employees will work harder if they believe that, in addition to producing profit for the firm, the innovation they are seeking will also benefit society. An employee who works hard to come up with a better electric car views that as a contribution to combating climate change. An employee who works hard to develop drugs to cure cancer views that as a way to help prolong people’s lives.

  Researchers have shown that employees work harder when they view their organization as authentically working for the good of society.25 The embrace of a higher purpose can motivate employees to voluntarily work harder for the common good because individuals also care about things besides explicit compensation rewards—things such as society, integrity, honesty, social identity and reputation, corporate social responsibility, moral behavior, and intrinsic motivation.26 We build on this idea in chapter 5 in developing an economic theory of higher purpose.

  CHAPTER FIVE

  Reframing Economics

  By “organizational higher purpose,” we mean a prosocial goal that transcends the usual pursuit of business goals but intersects with those goals. That is, decisions are made that are in line with prosocial goals as well as the business goals.

  John Sculley quotes Steve Jobs about higher purpose: “Great companies must have a noble cause. Then it’s the leader’s job to transform that noble cause into such an inspiring vision that it will attract the most talented people in the world to want to join it.”27

  We are not interested in examining the consequences of corporate social responsibility or charitable giving. The pursuit of a higher purpose is not a goal—like charitable giving—that is distinct from generating traditional outcomes like profits and shareholder value.28 Rather, we examine the pursuit of higher purpose that is integrated with the pursuit of business and organizational goals, as in the case of a biotech company working to find a cure for cancer, or the Walt Disney Company creating Disneyland as “a place for people to find happiness and knowledge.”29

  Richard Leider defines higher purpose for individuals this way: “Purpose is the deepest dimension within us—our central core or existence—where we have a profound sense of who we are, where we came from and where we’re going. Purpose is the quality we choose to shape our lives around. Purpose is a source of energy and direction.”30

  Leider’s observation leads us to ask, How does the adoption of an authentic higher purpose enable an organization to connect to the purpose of its employees? How can the fundamental self-interest assumption of the principal–agent model be modified to produce expanding effort inputs and relaxing budget constraints in a way that leads to superior performance? In answering these questions, in this chapter we will formulate an economic theory of higher purpose, something that Kenneth Boulding called for 50 years ago in his presidential address to the American Economic Association.31

  Unconventional People

  While many people behave in accordance with the predictions of the principal–agent model and do not organize themselves and others to a higher purpose, some, like Ricardo Levy, do, and they acquire a unique kind of influence. The conventional mind-set tells us that people are self-interested. As we saw in previous chapters, our normal experience tends to confirm this. When we encounter a person of higher purpose, someone like Rabbi Sacks, the experience captures our attention. For example, here is an entry that Bob wrote in his personal journal.

  A Woman of Higher Purpose: My daughter-in-law Lisa and my granddaughter Keely went to a mall. In the early evening we received a shocking text: “There are shooters in the mall, pray for us.”

  This message led to several tense hours. Eventually, Lisa and Keely were able to safely exit.

  At dinner the next day, I asked them to tell us the entire story. Lisa shared the account of she and Keely and about 80 other panicked people locking themselves in a back room of a department store. The people pushed a table against the door and spent their time trying to understand what was going on and what to do if the shooters came to the room.

  As Lisa told the story, I felt upset, not with just the specifics but with the evil that seems to be growing in the world. Then Lisa added a side note.

  Lisa said that as the people in the room made sense of what was happening and considered what to do, a person of her age engaged her. This other woman said, “If they get in the room and start shooting, you stand
in front of your daughter and I will stand in front of you.”

  Lisa was shocked and asked why. The woman said, “You are her mother and you need to raise her, if I can help that happen, I will.”

  I stopped eating. This was so unexpected I asked for clarification. Lisa had little other information about the woman except to say, “You could tell she really had her life together.”

  This woman was willing to lay down her life, not for her friends but for two strangers. Why? She was orienting to a higher purpose. The woman was willing to die for posterity or the good of future generations. It was not even her direct posterity, but for the posterity of someone else. She wanted a little girl to be raised by her mother and if someone needed to die for it to happen, she was willing to be the one.

  I suddenly felt involved in the story in a new way, and I was not sure why. As I was writing this journal entry, an insight came. In her willingness to die for Lisa and Keely, the woman was willing to die for my posterity. Without knowing me, the woman of higher purpose was willing to die for my granddaughter. This means she was willing to die for me.

  I was not only grateful that Lisa and Keely were safe; I was also grateful for a stranger who was living for a higher purpose. Prior to our dinner conversation, I only knew of a story that I interpreted to be about the spreading evil in the world. After the dinner conversation, I knew a story I now interpreted to be about the profound good in the world. I am grateful for a stranger, a woman of purpose who really has her life together.

  Often people “get their life together” because they have found a higher purpose or learned to live for a higher purpose. As we have seen, a purpose is higher when it transcends immediate self-interest, when you transition from a contract to a covenant. A higher purpose is a contributive goal, or what social scientists call a “prosocial goal,” meaning the focus is on contributing to the good of the whole.

  So living with a higher purpose is focusing on and sacrificing for something bigger than yourself. Research indicates that doing this leads to the development of the following personal characteristics: taking initiative, assisting others, persisting in meaningful tasks, being open to negative feedback, motivating others, stimulating new ideas, and inspiring creative action.32 This is a reasonable list of leadership characteristics. As you begin to live a purpose-driven life, virtuous characteristics tend to ignite. You become a better version of yourself.

  The woman who volunteered to die for Lisa and Keely demonstrated many of these qualities. In doing so, she was leading. Leaders with a higher purpose are focused on the common good. This transcendence of self-interest gives rise to moral power. Moral power is the influence that emanates from a person or persons who self-lessly pursue the common good. As with selfishness, moral power is contagious, and it can spread. It draws attention and invites new behaviors. When people of authentic, higher purpose act, they tend to bring out the best in others. If they continue over time, they bring forth a high-performance culture.

  Organizational Higher Purpose

  An example of a focus on higher purpose comes from Eric Greitens, a former Navy Seal and governor of Missouri. Here is an excerpt from our interview with him:

  I believe that people can have very strong internal motivations that can drive them toward achievement. But I think that is related to but different from your sense of purpose. Part of what you have to do to help somebody to see their sense of purpose is to actually communicate to them that they have something to offer. What we’re doing in many ways with our Mission Continues Fellows is that we are asking them to serve. We’re forcing them into a situation where they then have to see that they have something to contribute.

  As a Navy Seal lieutenant commander, Eric was awarded a Bronze Star and Purple Heart, among other decorations. Following his military service, he founded The Mission Continues, a nonprofit organization that helps reintegrate disabled war veterans into society. This is how Eric described the higher purpose of The Mission Continues:

  Our mission is to challenge veterans to serve and lead in communities across America. That’s our mission. We also have a purpose, which is to make it the case that every veteran who comes here thinks of their military service not in terms of the time when they were in the field. What’s interesting is that these people have a sense of purpose from the beginning. Some veterans think of having a higher sense of purpose as being part of a team, being devoted to something larger than yourself, and something that they did in the military. We want to change that to something that they learned in the military and that they apply to the rest of their lives. . . . Our objective at The Mission Continues is to make sure that the story becomes one so that 10 years from now, people will look back on this generation and say that they came home and they continued to serve. They came home and they made their country stronger. So that’s kind of our larger purpose.

  After we interviewed Eric Greitens, he admitted to an extramarital affair prior to becoming governor. He was investigated for having allegedly threatened the woman in question (prior to his public admission) if she went public with that information, although no complaint was ever filed by the woman. He subsequently resigned as governor of Missouri after only six months in office. Given this situation, we were advised to drop the example of The Mission Continues. Our response is that it is crucial to keep the example. All human beings are flawed. We feel it is crucial to keep the account presented here and for the reader to consider the notion that moral power is a dynamic phenomenon that ebbs and flows.

  Another example of organizational higher purpose is provided by Walt Disney. On the pitch statement to obtain funding for the Disneyland park in California, Walt Disney wrote: “In these pages is proffered a glimpse into this great adventure—a preview of what the visitor will find in Disneyland.”

  Later in the pitch, Walt Disney articulated a higher purpose that has influenced the company’s business strategy time and again:

  The idea of Disneyland is a simple one. It will be a place for people to find happiness and knowledge.

  It will be a place for parents and children to share pleasant times in one another’s company: a place for teachers and pupils to discover greater ways of understanding and education. Here the older generation can recapture nostalgia of days gone by, and the younger generation can savor the challenge of the future. Here will be the wonders of Nature and Man for all to see and understand.

  Disneyland will be based upon and dedicated to the ideals, the dreams and hard facts that have created America. And it will be uniquely equipped to dramatize these dreams and facts and send them forth as a source of courage and inspiration to all the world.

  Disneyland will be something of a fair, an exhibition, a playground, a community center, a museum of living facts, and a showplace of beauty and magic.

  It will be filled with the accomplishments, the joys and hopes of the world we live in. And it will remind us and show us how to make those wonders part of our own lives.33

  An Economic Theory of Higher Purpose

  Our economic theory of higher purpose:

  The adoption of an authentic higher purpose creates a bond between employees and the purpose and motivates them to work harder, be more entrepreneurial, and subordinate their self-interest for the common good, all in order to help the organization serve its higher purpose. This results in better economic performance. However, these things happen only if employees believe that the purpose is authentic.

  We begin our discussion of the theory with a simple observation: a major purpose of a leader is to recognize the common good and sacrifice for it so that others will follow.34 We proceed to the following building block for an economic theory of higher purpose:

  Self-interested people will remain self-interested unless there is a reason to change. In a purpose-driven organization, leaders continually orient to the common good and make personal sacrifices, and this unconventional behavior repels some but attracts others to do the same. Relationships change, and people at al
l levels begin to energize one another.

  To use this building block and develop an economic theory, we first put in place assumptions. The first assumption is that employees care about two things—the pecuniary and nonpecuniary rewards they receive from the organization for the job they do, and the utility they derive from pursuing a prosocial goal that transcends their narrow self-interest. But many employees may be uncertain about how much utility they derive from a particular prosocial goal or organizational higher purpose, and also about how to integrate the pursuit of higher purpose into their day-to-day business activities and decisions. They may need to experiment and reflect to discover this. If an employee believes that the organization has an authentic higher purpose, then that employee will be willing to work harder than if the only motivation was the combination of pecuniary and nonpecuniary job rewards.

  In other words, employees are willing to “sacrifice for the common good” because doing so provides them with satisfaction or utility beyond that provided by the wage and promotion rewards of working hard. Doing so serves as a covenant and generates utility-enhancing intrinsic rewards for the individual, something that does not happen when they are simply responding to a contract.

  The key, of course, is that the employees must truly believe in the authenticity of the organizational pursuit of higher purpose. To create such belief, a leader must do the following:

  Discover and believe in an authentic higher purpose

  Communicate the higher purpose

  Integrate the authentic higher purpose with the business strategy