Whose Capitalism is it Anyway?

In the few years since the financial crisis of 2008 hit us where it hurts, the calls for the "end of capitalism" have rung out from the streets and halls of power alike. We've witnessed a lot of hand-wringing and high-level conversation, and some serious approach to reform at the national and organizational level.

As crucial as that conversation is and as laudatory and important as the efforts from the top-down are, it's striking how much experimentation and invention is already underway from the ground up.

Exactly how capitalism is changing (and the inevitability of its metamorphosis) is the subject of Chris Meyer and Julia Kirby's masterful new book, Standing on the Sun. It's a revelatory romp through this economic and cultural moment with powerful implications for any leader wrestling with the crucial questions of our day: what is business for, how do we create value and what does it mean to win?

I spent a few invigorating hours with Chris, who is a judge for our Long-Term Capitalism Challenge, in Boston last week to unpack a short course of some of the most important lessons from the book.

Let's start by shifting perspective when it comes to our traditional definition of capitalism. Take what seem to be the three central tenets of capitalism as we know it: competition, the pursuit of financial gain, and the basic geography of power.

That burnished chestnut, "sustainable competitive advantage", is largely a fiction in the "mature to senescent industrial economy, where competition is just a matter of milking the advantage you have or the barriers to entry you've built," says Chris. "It's obvious why every CEO and strategist would want it, but it does not produce the benefits that competition is meant to produce."

So what replaces competition, what drives growth today? We already know the answer: the kind of innovation that comes from collaboration, not competition.

Moving on to the pursuit of profit, which is baked in at every level of our economic and personal lives. "On the national level there's sense that if we're not producing more GDP, we're losing a competition of some kind," says Chris. And that focus filters down to companies. "There's this complaint: 'I'd love to think and manage for the long term, but Wall Street won't let me.' At the company level, stock price is the measure." And at the individual level, that orients us to use money as the yardstick of success, even though all the social scientists, behavioral economists, and experience in the world show us that may look like success, but it sure doesn't feel like it.

But that's changing. More and more people, from the kingdom of Bhutan's nearly forty-year-old focus on Gross National Happiness to Facebook's index for the same are asking the question: if we know that money can't buy happiness, why are we optimizing for financial gain?

It turns out that there's a lot of the world that's not stuck on that question or hung up on the "rules" of capitalism as we know it. That brings us to the third big shift in capitalism: its changing geography. "The center of gravity of capitalism has been high-income societies in the G7. These are now not only high-income but slow growth and aging. Meanwhile, from 2004 to 2009, emerging economies accounted for almost all of the world's GDP growth." Not only has capitalism moved to "new lands," it's being carried out by "new hands", increasingly non-Western, less-moneyed, young, digital-natives.

But what if you're not new hand in new lands? How do you align yourself and your company with these forces of the future?

Build a lifeboatChris tells the story of GE Healthcare in India, where cardiovascular disease has quadrupled in the last forty years and the country is on track to produce 60% of the world's cardiac patients by 2020. In exploring how to serve this market, GE Healthcare tapped into the "in country, for country" fund established by General Electric CEO Jeff Immelt to promote experimentation around how the company brings products to market. Engineers charged with developing cardiograms for India and China specifically quickly discovered that GE's state-of-the-art $5000 machine wouldn't cut it on the bumpy, dusty roads to India's villages (many of which are without reliable electricity) and would have to be drastically cheaper. What they came up with, a sturdy, intuitive $500 cardiogram called the MACi, is not only working in clinics in India, 40% of them are now sold in Western Europe.

How do you encourage the invention of something entirely new that serves both the profit motive and provides social benefit, even without access to Jeff Immelt's special fund? You "build a lifeboat," says Chris. Create a protected space, permission, and some funding "for the people who believe in the new thing and just can't help themselves but to follow that belief."

Internalize the externalitiesIf the old model was to externalize every cost and impact you could get away with, the new version is to internalize every impact you make, both negative and positive.

"Corporations shouldn't take social responsibility," says Chris, "They should take corporate responsibility, which means to be responsible for all of their impacts, many of which today are not measured." It's a pretty simple formula, he says, "If you can identify it as your impact, then take responsibility for it." That's what Procter & Gamble and Unilever are doing when it comes to the epic packaging waste they contribute to, they've committed that none of their packaging will end up in landfill on a posted schedule.

Do what you believe (and only that)At the individual level, "that's what they pay me to do," is not enough of a reason to do something, argues Chris. But there just aren't that many jobs out there that match up personal beliefs and values to everyday work. There is a way beyond this conundrum (though it's not for the faint of heart), says Chris, "standing on the sun, it's worth remembering that jobs are a relatively new phenomenon. Before there were large industrial organizations, everybody was an entrepreneur. And what we're going to return to is a form of people finding their own work."

So, what does it mean to win today? The good news is that winning is more often the result of the alignment of different interests than of a battle between them. Says Chris, "Winning means a sense that you're contributing to the greatest good for the greatest number."

If you're rethinking what it means to win, we want to hear about it. Share your story or idea by entering the HBR/McKinsey Long-Term Capitalism Challenge.