For The Better - Email 1/2

For the Better comes to you bi-weekly with ideas about how and why to build companies focused on human flourishing and stories of the people who are doing it. Other enthusiasms may occasionally appear.

What is the purpose of a company? Chipotle customers vs. shareholdersA lot of discussions about corporate purpose are very, for lack of a better word, highfalutin. This is perhaps because they’re always about tackling monumental tasks like climate change or social justice or other inequities. The stakes are incredibly high, and our tools to combat them don’t always feel sufficient. As a result, rhetoric often stands in for everything we can’t accomplish despite our best intentions (especially in the face of seemingly competing corporate priorities, i.e., quarterly profit).But what if corporate purpose isn’t some lofty, ever-unattainable goal? What if it’s just doing the thing the company was created to do really well? And what if fulfilling corporate purpose in that sense was actually the same thing that made a company profitable all around? Crazy idea, right? Doing a fantastic job at what you set out to do as an organization leads directly to success.  I’ve been thinking a lot about the relationship between purpose and profit for my new book, and talking about it with some incredible people on my podcast. But one of the most relatable examples of the total misalignment of the two I’ve seen lately was in this Matt Levine column. He tells the story of how Chipotle discovered many of its franchises were dishing up diminished servings, covered it up, and started spending more money on ingredients. Then, as he writes, “Chipotle did an earnings call saying that it expected its cost of sales to increase in the next quarter as ‘an investment we are making as we focus on outlier restaurants to ensure correct and generous portions,’ which is (arguably) an admission that in fact, it was skimping on portions. And then the stock fell.”The result was that shareholders sued Chipotle for securities fraud on the grounds that they’d bought stock, unaware of the timeframe when all of this was happening. Levine’s amused, exasperated point is that in our current era, “Everything is securities fraud, but the main things that are securities fraud, the things at the core of the concept of “securities fraud,” are (1) making up numbers in financial statements and (2) not putting enough meat in burritos”.My point, though, is that, as a company, Chipotle has a very clear purpose: to make food and serve it to people. They were so distracted from this purpose by shareholder value concerns that instead of just doing their one job, they first squeezed their customers and then lied about it, leading directly to the lawsuit filed by the very people they were scrambling to please. If they had instead focused on every franchise upholding Chipotle’s purpose by treating their customers well, everyone from customers to shareholders would have been happy. By separating the two, they cost themselves billions of dollars and betrayed the whole reason the company exists in the first place.

Things I’ve Enjoyed Lately 

🔵 The Brilliant Jerk vs. Team Performance – Problem #3Who among us hasn’t seen this issue at some point? I’m a true believer in the idea that company building and progress are the work not just of visionary individuals but the interactions they have with everyone around them. This is a great piece on how to deal with it when not everyone agrees about that, including a Netflix mini-case study.

Athena:

One of the things I enjoy the most about what I do is that every day is a little different. I meet people building incredible companies and doing great things for the world, do my writing and work, and always reserve time for my family. Athena, which offers executive assistants at affordable rates, shares my belief that the key to making the most of everything life has to offer is keeping it running smoothly. I've partnered with them so you can focus on living your life rather than managing it. 

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🔵 State Capacity for Building InfrastructureIt’s no secret that getting big infrastructure projects done in the US takes longer and costs more than in comparable countries. This paper takes a look at the top three reasons why (personnel, procedure, and lack of adequate tools) and lines up a lot of practical tips and mechanisms for tackling them. 🔵 Loss aversion or mistakes?A great breakdown and analysis of a set of experiments on the relationship between loss aversion, risk, and complexity in decision-making and how we don’t always make choices for the reasons we think we do. The “findings suggest that much of the behavior motivating our most important behavioral theories of risk derive from complexity-driven mistakes rather than true risk preferences.”