How to think about value creation

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.

Capitalism is meant to be value-creating, but over and over again we see it doing just the opposite. Meanwhile, it’s keeping tens of billions of people alive which is hard to argue with. 

What I will argue with is the way we think about how to fix the value creation - value destruction contradiction. Almost reflexively, we turn to a single tool: policy. Every single expert opinion on this Brookings Institute list of “solutions for America’s broken system”, for example, involves governmental intervention of some kind. It gets close while addressing the issue of CEO vs employee pay: “What’s needed is a new business norm that says all workers should share in the success of their companies,” the author suggests. But only – wait for it – “with government playing a supporting role, nudging things in the right direction.” By the next sentence we’re on to new Securities and Exchange Commission requirements and changes to the tax code.

Government can’t be the only actor when it comes to reform. More importantly, it isn’t. Consumers already wield enormous power, as this WIRED history of the Tesla Takedown movement notes: “Tesla sales are down by half in Europe compared to last year and have taken a hit in California, the US’s biggest EV market. Celebrities including Sheryl Crow and Jason Bateman have publicly ditched their Teslas. A Hawaii-based artist named Matthew Hiller started selling “I Bought This Before Elon Went Crazy” car decals in 2023; he estimates he has sold 70,000 anti-Musk and anti-Tesla stickers since then.”

There is another, far less examined way. We can build our organizations and institutions differently from the ground up. Most builder discussions focus on what we’re required to do or even just what’s possible. We need to talk more about what we should want to do. What are we choosing to build? What if, instead of waiting for the government to tell us we have to structure company incentives from the executive level on down in an equitable way, we just … did it ourselves?

Many of the things that baffle us and make the world around us so much less liveable are the result of bad corporate governance. It’s not limited state capacity; it’s bad local architecture. 

• Comparatively insane American infrastructure construction costs. Sure, there are regulatory issues, but as this piece that looks at a failed light rail expansion in Boston after the initial cost estimate almost tripled from its original $1.12 billion (for 4.3 miles!) explains: “researchers were able to identify a few reasons for what happened to the Green Line: Jockeying between two different understaffed agencies with little experience managing large projects and consultants, a laissez-faire approach to allowing stakeholders’ expensive ideas to be added to the project scope ‘even if impractical,’” It also calls out the  issue of coordination between multiple cities or counties “to complete a multibillion-dollar project unlike one they’ve probably ever accomplished before, often without a clearly defined leader,” it concludes “ it’s like the most dysfunctional group project ever.” The projects themselves are poorly governed. 

• Prescription drug denials: Denials rose 25% between 2017 and 2023. Guess who’s making a lot of these decisions? They’re “not always made directly by health insurance plans. Much of that work is done by pharmacy benefit managers, middlemen who are contracted to manage prescription drug coverage. Large employers can also play a role, dictating which drugs they want covered for their workers in their provided health plans.” Whoever creates the incentive alignments for those managers – insurers, employers, or pharmacies – is responsible. 

• Urban planning: When cities don’t serve their residents well, there are two trains of thought. The right believes urban planners and the government are to blame for holding back development. Meanwhile the left pins the trouble on developers who build for sprawl and profit rather than the common good. Framing this as a corporate governance issue provokes skepticism, but that’s what it is. Better governance produces better results, as the history and benefits of unified land ownership in England, including a very recent example in the City of London, shows. This piece highlights “interesting cases where property ownership does not fragment at the point of occupation, and where unified landowners continue to provide services that we normally expect to receive only (if at all) from local government.” 

We don’t need to replace capitalism. We just need to fully appreciate the power we have to bend it to a better purpose. As Jason Crawford writes in a recent essay that ends on biotech and AI safety:  

Activists and governments can help solve problems after they arise, as the Clean Air Act required auto manufacturers to eliminate smog. To prevent problems, we rely on the researchers who are actually on the frontiers of science and technology.

I’ll close with a message for them: You are the ones who can see both opportunities and problems earlier than anyone else. You are the ones with the deepest expertise to evaluate risks, and the best view of how to mitigate them. You are the ones who actually bring new technology into the world, and it is up to you to judge when it is ready. Safety is part of your sacred responsibility. This responsibility should not be paralyzing—it should activate the spirit of solutionism, in which we ruthlessly identify problems and then ambitiously seek solutions.

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