The Bankwatch

Tracking the consumer evolution of financial services

Book review | The New Capitalist Manifesto – Umair Haque

I did up this post on evolution of bank business models last week in anticipation of reading Umair Haque’s new book, “The New Capitalist Manifesto”.  It was worthwhile and here are some thoughts after finishing it.

Banks have generally sufferred a great loss of trust and respect following the credit and banking crisis that centres on financial products and activities that feel to people as they are all for the benefits of banks and little for the benefit of people.

This is part of a larger thread that predates the crisis and really became highlighted following the advent of internet and the ready availability of information on almost anything.  Edelman have been keen followers of this thread by publishing the annual report on trust – Edelman Trust Barometer.  The trend was generally negative for western business in advanced economies. 

Business response over the last few years has been to focus on ‘social responsibility’ and to devote a section of the annual report to highlight those efforts.   Edelman confirms that has failed.

This is where Umair’s book comes in.  The theme of the The New Capitalist Manifesto can be summarised this way:

  • companies have been focussed on a very narrow definition of profit and value creation.
  • this narrow focus understates real costs, and maximises short term profits – he defines this as ‘thin value’
  • the costs that are understated include costs associated with current society, future generations, and environmental impact
  • he proposes a framework for aligning corporations with activities and thinking that builds a broader definition of value into everything they do – he calls this thick value.

Examples are needed to bring these concepts to life.  He notes that none of his examples are anywhere near perfect but that the positive examples are at least trying and there is evidence that they are trying to rebuild their business around a different set of principles that are focussed on thick value.  In simple terms thick value is more likely to have happier and more satisfied customers because the corporation is reflecting their beliefs and values.

A selection of examples from the book:

Insurgents (good)                                    Incumbents (bad)

Google                                                                  Yahoo

Apple                                                                    Sony

Lego                                                                      Mattel

Starbucks                                                              McDonalds

Grameen                                                               Vodaphone, HSBC

Nike                                                                      Adidas

 

The first thing that struck me is that many of those on the insurgent category were companies that had been crucified before for anti-societal or environmental activities.  The other and more important point is that the insurgents are all doing better on the stock exchange relative to the incumbents. 

This goes to the core of Haque’s book;  that thick value is genuine value for all both financially and otherwise. 

The other thing that rang true for me is that incumbent thin value companies are more focussed on marketing campaigns to highlight their value in the world.  Whereas the insurgent approach has little to do with manufacturing fake value in a campaign.  Those on the right are more likely to be seen in Super Bowl or similar ads.  Insurgents are more likely to have created entire new industries or completely redefined an industry.

I will quote one paragraph from the final chapter entitled ‘Constructive Capitalism’.

Most businesses still conceive of superiority as being better than a cohort of immediate familiar competitors.  But thick value says that just being better than the next guy, the next ten guys … isn’t good enough for competitive superiority in the twenty first century.  Constructive capitalists aren’t merely seeking to be better than rivals in yesterday’s terms.  They are fundamentally redefining what success means to encompass the well being of people, communities, society, and future generations; to return what you might call profit “plus”; profit plus social, environmental, human, and as yet unknown – unexplored kinds of – returns.

It is a thought provoking and worthwhile read.  Every bank needs to be thinking how they can redefine the industry.

Written by Colin Henderson

January 29, 2011 at 15:30

Posted in Uncategorized

4 Responses

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  1. […] This post was mentioned on Twitter by Scott Loftesness, The Bank Channel, TekFin, Caroline Pandey, Finno.nl and others. Finno.nl said: Book review | The New Capitalist Manifesto – Umair Haque: I did up this post on evolution of bank business model… http://bit.ly/g6vZGx […]

  2. Hi Colin, long time no speak–hope things are well.

    Haven’t read the book yet, but I’ve been a big fan of Umair’s writing on the Harvard Biz blog for a long time.

    Just wanted to note that ‘thicker’ concepts of profit and value bring other (heretofore unqualified returns), such as drawing employees, partners, peers and prospects more aligned with your values.

    You might get better production and commitment from a rested, inspired and fulfilled team. You’ll get better word of mouth referrals when your enthusiasts are in a position to crow about more than your benefits.

    It’s also worth noting that these areas are being explored by networks of successful entrepreneurs and enterprises: See (and read) Small Giants. Look up B Corps. Peruse annual lists of “best places to work” for signs that businesses with a bigger mission than their bottom line have an edge.

    B

    Barry Martin

    January 30, 2011 at 21:38

  3. Barry … it has been a while and thank you for stopping by.

    Colin Henderson

    January 30, 2011 at 22:00

  4. Hi Barry and thanks for the comments. This is a positive movement and the right thing.

    Colin Henderson

    February 1, 2011 at 08:21


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