Porter vs. Sandel: The Debate of the Michaels

Michael Porter and Michael Sandel share the same first name.

In fact, Michael Porter and Michael Sandel even share the same profession, both teaching at Harvard University (competitive strategy and political philosophy, respectively).

But the manner in which Michael Porter and Michael Sandel approach the global economy is vastly different.

porter        sandel

THE GREAT DEBATE:  CAN BUSINESS SOLVE SOCIAL PROBLEMS? 

…If so, how?

Michael Porter: Why business can be good at solving social problems.

“I’m a business school professor, but I’ve actually founded, I think, now, four nonprofits…That was the way we’ve thought about how to deal with these issues. But I think at this moment, we’ve been at this for quite a while. We have decades of experience with our NGOs and with our government entities, and there’s an awkward reality. The awkward reality is that we’re not making fast enough progress. We’re not winning.” – Michael Porter.

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Michael Sandel: Why we shouldn’t trust markets with our civic life.

“Over the past three decades, we have lived through a quiet revolution. We’ve drifted almost without realizing it from having a market economy to becoming market societies. The difference is this: A market economy is a tool, a valuable and effective tool, for organizing productive activity, but a market society is a place where almost everything is up for sale.” – Michael Sandel.


THE POWER OF BUSINESS, AS TOLD BY MICHAEL PORTER:

Fingers have long pointed to business as an instigator of the many social plights suffered around the globe. Porter does not deny the validity of this argument, rather concedes a plethora of “bad actors” have worsened social problems – and dampened the reputation of business.

Porter further contends that business is poised to alleviate social deficiencies.

I wholeheartedly agree.

NON-PROFIT VS. FOR-PROFIT:

A vital distinction must be acknowledged. When Porter asserts that “business” has the ability to alleviate social deficiencies, he is referring to for-profit business.

The Sustainable Investor has examined this notion extensively, most recently through Bill Gates and Mark Zuckerberg’s use of a for-profit organizationBridge International Academy, to tackle the education gap in Africa. Clearly, investment return is not a concern for these two billionaire entrepreneurs. It thus seems reasonable to conclude that Gates and Zuckerberg felt a non-profit organization would be insufficient to generate the desired results in Africa.

The fundamental problem? An inability to scale.

Michael Porter hit the nail on the head in his TED talk: “Non-profit organizations allow for incremental progressWe can make progress. We can show results. We can make things better. We’re helping. We can’t scale. We can’t make a large-scale impact on these problems.”

The vital impediment the world faces when it relies on non-profits is a lack of resources.

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There is a reality that must be accepted.

We must turn to for-profit business.

To be fair, and as Porter acknowledges, non-profit organizations can – and do – make a difference. But that difference is small. That difference is a mere penny in the bucket. The environmental and social plights felt worldwide are vast.

“All wealth is actually created by business. Only business can actually create resources. Other institutions can utilize them to do important work, but only business can create them.”

The kicker, Porter declares, is that business only generates resources when it makes a profit. This profit is the key ingredient to scalability. To self-sustaining solutions.

There is a larger issue at hand.

Conventional wisdom in economics alleges a tradeoff between social and economic performance. We have discussed this endlessly, but it is a misconception worth revisiting.

Consider pollution. The traditional belief has been that if business pollutes, it must be making more money than if it made an effort not to pollute. Companies have actually fallen into this conventional wisdom, resisting social and environmental advances, per the notion that adhering to such efforts would be expensive, and therefore they mustn’t.

Generally speaking, companies have, for decades, felt that it is not their responsibility to alleviate deficiencies. Solving such problems cannot result in profit, it is too daunting, it is not relevant, it is someone else’s duty.

Here’s the thing: companies can profit – tremendously – from solving social and environmental problems.

MARKETS MUST BE KEPT IN THEIR PLACE, AS TOLD BY SANDEL:

Michael Sandel expresses a concern that society – every aspect of society – has been dominated by market values and “market thinking”.

This is problematic for two reasons:

The more powerful money becomes, the more detrimental it is not to have it.

“If the only thing that money determined was access to yachts or fancy vacations or BMWs, then inequality wouldn’t matter very much. But when money comes increasingly to govern access to the essentials of the good life – decent health care, access to the best education political voice and influence in campaigns…inequality matters a great deal. And so the marketization of everything sharpens the sting of inequality and its social and civic consequence.” – Michael Sandel.

Secondly, when market thinking dominates certain practices, it has the potential to alter the meaning of said practices. Sandel claims economists have fallen prey to the assumption that market exchange does not change the meaning or value of the goods being exchanged.

Again, a distinction must be made.

“This (market exchange does not change the meaning or value of goods being exchanged) may be true enough if we’re talking about material goods…but the same may not be true if we’re talking about nonmaterial goods and social practices such as teaching and learning or engaging together in civic life…We have to ask where markets belong and where they don’t, where they may actually undermine values and attitudes worth caring about.” – Michael Sandel.

MICHAEL V MICHAEL:

The Michaels duked it out at TEDGlobal 2013.

Seemingly, the pivotal differing view is the following: Michael Sandel fears the inability of society to keep markets in their place, a concern for the monetization of our culture. Michael Porter counters that we simply have not tapped into markets enough. That business has power.

While I side with Porter, I see valdity in Sandel’s concern.

In fact, although it first appears as though Porter is praising markets while Sandel is blaming, the two Michaels are not all that different.

Porter recognizes the shortcomings of business. Business must fight conventional wisdom and learn how to channel its power towards greater good. Sandel too recognizes a shortcoming of business – of market societies, in particular. “My argument is not against markets, its an argument for keeping markets in their place. Markets are tools to serve broader social purposes…we need to figure out how to keep them in their place, which means we need to figure out what is their place.”

I raise the question to my readers: what is the place of markets?

Is business responsible for alleviating social and environmental deficiencies?

4 thoughts on “Porter vs. Sandel: The Debate of the Michaels

  1. ” It thus seems reasonable to conclude that Gates and Zuckerberg hold the belief that non-profit organizations are insufficient to generate the required results.”

    What about their foundations?

    On Tue, Apr 7, 2015 at 2:31 PM, The Sustainable Investor wrote:

    > thesustainableinvestor posted: “Michael Porter and Michael > Sandel share the same first name. In fact, Michael Porter and Michael > Sandel even share the same profession, both teaching at Harvard University > (competitive strategy and political philosophy, respectively). But the > manner”

    Like

  2. Hi Carlo,

    Thanks for reading. Both Gates and Zuckerberg’s foundations are grant-making organizations that do not have their own operations. These foundations partner with, and provide money to, operating non-profits, government entities, school districts, etc. It seems as though Gates and Zuckerberg pointedly decided to tackle the education deficiency in Africa with a for-profit business as they recognized the education gap as one that would require a scalable solution.

    Check out TSI’s post here: https://thesustainableinvestor.net/2015/03/18/gates-and-zuckerberg-strive-to-bridge-education-gap/

    Like

  3. Excellent post, TSI! The “what is the place of markets” is an age old question that is being looked at in different and thought provoking ways by the Michaels (and TSI). My way of looking at it is that markets are going to grow ever bigger because it’s human nature to want more (stuff, happiness, bling, whatever) and markets are where you find more. People want to play the game. The rub is that government and NGOs need to be strong as well–because they represent the rules of the game. If we want a habitable planet, basic access to healthcare, education, etc., the rules have to be strong and clear so that game players can operate. Problem is, IMHO, that many powerful game players don’t want strong rules because that sometimes means they have to work harder to win the game.

    Like

    • I love that analysis, greensportsblog, and I happen to agree with you.

      Humans are inherently wired to “want more”. Not all, but most. This is why land is increasingly developed, buildings increasingly taller, companies increasingly bigger (the list goes on), and why Michael Sandel espouses a fear of markets straying from “their place”. Markets will undeniably augment. (Not to mention the effect that population increase, etc. will have on markets…)

      The rules need to be stronger. Companies are not currently mandated to internalize the negative externalities they are putting forth on this planet. Some companies are conforming to the pressure they are facing from consumers and investors, and this, I believe, is why we are seeing an increasing commitment to implementation of sustainability as well as a greater level of transparency.

      Is pressure from what is arguably a minority group of consumers and investors enough?

      I think not.

      Like

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