Episode 29: Alex Edmans on Delivering Purpose & Profit

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Transcript

Announcer:

Welcome to Surfacing. In this episode, hosts Lisa Welchman and Andy Vitale speak with Alex Edmans. Alex is a professor of finance at London Business School and serves as Mercer's School Memorial Professor of Business at Gresham College. Alex talks about his pie-conomics framework, detailed in his book, Grow the Pie, and also explains how organizations can make a business case for sustainability and accountability, and offers suggestions on how anyone can make a positive difference at any level of an organization.

Lisa Welchmn:

I really think the first question that we have and that our listeners would like to know is to hear some about pie-conomics. What is the basic theory? Why did you come up with it? Why this area of research and interest for you? And so I think that would be a good place to start.

Alex Edmans:

So what is pie-conomics? So let me start by explaining what the pie is. So the pie is the amount of social value that a company creates. And now that value can be split between investors in the form of profits, or society in the form of taxes to the government, wages to workers, fair prices to customers, and also preservation of the environment. And so what we mean by pie-conomics or growing the pie is that often people have what they call, I call, the pie-splitting mentality. The only way to get a greater slice of pie for yourself is by reducing the slice available for others. Why? Because people think the pie is fixed. So if you want to make more profit, how do we do that? Pay lower wages to workers or work them harder, charge as high prices to customers as possible, and maybe pollute the environment.

Alex Edmans:

But the whole idea of pie-conomics is that the pie is not fixed. It can be grown. So when you choose to treat your workers well, pay them more than the minimum wage, provide them with meaningful work and skills development, you're not being charitable. You're not just giving them part of the pie. Instead, they're becoming more motivated and more productive, and that grows the pie, and therefore ultimately shareholders benefit. And so what I present with this pie-conomics idea is the business case for sustainability and responsibility. So often people think that there is an ethical and moral case for sustainability, and there absolutely is. Ethics and morals are really important. But I think, alone, that might not be sufficient to move the needle because any chief executive or chief investment officer realizes that companies do need to make a profit. Why? Their shareholders might be pension funds or citizens are saving for retirement. But when we have a business case, then actually doing things to serve society is not just good morally, but it can also be good business. And therefore it is possible for both society and shareholders to benefit.

Lisa Welchmn:

So our listeners are really people who work in the digital space. So it's a very broad case of listeners. Andy is a design leader, so there are a lot of people who are in user experience design. There are some technologists, there are people who work with content. There are digital leaders, people who are chief digital officers and lead digital teams, but they're all working in the digital space. And so it would be really great, and there's this urgency and this push and this reactivity that is in this digital space, whether or not you are a startup, dot com, or a digital first company, or whether or not you were some global B2B that existed prior to the internet and web even being here. Everybody's reacting and pushing. And so my question is, how do you think about pie-conomics in that context? If you're a startup company that is just trying to get things going, you're probably going to think, "Oh, for me to think about social value at this point is just like, no. It's all about profitability.

Lisa Welchmn:

We're trying to get funded, or we have been funded and we have to prove this result to grow." Or if you're in one of these larger, more stable businesses, you might be being very, very defensive because you're afraid of what your competitors are doing in a digital space, that might cause different types of competition. Or maybe you're just concerned that your vertical market is going to be completely disrupted. And so there's people are very, very defensive. And I think they use that reason to just push for this ultimate profitability, using that... I'm not an economist, but what is the classic model? Enlightened shareholder value mentality instead of the pie-conomics mentality. And it pushes things so hard. And so I'm wondering if there's something that you could talk about, or if you could just talk about that dynamic in those spaces and how pie-conomics might apply?

Alex Edmans:

I think pie-conomics is particularly applicable for digital companies and also startup companies. So why? Often people think that sustainability is splitting the pie more fairly, for example, donating a lot of profits to charity. And that's just not realistic for many companies which are startup companies, because they need to focus on profitability. And also many people think that sustainability is about doing no harm, maybe cutting your carbon emissions, or maybe achieving equality within the workforce of a company. Now those are not bad things, but why it's stressed with pie-conomics is that the main way for sustainability is not to do no harm, but to actively do good. So how much social value can you create? And that's something which I think is particularly applicable in digital. So let me give an example. So in 2007, Vodaphone, the telecoms company in the UK, they launched M-PESA, a mobile money service in Kenya.

Alex Edmans:

Now that was something which had a huge impact on wider society. At the time, 15 million Kenyans, they had no access to banking. That allowed people not to have to deal with cash, which has problems of forgery and robbery. And, in terms of empowerment, that lifted 200,000 households out of poverty. And many of those households were headed up by women because it allowed them to move from agriculture to business and retail. So why do I get that such an inspiring example that shows how digital can create a lot of value, but notice it is not something that would be ticking any boxes of traditional sustainability scorecards. Does it cut your carbon emissions? No. Does it change the gender pay gap within Vodafone? No, yet it does so many great things in terms of gender quality for the people in Kenya. So I think what we want to focus on is yes, we want to make sure that we do no harm within our company.

Alex Edmans:

Yes, absolutely treating workers well is important, but how can we use our technology to enhance socioeconomic progress? For Vodafone, a telecoms company, it should have just focused on telecoms, but then it realized, actually we have this technology that allows people to send to themselves money on their mobile phone. And that, to me, is a really exciting power of digital. I'm involved right now with some discussions as a blockchain fund, which wants to go into sustainable blockchain. You might think, well, is that an oxymoron? Isn't blockchain something which consumes a lot of carbon? Now first, yes, we do want to try to reduce our carbon consumption. So if we're going to do proof of stake, rather than proof of work, that's going to reduce our footprint. But the more important thing is what is the blockchain being used for? Can we use this to form a distributed ledger for carbon offsets, for example? And that power I think is what we really want to think about, actively doing good, not just doing no harm.

Lisa Welchmn:

Now. So, one of those examples at least was for Vodafone. That's a company that everyone knows well. What about people that are just truly startups? What is the argument for them adopting pie-conomics and that philosophy? I mean, it's an action, but it's also a philosophy in a lot of ways. Adopting that out of the gate, or is it even smart for them to adopt that out of the gate? Is pie-conomics something that you do after you're established and you have some profit, or is it something that you embed into the business from the very beginning?

Alex Edmans:

I believe pie-conomics is something that you should embed in the business from day one. Why? Because if a company is going to be sustainable in the long term, it needs to be producing a product or offering a service that creates value for wider society, because then customers will want it, then regulators will want to embrace it and so forth. So when you think about, well, what is our business, our company and business, to do? Is the use to which your technology is put something which is actually creating value for wider society, such as providing access to finance to 15 million people who are unbanked? And notice when I say that, this is something which is not divorced from the core business. So notice in our conversation so far, we've never used the term corporate social responsibility. And why? I don't like that term, because that has the connotation of something which is siloed in a CSR department, divorced from the core business.

Alex Edmans:

So I could be a tobacco company and have a CSR department donating something to charity. Whereas here, what this is about is, is the core business one that creates value for wider society? And that's something which ensures that what you're building your business around is something that's going to be sustainable. Now you mentioned earlier, Lisa, how is this different from enlightened shareholder value? So enlightened shareholder value is the idea that, if I want to maximize shareholder value, I do need to take into account long term aspects. I need to think about, well, am I going to fall foul of the regulators and so on? And I do think there are some similarities between enlightened shareholder value and pie-conomics, in that both of them take a long term approach. But I think the fundamental difference is one of them is intrinsic and the other is instrumental. So what do I mean by this?

Alex Edmans:

So what is an instrumental approach to business? Is before I make an investment decision or a business decision, I'm going to do a count crunch. So if I build a new factory, I'm going to think how many widgets can I produce? How much can I sell them for? What will my profit be? However, for many important business decisions, you can't reduce them to a financial calculation. So for Vodafone, could it calculate how much money they would make from M-PESA? Probably the answer would be zero, right? Would this even work to begin with? Would you be able to monetize this? Because this was to some of the poorest people in the world. Instead, what they started from is intrinsically is what we are launching something great for society? And then if it is, later on they might be able to market it. But I think it's first starting with, well, what is the value that we're creating?

Alex Edmans:

I think we can see this for many digital startups, which now are household names, but back then weren't. So perhaps when Mark Zuckerberg started Facebook, did he know how to monetize it? Or was this something where he was just trying to have this as a way to connect people within his Harvard undergrad class? And indeed, when you think of other things such as Google search engines or ways of getting data, and there might be some things like Google maps or Google docs, which aren't immediately monetizable, but when you first start with, can you create value for society? Then often afterwards, there will be a way of monetizing it, but that's something which should come secondary.

Andy Vitale:

So, Alex, as you're explaining this, where my brain goes automatically, I don't know if you're familiar with it, but HBR had an article maybe a few years ago about the elements of value. It was a pyramid, the elements of value pyramid. And they addressed the different types of value that companies, their products, their services can offer. And they go from functional, which are around how we can maybe reduce risk or connect people or help them save time, to emotional, where maybe it's reducing anxiety or providing some sort of wellness. Then the third tier is life changing. Does it provide hope? Does it provide motivation, a sense of affiliation or belonging? And the pinnacle, which is social impact. And it talks a little bit about self transcendence. So, for me, I'm just trying to think about how do you see organizations continuing to move up the pyramid? Is that even something they should strive for if they're already providing great value, but maybe not at that top pinnacle scale?

Alex Edmans:

Thanks, Andy. I don't know this specific HBR article, but I know many types of articles which try to classify and categorize types of value. And I do have to admit I'm in two minds about this, because that often suggests, well, you want to be right at the top of the pyramid. But if so, this might mean that a digital company is never going to get to the same level as a pharmaceutical company, which is curing cancer or curing river blindness. So there's an analogy that there's one body and many parts. One might think that the eye and the brain are the best parts of the body, but actually the hand is something useful. If the hand said, I need to try and be the eye. Then there would be no hands here. And I think there's different companies which play important roles. So one of the biggest examples of sustainability is Unilever.

Alex Edmans:

Now they make soup and soap. That is not really transcendent. It's not something that you might think is going to have as transformative effect. But actually by doing this in the same way, and also trying to bring hand washing to many people in developing countries, that actually had a large impact. So just by doing your core business really, really well, I fear that if we think about... Yes, if you can get to that transcendent level, great, but I feel that can be alienating to some companies because they might think, well, I can never be a purposeful company. I can never be a sustainable company. But if you think of something just every day, like financial services, that's something where let's say you have a digital bank, which is something which means that you can get easy access to money without having to physically go to the branch. It's something where just, you are able to...

Alex Edmans:

Remember the days where we had to physically deposit checks and get cash out? That's something where I think just doing the core stuff really, really well is something which does create a lot of value for something which is every day and mundane, to make that a little bit easier. I think that is something which might not be transcendent, but can create a lot of value to society.

Lisa Welchmn:

One of the challenges that I see a lot when I am working with these big, big digital teams, is that, particularly in some of these larger companies and some of them noted where things have gone a little sideways or there's been some unintentional outcomes. Or unintentional outcomes have surfaced and then the executive reaction leaves something to be desired. They're not prepared to react. And one of the things that I've noticed over the last 20 years or so is that digital efforts often lack clearly defined purpose. And so, if it's an already established company, they may stand up digital channels or digital products and services and they haven't quite been brought into alignment with, and already clearly expressed value statement that the organization might have. Somehow digital's offgoing this. Or if you're a digital first company or dot com, you might have fairly young or inexperienced leaders who have not taken the time to actually articulate the purpose of the company and to do the things that you describe in your book.

Lisa Welchmn:

So I thought that the way that you talked about purpose of being able to clearly articulate it, to communicate it effectively. And then the last part, which really gets me going, which is ensuring that it is embedded, that it pushes through into the interior of the business is super important. And I'm wondering if you could just talk about that? Because I think that is something that a lot of people who work in the digital space really struggle with. They sort of know the right thing to do, but it's not really clearly enough articulated at this very senior level, that everybody is marching to the same beat.

Alex Edmans:

I think one of the main things that people get wrong when trying to embed purpose is actually not fully understanding what purpose means. So often people think that purpose means altruism. A purpose of the company is one that serves customers and workers and communities and suppliers and environment and so on. But if you think about the word purposeful, it doesn't mean altruistic. It means focused and targeted. So a purposeful meeting is one with a clear agenda. If I do something on purpose, I'm doing it deliberately. And therefore, for a company to be purposeful, yes, it needs to be a purpose that serves wider society, but that purpose should be focused and targeted. Because if it's not, it's not something that can translate down below the C-suite, if indeed the CEO is very clear about her mission for the company, then that's something that people can see.

Alex Edmans:

Well, what is their specific role to play in this? So, again, let's say go to Vodafone. Their purpose is to use technology to enhance socioeconomic progress. But now, in that statement, they don't say anything directly about some great issues like climate change or diversity. And so those are really important issues, but they're saying the number one thing for us is how can we enhance socioeconomic progress? And so they're always trying to think about, yes, our technology right now. Yes, our bread and butter is offering telephony services, but are there other ways in which we can do that? So can we use this to help farmers predict what the weather is, and therefore that will help them know how to grow crops better or how to treat the crops? And that's something which then can lead to a lot of equality and a lot of progress here.

Alex Edmans:

And so I think what's really important is the clarity. And I think also what's key is to ensure that the purpose is linked to the core business. So with Vodafone, again, what they're trying to do is use their comparative advantage. But when purpose becomes CSR, then I think it's something which is seen as ancillary, it's not seen as something which is central. So we should always be aware, why is this not just good for society, but also good for business? Because at the end of the day, companies do need to make a profit. And I think, if you have a purpose which is divorced from the business, then people will think, well, this is unrealistic. Or they might think, yeah, the CEO says this, but does she really mean it because we know that she's still accountable for delivering returns to shareholders?

Lisa Welchmn:

Yeah. I just want to pick at one thing that you said, or just tune it a little bit to hear a little more about it. And that is, in this embedding zone, because one of the things that you said really hits a hotspot for me, which is how do you get that transference of purpose from the executive suite or the C-suite into people at the working level? Because a lot of times there's a big gap, depending on what the business is, the director, VP, EVP level. There's a gap that doesn't get translated. Up at the C-suite level, they're all looking at profit, profit, profit, profit, profit numbers, numbers, numbers. And they may have a mission statement, they may have a sort of strategy around digital, I'm talking digital in particular, around digital spaces.

Lisa Welchmn:

So it gets down to the working level, it's just turned into, do whatever makes money. So a lot of the softer value-based things never make it. And I'm wondering if you have good examples of how those mechanisms, those softer value-driven mechanisms, as well as the metrics and the measurable stuff, the quantitative stuff, actually get translated down into the working level inside of an organization? Because I think that doesn't happen well in areas where people are building digital products and services.

Alex Edmans:

Yeah, absolutely. So often, when you think about the purpose of a company, that purpose is generally quite broad. Why? Because it has to apply to the entire company. But you can't run a company with just one statement. So while there'll be a broader corporate purpose, each individual business unit should think about, well, what is their micro purpose? So how do they contribute to the wider side? For example, I don't know what London Business's purpose is. I think it's to have a profound and impact on business or something equally vague. But for what do I define my purpose as me, Alex Edmans? I defined it as to use rigorous research to influence the practice of business and to inspire people to fulfill their potential. So why is that purpose interesting? For me, it's all about influencing the practice of business.

Alex Edmans:

So why I'm an academic at heart, I would much rather do a podcast like this to practitioners rather than to supervisor and other PhD thesis. I do think PhD thesis supervision is great, but that I think my colleagues will be better at than me. My heart is speaking to practitioners like you. And then when I say, well, to inspire others to fill their potential, well, yes, that means that narrowly my job is professor of finance, but other things that I try to teach at London Business School are mental and physical wellness, time management, public speaking. And that encourages me to go beyond my smaller remit, just like within Vodaphone, they went beyond just providing telephony services. So what I'm saying here is that whatever unit you are in, it could be payroll, it could be procurement. You think about what is your small micro purpose here. And then to think about, well, what are ways in which you can measure or assess this?

Alex Edmans:

So when I was at Morgan Stanley, when starting out as an investment banker, when we were given the evaluations, yes, this was on accuracy of work and so on. But what was interesting is that we were evaluated according to sensitivity to support staff and things like that. And that was really striking. You might think that investment banking is a really cutthroat environment. Don't get me wrong, there were times that were stressful there, but what was interesting was they also would notice how you would treat other people. Because if you were somebody who, even as a junior analyst, were abusing your secretary, how would you act when you were a senior, a managing director? You'd probably be even more abusive.

Alex Edmans:

And so what they wanted was people who were following the values of the company. So I think, to put it into the assessment procedure, because then it's something which people don't think about. And also they get feedback on, and they might say, well, yes, you are critical. And I think this criticism that you're providing is useful, but maybe you could provide it in a more measured way or something like that, where you're getting feedback and that just changed the conversation to what the company considers to be important.

Andy Vitale:

So Alex, I'd love to touch on that from the opposite angle. You started to talk about influence and I know one of the things you talk about that really resonates is for companies to be able to do good and do well. So I'm curious what advice you would give for people at the opposite level, the different altitudes, maybe mid-level employees, middle management and potentially senior leadership, that can start to influence that purpose of the organization? Do you see the possibility of an upward trend as opposed to the downstream activity of purpose and how it rolls out through the organization?

Alex Edmans:

Absolutely. And maybe I'll start with the most junior level. So why? We often talked about companies and so that says, well, if you are a senior person, you can influence the direction of a company. But what is a junior person? Often people feel perhaps helpless, particularly now, there's such large corporations. You might think, as just one person, how can I influence a large company? So one thing I'd encourage is just the fact that you have much more power to make a difference than you might think. So, one question I always ask people is what is in your hand? So what do I mean by this? I'm asking, well, what are the resources? What is the expertise? What do you have in your hand that you could use to change the culture or the direction of a company? And so when I was a junior analyst at Morgan Stanley, I was right at the bottom.

Alex Edmans:

I thought there was nothing in my hand because I was so junior. Nobody worked for me, in terms of the bankers. But then I realized that people did work for me. There was the secretary, there was the IT department, and there was perhaps the most abused department at Morgan Stanley, which is the graphics department. So what you do is you scribble some PowerPoint slides. You give it to them to turn into some slides. And often analysts would shout at them because they didn't do what they asked, even though it was the analyst's fault often, for not having explained it clearly. But I realized, well, what I had in my hand was not huge resources, but I had my words. And so there were times when somebody would do a good job, I would call them up and I'd say, "Hi, this is Alex. Could you tell me who did my job?"

Alex Edmans:

And they'd say, "Well, hey, it was Juliet." I said, "Can you put me through to her?" And I said, "Hi, Juliet, this is Alex. You did my job. I just wanted to say it was a really good job. So all these three things I asked for, you did them really well. I didn't even ask for that fourth thing. Thank you for your initiative. That was a great addition." Now, sincerely, I did not do this to try to be a goodie goodie, to be seen to be nice, whatever. I just did this to say, thank you. But because I was so junior, because I was right at the bottom, I didn't have my own office. So I sat in what was called the bullpen within an investment bank, with just loads of people around me. And then the other junior bankers heard this and started doing it themselves.

Alex Edmans:

Now I'm not going to claim I changed the entire culture of Morgan Stanley. Clear I didn't, but, at least in the seventh floor of our offices in Canary Wharf, people did start to talk differently to other people. Just right now at London Business School, somebody from the IT department has come up with some good solution. And I asked, "Well, can you tell me who your boss is? Because I'd like to report this as being a great way of solving a problem." Often in these cases, I'm being told, computer says, no. No, this person chose to go out of his way. And I think this applies throughout the organization. So whenever you are, even if you are junior, you might have in your hand, your words. When you are, let's say, middle management, you ask, and just to give a sincere thank you to somebody makes a big difference.

Alex Edmans:

So I remember when I would, as a junior banker, do some work which goes into a meeting. I would obviously not go to those meetings as somebody junior, but then there might be, the boss would come round and say, this is what happened at the meeting. This is why your analysis was really useful. And the client asked about this. And then I realized, well, actually, yes, I have stayed up until midnight to work on this, but it was for a point. And then when you are more senior, what is your hand? It is not just kind words, but it could be resources. And it could be, you think, oh yes, we have this expertise of technology. We're going to use this to launch M-PESA.

Alex Edmans:

Another example is Mercedes in the pandemic. They said, okay, our expertise is engineering. Normally we use this to make formula one engines, but we're going to use the engineering expertise to make breathing machines, which are a less invasive alternative to ventilators, because that's something that we really need in the pandemic. But when you have the command of resources, think about, well, how can we use these resources to solve social problems?

Lisa Welchmn:

How you behave and how you are in a situation is infectious, in a lot of ways, and can gravitate and move towards other people. And so it's great to hear that validation that doing good isn't just about, yeah, you get the benefit of feeling good yourself, but it's also, it changes the air in the room in a positive way.

Alex Edmans:

Absolutely. We often think that we are a thermometer. So a thermometer is something that reflects the temperature in the room, but we can think of ourselves as being a thermostat. A thermostat affects the temperature in the room. And even as such a junior person, you can play thermostat. Why? Because your actions will be seen by other people and that changes the atmosphere, and therefore it can have a multiplicative effect. So on the one hand you might say, well, in such a large organization, I am such a small person. I'm powerless. On the other hand, you can say, well, in such a large organization, well, whatever behavior that I have can be seen and can be passed on to many more people. So actually it could be more empowering rather than less.

Andy Vitale:

Yeah. One of the things you talked about really early on was about growing the pie. And, as you described the pie, you talked a lot about you can do really good for your employees. And I know you talk about how companies do better when workers are happier. But right now we're in the middle of something like the great resignation and companies are starting to lean in on retention, on balance, on flexibility, better benefits, conditions. But not every company is there yet. So how do we convince companies? How would you convince companies that the costs involved in doing better for your employees, your team members, pays dividends? And what's a good way to measure that, to show progress?

Alex Edmans:

I think I try and convince them with data and evidence, which is what my heart is as a finance professor. So this is why I got interested in the topic of sustainability 15 years ago. It wasn't for moral and ethical reasons. It was that's where the data was leading me. So what I did during my PhD at MIT is I took the list of the hundred best companies to work for in America, which was a list of companies which went above and beyond in how they treat their employees. And then I looked at, well, how did they perform over a 28 year period? It was from 1984 to 2011. And importantly, that was a period that included some crises, included September the 11th and the collapse of the internet bubble. It included the financial crisis. And that's important because some people think, well, actually, if you are to treat your employees well, that's really difficult in a crisis because you should just be saving your money.

Alex Edmans:

And so what was interesting is that, in that 28 year period, I found that companies that treated their workers well, beat their peers by 2.3 to 3.8% per year, over a 28 year period. So that's 89 to 184% compounded. And that's consistent with the idea of growing the pie, is that if you are doing this, it's something that ultimately leads to more productive employees, employees more likely to stay, and ultimately to higher shareholder returns. Now, obviously I need to do things to show that it's causation, rather than just correlation, that it's employee satisfaction that leads to better performance, rather than better performance leading to employee satisfaction. But I'll just leave the interested listener to the paper, because I'd rather answer the other questions that you have, and which is how can you? And then try to, let's say you believe everything I've said, there are long term benefits, but what about the short term costs?

Alex Edmans:

It might be that you just don't have the money to spend. And what was really interesting is that many things in the best companies to work for survey, we're not things that actually cost a lot of money. But part of treating your workers well, yes, is pay and benefits. But many of the things were on communication to employees, on trustworthiness, providing meaningful work and skills development and feedback. And so this is why I do think that this pie growing idea is realistic, because actually many great things that you can do are just an attitudinal shift. So do you see your employee as a resource or a human? So when you, as a senior person, give an extra analysis to the employee to do, do you internalize that cost, or you do think, well, even if this analysis probably won't be used in the meeting, let's get my employee to do it just in case, because that's what I can do as a senior?

Alex Edmans:

So those just attitudinal things about treating your workers as colleagues, I think they go a long way. Now, certainly you do also need to ensure pay and benefits. And this is why I would say that, even in crises, you should still try to ensure that your workers are fairly treated. Why? Because of the long term impact. And that's something we're hopefully going to have a conversation with the chief financial officer and say, well, that's something where maybe we can cut the dividend in order to keep our workers. But I do think that, for many things that were coming up in that survey, there were more attitudinal shifts rather than things that necessarily involve a significant amount of expenditure.

Alex Edmans:

And then obviously to close the circle with Lisa's opening question, this is why do you think it's something that's realistic, even for a startup company, which is not yet profitable to embrace? Indeed it might make you even more profitable because actually some of the best ways of being innovative is to delegate to employees, is to empower them, because many great ideas come from employees rather than just the C-suite coming up with the ideas only themselves.

Lisa Welchmn:

How do you start? How do you start this journey? How do you start this conversation inside of an organization to get the ideas flowing? I mean, whether you're a leader or whether or not you're somebody more junior inside the organization?

Alex Edmans:

I think it's to recognize the multiplicative and catalytic effect that you can have. So you might feel, as an isolated example, in a company which only thinks about profit. But there are probably many people who feel the same way as you. And so once the person starts the snowball rolling, it can have this snowball multiplicative effect. So going back to what I did at Morgan Stanley, you like to think, well, all other junior investment bankers, why do they choose investment banking? Because they're just people who care about money. They don't care about support staff. But when I realized, well, when I first had those initial conversations, then that sparked other people who acted the same way. Recently, three months ago, I gave a keynote speech at the Financial Management Association, which is one of the biggest associations of finance professors. And normally what happens in the keynote speech is that you present your research.

Alex Edmans:

Why? Because it's a great platform to market yourself. I, very riskily, gave a talk called the purpose of a finance professor. So talking about, well, what the purpose of our profession should be. The fact that we are only looking at publication in top journals. We're not considering our impact to wider society. We're not considering how we teach our students. And so that was really risky because it could come across as preachy or idealistic, but the numbers of emails I've got from people saying, "Oh, I actually felt exactly the same way as this, but it was great that somebody articulated it." So I know it does take some courage, but actually if you start some conversations, you'll probably find out that there are many other people who feel the same way as you. And some of these people might be more senior than you and might be able to push this forward.

Alex Edmans:

And, if you were to start those conversations, you find you completely get shut down and there's nobody like this, then it may well be that this is not the company for you. So it could be a company which offers lots of great things in terms of pay and benefits, but if what you want is a purpose clear, well, not every company's meant for everybody. So there are fits. Some people fit with some companies and some don't, but I would try and test the water by having those conversations. And hopefully you will find other people are willing to reciprocate.

Lisa Welchmn:

Yeah. So in your talk, you were growing your own pie, huh?

Alex Edmans:

Well, I had to try and put my money where my mouth is [inaudible 00:35:56]. And so it was risky because, when you give a talk, I'm sure there people think, oh, why is he trying to talk to us about the purpose of our profession? Aren't we just here to make a salary? And then I decided to write it up into an article and that's even more dangerous because you don't have the nuance of tone that you have when giving a speech. So it might seem even more preachy, but I've just been really gratified. I got an email just before I'm coming on this podcast from another person who'd read it. I had never met this person, but just saying, well, how empowered he felt by reading it.

Lisa Welchmn:

Yeah. We've had a few guests on who are either... I'm thinking of Margaret Lee, who was talking about some issues related to diversity, equity and inclusion, and just the power of speaking and telling your story. And how other people, once you tell that story, light up and go, yeah. I feel that way too or whatever. And so that takes a lot of courage in some types of environments, but maybe not so much in other types. So that's really great advice. Andy, it looks like you've got another question.

Andy Vitale:

Yeah. I was trying to formulate it in a way that makes sense. So the thing that you talked about earlier also that resonated with me is when you said the pie is not fixed. But when things like market share are front and center, how do we gain that market share on our competitors? What are some of the areas that you would point to people to explore, to introduce how they can grow that pie? Are they maybe adjacent markets or areas of innovation to explore new ideas, or maybe it's lean all in on your local community and how you can provide value there? Just knowing that you've done so much extensive research, what are some of the areas you tell people, because you're not familiar with their business in particular, but what are some of the things they should start to peek under the hood and explore?

Alex Edmans:

I think one of them could indeed be to explore new markets. So what is your expertise? And then how can you deploy that expertise to something different? So that was the examples of Mercedes and Vodaphone that I mentioned earlier. But also for myself, again, I tried to practice the findings of my own research. So I've been teaching finance theory for 10 years or so, but I realized, well, what I can also teach is public speaking because that's something I have expertise in. Can I teach things like time management and mental and physical wellness? And can I teach this outside London Business School? Because, to go to London Business School, you need to be able to afford a hundred thousand dollars or whatever the tuition fees is. So what I did is I took a job with Gresham College. That's a strange institution where it's called Gresham College, but you can't get a degree from there.

Alex Edmans:

All they do is offer free lectures to the public, just like Michael Faraday gave on science. And so I'm currently giving a course on basic financial literacy. So what is the time value of money? What is compound interest? To some people who need to know this stuff, but can't afford to go to business school. So to think about, well, what are the new markets that you can access? So for me, it's things outside of finance and students outside of the people who go to London Business School. But the second thing you can think about is how can, even if you were not to change what you do, how can you do it better? So could this be empowering your employees, providing with feedback, providing with recognition and so on?

Alex Edmans:

And for me, let's say, I haven't changed the fact that I've always taught the core finance theory class, but can I bring in some new examples? Can I make it even more practical? Relate it to some interview questions that I know that my students are asked? So how can I think about, well, how can we do what we've always been doing, but a way that creates even more value for our customers or a way which is even more fulfilling for our employees?

Andy Vitale:

Yeah, Alex, I mean, it's been so great to spend some time with you. I know you have another book that's probably going to be coming out, that you're contributing to, by the time this episode comes out. So how do people stay in touch and understand what you have going on so that they can follow you? What's the best way for them to do that?

Alex Edmans:

Well, thanks very much for if people are interested in doing so. So you can find me on Twitter at aedmans, A-E-D-M-A-N-S. I'm on LinkedIn. Feel free to connect with me there. The book, if you're interested, is called Grow the Pie: How Great Companies Deliver Both Purpose and Profit. And if you're interested in that, I'd recommend you get the paperback version because I updated it for the pandemic and for all the new research. So the hardback came out just before the pandemic. Normally the paperback is exactly the same, but because so much happened in the intervening 18 months, I chose to update it significantly.

Lisa Welchmn:

Oh, that's good to know. So I'll have to read it a third time. Thank you so much for your time. We really appreciate you being here.

Alex Edmans:

You're very welcome. Thanks so much, Andy and Lisa, it was really nice to... I really enjoyed the conversation.

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