New Capital Model Needed.

Capital markets are broken and there seems no end in sight. Housing market stagnates. Credit markets remain frozen. No jobs. No wage increases for 12 years. Trillions in debt. No growth.

While the global financial meltdown and its aftershocks have unleashed a flood of indignation, condemnation, and protest upon Wall Street, the crisis has exposed a deeper distrust and implacable resentment of capitalism itself.

Capitalism might be the greatest engine of prosperity and progress ever devised, but in recent years, individuals and communities have grown increasingly disgruntled with the implicit contract that governs the rights and responsibilities of business. The global economy and the Internet have heightened our sense of interconnectedness and sharpened our awareness that when a business focuses only on enriching investors, it implies that managers view the interests of customers, employees, communities and the fate of the planet as little more than cost trade-offs in a quarter-by-quarter game.

I think it’s time to radically revise the deeply-etched beliefs about what business is for, whose interests it serves, and how it creates value. We need a new form of capitalism for the 21st century, one dedicated to the promotion of greater well-being rather than the single-minded pursuit of growth and profits; one that doesn’t sacrifice the future for the near term; one with an appropriate regard for every stakeholder; and one that holds leaders accountable for all of the consequences of their actions. In other words, we need a capitalism that is profoundly principled, innately moral, fundamentally patient, and socially accountable.

This isn’t a new challenge, but it’s more urgent than ever, not just as an effort to escape reform and regulation from the outside, but to restore the public trust, to repair the moral fabric of the system, and to unleash the innovation required to tackle the world’s most pressing and important challenges.

So, here are the questions we must begin to answer as we think about how we can make each of our companies more principled, more patient and more socially responsible:

PRINCIPLED

Capitalism degenerates into narrow self-interest without a strong ethical foundation.

How do we focus the entire organization on a higher purpose and embed such virtues as generosity and selflessness into everyday interactions, evaluations, and reward systems?

How do we measure the ethical or moral climate of a company, and what is the dashboard look like?

What does it mean for individuals at all levels to act as wise stewards of organizational values, resources, and stakeholder well-being?

What kind of a forum or process could we create that would allow individuals to freely share and discuss ethical dilemmas?

In what ways might extreme transparency preserve and promote the highest purpose of the organization?

PATIENT

Vision and perseverance are critical to value creation and highly vulnerable to short-termism.

How do we stretch management timeframes and perspectives?

What does it mean to articulate and instill a vision compelling enough to inspire sacrifice, stimulate innovation, and hedge against expediency?

How might we re-balance compensation and measurement systems to provide incentives for long-term value creation along with short-term performance?

What tactics or capabilities might we develop to earn some slack from investors?

What kind of incentives and measurement systems could we devise to encourage internal entrepreneurs and nurture a varied portfolio of opportunities?

SOCIAL

Capitalism cannot operate in a social vacuum, and profits and shareholder return can no longer be the only measures of a company’s value-add.

How do we eradicate the pervasive zero-sum mentality in business and embed the positive-sum view of stakeholder interdependence into operations at every level?

How do we build the consideration of social return into every conversation and every decision at every level in the organization?

How could we embed social goals into an organization’s innovation agenda and processes? In other words, how might we encourage not just social responsibility, but social entrepreneurship?

What kind of measurement and reward systems would give significant weight to social impact created by individuals and the wider organization?

These are the questions the management team at iPeopleFINANCE are asking ourselves as we form this new company, which we hope will become the Amazon of social finance. Our vision is the empowerment of individuals, small businesses, communities, organizations and non-profits to fund their enterprises and projects via loans, investments and donations from like-minded individuals wanting to participate in the outcomes and earn substantial returns on these investments, in an open market, crowdsourced, capital environment.

We have a chance to create the kind of business that we idealize, a new capital model for the 21st century. Our team’s shared values are directly locked into the ideals of social responsibility, patient execution and a strong ethical foundation of what we call moral capitalism. Will we be able to walk the walk after we talk the talk? I think we are off to a great beginning. Stay tuned for updates.

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About Steve King

iPeopleFINANCE™ Chief Operating Officer. Former CEO of Endymion Systems, Inc. a $36m Information Systems Services company. Co-founder of the Cambridge Systems Group, the creator of ACF2, the leading IBM Mainframe Data Center Security product; acquired by Computer Associates. IBM, seeCommerce, marchFIRST, Connectandsell alumni. UC Berkeley alumni. View all posts by Steve King

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