Thursday, June 17, 2021

Companies Adapt to Activism by Athletes

See Sweetgreen Bet Big on Naomi Osaka. Then It Doubled Down. by Heather Haddon of The WSJ.

Should companies try to improve society or try to make a profit? Might they make society better off by trying to maximize their profit? 

In his book The Wealth of Nations, Adam Smith wrote about how self-interested people were led by the "invisible hand" to make society better off:

"But the annual revenue of every society is always precisely equal to the exchangeable value of the whole annual produce of its industry, or rather is precisely the same thing with that exchangeable value. As every individual, therefore, endeavours as much as he can both to employ his capital in the support of domestick industry, and so to direct that industry that its produce may be of the greatest value; every individual necessarily labours to render the annual revenue of the society as great as he can. He generally, indeed, neither intends to promote the publick interest, nor knows how much he is promoting it. By preferring the support of domestick to that of foreign industry, he intends only his own security; and by directing that industry in such a manner as its produce may be of the greatest value, he intends only his own gain, and he is in this, as in many other cases, led by an invisible hand to promote an end which was no part of his intention. Nor is it always the worse for the society that it was no part of it. By pursuing his own interest he frequently promotes that of the society more effectually than when he really intends to promote it. I have never known much good done by those who affected to trade for the publick good. It is an affectation, indeed, not very common among merchants, and very few words need be employed in dissuading them from it."

Excerpts from the WSJ article"

"Many companies are now pursuing “purpose-driven marketing,” industry experts say, seeking to demonstrate their commitment to improving society, as well as customers’ meals or cleaning routines. Americans, meanwhile, are placing more trust in the values a company projects. More than half of 2,000 adults surveyed recently by market-research firm Mintel said they consider buying from brands they view as ethical a form of activism.

And athlete activism has also grown, especially around the tumultuous summer of 2020, with mental health advocacy a cause embraced by athletes in sports including gymnastics, track and swimming. For some athletes, such activism extends to striking deals with brands that they say support them in their advocacy and their personal lives.

“What drew me to Athleta is that they don’t only care that we’re an athlete but they truly care about how we’re doing as individuals and what we want to accomplish outside the sport,” gymnast Simone Biles told The Wall Street Journal in April when she said she was leaving Nike for the Gap. Inc.-owned brand.

Ms. Osaka, the No. 2 women’s tennis player in the world, has won prize money and endorsement deals from companies such as Nike and Mastercard Inc. worth more than $50 million.

She has also been an outspoken advocate for social causes. She forced a suspension of her semifinal match during the Western & Southern Open last summer to protest police violence against Black people following the shooting of Jacob Blake in Kenosha, Wis. She wore face masks bearing the names of Black victims of racist violence or police brutality during the U.S. Open."

Related posts

The hidden costs of corporate social responsibility

C.E.O.s Are Qualified to Make Profits, Not Lead Society

ESG Investing in the Pandemic Shows Power of Luck

ESG Investing Shines in Market Turmoil, With Help From Big Tech: The strength of socially responsible funds suggests they have staying power; ‘ESG is not a fad’

Funds that market themselves as sustainable investments aren’t necessarily focused on companies that fight climate change, develop wind turbines or promote diverse boards

ESG Funds Draw SEC Scrutiny (companies that pursue strategies to address environmental, social or governance challenges)

Is it a retailer’s job to keep shoppers from their vices? (or Adam Smith vs. CVS pharmacy)

Can You Find Virtue by Investing in Vice?

What if companies pledge to adhere to social and environmental accountability guidelines?

Conspicuous Consumption, Conspicuous Virtue, Thorstein Veblen (and Adam Smith, too!) 

Data show that socially responsible investments can outperform the S&P 500 index

Is altruism a result of selfishness?

Do you have to be selfish to make more money?

Does collective self-deception mask selfish behavior?

Why Doing Good Makes It Easier to Be Bad

Businesses intentionally display their social and environmental performance in addition to their financial performance to stakeholders

Should you invest according to religious guidelines?

For a humorous view of this issue see

A Snickers a Day Keeps the Doctor Away: Why does CVS want to make my migraine cures hard to find? by Joseph C. Sternberg of the WSJ


Anonymous said...

The concept of the Invisible Hand has intrigued me for the past 15 years or so. The idea of promoting Domestic interests over Foreign interests makes sense to me as we either buy stuff from home or we buy it abroad. Buying abroad hurts Domestic merchants, but just may save the consumer money. This over the long haul would put the domestic merchant out of business.

It seems like a zero sum game to me as money is limited and the idea of diminishing returns. So, if i have a business selling rice and you have a business selling beans, the resources of society would be spent on either of the 2(considering these are the only goods in society). The more beans people purchase is to the detriment of my rice business.

According to Smith, you and I would need to do whatever is necessary to maximize profits. All the while Not attempting to promote each other, but effectively we are according to him. Would you happen to know if I am off base here with the thoughts of a Zero Sum game vs The Invisible Hand concept?

Cyril Morong said...

I don't think it is a zero sum game. When people specialize in what they are good at, more of everything gets produced and then people can trade the extra output to someone else who does the same. Then we all benefit

Anonymous said...

i was thinking from the concept of having only so much money in circulation. Each product or service has a cost that goes into it. There is a possibility I can do the production myself, but that would be quite inefficient. Alternatively, I need to have capital to pay people. This is where I feel like the Zero Sum comes into play.

Also the extra production trade would rely on the each trader wanting what the other is offering. I guess its just too many variables.