Inspiring the ‘Change Agent’ in All of Us: Entrepreneur Richard Steel on the Evolving Economy and the Logic of Leading with Values
By Stacey Lindsay
Every element of life holds its share of change. A relationship ends, forcing a shift in planned futures. A flight is delayed resulting in a late arrival. A new boss takes over, creating a change in workplace culture. These scenarios—and countless others—show that no matter what situation we're in, we always need to be able to evolve.
Modern-day capitalism is no different. In these turbulent times, we are at the intersection of the status quo and the new, and consumers are demanding more of companies—more transparency, more inclusion, and more purpose-driven leadership. In turn, those leading companies need to step up to and evolve with the demand. This is the crux of what Richard Steel covers in his 2020-released book, Elevated Economics. A seasoned impact investor and entrepreneur, Steel has built a career building, running, and consulting public and private companies, as well as non-profit organizations. He’s also advised the White House Business Council. In all his endeavors, Steel has aimed to lead in alignment with both his values and those of his employees and colleagues.
Taking a keen look at the present and future of our “elevated” economy, Steel offers readers counsel on how to lead in an evolving conscious business world. His book and insight, which we discuss in conversation here, is practical and insightful—and it meets people where they are. “I wanted to lay out the math to show, ‘here's where everything is going. And if you want to be valuable to the business that you work in, you can be a change agent,” Steel tells me over the phone. “You can be a valued change agent.”
Steel borrows a term from hockey legend Wayne Gretzky to emphasize: “Skate to where the puck is going, not to where the puck is.”
A Conversation with Richard Steel
At the beginning of your book you tell the story about the Chernobyl disaster and how, contrary to popular belief, it wasn’t caused by an explosion but rather a leak. I likened that to the boiling frog metaphor—and that, perhaps, here in the US we may not realize the boiling water that we’re in. In considering that story, what are your sentiments about how it relates to the state of the world today?
The situation we find ourselves in globally, is a result of a failure to acknowledge the things that aren't urgent. They’re not headline news. It's that old business trope about doing the urgent at the expense of the important. I think that we've finally reached a point where, collectively, we all see that these systemic issues have come to that boiling point. I'm grateful that we're here. I wish we were here 40 years ago, or longer, actually, but I'm glad that we're finally here collectively.
Much of your book looks at a shift in how people are making decisions that reflect their values, as consumers and in other ways. What has the past year-plus revealed about this to you?
COVID really is the great reset. In my work with the Biden administration over the last year and a half, with the policy folks for innovation and economic policy, the phrase that they used both on the campaign side and on the policy side was “build back better.” And this is an opportunity for us to build back better—personally and professionally. It's a chance for institutions to change and pause and re-examine how they've done things and why they've done things.
A lot of it is not the fault of any one individual, because we're all busy and sort of caught up with getting through our daily lives. I think we rely on these heuristics, which are driven by history. The way we've done things in the past is the reason that we continue to do them without a lot of critical thought behind them or examination. The pandemic has given everybody that opportunity to pause and exhale and reevaluate some of the drivers and the reasons behind why we do what we do, either as consumers or investors or as businesspeople, as well as citizens and members of our community. It is a wonderful silver lining to tragic and horrible events.
I’d like to look at the dark side, or to the skeptics, if you will. In considering the evolving number of founders, CEOs, and other leaders who are leading in alignment with their values and purpose, there are those who still look at the bottom line first. They may not be considering all stakeholders in the decisions they make. Do you have advice about denaturalizing this compulsion to put profits over people?
Milton Friedman's theory of shareholder primacy is dead. It's dead and buried and gone. And to some of those business leaders that you mentioned, I would say look at some of the luminaries in the business world of our day and how they're thinking about things. So you look at the business roundtable and you see folks like Jeff Bezos of Amazon, Larry Fink of BlackRock, Tim Cook of Apple, Mary Barra at General Motors, and Robert Smith who runs Vista Equity Partners and the 140 or so others that said on August 19, 2019: Hey, this is not the way we have to do business anymore. It's not the way we can do business anymore. Not the way we should do business anymore. A hundred years ago that wasn't the intention; we've lost our way. I mention a hundred years is because there was a gentleman named Edwin Gay who was the Dean of Harvard Business School. He said that the purpose of business is to make a decent profit decently. And we've lost some of the “decently” part over the years.
There’s another trope in businesses, which is: what gets measured gets done. And what we measure is the easily quantifiable. If you take that and you extrapolate that and look at the math. Think about employee retention, as it is a huge cost saving measure. For example, for non-executive employees, the cost of turnover is about six to 12 months’ salary. For folks at the executive level it's 12 to 24 months. So there's a huge cost saving to retain employees. And for one, the way to attract and retain employees is to run a purpose-led business and to operate in a way that does benefit all shareholders.
So, to those holdouts that you alluded to, they have to look to those CEOs of America's largest companies that are members of the business roundtable, see how they're changing, see why they're changing and see how that really does improve the bottom line. Companies with high ESG scores do very well. There was a stat mentioned [in my conversation] with Eva that looked at the majority of public companies that failed had the lowest ESG scores. So there’s a whole series of metrics that can be easily measured and that show that behaving the way to benefit all stakeholders is the best thing you can do for your bottom lines.
You mention employee retention. It’s also been interesting to see a shift in employees feeling empowered and starting to see their value and worth, which links to wanting to work for companies that are aligned with their values. Are you seeing this, as well?
Yes, 100 percent. There are real consequences if companies don't change. And a lot of those consequences are with the employees themselves. So not only do consumers shun brands that don't align with their values, but you have this rise of employee activism. You can look at what Amazon employees did. They formed a group called Amazon Employees for Climate Justice and they staged a walkout from the Seattle headquarters. They were joined by employees from Google, Microsoft, Apple, and Facebook. And what was the result? A few months later, Amazon pledged $2 billion to the climate crisis. You have Wayfair employees refusing to work because they didn't want their company to sell mattresses to the government who were planning to use them at their detention facilities at the border. You had Google employees refusing to work on military projects for the DOD. You see these examples of employee activism that can also be addressed by changes in the way that the companies behave.
You mention these 140-plus CEOs that are stepping up. One exemplary company you talk about in your book is Method. What are some other companies fueled by innovative minds and collaborative measures that are inspiring you?
There are a whole host of lists of companies that are the most sustainably managed companies or the companies that are really focused on ESG and walking the walk versus talking the talk. There's a firm called Just Capital and they put out a ranking of all sorts of different businesses that really reflect issues that matter to a lot of people in regard to business behavior. You'll see companies like Intel, Alphabet, JP Morgan Chase, Salesforce, Microsoft, to name a few, that rank very highly because they've taken steps and taken leadership roles across these issues, not only ESG but also issues of social justice, gender equality, and diversity equity inclusion. They are well positioned to continue to reap the rewards of doing well by doing good.
Shifting gears to focus on you. Was there a formative moment for you that precipitated you starting your businesses and leaning into conscious entrepreneurship?
My mom and dad were, I would say, the earliest and first drivers of that. They were people who didn't just talk about this. This was just the way that they went about their lives. My dad's a highly ethical person. A good moral compass to follow. They never sat us down and had conversations about this. We were not well off by any means when I was younger, but I would see my dad give to charity.
You know those mailing labels that you get from charities that have your return address on them? Our house was filled with those. We had them from cancer charities and children's charities and a lot of wildlife and natural resources groups and things like that.
But it was just part of my life growing up. When I started my first company, and every company since, we always made a point of knowing what we'd say no to as well as knowing what we'd say yes to. So you know your target, who your clients are, and the space in which you operate, but you also have to understand what you're not willing to do. There's a story in the book about us not taking money from R. J. Reynolds Tobacco Company when it would have been very lucrative. It was a pivotal point in the business and it would have set us up for a lot of success. But I said that I didn’t want to make money that way. And I don't think any of my employees wanted to make money that way. We had five times the industry retention rates in my first company, and I think that was hopefully in part due to employees respecting the way that we did business—and how we made money and from whom.
We just founded a company and, at the time, we basically said, ‘what are we going to do with, who are we going to work with, and who we're not going to work with?’ It was basically the same criteria that we had 20 years ago: It’s not going to be alcohol, tobacco, porn, gambling—that’s not how we want to make money. In every company that I've been associated with, either as an investor or as a CEO or in any way that I'm affiliated with them, I just draw that line in the sand and it makes things really easy. Once you make that decision, every decision going forward becomes a lot easier.
Values are very personalized. They vary person to person, company, to company. Yet for some, they may be elusive and hard to pinpoint. Is there an element of your approach that you feel could be helpful for somebody who doesn't know where to start in discovering and defining their values?
Eva talks about doing a “values audit” and I think that that's important both personally and professionally. Knowing what you'll say no to is important, and it's the easier way to go about that process of finding out what your values are. It's tough to sit on and say, ‘I stand for this. And I stand for that.’ It's a little bit easier to say, ‘here are the things that really rubbed me the wrong way. Here are the things I kind of don't like about society at large or the way that things are working in my community or in my profession.’ Starting from there, that's sort of the low hanging fruit, if you will, in that decision-making process.
Cancer has touched just about everybody in one way or another. So it's a pretty light lift to say ‘I'm not going to work with a tobacco company.’ Most people can probably get behind that. And then I would just say reach into your own personal experience and see where you've been and where you've been touched. If you’re looking at your emotional highs and emotional lows, sometimes we'll have a connection to one of these issues.
By no means am I a perfect human being. I've made tons and tons and tons of mistakes, especially when I was younger, hopefully fewer as I gained some experience in reaching back into history and saying, ‘okay, I wish I would have done that differently. I wish I would've behaved differently in this instance.’
If you take a few minutes of quiet introspection, you can identify what those are pretty quickly.
To learn more about Richard Steel, click here, and to order Elevated Economics, click here.
Recently, our founder, Eva, spoke with Richard about Conscious Consumerism and Investing.
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