On September 13, 1970, in The New York Times, economist Milton Friedman published an article entitled, “A Friedman Doctrine: The Social Responsibility of Business Is to Increase Its Profits.” He began his article with a direct broadside at corporate social responsibility:

“The businessmen believe that they are defending free enterprise when they declaim that business is not concerned ‘merely’ with profit but also with promoting desirable ‘social’ ends; that business has a ‘social conscience’ and takes seriously its responsibilities for providing employment, eliminating discrimination, avoiding pollution and whatever else may be the catchwords of the contemporary crop of reformers. In fact, they are—or would be if they or anyone else took them seriously— preaching pure and unadulterated socialism. Businessmen who talk this way are unwitting puppets of the intellectual forces that have been undermining the basis of a free society these past decades.”

Friedman insisted that the exclusive owners – and beneficiaries – of a business are its shareowners. Everyone else connected with the business is an employee, including the CEO, even if he or she is the founder and guiding visionary. Because the managers of the business are handling someone else’s money, they’re obliged to not waste it on frivolous “feel-good” activities that do not produce an immediate cash return on investment.

Friedman wrote: “In each of these cases, the corporate executive would be spending someone else’s money for a general social interest. Insofar as his actions in accord with his ‘social responsibility’ reduce returns to stockholders, he is spending their money. Insofar as his actions raise the price to customers, he is spending the customers’ money. Insofar as his actions lower the wages of some employees, he is spending their money.”[i]

Fortunately, we now know that this so-called “Friedman Doctrine” was horribly myopic, and today’s investors see “the big picture” with much greater clarity. As my valued client Ron Levin reveals in his powerful new book, Higher Purpose Venture Capital, socially responsible businesses and their investors have two key characteristics:

2. Today’s investors are concerned with more than the fastest possible cash return. Today’s world is full of thoughtful, smart people who look at the overall potential for good that capitalism can produce. They are concerned about receiving a solid return on their investment (who wouldn’t be?), but they actually care about how that return was earned. They want to leverage their investment to, at the very least, do no harm, and at the very best make a positive contribution.

3. Socially responsible businesses can be just as profitable as regressive businesses. Perhaps Friedman’s biggest lie was the assertion that managers who invest in socially responsible aspects of the enterprise are less astute or less mindful of profitability than those who are concerned only with the immediate, end-of-quarter cash return. This is ridiculous. The companies that provide substantial returns year after year are often those that make investments in their people, their environment, and their community.

Even with the necessity of the profit motive—which is non-negotiable—there’s an absolute bottom line, in the form of two questions posed to an investor:

“Do you want to use your investment funds to help make the world a better place while fairly sharing in the rewards of doing so?

“If you were ninety years old and your grandchild came to you and asked, ‘What did you do with your money?’ What would you say?”

Higher Purpose Venture Capital is not just a book of theory. It’s a very practical guidebook! Levin presents a portfolio of socially responsible startups that are open to investors. You can dive in and learn about exciting possibilities today… and how to spot emerging opportunities tomorrow.

[i] NYTimes. https://www.nytimes.com/1970/09/13/archives/a-friedman-doctrine-the-social-responsibility-of-business-is-to.html