In 2008, Facebook turned down a former Yahoo employee called Brian Acton who had applied for a job. So Acton and another former Yahoo employee, Jan Koum, set up their own networking and messaging service instead and called it WhatsApp. In 2014, they sold it to Facebook for $19m.
Yet at the time of the Facebook acquisition, WhatsApp was burning money. In the previous six months, it lost $230mn. It was a business with no machines, no men, no money - just code-writers.
Why would Facebook want a business like this? For a very good reason, says Professor Colin Mayer, First Professor and former Dean of the Säid Business School in Oxford, in his most recent book, Prosperity: Better Business Makes the Greater Good. He calls businesses like these 'Mindful Corporations,' a term that has little to do with mindfulness in a more meditative context.
The Mindful Corporation, Mayer says, is merely the latest evolution in a structure – the corporation – that has been in existence for 600 years. Moreover, it is a very efficient concept.
Forty years ago, 80% of the market value of U.S. corporations was tied up in fixed or tangible assets such as plant and machinery. Nowadays, 85% of the market value of U.S. corporations lies is in intangible assets such as licenses, patents, research, and ideas. The rise of the Mindful Corporation has led to unprecedented rewards for owners of the more successful companies, which to Mayer crystallizes both the wonders and the woes of the corporation.
For instance, after Google's IPO in 2004, the company was valued at $32bn. As Alphabet, the market value today is $817bn. In the meantime, according to Forbes, the net worth of founders Sergey Brin and Larry Page has risen to $53bn each. As Mayer says, this kind of company is 'creating extraordinary disparities of wealth and power in the hands of those with the minds to create them.'
Is this good or bad? That's a moot point. Mayer believes that we could be standing on the edge of the most remarkable prosperity and creativity in the history of the world through our corporations. Or, as he writes, 'We could equally well be at the mercy of corporations that are the seeds of our destruction through growing inequality, poverty, and environmental degradation.'
It all comes back to the question: what is the purpose of a corporation? Mayer argues that the corporations' purpose has been ‘progressively eroded by shareholder primacy’ which has led to the pursuit of profit alone as a purpose for business. Colrevailing beliefs about business cause inequality, low growth, poor innovation, and environmental degradation, he adds, and this is no longer tenable. “Business thinking and education need to move on to define a purpose that is aligned with their activity and role in society.”
He calls for a reinvention of the corporation centered on values with a purpose that encompasses social good and sets out a renewed vision of how the corporation can create both economic and social wellbeing, and how regulation and taxation can make this happen. With echoes of the review by Professor John Kay of the U.K. equity market in 2012, which called for a much-needed shift in the culture of the stock market, Mayer calls for ownership to be in the hands of investors with a real interest in long-term sustainability and in corporate governance that holds business leaders accountable.
He also emphasizes the importance of trust in fostering a successful relationship between the management and the owners of companies and is interesting on family businesses and dual-class voting structures where owners retain control relative to external shareholders.
Mayer argues that it is possible to create the world that he describes in his book, where people and companies, enabled by law, committed by regulation, partnering with government, produce a public as well as a private purpose. I hope for all our sakes that he is right.
https://www.youtube.com/watch?v=_apbyleLTHQ
Prosperity; better business makes the greater good by Colin Mayer is published by Oxford University Press ISBN 978-0-19-882400-8£16.99 U.K. $24.95 U.S.
