A preliminary note is in order. This idea of maximizing long term value is admittedly not new. Some organizations and some business schools apply and teach their versions of it, with some notable success. However, the idea of profit maximization over time has been most often the driving concept in business schools, corporations and certainly Wall Street – and Professor Milton Friedman, an icon to be sure, taught his ideas of this narrow purpose. Ironically enough, long term profit maximization really is most probably an outcome of a laser focus on and culture committed to long term value maximization. We offer here our beliefs about the best way to understand and apply this idea at its roots. The angels, of course, are in the details that enable organizations, business schools, governments and all to put these ideas into action.
Here we are in the 21st century. Democracy, capitalism, monarchy, communism, Marxism, socialism, dictatorships, kingdoms, etc. have each been around long enough to be seen and understood clearly in the public square and the marketplace. I believe it is fair to say that most students and practitioners would concur that democracy and capitalism, when each is conducted in accordance with their fundamental purposes in place, and not diluted or misapplied, are the best political and economic means (catalysts) to the end of long term value maximization locally and around the world.
Let’s use a couple basic definitions or descriptions of each system as our reference points:
Democracy – a government in which the supreme power is vested in the people and exercised by them directly or indirectly through a system of representation usually involving periodically held free elections.
Capitalism – an economic system characterized by private or corporate ownership of capital goods, by investments that are determined by private decision, and by prices, production, and the distribution of goods that are determined mainly by competition in a free market.
For me, these definitions make the systems sound ultimately fair and equitable. It might be asked whether fair and equitable are the necessary and sufficient preconditions to achieving maximum long term value around the world? My answer is YES, even knowing some important pre-conditions consistent with fairness and equity can be added.
We could spend some time addressing the questions about the founding fathers of the two systems. Was it Athens and Athenians who started the democratic political system? Did Thomas Jefferson have a hand in it, at least for the United States of America? How about capitalism? Was it Adam Smith who got capitalism up and running? For us, I think these are both fine, intriguing questions and, at the same time, not limiting or centrally relevant to address our question and answer.
So, here is my nice and tidy finite package of connected and actionable concepts that can allow the world, locally and globally, to unleash democracy and capitalism, through their fundamental purposes, to be our catalyst systems for long term value maximization.
Mindset, excellence, happiness, fiduciary, stakeholders, optimization, blocking and tackling, universal and unalienable rights, ubiquitous virtues, traits and valued things, self-interest and other-interest, gold standard leadership characteristics, gold standard cultural characteristics, profit (npv of future cash flows, etc.), purpose, vision, mission, multi-year plans (playbooks), ethics, full potential – seen and actualized.
There are a couple other very important matters to address. The first is that national sovereignty exists, is important, and must be earned case by case based on these connected concepts. That is, nations must behave in accordance with these concepts no less than for profit corporations and other organizations.
In addition, we must come to grips with the elegant reality that we are, super-imposed on all local and regional political systems and economies, a global village – which is or should be an ultimately and inevitably good thing. The second is that the connotations of each of the connected concepts we list here, as well as the matters of national sovereignty and global village must be presented in seminar or group meeting settings, fully discussed and a consensus must be reached. Talking and behaving smilingly right past each other is unacceptable.
When these matters are all addressed in a group setting, and then another and another, on and on, it will dawn on people – in ah-hah or epiphany ways – that this long term local and global value maximization can and must be reached. The good will have triumphed. Full potential will be continuously actualized.
Is it all a naïve utopian dream? Some might think so. I believe it is the natural ultimate vision and set of goals we should have as a race – as a people.