[jameslk]

Eric, thank you for taking time to answer questions! I read The Lean Startup early in my career and it shaped a lot of it. I’m keen to read your new book

As I read through your comments, one question popped into my head: what’s your thoughts about the Friedman doctrine? Do you address it in your book?

Specifically, the Friedman doctrine makes the argument that the social responsibility of the firm is to increase its profits. That policy making should be left to governments.

Milton Friedman states in his essay:

Insofar as [a business executive's] 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.

His theory was introduced in 1970 and it seems has since become the standard for the corporate world

How does this square with what you present in your book? Do you disagree with his theory?

[forlorn_mammoth]

> the Friedman doctrine makes the argument that the social responsibility of the firm is to increase its profits. That policy making should be left to governments.

> His theory was introduced in 1970 and it seems has since become the standard for the corporate world

questions: WHY has it become the standard? Should it still be the standard-- the world has changed a lot since 1970, is the context that supported Friedman's arguments still true? Does this also mean corporations shouldn't try to shape government/public policy?

Additional questions: "increase profits" over what timescale? PE has a reputation for increasing profits in the short term while killing the company over the medium term.

Re social responsibility. Wasn't it Ford who helped realize that paying workers enough to let them buy your product increased your market size, thus increasing profits? Did Ford perhaps go too far in 'social policy' by requiring his employees to pass invasive inspections by his company's Sociological Department. Where to draw the line?

[jacques_chester]

> questions: WHY has it become the standard?

1. It coincidentally aligns with the interests of the C-suite. They are mostly compensated in stock, and compensation mostly set by other members of the C-suite elite. And gosh darn it wouldn't you know it, they all think it's a jolly good idea.

2. It is taught in B-school, so most of the C-suite believe it or have never thought seriously about its deeper meaning. "Shareholder value" is easy to mouth, but breaks down almost immediately after trivial scrutiny. Which shareholders, pray tell Mr Babbage? What is value to them? Are they just are hivemind with perfectly identical interests, opinions, attention span, background knowledge, experience, access to capital, prestige, ...?

[bruce511]

I'm not Eric, and I'm not an economist, but I'd suggest this quote is mostly used to drive up profits for shareholders, and not for the benefit of the other two constituencies.

For example, we bought a company, and over the next year or so doubled wages in that company. Our "social responsibility" in that case was to spend shareholder money so that workers had a living wage. That doesn't seem to be the story I hear about say Amazon.

Yes, we've also spent money outside of those 3 groups. We contribute to charity. We spend money encouraging staff (and customers) to get cancer screenings etc. We spend (I guess shareholder money) on lots of things that are adjacent to our actual business.

Frankly, in the long run, I think it ultimately helps the business. It makes us "human" and reminds us that we control money, the money does not control us. This permeates through employee relationships, it permeates customer relationships. Ultimately that makes for a stronger company, built to last.

We've had acquisition offers. The shareholders have resisted them so far (despite easy riches) because we've seen what happens to other companies our size when they get acquired. Shareholder interest flows up. Staff (and by extension society) interest goes down. Ultimately most everyone leaves.

[logifail]

> For example, we bought a company, and over the next year or so doubled wages in that company. Our "social responsibility" in that case was to spend shareholder money so that workers had a living wage. That doesn't seem to be the story I hear about say Amazon. Yes, we've also spent money outside of those 3 groups. We contribute to charity.

I would suggest that there is also some degree of (subconscious?) expectation of higher wages meaning: staff would be happier/performance would be higher/staff retention would be better/absence would be lower.

You weren't just giving (shareholder) money away. You were trying to optimise your team.

[bruce511]

Yes, of course. We expect that creating a happier environment where people are well paid, will naturally lead to better productivity and happier customers. And yes, that will ultimately benefit shareholders.

Not that everyone stays forever. People come and go, just like in any business.

As an aside, I'd also say that the "happy bump" employees get from raises (even substantial raises) does not really last. It's not like it's all rainbows and unicorns just because you pay folk a decent wage. After a while there's pretty much the same level of complaints as before. You can't please everyone all the time.

[eries]

FWIW, Friedman himself I think would be quite scandalized by what passes for normal business practice today.

[eries]

Yes, indeed, this is discussed extensively in Chapter Four