The problem and promise of purpose: Part 2
When we hypothesize, we need to compare apples to apples.
Good morning. This is working theology.
In my last post, we discussed some of the unclear definitions and goals surrounding debates on purpose in new capitalism. Today, let’s look at how we often make comparisons that muddy the waters of these important issues.
A good economist responds to any proposition with “Compared to what?” New capitalists argue that because of such-and-such statistic, organizations need to reorient themselves to solve this supposed problem.
Sometimes, though, we need to zoom out on the chart, or compare our hypothesis against a metric that’s more apples-to-apples.
For example, many leaders discuss the gender pay gap. There is a gap between what women are paid on average and what men are paid, and, the argument goes, this is due to discrimination and bias. The solution to this problem is pay equity, pay transparency, or DEI quotas to hire more underrepresented groups, like women in engineering or construction. With this last one, I do wonder how this is legal. Isn’t that discriminating based on gender?
Anyway, there is ample evidence to suggest that the gender pay gap, if it exists at all, is due to much simpler compensable factors than discrimination.
I wrote a paper about this last year called “Blame the Kids.” I suggested that the pay gap begins as soon as a child is born, perhaps even before, but it’s also due to the fact that children are born, and they’re born to mothers. A geneticist at the University of Texas, speaking with the University of Chicago’s podcast Capitalisn’t, suggests genes have something to do with it. Charles Murray argues that intelligence is the biggest predictor of success.
To “fix” this problem, we’ll have to play God.
Consider this simple example to further illustrate the point: A performance chart for the S&P 500 in January looks pretty bad. Yikes, right?
But zoom out to the performance for a year, and things don’t look so rough. The colors help.
Sometimes we make comparisons in politics or business using charts with too narrow a focus. Debates on inequality start like this. “Look at this chart of S&P 500 companies,” they begin, “and see how executive compensation is at an all-time high while median wages have stalled. Capitalism therefore creates inequality.” Jamie Dimon, CEO of JPMorgan Chase, for instance, received a pay rise of $3 million last year, bringing his total salary to $34.5 million.
It reminds me of that cartoon about media bias.
The 500 largest companies in the US are hardly representative of capitalism. According to Census data in a JPMorgan report, the US has 28.7 million businesses, 88% of which have fewer than 20 employees.
But when we think of the ills of capitalism, we tend to think of Amazon or Walmart or Facebook single-handedly destroying the whole world.
Similarly, social responsibility proponents cite underrepresentation as a major indicator that there is discrimination and bias among employers. Underrepresented compared to what? The share of the total population? Why should we expect representation to be equal among various jobs, industries, or people groups?
There is hardly an equal distribution of anything in the world: Over 75% of global tornadoes occur in a small sliver of the United States. Almost 90% of all earthquakes occur along the Ring of Fire surrounding the Pacific Ocean. One in four global homicides occur in just four countries—Brazil, Mexico, Venezuela, and Colombia—and 80% of Latin American homicides in medium- and large-sized cities occur on just 2% of the streets.
Statistics like these are endless, especially in the business world, whether we’re talking about leadership representation, pay equity, gender parity, market share, or any other measure. Uneven distributions occur so frequently across so much of the world that it even has a name, the Pareto principle, commonly referred to as the 80-20 rule.
Besides, people choose jobs because they like them. Sometimes the job chooses the person due to financial or familial obligations. Sometimes people just fall into a career unexpectedly. Why must irregular distributions be the result of bias? There are literally endless reasons why one factor has led to another.
Thinking more clearly about some of these issues has led me to believe that there may be alternative reasons for the pronouncements on purpose. The definitions, the facts, the reality surrounding these conversations just don’t line up.
One founder, when asked what led him to create his business, said to me, “We saw a market opportunity.” Rather than the moral visions from today’s organizations, a “market opportunity” is probably closer to the truth of how businesses and initiatives within them begin.
We’ll discuss that next time. Thanks for reading.