My friend and former colleague Gael Andry recently shared an article titled How Will You Measure Your Life? by Clayton Christensen of disruptive innovation fame. The article is well worth reading in its entirety, but the following passage caught my attention, in particular:
If you study the root causes of business disasters, over and over you'll find this predisposition toward endeavors that offer immediate gratification. If you look at personal lives through that lens, you'll see the same stunning and sobering pattern: people allocating fewer and fewer resources to the things they would have once said mattered most.
Jensen and Meckling's analysis of agency costs has frequently been used as the justification for the assertion that the purpose of business is to maximize shareholder value. Single factor maximization is appealing because it is mathematically tractable and seemingly actionable. But, I believe it to be fundamentally inappropriate.
Generating sufficient returns for shareholders is a constraint, not an objective. To continue in business, providers of capital must be offered adequate returns. Likewise, customers have to be served competitively, suppliers must make a reasonable profit, and employees must be compensated fairly.
The purpose of business is to allow us to live meaningfully. It's up to each of us to define, and be responsible for, the purpose of the business in which we engage.
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