The Value Every Business Needs to Create Now

In the vast majority of boardrooms I've been in this year, decision-makers are asking fundamental questions about profitability. And they're not the only ones. Here's an exchange between Stephen L Carter, an eminent law professor, and James Kwak, one of his students — debating the merits of megaprofits. Their exchange mirrors the very first question I'm often asked: when should we strive to profit — and when shouldn't we? Is profit a "good" thing — or isn't it?
My answer is: not all profit is created equal.
Consider David Pogue's recent campaign to ask mobile operators to do away with hidden and unfair charges:
"I've been ranting about one particularly blatant money-grab by American cellphone carriers: the mandatory 15-second voicemail instructions.
...These little 15-second waits add up-big time. If Verizon's 70 million customers leave or check messages twice a weekday, Verizon rakes in about $620 million a year."
Pogue then adroitly points out that these messages are strategic — they're there for the benefit of operators, not customers:
"In 2007, I spoke at an international cellular conference in Italy. The big buzzword was ARPU—Average Revenue Per User. The seminars all had titles like, "Maximizing ARPU In a Digital Age." And yes, several attendees (cell executives) admitted to me, point-blank, that the voicemail instructions exist primarily to make you use up airtime, thereby maximizing ARPU."
Ethically questionable — but that's just hard-as-nails business-as-usual, right? Wrong. Welcome to the 21st Century:
Profit through economic harm to others results in what I've termed "thin value." Thin value is an economic illusion: profit that is economically meaningless, because it leaves others worse off, or, at best, no one better off. When you have to spend an extra 30 seconds for no reason, mobile operators win — but you lose time, money, and productivity. Mobile networks' marginal profits are simply counterbalanced by your marginal losses. That marginal profit doesn't reflect, often, the creation of authentic, meaningful value.
Thin value is what the zombieconomy creates. The healthcare industry profits, but Americans get poor healthcare. Automakers fought tooth and nail against making sustainably powered cars. Manufacturers of all stripes stay mum about environmental costs. Clothing companies can't break up with sweatshop labour. The clearest example of thin value, is, of course, banks: they invested our national wealth in assets that turned out to be literally worthless.
The fundamental challenge for 21st Century businesses — and economies — is learning to create thick value. We're seeing the endgame of a global economy built to create thin value: collapse. Why? Simple: thin value is a mirage — and like all mirages, it ultimately evaporates. In the 21st Century, we've got to reconceive value creation.
Constructive Capitalists are disrupting their rivals by creating thicker value. Thick value is sustainable, meaningful value — and a new generation of radical innovators is wielding it like a strategic superweapon. Wal-Mart is learning to create thick value: it is turning into one of the 21st Century's great Constructive Capitalists. Apple's challenge, as I've recently demonstrated, is learning to create a thicker kind of value: creating a better iPod that's worth the ~ $60 premium producing it ethically might cost.
Here's a deeper discussion of the economics of thin and thick value, for those who are interested.
For now, ask yourself: how thick is the value you're creating? Are your profits, like mobile operators, built on hidden costs, surcharges, and monopoly power — or on awesome stuff that makes people meaningfully better off?
For those whose answer is the former — there's a Constructive Capitalist out there somewhere, and your business is directly in their cross hairs.
Fire away in with questions, criticism, or comments.