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A Sadly Unusual Idea about Business Purpose

Hip hooray! You can now read premium content at The Economist by watching Ultramercials. Truly cool stuff like this opinion piece from Ian Davis, Worldwide Managing Director (CEO?) of McKinsey & Company.

To me, his idea that the purpose of business is to efficiently provide goods and services society wants is a no brainer, but a large majority of people seem confused about it. The big problem is that businesses easily find ways to avoid paying all the costs of producing their goods, dumping some costs, such as restoring the environment and taking care of people whose health they have damaged, back on the public. His point is that companies have to get ahead of that problem.

Link: Economist.com | Business and society.

Shareholder value should continue to be seen as the critical measure of business success. However, it may be more accurate, more motivating—and indeed more beneficial to shareholder value over the long term—to describe business's ultimate purpose as the efficient provision of goods and services that society wants. This is a hugely valuable, even noble, purpose. It is the fundamental basis of the contract between business and society, and forms the basis of most people's real interactions with business. CEOs could point out that profits should not be seen as an end in themselves, but rather as a signal from society that their company is succeeding in its mission of providing something people want—and doing it in a way that uses resources efficiently relative to other possible uses.

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