Are you creating real value?

Are you creating real value?

What if a cheeseburger really costs $30 instead of $3? What if we’re not pricing things based on their actual value?

This is one of the opening challenges presented in The New Capitalist Manifesto by Umair Haque. The author, an economist and researcher, argues that capitalism itself is at an inflection point, partially caused by borrowing value instead of creating it.

Here’s how that works, using the cheeseburger as an example. Haque calculates that the true cost is closer to ten times what we pay now at the drive-thru window. To be able to price that burger at $3 instead of $30 requires that we essentially borrow $27 in value from the environment, society and future generations. The environmental cost would rise if water were no longer subsidized for beef farmers, sending the price of beef soaring to an estimated $35 a pound. Suddenly, that quarter pounder is an $8 proposition! The social costs include epidemics of diabetes, high blood pressure, and other diseases. Finally, the cost to future generations comes from associated expenditures related to environmental degradation and health care.

In essence, Haque argues, that cheeseburger creates $27 in debt. It creates no true economic value on top of offering little nutritional value. Haque calls this “deep debt.” He explains, “The real debt problem isn’t what America owes China, or what Europe owes Germany. It’s the deep, ever-mounting, unpaid debt of harm the business as usual owes people, communities, society, the natural world and future generations.”

According to the book, new capitalism companies will succeed by creating real value instead of borrowing it from the planet and our children like a slick accounting practice. Real value can be created by adopting “new cornerstones” of business that replace some of the long-held tenets of capitalism practiced in most of today’s companies and taught at most business schools. Here’s Haque’s list:

  • Replacing value chains with value cycles
  • Transforming value propositions into value conversations
  • Trading the reasons why production, consumption and exchange happen from strategies to long-term philosophies
  • Completing markets instead of protecting them
  • And exchanging goods for “betters”

As someone who adores a good cheeseburger, I’d be loathe to pay $30 for one. But I understand his reasoning – we must start to think of value in different terms. And that’s hard to do these days. Homes that once cost $300,000 are fetching half that, yet gold is trading at all-time highs. Real take-home pay for Middle Class Americans has shrunk, as hedge fund managers’ bonuses are unimaginably high.

Sustainability, then, is not just about changing consumers’ personal values, it’s also about changing the concept of economic value. Companies who embrace the tenets of new capitalism and create true, lasting, beneficial value will likely be the ones who succeed in the long-run; while those who cling to the rules of old capitalism (that have served us well) could fall behind. It’s time for us all as marketers, then, to re-examine what our companies’ and products’ true value is (by this new definition) and get ahead of the shift.

About the Author

Karen Barnes

Karen is a former contributor to Shelton Insights.

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