Excerpt from Chapter 2 of
Purpose: The Starting Point of Great Companies

The most effective standards of morality, when it comes to Purpose, are internally consistent. They do not contradict themselves. They are also relevant; they speak to the decisions that leaders are trying to make right now. And they agree with our sensibilities; they appeal to our ideas about what is right and what is worthwhile. As such they create a sense of obligation.

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Morality is personal. And there are many personal reasons why an individual leader might develop a particular purpose for a business, firm or organization. The four Purposes at the heart of this book are not the only possible purposes one might choose—as we’ll see, there are many others. But these four are by far the most likely to engender success. Different people, of course, are likely to be attracted to different Purposes, and they will be drawn to environments reflecting those Purposes. See which of these descriptions apply to you.

DISCOVERY: ADVENTURE’S CHALLENGE

Discovery put men on the moon, America on the map and the dot coms in business. It involves a love of the new and the innovative, and it animates many technological businesses. At Sony, the “joy of technological innovation” was explicitly stated by its founder as one of the reasons for the company’s existence, and innovation has consistently driven 3M.

Many of the dot com entrepreneurs were driven by intellectual curiosity; they believed they were reinventing their industries, economics and indeed themselves. There were no constraints: as an employee or inventor, what you did was your own decision. You created yourself in every choice you made. Those who remained hamstrung by traditional economics or ways of doing things were not only foolish, but even immoral in their refusal to face the wide range of options open to them. The dot com entrepreneurs genuinely believed in a moral imperative to transform the world though discovery.

This type of Purpose and morality is rooted in the intuition that life is a kind of adventure. We are free and should not be bound by convention. When we live authentically, we are constantly seeking out and creating the new. But this does not mean constantly changing course. Precisely because we are creating something, precisely because we have chosen the course we have embarked on freely, we are committed to pursue that course consistently. The best reason for staying with an action is that we have freely chosen it.

This is the intuition of the existentialist, which was first articulated by Søren Kierkegaard in Denmark in the early nineteenth century. Individuals must take responsibility for their choices and cannot hide behind convention or rules. In the last analysis each individual has to make their own choices, if only to decide which rules to accept.

The emphasis on our complete freedom of choice and our resulting commitment to the consequences of our choices recurs again and again in the writings of existentialist philosophers. It emphasizes the importance of the individual and applauds his constant attempt to break out of conventional ways of doing things. We must “think of each situation afresh,” proclaimed Jean-Paul Sartre, “and try and see . . . what ought to be done for the best. . . . We must really decide for ourselves . . . remembering we could decide anything.”

Tom Watson of IBM would have agreed with this idea: “THINK” was the slogan that he plastered up all around the company’s offices. He recognized that he could not hide behind convention, and he would have to live with the consequences of his decisions – which took the company to the edge of bankruptcy on more than one occasion.

Discovery is a difficult principle to live by because humans tend to want to identify with something else, another group, say, or corporate body. They have a tendency to accept external rules governing behavior and thought. The existentialists recognize this: Sartre writes that the freedom resulting from limitless discovery is unbearable, precisely because we are no longer in a position to say, “I couldn’t help it.” Discovery requires a constant openness, which brings pain as well as joy. Nonetheless, for those who accept this Purpose, there is a morality that transcends the pain, and a keen appreciation for the accompanying freedom and power. In each choice we make, we have the potential for discovering a new world.

EXCELLENCE: VIRTUE’S FULFILLMENT

Excellence built the great cathedrals of Europe and today’s most successful professional and creative businesses. It implies standards, like those of an artist, defined by the craft itself rather than by the customers; it creates a picture of a never-ending struggle to achieve ever higher standards. Medieval craftsmen spent as much time carving angels that would be invisible to spectators on the ground as they did on the cathedral’s more prominent ornaments, because God would see them too. Excellent businesses prefer to turn away customers rather than compromise their quality standards. Publishing businesses such as The Economist, although theoretically interested in the greatest possible profit, are in practice strongly driven by a passion for truth and intellectual integrity.

Not that the pursuit of excellence and profit maximization need conflict: Warren Buffett, who we will consider in detail later, is one of the best examples in modern business of both.

This type of Purpose is rooted in the belief that excellent performance in our role in life represents the supreme good. If you care about excellence, you are automatically part of a community; someone outside of yourself must exist to judge your contribution. If excellence is your priority, you should cultivate your character in such a way that you can flourish in your community.

Aristotle articulated this thought in Athens in the fourth century B.C. His audience was young men who were to become citizens, and the ideal of citizenship and of the “polis” or city-state to which citizens belonged was real and powerful.

In his scheme, the ultimate end of human activity is “eudaimonia,” which is sometimes translated as “happiness,” but is perhaps closer to “fulfillment,” “flourishing” or “success.” Implicit in this idea is the view that man has a function, with eudaimonia as the fulfillment of that function. But we do not achieve fulfillment simply by aiming for it; instead we must cultivate the “virtues.” These are not abstractions of good behavior; rather they are traits of character, which lead us to behave in a way that contributes to our success.

Aristotle has been called the eternal optimist. In his scheme success and virtue are closely entwined, in contrast to the situation common in the modern world where we often draw a sharp distinction between ends and means. For Aristotle, the end (success) cannot be understood in the absence of the means (virtue). To my mind, Warren Buffett is perhaps the most powerful example in modern business of this aspect of Aristotelian morality.

Aristotle identified the following as relevant for the Athens of his day: Courage, Temperance, Liberality, Magnificence, Pride, Good Temper, Friendliness, Truthfulness, Wittiness, Shame, Justice, Honor. In our time, we might choose others; the particular virtues matter less, under the Purpose of excellence, than the commitment to try to reach them.

To every virtue there are usually two vices, corresponding to too much and too little of the virtue in question (the famous doctrine of the “golden mean”). In contrast to the vicious man, the virtuous man adopts a reasonable and measured course of action. This is the Aristotelian balance, the golden mean, which leads an individual and an organization to an excellent life.

ALTRUISM: EMPATHY’S JUSTIFICATION

Altruism lies behind major political movements, charities and a whole range of businesses that exist primarily to serve their customers. In these organizations, altruism may take the form of personal service beyond formal obligation (as at Nordstrom), delivering products at affordable prices (Sam Walton’s Wal-Mart) or using technology and ideas to improve, or save, lives (Hewlett-Packard, and, even Hallmark Cards). A good proportion of small business is animated by this benevolent ethic.

In these examples, altruism is directed at the customer, but it does not have to be. For Anita Roddick of the Body Shop, and other leaders of so called new age businesses, altruism and customer benefit are distinct. In her case the altruism is directed at animals, and to some extent her staff. As she put it, rather brutally, “How do you ennoble the spirit when you are selling something as inconsequential as a cosmetic cream?” The answer is by following certain principles, but the company’s most famous principle (not selling cosmetics tested on animals) is quite unconnected with what Body Shop employees do day to day or with standards of customer service. Another, more traditional, variation on altruism is paternalism toward staff. A good example is the leading British retailer Marks and Spencer (at least in its heyday) whose Jewish founders established a tradition that staff were to be treated as “part of the family.” Service businesses often “care” about the staff, which will in turn care for customers—an approach summed up by Federal Express as “People-Service-Profit.”

Altruism, as argued by Scottish philosopher David Hume in the eighteenth century, is less a principle than an emotion. We care about others’ well-being as well as our own—indeed we maximize our own happiness only by taking into account the happiness of others, trading off our selfish pleasures against those generated by our moral instinct to care about others. The ultimate reason for an action is thus that it increases happiness.

More formally Hume argued that the will is driven, in the last analysis, by the prospect of pain or pleasure; in addition we have a natural sympathy with other humans that results in our emotions being triggered when we contemplate harm and good coming to them: “It is from the prospect of pain or pleasure that the aversion or propensity arises towards any object,” an aversion or propensity that drives action; it follows that “reason alone can never produce any action.” But “morals . . . have an influence on . . . actions [so] it follows that they cannot be derived from reason.” The pleasure and pain we get from contemplating virtue and vice is closely dependent on this natural human sympathy or compassion:

If any man from a cold insensibility or narrow selfishness of temper is unaffected with the images of human happiness or misery, he must be equally indifferent to the images of vice and virtue; as on the other hand, it is always found that a warm concern for the interests of our species is attended with a delicate feeling of all moral distinctions, a strong resentment of injury done to me, a lively approbation of their welfare.

Sam Walton was a highly competitive, tough businessman, but this kind of fellow feeling shines through his own account of his motivations:

Also I think those associates in our company who believe in our ideals and our goals and get with the program have felt some spiritual satisfaction—in the psychological rather than the religious sense—out of the whole experience. . . . Many of them decide they want to go to college, or to manage a store, or take what they’ve learned and start their own business, or do a good job and take pride in that. Wal-Mart has helped their pocketbooks and their self-esteem. There are certainly some union folks and some middlemen out there who wouldn’t agree with me, but I believe that millions of people are better off today than they would have been if Wal-Mart had never existed. So I am just awfully proud of the whole deal, and I feel good about how I chose to expend my energies in this life.

Sam Walton, in other words, was the Hume of American business. His company was powerful and effective precisely because customers recognized that caring about them was the core Purpose of the company.

Later philosophers, notably Adam Smith, Jeremy Bentham and John Stuart Mill, built on these ideas, eventually producing “Utilitarianism.” This is the view that the right action in any situation is what brings about the greatest possible happiness (or absence of unhappiness) to the most number of people—a more widely known philosophy than Hume’s. It is important in our story because this is the moral system often used to justify capitalism, markets and profit maximization: These are all said to be good because they maximize wealth, which, in turn, maximizes happiness.

HEROISM: POWER’S EFFECTIVENESS

Heroism resulted in the Roman Empire, Wimbledon champions Serena and Venus Williams and many of the most spectacular growth companies, from Standard Oil to Microsoft. Bill Gates’ plan to put his operating system into every desktop was just such an obsession. It is not the “winning” or the specific goals themselves that tap into broader human aspirations, but the ambition, daring or heroism evident in those goals.

Henry Ford was by far the most famous industrial hero of his day. At first sight, his ambition to “democratize the automobile” and his introduction of the $5 day for his workers might indicate a strongly altruistic Purpose, a desire to bring happiness to customers and workers alike. But this is an illusion. The specific social and economic goals he pursued at different times were quite inconsistent—these goals were less important to him than his ambition to use the Ford Motor Company as his “machine.” Ends and means were curiously reversed; the outputs were the means to his ultimate end, exercising his will to improve the world.

Heroic Purposes such as Ford’s gain their force from the Nietzschean intuition that only some people are truly free and have the capacity to lead. If you are one of these people, you realize you must exercise your willpower and your influence. If you are not, you realize you should follow those who are capable of leadership.

Writing in Germany in the late nineteenth century, Nietzsche was repelled by what he perceived to be the mediocrity of the democratic age – he longed for rule by an aristocracy of great men. “The [French] Revolution made Napoleon possible,” he wrote. ‘“That is its justification. We ought to desire the anarchical collapse of the whole of our civilization if such a reward were to be its result.” For him, Christianity and compassion should be shunned: they tame great men like Napoleon, and may tempt us to think there is no fundamental difference in value between the elite and the masses. These ideas have resulted in a “dwarfed, almost ludicrous species . . . something sickly, mediocre, the European of the present day.”

Courage, pride and firmness are raw materials of the Nietzchean leader, but the necessary level of these characteristics is found in relatively few human beings. These men are the leaders who can command those without the necessary character. It is easy to see how this moral theory could be used to justify the extremes of fascism. But in less violent forms, adulation of willpower and command also justified the bureaucratic structures emerging as Nietzsche was writing.

SUMMARY

Four possible sources of energy for the company, four sets of moral ideas that can underpin Purpose—and each includes beliefs about the ultimate moral basis for an action. Each set of ideas is associated with a particular philosopher and is exemplified in action in different companies. Each company expresses the idea in its own way: No two excellent companies are alike; nor will companies manifest heroism, discovery or altruism in the same way. But every great company has come to its greatness by drawing on one of these philosophical traditions (consciously or not) and applying it with integrity.