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The Next Focus for Business — Jonathan Haidt

Executives balancing the needs of a wide range of stakeholders including Gen Z workers are in a battle of ‘all against all’, American social psychologist Jonathan Haidt told the APEC CEO Summit on its second day.

Professor Haidt said the corporate world had moved from economist Milton Friedman’s model of shareholder primacy to a stakeholder model where executives were expected to balance the needs of many different groups, including customers, shareholders and their staff.

The timing was bad, coinciding with two megatrends - the evolution of social media into an extremely toxic form and the arrival of Gen Z, born after 1997, he said.

Quoting a New York Times headline ‘The 37 year olds are now afraid of the 23 year olds who work for them’, Professor Haidt said the effects had been felt since 2018.

“I’m talking about a small number who are empowered by social media to inflict tremendous damage on anyone they aim their hostility at. I would say Twitter in particular, Slack and other channels, have basically taken intimidation and democratised it, incentivised it and freed it from accountability.

“I certainly believe business can be a force for good but I worry what we’ve done by moving to a stakeholder model just as we entered this peak intensity of social media polarisation and Gen Z activism is that we now have incoherence and a lot of really bad policies being made.”

There is no reasonable, rational way for executives to balance expectations.

“It doesn’t work. Because in real life it’s a battle of all against all. Executives are saying it’s just so incredibly hard now, so much harder than it was five years ago.”

“We’re seeing companies pushing back saying this is crazy. We’re here to make a product. We’re here to serve our customers. We’re not here to fight social issue after social issue.”

At its best, a free market society is a game that you can only win by making other people better off, Professor Haidt said quoting philosopher David Schmidtz.

“There’s a lot we can do to make business be a force for good by minimising the harm it causes incidentally or by design through free market failures - externalities or costs imposed on others and monopoly power which can be broken up by regulators; asymmetrical information where a company can use vast information to manipulate customers and exploitation of public goods,” he said.

“That takes intelligent regulation, social pressure, journalism exposing market failures, trade associations trying to get ahead of things and saying we want our industry to be respected and liked and treated well by regulators.

Every society has needs for dynamism characterised by innovation, raised overall wealth, and decency which is about fairness, impacts on civil rights, the environment, he said.

“In this way we can keep dynamism and decency even in the age of social media and political polarisation.”