Do Well and Do Good

'Nudge' Your Way to Doing Well and Doing Good

I've been hearing a great deal lately about Nudge, the new book by big name economists Richard Thaler and Cass Sunstein that explores how people can and should be 'nudged' into making better decisions since, as it turns out, we often don't make the choices that are best for us.

 

The works comes out of the tradition of behavioral economics first formalized by Amos Tversky and Daniel Kahneman that claimed that people don't actually act like the rational robots that traditional economic models take them for (surprise, surprise). While I have not read the book yet, what does seem fascinating to me based on what I have read so far is that Thaler and Sustein propose that rather than trying to ignore or overcome our irrational tendencies we should actually create policies and incentive structures that use these irrational tendencies to push us in the 'right' direction. The easiest example would be a policy that requires employees to 'opt-out' of 401k retirement plans rather than to 'opt-in' (which is the case today). Such a policy would likely significantly increase participation in these programs. I've also written in the past about behavioral economics since some of my personal heroes including Warren Buffet and Charlie Munger have often talked about how irrational decisions affect investment choices in particular. Finally, there are some pretty interesting examples also on the Nudge blog.

 

But what is most powerful about the ideas behind Nudge to me is that the book is part of a larger trend that seeks to carve out a middle path between market forces and profit motives on the one hand (doing well), and social objectives on the other (doing good). The old way of thinking took for granted that you had to let people choose freely for the market to work and for their rational self-interest to take hold. In this old mindset any 'social objective' overlaid on top of this would distort the free market. No longer. Today more and more businesses, non-profits, and academics are acknowledging what perhaps we should have known all along: there is a third way, all it takes is a little nudging.

Deloitte Survey: Doing Good Makes Employees Better

In thinking and writing about the convergence of 'doing well' and 'doing good' I tend to focus on money. Perhaps that's my nature as an investment manager. Or maybe I focus on money because in today's burgeoning cause-marketing filled environment that also tends to be how companies approach their social initiatives.

Still, in perusing Cone marketing's always interesting Do You Stand for Something? blog I came upon an item about volunteerism. According to a 2008 Deloitte Volunteer IMPACT Survey 91% of Human Resource professionals surveyed say that skills-based volunteering does or would add value to corporate training and leadership development programs. I can think of few other examples that so clearly illustrate win-win situations. The organizations receiving the volunteers get additional resources but with a specific skill set they can use and the companies enabling the volunteerism get more effective employees over the long-term. 

Add to this the fact that such volunteer programs can actually make employees happier and can be an effective recruiting tool especially now when younger generations of workers consider giving back a core part of what they want to accomplish in life. I found the videos that are part of the Wall Street Journal article on this topic pretty compelling, as Ernst & Young employees pretty sincerely talk about their experiences with the company's volunteer programs.

All in all this reminds us all that in the quest to find the spaces where economic and social value overlap we need to think broadly about all the opportunities in front of us and leverage all the resources we have, not just money.

Advertising Age: Doing Good Does Generate Returns for Business

Perhaps little else indicates the widespread adoption of an idea more than its transformation into a 'gut sense' that is easily accepted as truth. In that case, it seems that the benefits of cause-marketing are no longer up for debate and are now part of conventional wisdom, or at least so was my impression after reading this recent article in Advertising Age whose title "Yes, There is an ROI for Doing Good" promises a wealth of supporting data for its bold headline.

It turns out that most of the executives interviewed for the article hadn't really 'crunched the numbers' that would help quantify ROI for cause marketing initiatives, but they did indicate that there was little doubt in their mind that these programs can yield big returns when done right. So while the debate around the true motivations of cause-marketing lives on (whether or not companies are just in it for the money and if so does it really matter?), it look like the greening of our TV networks will continue.

Most interesting to me were the cause marketing examples called out in the article, especially the HelptheHoneyBees.com program by Haagen-Dazs that addresses the problem of the disappearing bee populations. What I liked about this effort was the seemingly sincere reason for choosing this cause (turns out most Haagen-Dazs ice cream flavors contain ingredients pollinated by bees) and the beautiful execution on the site and even in the advertising that really tries to not only inform you but even to get you to act. Amazingly, the print ad for the campaign (pictured here) actually ran on recycled linen paper embedded with sunflower seeds so that you could just tear out the add, plant it in your backyard and presto: you are planting flowers that help bees survive. Now that's what I call full circle.