Rebecca Henderson: Does Capitalism Need to be Reimagined?

How to reform capitalism to confront climate change and extreme inequality, with economist and McArthur University Professor Rebecca Henderson

Rebecca Henderson headshot over an orange background

Rebecca Henderson



Climate change is out of control, leading many people to question whether it isn’t just fossil fuels, but our entire economic system, that needs to be replaced. In this episode, Harvard Business School economist Rebecca Henderson talks through her own efforts to reconcile the climate crisis with her faith in the ingenuity of capitalism. “I believe that at the moment, our capitalism is also neither free nor fair,” she says. “The free market works when everyone can take part, and prices reflect real costs”—when polluters have to pay the cost of emitting fossil fuels. Henderson’s smart, original vision for recalibrating capitalism to meet the linked crises of climate change and extreme inequality is a must-listen. 


A transcript from the interview (the following was prepared by a machine algorithm, and may not perfectly reflect the audio file of the interview):


Marina Bolotnikova: Climate change will transform the way we live, work, eat, travel, and the list goes on, almost nothing about life on Earth will remain the same, so does climate change mean we'll have to transform our economic system too? Welcome to Ask a Harvard Professor, the show where we talk to some of Harvard's most interesting minds about the problems that confront the United States and the larger world.

I'm Marina Bolotnikova, and today I'm joined by Rebecca Henderson, who's an economist at the Harvard Business School, where she's taught for more than 10 years. She's one of today's most original voices on how businesses can, and can't, and should play a role in our transition to a new, decarbonized, sustainable economy. She's the author of Reimagining Capitalism in a World on Fire, a recent book based on her MBA course of the same name. Welcome, Rebecca Henderson, we're so glad to have you on the podcast.

Rebecca Henderson: Marina, thank you. I'm delighted to be on the podcast, and I'm honored by your very effusive introduction. Let me begin by saying that one of the exciting things about doing this work is you come to realize that there are thousands of people trying to rebuild and reform our society so that we can solve climate change, and that's part of the fun, that's one of the reasons I enjoy doing the work I do, so you said all kinds of nice things, but I'm very much aware that I'm standing on the shoulders of many, many giants.

Marina Bolotnikova: Great. You start your book, Reimagining Capitalism, with a very heartfelt, personal story about the realization that climate change was destroying the natural world and everything you hold dear. You write, "I came close to quitting my job. Spending my days teaching MBAs, writing academic papers and advising companies as to how to make even more money seemed beside the point." I'd love it if you could talk through what that experience was like for you, what triggered that for you?

Rebecca Henderson: The immediate trigger was seeing Al Gore's movie An Inconvenient Truth. My brother, who was a freelance environmental journalist, had been sending me papers about climate change for some years, but there was something about seeing that movie that really crystallized that, "Oh my goodness, this is really happening, and if we don't do something, it's going to get a whole lot worse." And my first response is, "What am I doing teaching MBA students?" It was a very confusing moment.

I spent several months talking to friends, and friends of friends, and anyone I could find, literally asking the question, "Well, what can I do? How can I help? What should I do next?" And in fact, it was friends who were working for some of the big NGOs in the area who said, "No, you're in exactly the right place at the right time, and you should stay precisely where you are." And that sounds nice and neat after the fact, but I remember, oh, all kinds of rough days and nights going like, "What am I going to do? Should I become an activist? What can any individual do?"

Marina Bolotnikova: But you ultimately decided not to quit your career. Did you see that you were in a good position to make the contributions that you wanted as an economist, a business school professor?

Rebecca Henderson: So, sometimes students come to see me and say, "I'm really worried about climate change, what should I do?" And I always ask them what they enjoy doing, because if you were to ask me sort of, "Where is the really high leverage, how can we solve climate change as quickly as possible?" I usually say, "Well, we need political action, and we need more people making a fuss, and more people driving change, and we won't solve this without political change," and I really believe that, and so anyone who has that kind of appetite or interest, I think that's a hugely high-leverage way of spending one's time.

But I'd spent 20 years as a business school professor, I knew nothing about political activism, I knew about how firms innovate. And it was a really interesting moment, because just at that time, big energy companies had started to show up at MIT, which is where I was teaching at the time, and say, "Whoa, we think climate change is going to change everything about how we do business. How do we deal with that?" And that was my research specialty.

I was the Eastman Kodak Professor of Management, which was a huge coincidence, really just a coincidence, but a deeply funny one, because I spent the first 20 years of my career working with very large companies trying to do new things, and I realized that, "Whoa, changing out the whole economy to respond to climate change is a new thing," so it seemed to me that I could be helpful in a strange way, sort of taking what I already knew and slightly pivoting it in this direction. So I started working with some of the biggest energy companies in the world, talking about transitioning to renewable energy, what it would take, what that would mean, and that was very exciting.

Marina Bolotnikova: How did you begin to see that our economic system needed to be reimagined in the way that you describe in your book, that it isn't just a matter of tinkering on the margins, but that we need big picture change?

Rebecca Henderson: So, I'm a big fan of capitalism, as I say in the book. I think in its best form, capitalism is an incredible source of innovation and productivity, that we wouldn't be where we are without it, and indeed we won't solve climate change unless we unleash the full potential of what capitalism can do. But I started to realize something was badly off when I hosted a book writing conference called Accelerating Innovation in the Face of Energy, or something. I can't remember the title of my own book, but Accelerating Energy Innovation or something like that, and the conference had pulled together seven or eight of the best economists who study change, because I studied change, they were all my buddies, so we got together, and I said, "Okay, I'd like everyone to write a chapter on what they know about what really drives change in the industry they know best."

So, you can still pick up a copy of the book, and it's actually... I can say it's really good, because I wrote merely the introduction and the conclusion, but the chapters are fabulous, and there's a history of how come agriculture took off in the 19th century, what really drove the innovation in agriculture, chemicals, the internet, of course, computers, semiconductors, biotech, chemicals. So each chapter looks at what really drove innovation, because that's what I was doing, and what did we learn? Well, we learned some things we already knew, that small, entrepreneurial firms make a huge difference, so making sure that new firms can get into the industry is super important. And we learnt that federal R&D, or government spending on basic R&D, made an enormous difference in all these industries, and we all kind of expected that, and we knew that.

But the thing that really jumped out at us from looking across the chapters and talking that we didn't expect, although in retrospect it's obvious and it's in the literature, is the way in which you need demand, you need someone to want what it is you're innovating for. So one of the reasons that when innovation really got going in smartphones, for example, so fast, and it was incredibly fast, is after a few bumps, everyone said, "Whoa, I really want one of these," and if you've got lots of people who want one, then that lets you go through multiple innovation cycles very quickly.

And what was so interesting about most of the industries we studied is that in the early stages of most of them, the initial demand came from the government. Computers is probably the best known, right? That it was the Department of Defense that drove innovation in computers, because they were the market for those first machines, which were far too expensive for anyone else to buy. And this got us thinking about energy, of course, and got me thinking, and the trouble with clean energy is it doesn't look any different from the dirty kind.

I mean, I can't tell whether this mic or this computer is being powered by dirty energy or clean energy, so why should I pay more for clean? Yes, it will save the world, but I'm busy and I'm on a tight budget. Where's the demand going to come from? And so I'm going to say what 99.9% of the world's economists say, and that is the secret to solving climate change is putting a price on carbon, so that the people who produce dirty energy... And modern research suggests for example that $10 worth of coal-fired power causes at least $8 worth of harm to human health, and at least $8 worth of climate damage, so the real cost of $10 worth of coal-fired electricity is not $10, but something more like $26, it's a gross distortion in the market.

Remember, I'm a big capitalist, I'm an economist, I like the market, but when prices are so far out of whack, you get what we got, which is anyone who's burning fossil fuels or emitting greenhouse gasses is causing enormous harm that they don't have to pay for, and that we're seeing... I mean, my God, look at what's happening in California right now. So I said, "Well, well, this is easy, we just need government to put a price on carbon. Okay, check."

And my second point was, "Oh, and every major company on the planet will advocate for that, won't they? Because of course, climate change is going to cause enormous disruption to global supply chains, it's going to put our major coastal cities underwater if we don't do anything, you can see the failure of the harvest in Africa, and it's going to be a mess, so the big businesses should be advocating for a price on climate."

You look around, no one was doing it. I mean, there were a few, you know, Patagonia, but none of the big companies were talking about this, and we had a political system that... I thought it was bad 15 years ago, but now we're at war with each other, and one side has decided that climate change is a hoax. And so I got really interested in politics, and I got really interested in whether business could help, because I thought it was in business' long-term interest to fix this problem, I still do, I believe it very strongly. And so when I talk about reimagining capitalism, I mean rebalancing, rediscovering a very old idea, which is that the market works best when prices reflect real costs, and the firms who compete in the market don't get to set the rules.

Right now, 70% of Americans think that big companies are basically setting the rules in their own favor, and when you ask the political scientists, there's an unfortunate amount of research to suggest that that's the case, that one of the reasons we don't have a climate price or a price for climate is because the large fossil fuel companies have spent hundreds of millions of dollars from their heavily-subsidized profits, those are profits subsidized by the destruction of our health and our climate, to deny the reality of climate change, and to flood our political system with money.

So, I called it Reimagining Capitalism, but one friend I talked to said, "You shouldn't really call it Reimagining Capitalism, you should've called it Rediscovering the Capitalism We Had in the '50s and '60s, Only Without the Misogyny and the Racism, right?" I was like, "Yeah, but that's not a great book title, and that's one hell of an asterisk, Without the Racism and the Misogyny," so I do think we need to reimagine capitalism, but that we can, that we can build a just and sustainable capitalism that can address not only climate change, but some of the enormous additional problems that we face.

Marina Bolotnikova: What does it mean for markets to be free and fair, and why are we not in that situation now? You mentioned the markets have gone off the rails, why? What does that mean?

Rebecca Henderson: Well, when you start by thinking about climate change, the first thing that jumps out to you is exactly the price distortion that I just outlined to you, and this is an enormous distortion. I mean, when I say that $10 worth of coal-fired electricity causes $26 worth of harm to human health and climate damage, I mean, just think about it. That means that the damage caused by the average coal company is nearly twice its revenue. I mean, that's a distortion, because prices are supposed to work their magic, and I love the price system, it's incredible driver of innovation and prosperity and... I mean, I love competition, but it's as if we've asked everyone who's trying to build a clean economy to run with weights on their feet.

So, I come along, and I want to sell you a solar powered array, let's say, and it's... Coal is 12 cents a kilowatt-hour, it depends where you live in the country and in the world, but let's say approximately $12 a kilowatt-hour, and it's working fine, and I'm in northern New England, and the solar power guy says, "It's going to be a bit more expensive, it's going to be 18 cents a kilowatt-hour." And so you say, "Oh, the magic of competition, I buy coal-fired electricity," but we're stopping the real magic of competition happening because that coal-fired power is not 12 cents, it's more like... I can't do the math quickly in my head, but it's nearly triple... The real price is nearly triple, and if I really knew that, then I would go ahead and put the solar on my roof, of course I would. So this is a massive distortion, and it's not capitalism that is fair or free.

Now, we can talk a bit more about the fact that I believe that at the moment, our capitalism is also neither free nor fair from the point of view of freedom of opportunity, that lots of people who might have the potential to become amazing entrepreneurs are born perhaps in the wrong ZIP code with a different colored skin, and as a result have junk healthcare and junk education, and I mean, talk about running with weights on your feet. And so the free market works when everyone can take part and prices reflect real costs, and neither of those are true at the moment, so I think our market is neither free nor fair.

Marina Bolotnikova: Mm-hmm (affirmative). One of the issues you focus on in the book is that for so many companies, maximizing value for their shareholders is the ultimate priority. What's the reason for that, why are companies so devoted to maximizing shareholder value, and why is that bad or potentially a problem?

Rebecca Henderson: So, focusing just on shareholder value is fine if someone else is worrying about whether the market is free and fair. So for example, if we had a good price for carbon and everyone had the education and healthcare they needed to compete in the market, and just one more asterisk, and if firms couldn't write the rules in their own favor... I mean, there's no quicker way to make money than to write yourself a personal monopoly, so we have to have a government that doesn't allow that, but if that was the case, focusing on shareholder value maximization, take it away, great way.

That's going to maximize prosperity and innovation and creativity and jobs, and all kinds of good things, and indeed, when we first started focusing on shareholder value maximization as the only goal of the firm, it wasn't completely true, but to a first approximation, the market was pretty fair, and it was pretty free if you were male and white. Not so good for everyone else, but if you were male and white, most people could compete, and most people got a decent education, and in fact we saw huge uplift in the fortunes of people right across the society back in the '50s and '60s.

So, when it's in balance... I talk a lot in the book about there being three foundations to a healthy society. The free market, check, but also a democratically accountable, strong, capable government that can hold the market, that can make sure the rules are the right rules, and then last, a strong civil society which can hold the government and the market in check. When you have that, then it may be okay, to a first approximation, for firms to focus just on shareholder value.

Now, if we're going to go one step beyond that, that balance between those three institutions is always fragile. So I hope we never go back, even if we get the market free and fair, I think business will always have to pay attention to, "Is the government still democratic and accountable, I'm not controlling it too much? Is civil society still strong?" Because in the long term, that's what maintains the society.

And I know by now you're probably thinking I'm like, "Yeah, wherever," have I drunk way too much Kool-Aid? But there are countries, as you know, one of my favorites is Denmark, where Danish business first started trying to strengthen civil society and labor because they were desperate, because the society was falling apart, and so they started to work together with government and labor to build a healthy society, and 100 years later, they're like, "Oh, that was a really good idea. Let's keep making sure that we maintain that balance."

And so, I think it'll never be 100% shareholder value, but for sure, that in some circumstances, that's a fine thing to do. Right now it's a disaster, because right now the best way to maximize shareholder value is to buy a whole bunch of fossil fuels, "[inaudible 00:18:01], I don't pay for the damage I'm causing," or drive wages to the bottom and not worry about it, or corrupt my local politicians. I mean, what better way to make money than corrupting the politicians? I mean, fantastic, maximizes shareholder value. Bad idea, right? I've come to believe that if you as a capitalist really believe that the deepest values of capitalism are freedom and prosperity, then you should be working hard to rebalance the system.

Marina Bolotnikova: Yeah, you make a really sharp point, which stuck with me, which was that capitalists shouldn't try to maximize shareholder value by tearing down the government that keeps the whole system in check, right? And that in fact, government regulation is actually good for business, that businesses should be asking to be regulated.

Rebecca Henderson: Which is such a paradox-

Marina Bolotnikova: Why is that, could... Yeah, can you give an example of a case in which regulation benefits business, maybe... You had some great ones in the book.

Rebecca Henderson: It's such a paradox. If you just go and talk to a typical businessperson and you say, "Whoa, you need more regulation and you should have less control over what government does," they're like, "Whoa, no, no, no thank you." But it's a classic prisoner's dilemma, or a classic collective action problem, which is every individual has incentives to act badly, let's call it acting badly.

One example I use in the book is using unsustainably-grown palm oil. So palm oil is the most widely-consumed oil on the planet, it's cheap and versatile, it's in almost everything, including the cosmetics I'm wearing, which is kind of weird, but palm oil is everywhere, and the trouble is, the way it's grown is an environmental and social disaster. But it doesn't make sense for any individual firm to buy sustainably-grown palm oil, because it's quite a lot more expensive, and consumers aren't willing to pay for it.

So the first step was for firms to try and get together and agree together that they would only buy sustainable palm oil, and for a while I think many people, including myself, thought that that might work, but it's super hard to get, pick a number, 28 of the world's largest multinationals to cooperate and all really do the right thing all the time, when everyone at the lower level is paid on their quarterly returns and consumers don't care, I mean, that's super hard, and so it was the firms in that case that worked out that, "Oh my God, we need government to help us here. Or investors," and I'm sure we'll get to investors, but "We need government to make sure that we can only buy sustainable palm oil."

I mean, the example we've been talking about right the way through, a price for climate, for carbon. If we could have a tax on fossil fuels so that they were significantly more expensive than clean energy, everyone would start to transition to clean energy, and we would save the planet. That would be good, and it would be really good for business, so that's another example. I'm going to give you one more, which is I think that what's just happened in the pandemic has really shown up how important it is to have a government that cares about the public health, that has the capacity to take care of populations, to set rules, and as we look across the world and we see the difference between those countries where life is pretty much back to normal, and those countries which are still grappling with the pandemic, I think we see a much stronger government and one that enjoys a much broader degree of popular support, of sort of non-partisan consensus support, that's made all the difference.

So I think another example, and I'm hearing this from a bunch of companies I talk to, is... They don't exactly use these words, but, "You know, Rebecca, all that stuff about rebuilding government, I thought that was kind of interesting, but..." But now they're saying, "Oh, that's a good idea. We need a government that can handle these kinds of crises," and climate change is going to make COVID look like a walk in the park if we're not careful.

Marina Bolotnikova: Yeah, I'm so glad you brought up the case of palm oil, because that was to me one of the most tragic case studies in your book, and one of the clearest examples of how much is at stake, so I wanted to dwell on that a little more. Do you think that the palm oil industry, can that... Is that an example of the success of industry self-regulation, is it a partial success, is it failure of self-regulation? I guess I'm asking what does it tell us about the ability of companies to self-regulate?

Rebecca Henderson: It tells us that self-regulation is really important and can make a great deal of progress, but except in some specialized circumstances, is probably not the answer. I think the industry is much further forward because they tried to self-regulate, that they developed all kinds of tools and techniques so that they could tell what people were doing, they worked out that doing the right thing could in fact be much cheaper, particularly if you have a large plantation. They ran into a wall when it came to the smallholder farmers, and if you're in Indonesia, the story I was told is if you cut down a couple of acres of the jungle and grow palm oil, you can send your kids to college, and who's to say no to that?

And addressing that is a massive problem that requires both education on the ground, but also sanctions for those that are going the quick and dirty way and not doing the right thing, and so the firms discovered that they needed government. And people sometimes say to me, "Wait, wait, Rebecca. I thought you didn't like business getting involved in government, I thought you used the word 'corruption,'" and so I'm caught in this tricky moment. The way I want business to get involved with government is for the greater good. So it would be better for all of us if you regulated how palm oil is grown, it would be better for all of us if there were a price for carbon.

And of course, how do we know the difference? Well, that's one of the reasons that I stress purpose in my book so much, that I think firms should be explicitly purpose-driven and hold themselves to high standards, because the only way to hold firms to this standard is both their employees and the broader society saying, "Wait, you said it was about the greater good." So it's tricky, I mean, this is super tricky. Is it about now in the conversation that I say, "There are some books that are five easy steps to saving the world, but this is not one of them. These are five difficult, intricate, tough steps that we have to try, because we don't have anything else to focus on, but with no guarantee of success," which again is not such a great way to sell books, but is, I think, what's actually going on.

Marina Bolotnikova: There are of course those who believe that there's no such thing as sustainable palm oil, right? That the very idea is a contradiction in terms, and that gets at a larger question I wonder about when reading about these sorts of problems, which is do you think we can continue to accommodate the rapidly growing demand for palm oil without deforestation? Even with the best sustainability standards in the world, if we could continue improving crop yields and so on, is it possible to keep growing ever more of this product sustainably?

Rebecca Henderson:So you're asking the consumption question, and yes, I do believe it's possible to grow palm oil sustainably, and much more is than wasn't historically, and in the case of the Amazon prior to the election of the current administration, firms were helping to really roll back deforestation because of the way they were buying beef and soy and timber, and so I think we have seen progress. But you're asking are we ultimately up a creek without a paddle because everybody just wants and wants and wants and wants?

So, few things to think about. First, I think it's really important to differentiate between consumption in incredibly rich and privileged countries like our own, and countries in places which are still struggling. There are families that don't have a light bulb so their children can do their homework, and still don't have clean water or adequate nutrition. And I sometimes nervous when people talk about, "Oh, we have to go to zero growth or have to limit consumption," that they forget that there are billions of people living on less than $10 a day, and so there are places where we really need the consumption. That's the first point.

The second point is, and here you're going to get my full-on capitalist, ex-MIT professor self, which is capitalism is super good at solving these problems. If you tell me we need sustainable palm oil, and has to be genuinely sustainable, and you set the rules like that that way, I'll get it for you, I promise, and I promise it's going to be much less expensive than you think.

The best example of this, of course, is clean energy. I mean, I'm a huge tech person, I think innovation is amazing, I think clean energy is the future, and I was taken aback by how quickly the price of solar fell, and how quickly the price of wind fell. I mean, humans are incredibly resilient, smart creatures, we've got ways of new technology coming our way, AI, robotics, nanomaterials, genetic engineering, 3D printing, I mean, let me go through the list, ways that will make us much more efficient, and I think we can get much more efficient.

Now, in the West, I'm a big fan of social and cultural movements that start to stress the sharing economy, that start to stress experience rather than things, so I do think we need a cultural shift, but again, it's the economist in me, if we get the prices right so that people see this is the direction we need to move in, it will start to happen very fast. So I'm not nearly as worried about the consumption problem as most people, only in the sense that I think the hard problem is the political problem, and if we can fix the political problem, we can fix the consumption problem.

Marina Bolotnikova: Mm-hmm (affirmative), mm-hmm (affirmative), and to get the prices right, that's where we have to do all the hard work you were talking about about pricing, pricing externalities, putting a price on carbon, deforestation, and so on. You talked a lot to CEOs in your line of work, and I was curious if you could tell us a bit about what they're like, what do they worry about, what role do they see themselves as playing in confronting climate change, and extreme inequality, the other crisis we face in the 21st century?

Rebecca Henderson: So, I have this wonderful vision of CEOs as a kind of separate species off to one side. So what are CEOs like? So first, they're really super different, CEOs really differ from each other. A really disappointingly large fraction are white, male and tall, I will say that, but I've met all kinds of people who are CEOs, women and people of color, and scientists and economists, but what do they worry about?

So, this may sound really obvious, and anyone who's listening who's been an entrepreneur I think will get this right away, but CEOs worry first and foremost about making payroll and keeping the wheels on the bus, it's a tough job. Unless you're in one of the very few companies that have basically locked themself in behind a huge monopoly wall, Zuckerberg, it's really competitive out there, and so you're really, really thinking about just running the business and keeping it going for a lot of the time.

Otherwise, you're worrying a lot about what's coming at you, what's coming at you in the future, and so I mean, Zuckerberg is kind of a funny example, because he has more money than God and in principle could just spend his days eating bonbons, but he doesn't. I mean, he really cares about the company, and we could differ about what kind of job we think he's doing, but he really cares about that company, and nearly every CEO I've met, and all the really successful ones, care passionately about the company and the people that work there, and the product they produce.

I think if you don't, it's hard to do the job. I mean, yes, there's a ton of money and fame and blah, blah, blah, but it's a super hard job, and so I think you have to really care about the company, or you have to get a kick out of playing the game. I've met a few CEOs who just get a kick out of building the company, making it work, making the money, it's just... It's like the world's best ever game, only it's played out on the whole stage.

Some CEOs are very aware of the power that their organizations have, and very aware that things are not working as they should. I was just talking to a friend in England who founded a group called Blueprint for Better Business, and that organization was founded when a group of business leaders came to him maybe five, 10, I think about 10 years ago now, and he was working for the Catholic Archbishop of London at the time, and they came to him and they said, "We've been reading this Catholic social teaching and it's incredibly interesting, and it really sketches out a very different relationship between business and society, and a very different way of talking about the purpose of business, and we'd like to talk more about that, please."

And so I've had the great pleasure of meeting CEOs like that who are deeply aware that our society is badly out of joint, and that business is an incredibly powerful player and has a role to play in fixing it, and that's so encouraging, and I've met CEOs who just look at me and say very politely, "Well, that's very nice, Rebecca, but I have to make payroll and that's somebody else's job," and I understand, a lot of firms, it's tough, and there's not much space. Now, as you know, I think that they can still make money and do better by thinking about these issues, but that's the sort of second level of conversation.

Marina Bolotnikova: What should be the role of business schools like Harvard Business School, where the future executives and CEOs are being trained? What should the role of business schools be in bringing about a reimagined capitalism?

Rebecca Henderson: Business schools played a huge role in disseminating the idea that firms should simply maximize shareholder value, and I've spoken to many people who were at the forefront of that movement, including Michael Jensen himself, who's since recanted big time, but at the time, they were very focused on the fact that if you run a company really hard and you really focus on the bottom line, you can create a lot of growth and a lot of jobs, and they were very worried about CEOs who were using companies basically to have a good time and not to focus on the bottom line, and the technical term would be agency costs, they worried about agency costs, and so...

I told you I was the Eastman Kodak Professor of Management, and so I spent a lot of time thinking about how organizations develop ways of thinking about how the world works that are very effective at one time, but over time, become very dangerous, and I think that's what's happened to business schools, is I'm teaching finance or I'm teaching marketing, and to a first approximation, firms need to maximize profits, firms need to maximize profits, and we haven't, I think, spent enough time talking about the way that firms are embedded in a larger context, and that in some times and places, doing nothing but maximizing profits is inconsistent with the deepest normative commitments of capitalism.

Now, I think that's really changing, and when I said... I write at the beginning that "I stand on the shoulders of giants," some of the giants are the lone business school professors who 20 years ago said, "This really has to change." There are hundreds of business school professors out there who understand this now, and are moving in this direction. You have some business schools that have gone 100% like, "We teach sustainable business."

Here at Harvard, the dean asked me to take some of the central ideas from Reimagining Capitalism and bring them into the first year course on leadership and governance, which is what I now lead, and we've tried to do that in a way that doesn't prescribe. We don't say to the students, "Here's the meaning of business, here's the party line," we say, "Well look, here are different ways of thinking about the purpose of business in different places and times, here's the underlying theory, here's some of what people are saying about it, what do you think? What do you think the purpose of business should be?" And that's where I think most business schools should be going, which is let's give the students enough information so that they can think deeply and profoundly about what their role as business leaders are in this incredibly complicated and difficult world.

Marina Bolotnikova: Great. Well, anything else you want to add? What else should I have asked you about here?

Rebecca Henderson: One question you haven't asked me, which I kind of always like to talk to if I can, is what we can do as individuals, because we've talked a lot of grand theory, and I love theory, and I think it's really important to remember that there's no way we're going to drive change unless individuals start changing, and I really do believe that each and every one of us can make a difference. The metaphor I use is I say, "We need an avalanche, and avalanches are started by pebbles, and no one knows which pebble started it, but we all better get out there and be pebbles."

And in the book, I talk about... I try and tell some really concrete stories about people who are not CEOs who made a big difference, people like Michiel Leijnse at Unilever, who was brand manager for Lipton Tea, which was not a sexy position or a sexy product, and who worked really hard with his colleagues for years to transform that tea business to make it more sustainable, and was one of the reasons that Unilever, which is now so highly thought of, became very sustainable as a firm.

I talk about our role as customers, it's not nearly as important as our role as employees. I mean, as employees, anyone who's listening and is curious, look around. I'm betting there are opportunities to make money by thinking about these issues, by treating people better, by saving energy, water, waste, I bet those opportunities are there, and if you start looking and you bring friends to look at them, you can make a big difference. So your role as an employee, your role as a customer, firms really move quickly when customers demand it, it's quite striking.

Your role as a neighbor. We know from the social psychology, if you stop eating beef and put solar panels on your roof, then the odds of the people around you picking up those behaviors go up. And absolutely and most importantly, vote. Vote, vote, vote, vote, and get involved in politics, work with people who are getting the vote out. If you care about climate change, it's the lever, and you can make so much difference.

One of my friends founded an organization called Mothers Out Front to address climate change, because she thought mothers were the ones that were really focused on the long term and the future, and now she has 9,000 mothers across, I forget, maybe 10 or 12 states, I forget the details because they're really growing quite fast, and she said, "Rebecca, there is nothing like 10 polite, persistent, well-informed mothers going into the hearing on the legislation to get the politicians to listen," because most people become so disconnected from politics, they don't show up. If you show up, you can make a huge difference.

Marina Bolotnikova: Great, I think that's a great note to end on. Thank you so much for joining us, Professor Henderson, it was a pleasure to talk to you.

Rebecca Henderson: Marina, you're most welcome, I really enjoyed the conversation, thank you.

This episode of Ask a Harvard Professor was hosted by Marina Bolotnikova and the season is  produced by Jacob Sweet and Niko Yaitanes. Our theme music was created by Louis Weeks. This third season is sponsored by the Harvard University Employees Credit Union and supported by voluntary donations from listeners like you. To support the podcast, visit If you enjoyed this episode, please consider rating and reviewing us on Apple Podcasts. Contact us with questions at

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