Seth Levine and Elizabeth McBride argue for an alternative model that recognizes the increasing influence of business in society and the need for companies to consider stakeholders beyond just shareholders. 

We spoke with Seth Levine, a longtime venture capitalist, and Elizabeth MacBride, an award-winning financial journalist, about their book Capital Evolution: The New American Economy (which has since been named a USA Today Bestseller). “We felt like we needed to write this book in part to defend capitalism, not because it doesn’t have exploitative tendencies, but because it is the best way to rise up people, communities, the economy as a whole, if it’s practiced correctly,” Seth explains.

They advocate for “dynamic capitalism” which recognizes the power of capitalism and free markets but, says Seth, they also recognize that “the type of capitalism that we’ve been practicing for the last 50 years, we call it neoliberal capitalism — you could call it the Washington Consensus, you could call it Friedman-style capitalism, pick your choice — but we recognize that that’s not working and it’s leading to levels of inequality that are simply unsustainable.”

Their point, as Seth puts it succinctly, is “There is more to operating a business than just the bottom line.”

Seth and Elizabeth believe capitalism is the best system for organizing the economy — and relate snapshots of history to illustrate their discussion — but has become too focused on short-term shareholder returns, which has led to increased inequality.

“So, thing one is shift our orientation to longer term,” Seth says. “We’ve seen some companies try to do that, very explicitly talk about how they aren’t going to manage quarter to quarter. That’s, I think, important. There’s actually an entire stock exchange that’s trying to be built by Eric Ries to get out of that short-term mentality and short-term thinking.”

Along with painting the picture of tremendous positive potential, they also candidly address challenges. For instance, Elizabeth notes, “It’s important to recognize [public companies] have a legal obligation that grows out of Milton Friedman’s ideas of capitalism. They are legally bound to put the shareholder first.”

But she goes on, “I just want to highlight the fact that I believe it is already changing because the man we just highlighted, Dan Schulman, went from being CEO of PayPal to being CEO of Verizon. And he was obviously hired by a board of directors for his business acumen, but also probably because he embraces and is able to balance the community needs.” Her point is that Verizon is a company that has a lot invested in the country and all the communities within the country doing well — and the board recognized that.

Picking up the thread of Elizabeth’s thoughts, Seth adds, “So there’s certainly work to be done from a corporate structure standpoint and it has been historically challenging. It’s getting a little bit better for companies who are B Corporations or PBCs to go public. I think it’s starting to be a little bit more accepted that that’s a reasonable way to organize yourself as a public company.”

Their conversation ranges over several major companies they name practicing what we at the Center call “Social Capital” philosophy — along with the role of business in fostering this as a societal change. Says Seth, “What we argue in the book, government is going to follow the leadership of business, not the other way around. It never really was the other way around, but it’s definitely not that way now.”

In fact, they see government, in many respects, having shrunk in terms of its power. Seth notes, “Neoliberalism treated government as the enemy. Ronald Reagan famously said government is the problem. And then companies have really stepped into that void.” And points out that many companies are bigger than a lot of nation states. “And because of that, they have a certain responsibility,” he adds, then continues, “One of the questions that we ask in the book is, where does that responsibility end? What is too much? At what point are companies wading too much into social issues, let’s say? And I think it’s an open question. I won’t sort of steal the thunder of the book to describe the conclusion, but we talk about the nuance of that.”

Speaking of social issues, Elizabeth cites meritocracy as a great thing – worth the effort of striving for even while recognizing it’s never going to be perfect. “And in fact, when you talk about access to capital for women, people of color, or — we write about this in the book, too — people who grow up poor. When we talk about expanding access to capital for those groups of people, that is meritocracy. And so, embracing that idea is fundamental to the changes that we’re talking about.”

Shares Seth, “This book took two years to research, a year to write, and then editing, and we started on it three-plus years ago. This question has only gotten more important. And so, the timing of it coming out, as it turns out, has really been perfect because this is a conversation that we’re having nationally: What is the future of capitalism and should we do something else completely?”

Their discussion may well be an eye-opener. Click on the link below to listen in.

Seth Levine is partner at Foundry, a Boulder, Colorado-based venture capital firm he co-founded in 2006.

Elizabeth MacBride is an award-winning journalist, author and expert in finance, investing and technology.