Stuart Hart, "Beyond Shareholder Primacy: Remaking Capitalism for a Sustainable Future" (Stanford Business Books, 2024)

Summary

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Podcast Summary:

Podcast: New Books Network
Host: Alfred Marcus
Guest: Stuart Hart, author of Beyond Shareholder Primacy: Remaking Capitalism for a Sustainable Future
Date: October 22, 2025

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Overview

In this episode, Alfred Marcus interviews Stuart Hart, a prominent scholar in sustainable business strategy, about his new book Beyond Shareholder Primacy: Remaking Capitalism for a Sustainable Future. The conversation traces the evolution of American capitalism, critiques the dominant “shareholder primacy” model, and explores pathways toward a regenerative, stakeholder-oriented system. Hart draws from business history, economic philosophy, and contemporary challenges—from AI to business education reform—to argue the urgent need for systemic change. The tone is intellectually rigorous yet candid, drawing on decades of practical and academic experience.

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Main Themes & Discussion Points

1. Motivation for the Book & Critique of Win-Win Sustainability (04:48–08:05)

• Hart reflects on 35+ years of promoting sustainable business within the prevailing American shareholder-centric model. He notes that incremental, “win-win” changes—ecoefficiency and product stewardship—fit the old system but fail to address core crises.
• The “business case” for sustainability—proving environmental or social actions also yield increased shareholder value—has limited real transformation.
• Hart’s realization: meaningful, systemic business transformation is stymied by shareholder primacy doctrine, leading to persistent incrementalism.

“By and large we were still stuck in greening. The reason…was that the larger system just really precluded it…as long as we were living in a world dominated by American style, shareholder first financialized capitalism, we’re doomed.”
— Stuart Hart, (07:59)

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2. The Problem with Shareholder Primacy (08:44–16:11)

• Key arguments:
  • Shareholder primacy fosters relentless short-termism—companies and executive compensation focus on quarterly earnings, at the cost of long-term value.
  • The broader worldview (rooted in Milton Friedman’s legacy) defines profit maximization as a corporation’s sole purpose.
  • The “401k culture” means most Americans’ retirements are tied to stock market performance, reinforcing the status quo.
  • Stakeholder-centric models are marginalized, even when many privately-held businesses operate more purposefully.
• “Saddlebags, not transformation” analogy: Sustainability programs are often peripheral, not fundamental to company purpose.

“If the purpose of business and the purpose of the firm is to maximize profits, then that sort of discounts the idea that…an important purpose…is to solve real problems in the world and make a positive societal contribution. Profit is really a result.”
— Stuart Hart (17:15)

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3. History and Evolution of Capitalism’s “Reformations” (23:22–38:28)

• Hart contextualizes today’s crises as part of cycles in capitalism:
  • Mercantilist era: Early joint-stock companies (e.g., British East India Company) served investors and the crown, often extractively and violently.
  • American Revolution: Motivated in large part by resistance to monopolistic, extractive British trading companies.
  • Second Reformation/Gilded Age: Industrialization, massive inequality, environmental degradation, and the formation of managerial capitalism.
  • The New Deal: A breaking point and a “flip” to a different societal-business contract.
  • Shareholder primacy is recent, not inevitable; shifts have occurred before at moments of social and ecological stress.
• Hart references Carl Jung’s “enantiodromia”—extremes naturally flip to their opposites—and emphasizes cyclical historical dynamics.

"A lot of these challenges... extraction, externalizing negative impact, subjugating populations, exploiting workers, environmental degradation, inequality—these are not new problems... They’ve been around for a long time... When things reach extremes, you tend to get pushback and then there’s a point at which things give and it flips."
— Stuart Hart (24:36)

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4. Current Dynamics: Authoritarianism, Policy, and Business Models (38:28–44:53)

• The present “pushback” against ESG and sustainability may signal the last gasp of an outdated order.
• Hart characterizes the Trump administration and broader trends as a shift from neoliberalism to corporatism and statism, where business elites seek monopolistic advantage via alignment with state power.
• The notion of “interregnum” (per Gramsci)—the old order is dying, but the new is yet to be born—aptly describes the current liminal state.
• China's “state capitalism” is acknowledged for driving sustainable innovation, challenging the Friedman doctrine that economic and political freedom are inseparable.

“You can’t revoke physics, chemistry and biology, which is…what underpins all of this.”
— Stuart Hart (38:58)

“Capitalism is flourishing in China under conditions of no political freedom and statism… It’s the complete opposite of what Friedman talked about.”
— Stuart Hart (44:23)

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5. Innovation, Fossil Fuels, and the Limits of Corporate Change (47:22–51:33)

• Hart highlights the divergence among industries and companies in sustainability leadership. The fossil fuel sector, especially Saudi Aramco, is called out for maximum extraction and record profits.
• Despite pressures, there are examples of transformation, e.g., Trane Technologies—pivoting to electrification and decarbonization as their core business logic, achieving growth.

"Saudi Aramco achieved the single highest quarterly profit in the history of capitalism in 2022—over $80 billion in one quarter."
— Stuart Hart (48:00)

• The AI boom exemplifies how new technological “revolutions” can reinforce industry concentration, corporatism, and unsustainable energy demand unless specifically directed otherwise.

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6. Reforming Business Education and Mindset (56:10–64:50)

• Hart and Marcus review the evolution of sustainability in business schools:
  • 30+ years ago, sustainability voices were marginalized; now, more research exists and there is student appetite.
  • Yet, the core MBA curriculum—dominated by shareholder-primacy-trained faculty and financial economics—remains largely unchanged; sustainability is usually relegated to electives.
  • Business schools act as “finance and consulting schools,” placing students in fields that perpetuate the system under critique.
  • The broken model—expensive education, outdated curriculum, status-quo job funnels—is under pressure as student numbers drop and demands shift.

“The core curriculum in most business schools is still fundamentally the same as it was in the 80s. And that’s a huge problem…”
— Stuart Hart (62:17)

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7. Pathways for Systemic Reform: Leverage Points (65:39–72:25)

• Hart is focused on two major leverage points for transformation:
  • Business Education: Demonstrating alternative models, such as the Sustainable Innovation MBA at UVM, and pushing for curricular overhauls and global leadership initiatives.
  • Privately-Held Mid-Tier Firms: Launching the “Internality” project to support and connect purpose-driven, privately-held companies (not private equity–owned), which are the “guts of every economy.” The goal is to organize, share innovation (e.g., “Pivot Labs”), and influence broader policy and practice—mobilizing a critical mass for systemic change.

“Factoid: In the US, of those corporations that earn $100 million or more in revenue, 90% of them are privately held, not private equity owned, and they create 80% of the new jobs… If you get a dozen CEOs…going to state capitals in Washington, they’re going to be more persuasive than a bunch of paid lobbyists.”
— Stuart Hart (68:57; 72:10)

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Notable Quotes & Timestamps

• “As long as we were living in a world dominated by American style, shareholder first financialized capitalism, we’re doomed.” — Stuart Hart (07:59)
• “Shareholder primacy has…created the equivalent of a market with an invisible dog fence…If you try to run…and get free of that, you get shocked back inside the fence.” — Stuart Hart (11:37)
• “Profit is really a result...to deliver on your purpose…to solve real problems in the world and make a positive societal contribution.”—Stuart Hart (17:15)
• "Adam Smith…totally misinterpreted by most…modern…He was essentially…a professor of moral philosophy…The whole point is to grow this thing so the Commonwealth can grow, that you can hire more people…and the better off everyone is. It's a virtuous cycle." — Stuart Hart (29:00–29:45)
• “We’re at…what Gramsci talked about as the interregnum: the old has died but the new cannot yet be born.” — Stuart Hart (40:41)
• “I think there's a certain inevitability to all this: extremes…then there's a breaking point and things flip…What separates now from anything in the past: never before has capitalism and business threatened the life support system of the entire planet. But it does now.” — Stuart Hart (31:56, 38:58)
• “The core curriculum in most business schools is still fundamentally the same as it was in the 80s. And that’s a huge problem…” — Stuart Hart (62:17)
• “Our thesis is…If you get a dozen CEOs…going to state capitals in Washington, they're…more persuasive than a bunch of paid lobbyists.” — Stuart Hart (72:10)

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Memorable Moments & Closing Thoughts

• Marcus’s quick fact: The number of US publicly traded firms has halved in recent decades; private equity ownership largely escapes public scrutiny, often exacerbating negative social impacts. (19:32–21:42)
• Hart exposes the paradox: Most small and medium privately-held businesses already operate with stakeholder logic, while reforms target either megacorporations or too-small B corps. (18:39–20:22)
• The discussion on business school inertia is both nostalgic and biting, as both speakers reflect on 1980s marginalization and today’s stalled curriculum. (56:10–64:50)

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Timestamps for Key Segments

• Motivation & Critique of Win-Win Sustainability: 04:48–08:05
• Shareholder Primacy as Structural Obstacle: 08:44–16:11
• Philosophical Roots—Friedman vs. Stakeholder Theory: 12:32–19:32
• History of Capitalist Reformations: 23:22–38:28
• The Era of Corporatism & China’s State Capitalism: 38:28–44:53
• Innovation, Industry Change (Aramco, Trane Technologies, AI): 47:22–56:10
• Business Education Reform: 56:10–64:50
• Leverage Points & Internality: 65:39–72:25

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Summary and Takeaway

Stuart Hart’s Beyond Shareholder Primacy is not just a plea for “greener” corporations, but a sweeping call to rewrite the economic “source code” of capitalism for a sustainable and equitable future. The conversation traces deep systemic roots and the inertia of current models while identifying concrete leverage points: business education reform and mobilizing the overlooked sector of privately-held, purpose-driven firms. Hart is cautiously optimistic—seeing hope in cycles of transformation and the growing forces for change—while unflinching about the scale and urgency of the crisis.

“This isn’t just a book about reforming business. It’s a book about rethinking capitalism itself. Shifting from an extractive shareholder-first model towards a regenerative, purpose-driven system. Stewart calls this our third capitalist reformation.”
— Alfred Marcus (72:41)

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Transcript

[Stuart Hart]

Hello, everybody.

[Marshall Po]

This is Marshall Po. I'm the founder and editor of the New Books Network. And if you're listening to this, you know that the NBN is the largest academic podcast network in the world. We reach a worldwide audience of 2 million people. You may have a podcast or you may be thinking about starting a podcast. As you probably know, there are challenges basically of two kinds. One is technical. There are things you have to know in order to get your podcast produced and distributed. And the second is, and this is the biggest problem, you need to get an audience. Building an audience in podcasting is the hardest thing to do today. With this in mind, we at the NBM have started a service called NBN Productions. What we do is help you create a podcast, produce your podcast, distribute your podcast, and we host your podcast. Most importantly, what we do is we distribute your podcast to the NBN audience. We've done this many times with many academic podcasts and we would like to help you. If you would be interested in talking to us about how we can help you with your podcast, please contact us. Just go to the front page of the New Books Network and you will see a link to NBN Productions. Click that, fill out the form, and we can talk. Welcome to the New Books Network.

[Alfred Marcus]

Welcome to the New Books Network. I'm Alfred Marcus and today we're diving into a powerful book about capitalism at a crossroads. My guest is Stuart Hart, one of the world's leading authorities on business strategy and sustainability and author of Beyond Shareholder Primacy, Remaking Capitalism for a Sustainable Future. For over 30 years, Stewart has argued that the sustainable business movement is not enough, that incremental win win solutions won't meet the scale of today's crises. In this book, he makes the case for a third capitalist reformation, moving beyond shareholder primacy toward an economic system built on purpose, regeneration and value for all stakeholders. This conversation sits at the very core of strategy and ethics. What role should business play in reshaping our institutions, redefining value, and securing a sustainable future? So let's start.

[Interviewer]

Stuart and I have to start by.

[Alfred Marcus]

Saying I've known you for a long time about your background and motivation, and.

[Interviewer]

You'Ve been at the forefront of this movement within business schools for as long.

[Alfred Marcus]

As I can remember. So what motivated you to write this book now and how does it build on your prior work?

[Interviewer]

In particular, the book you wrote called.

[Alfred Marcus]

Capitalism at the Crossroads?

[Stuart Hart]

Yeah, Alfie, thank you. Great to be with you and with the listeners. Yeah, it's a good question. Like. Like, what was my motivation for this because in some ways it's a, it's a, it's a bit of a shift of message, you know, that I, I spent as, you know, the better part of 30, probably now going on 35, 40 years kind of toiling in this field. And most of the work that I'd done, including capitalism at the crossroads, was really premised on the prevailing model of American style capitalism at the time, which we all know kind of arose in the 70s and 80s and kind of inflicted a particular view of how business ought to be run, which mostly had to do with generating quarterly earnings growth and boosting share price and so forth. We'll call that shareholder primacy. And I would say that most of what has passed for sustainable business over that period of time, which is the, you know, I'd say the entire duration since the 80s has, has had of necessity to fit into that model. Right. In other words, we, the, the, the watchword is what's the prove the business case for sustainability, which is really code for if it violates sort of the Friedman rule of, you know, maximizing profit in the short term, then it's probably not going to happen. And I did my best over a long period of time of trying to kind of shoehorn myself into that model, you know, written things like creating sustainable value and so forth, you know, because it wasn't going to happen unless you could make a case for this in terms of value creation, you know, kind of shareholder value creation. And you know, as you mentioned at the outset, you know, I've been writing about this for a while, going back, you know, you know, now 30 years or so, and wrote a piece back then, you may recall, that was in Harvard Business Review, the title, which was Beyond Strategies for a Sustainable World. So, you know, I think we knew, I knew, probably almost all of us knew even then, right, that just what was de rigueur at the time, which was eco efficiency. And it took off because it dropped to the bottom line fast, right? It was eco efficiency reduces cost and reduces risk in the short term. So it was entirely consistent with, with, you know, the, with the dominant way of thinking about business. So it's unsurprising that that took off. And then some aspects of what I call product stewardship I think also got legs because they, they helped kind of boost reputation and legitimacy and serve to help differentiate companies. So that again, there was a, there was a, a quicker payback, you know, sort of to make, to make that easily, more easily justifiable as either an expense or an investment, depending on how you look at it by the companies. But what we all know we really need are the more fundamental transformational kinds of big bad investments that get us to the future, which in many industries involve wholesale shedding of existing technologies and acquiring entirely and commercializing entirely new competencies. You know, so I've that, you know, in my little sustainable value framework, I kind of posed as sort of, we'll call that clean technology strategies. You know, you can use whatever buzzword you'd like. And you know, if we were going to really address the sustainability challenges of the world, not only is the environmental piece of huge importance, but so too is the problem of inequality in the world. And so that was this work on base of the pyramid. And so the other kind of aspect of beyond greening was how do we get after? How could business play a role in serving and lifting the underserved of the world? And then there was a whole line of work I did starting with CK Prahalad on base of the pyramid business and so forth. And I still believe in all that work. Right. I mean, I think all of that is right in terms of leapfrog innovation, disruptive innovation, creative destruction, new business models for serving the underserved. The problem is it just hasn't happened. So my motivation is, I get to the point where it's like 10 years ago or so and I realized that I'd been kind of pounding on this for a long time and worked with a bunch of companies and made some, there were some interesting initiatives here and there, but by and large we were still stuck in greening. We're still for existing incumbent firms. I'm not talking about clean tech startups and that sort of or impact investing, which is, you know, which is small potatoes by comparison. So I'm talking about, you know, kind of transformation of existing firms that we're still stuck in incrementalism and still stuck in greening in stuff that dropped. And the reason I, you know, sort of had to conclude was that the larger system just really precluded it. Right? That and as long as we were living in a world that was dominated by American style, you know, shareholder first financialized capitalism, we're doomed.

[Interviewer]

So it's the win win model that has been the problem. And the win win model, maybe conceivably if we had a longer term perspective, would not be a bad model, but it is very short term driven and certainly a lot of the initiatives that companies have taken, large base of companies in the United States like General Motors are now being pushed back by the current administration. We could speak a great deal about that.

[Alfred Marcus]

So could you elaborate a little bit.

[Interviewer]

More on why shareholder primacy is broken? And you argue that most corporate sustainability.

[Alfred Marcus]

Programs are saddlebags on the horse, not.

[Interviewer]

Transformation of the horse itself.

[Alfred Marcus]

Why is the shareholder primacy such a central obstacle to meaningful change?

[Interviewer]

Is it just the short term aspect of it or is it even more fundamental than that? Is the problem really that we as teachers of MBAs have also contributed to? I guess we'll get into that a little bit later.

[Stuart Hart]

Yeah, I think certainly short termism is a big part of it. Right. You know that companies are analyzed, evaluated, rewarded for quarterly earnings growth as the number. Obviously I'm not that simple minded to believe that that's all that matters on Wall street, but it matters a lot, to be sure. And so I think that that does tend to drive short termism. Then you have rapid turnover in the executive suite where CEOs that even shortens their attention span further. Their comp has been basically tied because part of shareholder primacy is because of agency theory and the impact that had. These damn executives are selfish and greedy and they want their own money and they're going to play their own game and they're not going to pay attention to the shareholders. So we got to tie their comp to share price. And I think that's, that's been a big contributing factor to this as well. But I think it is even larger than that. As you say, Alfie, I think it's all those things that I just mentioned, but it is also this sort of fundamental worldview. I think the belief that the purpose of business is to maximize profit. And that goes back to the Chicago school and Friedman in particular, that is the purpose of the company. There is no larger purpose for the company other than that that is the purpose. And that that's the best way to maximize societal value is by maximizing profit. That I think is. That's the fundamental worldview under which all of these other things are subsidiary. Right. But what it's produced I think is just what we've been talking about, you know, kind of attention to things that are primarily financial and more short term. And it's been aided and abetted as well by over the last 30 years or so the kind of the rise of the 401k culture, right, that defined benefit pensions have pretty much gone away in favor of people having stock accounts. So half of the American public now own stock. You know, they may not own large amounts of it, but they own stock nonetheless. And that means that their retirement, you know, you and I included. Right. Is dependent on the performance of the market. And that that tends. Even though we may have different views, you know, we still have to pay attention to what our portfolio value is, you know, to be sure. And you know, my colleague here at Michigan, Jerry Davis, has had a wonderful expression for that, that essentially what shareholder primacy has done is create the equivalent of a market with an invisible dog fence. You know, that if you, if you try to run, you know, and get free of that, you get shocked back inside the fence. And that's. I think that's what's been going on for the last 30 years.

[Interviewer]

Yeah, I, well, I mean, I think there, I know we've all made Milton Friedman into a boogeyman, but I think we have to be a little careful. I think Jensen, in the way he extended it and he actually came back and said that that was wrong to tie corporate pay to shareholders.

[Stuart Hart]

But yes, he's recanted, I agree. But the damage was already done, a lot of damage.

[Interviewer]

And the damage continues. And I mean, it's true of all of us that we depend on. People are living off of their assets, especially as we get older, rather than on basis on income. It's kind of. But just in defense of Milton Friedman, you know, he did say maximize shareholder returns, but he didn't talk about time periods. So you know, you could imagine this as being maximized shareholder terms and shareholder interests in the long term as opposed to the short term. I don't want to go, you know, get into this too deeply. And I also. And he also talked about within the confines of long, of law and morality and he never defined either one very closely.

[Stuart Hart]

No, that's, that's of course true. But then, you know, if you go back and I've now reread a couple of times, Capitalism and Freedom.

[Interviewer]

Yeah, right.

[Stuart Hart]

You know, he says that. But then the balance of the book really is a, is a, an exposition of all the things that government should never venture into. Right. Which, which would be the majority of things that we would think of as kind of facilitating the well being of the population.

[Interviewer]

Right, right. Regulation would disappear. His notion of. He believes in externalities. I mean that's very basic tenet of economics.

[Stuart Hart]

He believes that because he's a firm believer in the sanctity of private property, that property owners have a right to do with their property what they please and government intervention be damned because that's an infringement on their economic freedom. So he comes right out and says that property owner, factory owner, has a right to pollute because it's his property.

[Interviewer]

Right. But I mean, he accepts the idea that there are externalities, as I recall reading the book. But then he is. I think his big critique is that he maintains that the government is incapable of correcting these externalities because it's so inefficient. There's a huge attack on government.

[Stuart Hart]

That's far efficiency perspective. Right. And so that. And if running a successful society were just about efficiency, then maybe just the unfettered free market would work. But there's a lot more to it than just efficiency.

[Interviewer]

Right, right. And I don't think it's, you know, you can make the absolute strong case that governments are completely inefficient and corporations are totally efficient because of the. Which is kind of the implicit faith.

[Stuart Hart]

Behind it, you know, and true. But there's also, I think just. We should also have the realization that the government wasn't necessarily designed to be efficient.

[Interviewer]

Yeah, right.

[Stuart Hart]

It was designed to be effective in trying to tap into what the public interest is, which I think is another interesting thing about Friedman is that again, in terms of his worldview, doesn't really believe there is such a thing as the public interest or the common good. Right. That society is best organized by the actions of individuals making purchase decisions in a free market. Period.

[Interviewer]

How would you comment about Freeman, the other player in this game, this stakeholder theory? Because I've heard him say publicly that he's a libertarian, which I think is very confusing given where he kind of sits in this whole picture. What's your understanding of the role that he plays in this larger game?

[Stuart Hart]

Yeah, well, as you say, these two like to be kind of played off against each other in sort of a point counterpoint way, you know, as. As anchoring two ends of a spectrum. And I, you know, I don't, I don't know. I mean, that's an. That's kind of an easy thing to do. Right. To kind of set up an argument. But. But I don't know that it's necessarily useful. Right. To kind of put it that way, because I think to. To your point, you could be a libertarian and still have a worldview of stakeholder capitalism. You absolutely could. Right. And so that's where I think kind of one of the other shortcomings of shareholder primacy. As I say, if the purpose of business and the purpose of the firm is to maximize profits, then that sort of discounts the idea that an important purpose of business is actually to solve real problems in the world and make a positive societal contribution. It sort of Discounts that possibility and even saying that that's the primary purpose. Right. And that profit is really a result. Profit is something that you have to make money in order to deliver on your purpose and in order to deliver kind of useful products to people that are important from their point of view, that make a societal contribution. That's much more in line with the stakeholder way of thinking. Right. That the purpose of the firm is actually to serve society and to do something positive in the world through its products and services. And that the best and the. And that includes, you know, the entire value chain, up and down the value chain and also to be a good corporate citizen in the communities where you work. So I think that as a leader, right. You could imagine running a business that way as a leader, business leader and still believe in small government.

[Interviewer]

Yeah. And it. The serving your stakeholders contributes and I think freedmen too, to shareholder value. So as long as it contributes to shareholder value, it's fine.

[Stuart Hart]

And again, you and I, a lot of this is just so contrived that probably the majority of businesses out there in the world which are privately held, small and medium sized businesses, co ops, munis, so forth, already are run that way. It's mainly the big publicly held global corporations that get their feet, get held to this fire, you know, by analysts and so forth on Wall Street. I mean, I know personally lots of business people. Right. That business leader, including business founders and CEOs and their companies are private and they will forever be private. The last thing they would want to do is take them public. And they've run their companies according to their values to make a societal contribution for decades. And they've been very successful at it.

[Interviewer]

We can get into that a little bit. But I want to. You're bringing something up that I think is very important is that the number of firms that are actually traded on public markets has put way down. I think it's like down to about 3,000. Half.

[Stuart Hart]

It's about half of what it was 20, 30 years ago.

[Interviewer]

And there's been this huge rise of private equity which escapes a lot of regulation and public scrutiny and is probably worse overall for public benefit because their need to raise the value of these companies in order to sell them. You know, it's. It's a flipping strategy essentially is oftentimes.

[Stuart Hart]

Yeah, yeah, right. I mean, so there's an important distinction to be made between privately held companies that are just. That are owned and operated by. By owners versus private equity owned private companies.

[Interviewer]

Right.

[Stuart Hart]

Important distinction.

[Alfred Marcus]

Right.

[Interviewer]

A very important distinction. Because I mean I think in a way more and more companies are being owned by private equity and it's probably, it's understudied for many reasons. One of the main reasons being that there's not adequate data.

[Stuart Hart]

Yeah, there's no public data. It's private. Right, but you're right, I mean the private equity has exploded over the last.

[Interviewer]

20 years and the valuation of these companies is always to be questioned because they are establishing the valuations and they prop up endowments by having them be exaggerated on the upside rather than on the downside and their ability to really sell these companies for the values that they've maintained. There's a lot of interselling going on where one private equity firm dumped it on another private equity firm. But I don't think that much study has been done with regard to the actual. Well, there's been some, the study of their actual social impact. I mean, their impact on communities and laying off people. I think that has been studied pretty extensively, but. And I would assume that their environmental impact is no better after.

[Stuart Hart]

Yeah, yeah. I think it, you know, a lot of the private equity kind of growth has been in sectors that, you know, we would consider, like healthcare, for example.

[Interviewer]

Right, yes, right.

[Stuart Hart]

That, you know, we would consider to be important in terms of social well being. And you know, have had the effect of really driving, driving, you know, cost, you know, they've cost cut but, but cost to, you know, the cost to patients has not gone down. It's gone up. And you know, and availability has gone down, access has gone down, but profits have gone way up. Right. So I think that's the, so the, the profiteering aspect of this, I think is also. Right. There's a difference between, you know, we're back to what we originally talked about. The purpose of the firm is to maximize profit versus the purpose of the firm is to, is to solve problems in the world through a commercial model where profit is an important component of that in order to have money to reinvest and grow the business and to compensate people in the company accordingly.

[Interviewer]

In the book you talk about these transitions or corporate reformations over time. Could you talk a little bit about that and also tell us a little bit about your sense at this moment in history of the prospects of a new transformation or reformation of capitalism more in line with what you would consider to be beneficial? Yeah, yeah, that's a big task.

[Stuart Hart]

I mean, I think as I, as I look, as you say, like the first third of the book really is historical. Right. And, and that was part of my, you Know, as I, as in the, in our leadoff conversation, you know, kind of what got me to realize that we needed something, something more fundamental and systemic to change. Part of that was also a desire on my part to understand how we could have possibly gotten to this place. And that took me on maybe a five year reading journey. I'm not a trained historian, but I've learned a lot about history, not just economic history, but cultural history and so forth. Because I think it's important to understand those various threads at the same time. And I think one of the things that becomes very clear when you do that is that a lot of these challenges that we now face, you know, extraction, externalizing negative impact, subjugating populations, exploiting workers, you know, environmental degradation, inequality, these are not new problems, right. They, these have been around for a long time, going back hundreds of years under what, you know, what I would. Under the early, in the early days of capitalism, right. And there were periods where those reach extremes, you know, to the point where it was creating was really wreaking havoc. And that inevitably causes pushback, right? You end up with resistance. That's just kind of human nature, I think, right. That when things reach extremes, you tend to get pushback and then there's a point at which things give and it flips, right? So like I use the, I bring in the kind of the Carl Jung notion of enantiodromia, which is really a weird term, but I think it's apt here, right. And so Carl Jung, the psychologist, observed that it just in, in human beings, right. And humans tend to can, you know, either cognitively or emotionally kind of reach certain extremes. And then the tendency is when you reach, when you reach those extremes that you flip to the opposite, that extremes turn into their opposite.

[Interviewer]

It's very Hegelian, contradictory.

[Stuart Hart]

Very much so, yeah, very much so. And that I think is in large measure what's happened if you look over the last four or five hundred years of, we'll call it capitalist history. Because I sort of sketched the idea that the source code for what we think of as capitalism today was actually mercantilism. Things like the British East India Company and so forth, were the first true joint stock limited liability corporations as we know them today. And they were created solely for the purpose of lining the pockets of the investors and the crown that gave them the charter, right? They were monopolies, they were preferred charters that gave kind of monopoly control over particular geographies. And that was really the source code of what we think of as capitalism today. And they were entirely extractive. Right. And used private armies to subjugate populations like they did in India.

[Interviewer]

The origin of Indian colonialism.

[Stuart Hart]

Exactly.

[Interviewer]

English colonialism in India.

[Stuart Hart]

Yeah, yeah. So, but that. And then they tried to use the same model, the British, to settle something called the New World, and that didn't go as well. Right. It ended up that these. These feisty colonists decided that they'd had enough and fought a revolution over it. I mean, a lot of what the American Revolution was about was the fact that the British had imposed. They were using English trading companies as the instruments of subjugating the continent. And that was really it. Right. That meant that under the mercantile's model, it meant that they would prevent the colonists from learning how to actually make things themselves and just simply use them as vehicles for exporting either raw materials or commodities that they then bring back to Britain and manufacture into finished products so they can sell them back to the colonists. That was the mercantilist model. Right. And most of the people involved in the early days of the revolution, including the signers and the Declaration of Independence, were all business people. And they were, they. They were. They were small business people, they were farm. They were, you know, they were planters, as they called them, which were basically plantation owners like, you know, George Washington and Thomas Jefferson and so forth. Or else they were northern industrial, you know, emerging industrialists like, you know, what, you know, like John Hancock, so forth. They were established business people and they were pissed that the British basically were leaning on them this. This way and preventing them from actually growing into what they thought they could become and what the colonies could become. That was a lot of what the fighting of the revolution was really all about. And when the founders then. And they were heavily influenced by the Enlightenment thinkers of the time. And I talk about this in the book. And again, I return to our friend Adam Smith, who also gets a lot of play. But I went back and reread. I guess it is reread because I read some of it, you know, like in college, but actually read, you know, wealth of nations and Theory of Wealth Sentiments, which is not easy reading.

[Interviewer]

Right, right.

[Stuart Hart]

It's.

[Interviewer]

It's. It's a lot easier than the German thinkers. That's what they'd say.

[Stuart Hart]

But it, you know, it just, it just reinforced the fact that he's just, you know, he's totally misinterpreted by, you know, by. By most sort of modern, you know, the, the way he's portrayed as the father of. It was just bonk complete because he was essentially, well he was a professor of moral philosophy. Right.

[Interviewer]

Moral sympathies.

[Stuart Hart]

Yeah. Sympathy was a big part of his thinking. Right, right. And, and that, you know, there was no such thing as economics at the time. Right. There was political economy, but, you know, it was seen in a much more integrated way. You know, there was no separate discipline of economics in the mid to. It didn't exist, you know. And he was a, he was a professor of moral philosophy at the University of Glasgow. And they were heavily influenced by, you know, the classical thinking about virtue and the importance of practicing virtue, which meant, you know, virtue meant behaving for the common good. Right. And so the whole theory of the wealth of nations was, yes, we want small businesses that compete with each other so that no one can control the price. Because he railed against the British trading companies as monopolies. He was, you know, entirely opposed to that model. Right. He was a, he was an anti monopolist. And so in a lot of ways the wealth of nations was a subversive doctrine. Right. To what, what was then the dominant model in Britain. And he was, you know, he was anti slavery from the, from the very beginning. And in his theory of, of, you know, kind of the wealth of nations believe that business people that behave with virtue, what it means is you don't accumulate personal wealth, that if profits should be. Profit is important, but it should be dedicated to, as he put it, hiring more assistance. Right. The whole point is to grow this thing so that the Commonwealth can grow, that you can hire more people because the more money that those people have, the more they can afford to buy and the better off everyone is. It's a virtuous cycle. That was his theory of the wealth of Nations. Very different from the extractive and subjugating kind of trading company model. And that was what the colonists were influenced by. Right. So when they once in the new, in the new Republic, they put corporations in a box, right? I mean, corporations were carefully controlled in the early days of the American Republic.

[Interviewer]

But like today, where we have so much pushback and so much effort that you, I and many others put into creating greater consciousness of sustainability in corporations. And there were a lot of apparent victories up to, let's say, five years ago, three years ago, two years ago, where do you think it's going to head now? I mean, what's going to happen next? Do you have any sense of that or any ceiling?

[Stuart Hart]

I, I mean, I think there's this, in, in my view, there's a certain inevitability to all this that again, if I, you know, if I reflect on kind of history, things kind of reach up. They. There's. There's a build up of extremes, right? Extreme inequality, extreme environmental degradation in, you know, along various dimensions. That was certainly the case with the trading companies and kind of the impetus for the American Revolution. I'd say the same thing happened the Second Reformation. In my book, I talk about what we think of now as the Gilded Age. Sort of the height of the second Industrial Revolution and the Gilded Age, same thing, right? Kind of the buildup of extreme wealth and extreme inequality and degradation of the city environments where those industries operated, and then the exploitation of labor and the level of dissatisfaction came from that. And then the rapid emptying out of the countryside and the populist kind of uprising that stemmed from that. And that's what Carl Polanyi wrote about. And the great transformation and just all of the buffers and protections basically got taken away and people just felt totally exposed because they were right. That's when. And so you end up with this buildup of extremes and at some point it reaches a breaking point and things flip. And they did back then, right? There were a couple of times you could say, well, Teddy Roosevelt tried to do this, Woodrow Wilson tried to do this. And then there's World War I. Then there's the return to the old days in the 20s, just profligate kind of speculative investing. And then 1929, but then the 30s with the great Depression is when things reach their breaking point, right? And it completely flips, right, to this thing called the New Deal and FDR and the importance of government, the role that government plays. And then you come out of the Second World War and we have a very different form of capitalism, right, which business leaders like the CEOs of GE and IBM labeled as welfare capitalism, right? They saw it as their role to build the middle class, to create promotion ladders and job ladders so that they could bring people into the middle class and be good citizens in their communities and so forth. Now, did they have a lot of blind spots? They sure did, right? You know, things like, things that we cut our teeth on, like environment, you know, civil rights, women, you know, those were all blind spots. But if you go back and really kind of examine that, you know, it is true that those companies were running. It was called managerial capitalism. That's what Berle and Means called it. And, you know, and, and Berle and Means, their famous book, you know, the Modern Corporation and Private Property kind of put forward the idea that. Because that by then shareholders had become Highly, highly dispersed, you know, like a lot of small shareholders. For the first time in human history, hundreds of thousands of small shareholders were the, you know, the kind of the people that owned the stock of the companies. Big companies by then, not, you know, the original tycoons, they'd all passed on and the companies now, you know, you had hundreds of thousands of these. That's, that's who got burned, you know, in the, in 29. But, you know, but they didn't give up on the, Even after, into the 30s, these big corporations had hundreds of thousands of distributed shareholders, not institutional investors, individuals. And so Berlin means whole kind of thought behind this was, well, so for the first time in human history anywhere, because elsewhere in Europe there was mainly banking, companies were financed via banks still or in Japan. Whereas in the US you had this public equity market with these dispersed shareholders for the first time that as they viewed it, this was an opportunity, as they said, these individual investors, in their words, invest not, manage not, nor do they accept liability. So why should they get the lion's share of the returns they should be paid, in their words, the wages of capital. Wages of capital. And that the companies for the first time now, because they're no longer controlled by the tycoons themselves, they're run by professional managers for the first time who were trained in business schools, in many cases business schools that were created by the tycoons, you know, in the, you know, in the teens and twenties. And those business schools, at least a part of their purpose was to create some legitimacy for big business because they knew if they didn't, they get broken up. So that for the first time then Berlin means, point of view was that we have professional managers who can run these companies for the societal good. And because the shareholders don't, don't deserve the lion's share of the return, they should get the wages of capital. Totally different model, like the complete opposite when you think about it, of agency theory and of the notion of shareholder capitalism. And that was the logic coming out of the Second World War that the big corporations that the Americans dominated in, because Europe and Japan and others were decimated, could afford to offer pensions and kind of retirement and healthcare and so forth, which none of the other countries went that route. They all nationalized healthcare and pensions, whereas the U.S. the companies were, it was known as Generous Motors back in the day. And so they were run with a completely different logic right back then. So as I kind of went through this, it became clear to me that this whole shareholder primacy thing is not preordained I mean, it's gone through wild swings, right? And it was only in the 70s and 80s when it shifted back again to shareholder primacy like the Gilded Age or like mercantilism. And now we're in the midst of another one of these things where that now has reached such extremes that it's gotta give. Right. I mean, I think what separates where we are now from anything in the past is the scale and scope of the decimation, right. That never before has capitalism and business threatened the life support system of the entire planet. But it does now. That's very different than anything we faced before.

[Interviewer]

So you think that recognition will fly in our face and at a certain point in time the pushback that we're feeling right now will reverse itself.

[Stuart Hart]

I view it as the last gasp, you know, it's the death pose of a dying system, you know, the defenders of that system to the death. Right, but, but it's inevitable, right? I mean you, you can't revoke physics, chemistry and biology, which is, and human nature, which I think is what underpins all of this.

[Interviewer]

Would you consider, get a little political. Would you consider the Trump regime then the apex of shareholder capitalism? Or would you consider it a whole new form of capitalism because some of their moves are really not in total conformance to the shareholder model or. Many people would say that this regime is not really. It's anti neoliberal in many respects. Many of the neoliberals have abandoned things.

[Stuart Hart]

I think we've reached a point where for the, since the 80s, the political order, you know, the kind of the neoliberal political order and policy order has been hand in glove with the economic order, with shareholder primacy. Those two things were like this. But over the last 10 years the neoliberal political order has been blown up, right? It does, it's really doesn't exist anymore. It's become corporatist. You know, it's become. In that sense it is, it's following the authoritarian model, which is further industry concentration into just a couple big corporatist entities that then can be controlled by the authoritarian government. That a lot of competition is bad if the desire is statism. But it doesn't reduce the fact that those business leaders, the reason that they're complicit is because they sense the opportunity for monopoly profits.

[Interviewer]

So the next phase, post Trump, if we get there, what will it look like?

[Stuart Hart]

Well, I mean, I think that we're at sort of what Gramsci talked about as the inner regnum, you know, like back in the 20s you know, it was this. In some ways we're at a similar place, you know, where as he put it, the old has died, but the new cannot yet be born. You know, and that's kind of where we are right now. We're stuck for the time being. And it could break. It could go in a really, I don't want to use the term bad, but it could go in a direction that produces a lot of strife, just like the 20s and 30s did back then. But eventually that broke, right? I mean that fever dream broke too. It was called World War II. It broke right eventually and we got the, we got the post warriors in the 50s. So I think eventually it breaks. It depends on how ugly and long it takes.

[Interviewer]

I want to think about three or four more questions to ask you. So are you hopeful? Let me start with just that. Are you hopeful?

[Stuart Hart]

I am. Because I think what's different about now also is the, you know, the spread. Even though we have a lot of disinformation, there's also much more information than there ever used to be. Right. So that it's harder to kind of hide things. So there's much more access to information for people who seek it out compared to what it was like 50, 70, 100, 200 years ago. Now there's also a lot of disinformation which Ivy, it creates cross currents and the kinds of problems that we're living through right now. So I freely acknowledge that. And that's what makes it different than anything that we've any sort of pushback or what I'll call capitalist reformation that occurred in the past. But again, I don't think it lessens just the underlying motive forces, kind of the forces of crisis that are emerging, the physical forces in terms of climate change, in terms of loss of biodiversity and the implications that has just for our physical well being and then just the continued march toward toxic levels of inequality almost everywhere in the world can't not last. That is completely unsustainable.

[Interviewer]

I sometimes feel that way too, that there's huge amounts of disinformation, but there's huge amounts of information is out there. And I may ask a couple other questions. What about Chinese state capitalism? It seems that the Chinese, as much as we can condemn them, and I certainly do for their authoritarianism and there's no freedom in China, at least is our conception of freedom. But they have made huge advances in sustainability. I think we have to admit it, the United States withdraws, are taking leadership roles. What do you feel about that?

[Stuart Hart]

Yeah, I mean, I think it's again, it just is. It's in total violation of our orthodox beliefs about business and capitalism and economics at some level. Certainly it's in direct conflict with the kind of Friedmanesque market fundamentalist, neoliberal view, Right. Because like you said, you have essentially a. It is statist government, right? Industrial policy gone wild, industrial policy and statism. But yet capitalism is flourishing and it's also flourishing under a regime that has repressed freedom. So the whole core premise of Friedman's book about capitalism and freedom, you know, that you have to have economic. Without economic freedom, there can be no political freedom. That the two go hand in hand is just clearly not true. Right. Because capitalism is flourishing in China under conditions of no political freedom and statism and industrial policy, where it's the complete opposite of what Friedman talked about.

[Interviewer]

A weird strange thought that I just had was, could all this aggregation of power in the executive in a new regime be used by a beneficial force so all the checks and balances that prevent rapid transformation of US Society in a more sustainable direction could be taken away and we could make really very rapid advances?

[Stuart Hart]

Because when it flips, right? When it flips, what happened during the Great Depression, right. I mean, that's really what happened with the New Deal too, right? Is that right? I would think most of the resistance got worn away because, you know, the, the laissez faire view had been so totally discredited by then that it really had no. There was no opposition. There was opposition, but it was. The opposition had been vanquished for a period of time. And then it rose again, right. In the post war years, starting with Hayek and on Mises with, you know, with the Mont Pelerin society and so forth.

[Interviewer]

So we could have sustainable authoritarianism as our next. To coin a phrase. I don't know if I like that phrase very much, but two things I just wanted to, you know, Joel Mokir, I think that's how you pronounce his name, just won the Nobel Prize for economics. And his, you know, he's a major proponent of economic growth, although his work I think is quite interesting with regard to creative destruction and in strategy, the strategy literature all about many of these companies struggle between exploring and exploiting that dichotomy, I think is. And that's what has held back my work on energy industry was really about how these large companies are trying to do both of them at the same time. But now they're be. Most of them are being pulling back the large. Do you think there's. I mean, you're very in touch. Do you think that this is a permanent pullback or. They move so quickly and I think they're forced to move so quickly in response to the political pressures. So they could be again moved very quickly in response to political pressures or how do you view it?

[Stuart Hart]

I think it's hard to paint companies with a single brush.

[Interviewer]

I agree with that, that, that it.

[Stuart Hart]

Really depends on industry and players within industry that, that you know, even in industries like, you know, we might say like the fossil fuel industry is just, you know, we paint that whole thing with the same brush, you know that we've just kind of given way to total kind of like a final kind of crazed madness for run on exploit on exploitation. I mean I saw, I saw a number recently that took my breath away, which is that if we. Two things. One, that the Saudi Aramco achieved the single highest quarterly profit in the history of capitalism in 2022, where they earned over $80 billion in one quarter in profit.

[Interviewer]

Wow, that's amazing. That's amazing.

[Stuart Hart]

Number one. Then number two, that should we stay on the same trajectory that we're on right now when it comes to the fossil fuel industry, oil, gas and coal, that we're on a path to generate more carbon equivalent emissions between 2022 after Covid and 2030 than we did the entire time from the Industrial revolution up until 2022.

[Alfred Marcus]

Right.

[Interviewer]

That's very alarming.

[Stuart Hart]

That's that it's completely unsustainable. Right, right, completely. But it just so it tells you them that that industry obviously has just gone. It's just gone mad. I mean it's gone hog wild. But not all industries are like that right now. There are some industries that I think have realized, you know, have. And even within that industry, some of those companies I think recognize that their days are numbers.

[Interviewer]

Right. They seem to recognize that and then they go in the opposite direction. And I think that's true. In general, these large companies gets the pressure on them is immense to bend to the spirit of the times.

[Stuart Hart]

But then others that are positioned. I do work with a few companies and one that I've done a lot of work with over the last decade or so is now called Trane Technologies which was part of Ingersoll Rand. And Trane Technology I think is very interesting. You know, it's a. Ingersoll Rand demerged, you know like six years ago just before COVID and in order to create this pure play climate company called Train Technologies which has. It's essentially climate control, air conditioning.

[Interviewer]

Right.

[Stuart Hart]

And he well, climate control.

[Interviewer]

Yeah, yeah, climate control, that's how they refer to it.

[Stuart Hart]

So he, so heat pumped technology and moving optimization and then transport refrigeration. Right with thermo King. And so their whole play has become deep electrification, that in order for us to make any significant headway toward a sustainable world, we need to deeply electrify everything. And deep electrification means also not only electrifying but the source of that electricity must be renewable because yeah, it's great to electrify, but if you just fire up more coal, not going to get it done. And that's really the whole purpose of their company at this point. And they've been able to make great headway. I mean their business has grown dramatically right. Over the last six years and they've done really well just even in the conventional stock market, if you look at their stock price because they, they become sort of in many cases a preferred vendor, especially to players, because they have it, they have the, they have created this thing called the gigaton challenge, like Walmart did for their upstream part for Trane. It's downstream that they have a, they made a commitment to reduce carbon equivalent emissions by a gigaton by 2030 through the, in their customers, through their products. And so for a lot of those, a lot of those customers, that's a real priority because even though there's the anti woke and anti ESG stuff going on, most of them are still committed to those kinds of things because it just makes good sense that you business.

[Interviewer]

Model is now totally connected to it. You did bring up this issue of electric power and that forces me to ask you the question about AI. And it's like AI is really just electrical generation, that it produces some type of intelligence or another. But the demands on the electric power system are just outrageous and how it's going to be fulfilled, I don't know how that's going to work itself out. You have any comments on that one?

[Stuart Hart]

Yeah, I mean I've been trying, probably like you, I've been trying to get on as steep a learning curve as I can, not only about how people like you and I deal with AI in our setting, like in an educational setting. That by itself is an interesting challenge, but then to understand it in the larger context of it as an emerging industry. And I guess where I am right now on that, Alfie, is it seems to me that the way it's playing out, the direction that it's headed right now is entirely consistent with what we talked about just a moment or two ago, which is corporatism. And industry concentration and with government aiding and abetting that where either by design or by default because the people in the government just don't understand AI. They've been duped into believing that the game really is about hyperscaling and some quixotic quest for artificial general intelligence that nobody really understands, you know, what that even what that means and that the concern is, well, you know, we could end up, you know, with these hyper, you know, hyper intelligent kind of capabilities that threaten humanity and so forth. And that's what you should be focused on and regulating when really the real, you know, the reality is behind the curtain they're scooping up everyone's intellectual property, you know, scraping the, scraping the world for everything and you know, using it to train models and nobody's looking, right? And it's certainly not being regulated when maybe that's what the government ought to be focused on and that furthermore, you can harness AI for specific purposes, to do specific useful tasks, to be agentic in a variety of ways that requires far, far, far, far less energy than this sort of wild quest for hyperscaling to achieve artificial general intelligence. My own view is that that's just a way for a few players like OpenAI and a few others to winnow down the field to the point where you have only a couple, three players and they're the ones that rake in all the money.

[Interviewer]

It's created a stock market boom, it's keeping the stock market afloat. At this moment I'm talking about shareholder capitalism.

[Stuart Hart]

Totally, totally. And it probably is a bubble because I just can't imagine that that's where we end up. Right? I mean already just for me, in terms of how I use things, do I use generative AI? I do, you know, but actually find, you know, there are these players that have created, you know, suites of useful products that harness AI. You know, like there's little company in Detroit that I learned about called Boodlebox, which has under its umbrella you can, you use dumbed down versions of all of the generative AIs, you know, whether it's Claude or you know, what, whatever, you know, chatgpt, all of them. But they don't share that data from their users back with those players, so the data remains private. And they've developed suites of really focused bots. Right? That, so there's a whole suite of applications for professors that use AI, you know, to do specific useful things, you know, including syllabus, renewal, readings, updates, cases, updates, grading. That's really useful, right? And it, and that takes a fraction Small, tiny fraction of the energy to drive those kind of applications of AI compared to this hyperscaling craze.

[Interviewer]

Right. I think that that's recognized even by the people at Nvidia and other companies that they have an interest in it not being right.

[Stuart Hart]

Right. Because what an amazing, you know, kind of growth and profit opportunity for the chip makers.

[Interviewer]

So let me get on with two things, the last two things, because I think we don't want to burden the listeners. We could go on for a couple hours. One is business education. So what are your thoughts about reforming business schools at this point in time and how far have they come? I recall when I first started doing work on business in the natural environment, which was the year, I mean, really from the beginning of my career, but I seriously started doing it in 1988. It was so marginalized. We can all talk about that history. We were cast as idiots in our respective sense schools. And now if you go to an organization like the Strategic Management Society meetings, I think in 40% of the papers are about sustainability. I don't know if that will continue. I think, well, 60% this year will probably are about AI. But. So where do you think business schools are at?

[Stuart Hart]

Yeah, I mean, I think you're right that certainly over the last 35 plus years, you know, I joined the faculty at, at Michigan as an assistant professor of strategy in 1985.

[Interviewer]

I started about the same time, a little before you to be, you know, my first position was 1977 actually. But then I worked outside, I worked outside of academia for five years. So my position at Minnesota started in 1984. So we're about to same.

[Stuart Hart]

Yeah. And I was, I was at the Institute for Social Research before I went on the business school track, you know, as a, as a, you know, assistant research scientist. Because that was really where the action was. Right. It wasn't in business schools intellectually back then. Oh, in the 80s, business schools were sort of empty vessels intellectually. But then they went on the hiring binge. Right. In the, in the 80s, hiring PhD trained faculty like us.

[Interviewer]

Right, exactly.

[Stuart Hart]

And that's when the business schools got taken over by shareholder primacy. Right. That I, you know, I look back now and realize that I witnessed that. Right. That, that they were not always like that. There were lots of, there were older faculty who had been there, you know, back, you know, in the 60s and 70s when it was. They were different places and that. But most of them got retired or drummed out, you know, and you know, Michigan had a business history group gone, you know, that, that sort of, you know, that kind of stuff just went by the wayside and it got taken over, you know, by those trained in economics and particularly financial economics. That became the dominant culture in business schools. And that's the way it is to this day. So I, I think what's happened is, as you say, it's no longer, you know, we're no, no longer viewed like we were like in 1990. But what's happened is that maybe the intellectual agenda, right? So from a research point of view, we had like as you know, the creation of organizations in the natural environment interest group at the Academy of Management and that sort of legitimized academic pursuits with this focus. And that's happened in other areas. It's happened in marketing, it's happened in operations, it's happened in accounting, and it's now starting to happen even in finance, like the area of climate and nature. Finance now has become a bit of a hot academic topic. So I think academically there's more of that work and that could be beneficial in the long run in terms of faculty members then feeling as though they have the competence to talk about this in the classroom. But I think that's what's really held it back. Because the truth is the core curriculum, MBA curriculum in most business schools hasn't really changed since the 80s.

[Interviewer]

I don't think so. I don't think I'm really teaching things that are that different.

[Stuart Hart]

And that's the problem. That's the problem. And I think at least part of the reason for that is none of the incentives would point toward faculty members investing much energy in doing that because the rewards are in a journal, publishing, still not teaching. Right? And especially core teaching, where you can go and teach two or three sections of the same course, kind of fill your load. And the path of least resistance is just to take the, in the teaching group, take the same teaching notes and everything that have been used from faculty before that taught the core. It's already prepped for you. So maybe you need to put in one newer reading or change a case here. And there's. But by and large you're just teaching. Just that whole thing marches on like it's the same messaging as it was in the 80s. And so that the people, the students walk away in terms of the core taking away the same worldview as they did in the 80s and 90s. And that's the problem, you know, all the sustainability stuff, or most of it is packed into second year electives.

[Interviewer]

Many students will not end up taking much of It, I think the students are much more receptive to it. I found cases, yeah, they were resistant. Now it's just a part of the environment that they exist in and they bring it up. Oftentimes they want us more of it.

[Stuart Hart]

Right. But I think the problem is that the faculty that teach the core, I think the problem now is that faculty don't feel competent to teach it and that faculty don't want to go into a classroom feeling as though they're not the experts in the room. And I get that. I get that.

[Interviewer]

Yeah. But many of them, I think, are publishing in these areas and there has.

[Stuart Hart]

Been help that could help, but it's all academic. That's the thing. Right.

[Interviewer]

It's academic. But there's been a huge amount of curriculum material that's been created since then. Huge amounts. The number of cases, the number of books, and many of them went. A lot of it is really very good. Including your stuff and my stuff.

[Stuart Hart]

Yeah, we've done our share. Yeah, no, you're right. But I think that. But that still hasn't happened in the core. The core curriculum in most business schools is still fundamentally the same as it was in the 80s. And that's a huge problem because the vast majority of those students, like we're saying, leave with that worldview and then they end up. Because the business schools basically, for the last 30 years had placed people in high paying jobs in finance and consulting, by and large, and was tech for a while. So they're not really business schools, they're finance and consulting schools. And that they, them, those institutions are the ones that pretty much perpetuate shareholder primacy.

[Interviewer]

Right. They're the choice jobs and those. And they're going into, or even going into private equity. I think today, I bet you a lot of students at the top business schools are aiming for that. Yes.

[Stuart Hart]

As long as that's the case, we just keep perpetuating the status quo. And so the business schools become a real problem because there's so much inertia and they continue to churn out hundreds of thousands of graduates, if you include undergraduates, millions every year. And they leave with that worldview and end up in exactly the kinds of places that progress. You know, consulting firms and financial institutions are the ones that hold the flame of shareholder primacy.

[Interviewer]

I mean, the business schools themselves now are facing a lot of turbulence for a lot of reasons. We can't go into that. That would be a whole lot.

[Stuart Hart]

That's why I think that the same thing is true in business schools, that it's Inevitable that business schools change for the same reasons that we talk about society and the world. Because as you say, the, the jig is up. Right. And I think most deans know that the way it's been for the last 30 years, the model of paying faculty ridiculous salaries and guaranteeing summer support to write academic journal articles that nobody reads have no impact, is not sustainable. And then charging students high tuition to take courses that were designed in the 80s that then land them in jobs that perpetuate the status quo but allows them to pay back their debt. That whole model, I think is coming apart because one, the jobs aren't there as much as they were. Two, the students are demanding change much as anything. And that the demand for the traditional two year MBA is falling off.

[Interviewer]

Yes, exactly. I think that's a huge. And even the input, the students themselves, the number of students, especially if we exclude people that weren't born in the United States, the demographic crisis is going to affect us in a major way. So this is the last thing. I try to keep my podcast within an hour, but when it happens, that's fine. But what are you working on now? What do you think of. We've both been around for a long time, so we don't have an infinite horizon as we once had. So we.

[Stuart Hart]

Well, we thought we had.

[Interviewer]

Yeah, we thought we had. So. Yeah. And what do you think is really important to do not only by yourself, but by others at this point in time?

[Stuart Hart]

So in some ways I think I'm trying to make good on what I talked about in the book in terms of where are the leverage points for realizing the kind of systemic shifts, systemic transformations that we need. And those are business education. So I'm continuing. You know, there's the work at Vermont, right, that, that. And I think that that, that was an important, at least demonstration that you can design, develop and grow and launch and grow an accredited, AACSB accredited MBA program that has an. It's called the Sustainable Innovation mba. It's from start to finish, focused on the knowledge skills, capability, toolkit, leaders, you know, kind of leadership skills, worldview of harnessing business for a sustainable world. That is the focus of the MBA program. And I think more and more, as we were saying, more and more deans, especially in what we call second tier business schools in the U.S. but elsewhere, know that things are broken. In some cases it's immediate because it's existential. They're shutting down MBA programs for lack of demand. Business schools are closing. And so a lot of these deans know that it's change or die time. Right. And they're motivated. So more. And you see more and more of that kind of innovation happening, as Clay Christensen would have predicted. You know, that's why it could happen in a place like Vermont at first, where you throw out the old MBA program and start over again, which is what we did versus, you know, the top 20 schools are. Want to do that. But so they. They continue to try to do incremental change to the existing program. But. But eventually I think we're. We're see that sort of wholesale change because the whole model just no longer works. So that's one of the things I'm working on, is with some of the initiatives that are trying to accelerate that, like the Globally Responsible Leadership Initiative, like the One Planet Education Network. And now the Club of Rome has an initiative focused on business education transformation. So I'm pretty heavily engaged in that. And that's one thing. And I can describe the second.

[Interviewer]

Okay, yeah, go ahead, please.

[Stuart Hart]

Yeah. And the second one has to do with this notion of there's the chapter of the book, as you know, about redefining value.

[Interviewer]

I wanted to get to that, actually.

[Stuart Hart]

So one area that I think we've neglected in terms of possible leverage to demonstrate how to do that is, and we talked about this a little bit earlier, that so much of our attention in the sustainable business area has been as we were discussing big, large, publicly held, global companies and trying to change them on the one hand or the other extreme, you know, kind of tiny B corps and impact investing, you know, to kind of create different kind of corporate structure with a different purpose from the beginning. And I don't mean to, you know, to speak. I don't mean to speak. Ilo. I think that's great. I think all that stuff's great. It's just that it doesn't move the needle. And so the question is, where's the leverage to move the needle and move it fairly fast? Because that's what has to happen for that. You know, I gotten involved over the last couple of years with a business leader, old business leader, friend of mine, business founder and leader, a guy named Fred Keller, who was the founder and was CEO for a long time of a company called Cascade Engineering in Western Michigan in Grand Rapids, who, as we were saying earlier, privately held company, it's a manufacturing company, but he's always run his company with the kinds of values we're talking about. He was one of the first people to figure out how to effectively hire the formerly incarcerated and incorporate a welfare career program. In his company has been hugely successful and good for the company too, and he has the data to prove it. He's always focused on environmental sustainability in technology and product development as well. That's why he's always run the company and it's been very successful for 50 years. And I had his daughter as an MBA student at Cornell and she's now the CEO. So it's a family company. Anyway, so Fred and I have started this, this initiative called Internality which is play on externality. Obviously that we need to fundamentally rethink the whole notion of externalities because they just can't exist anymore. As business leaders, we have to think of the whole world and where are the most likely places where that can happen. And because, you know, it's Fred and that, you know, our hypothesis is there are a lot of Fred Kellers out there and they don't know each other. You know, we paid so much attention to things like, you know, big corporations, the World Business Council for Sustainable Development of the World Economic Forum or you know, B Lab and Global Impact Investing Network with the tiny end of the spectrum. But nobody's paying attention to what is the guts of every economy, which are the privately held mid tier companies. Factoid in the U.S. of those corporations that earn 100 million or more in revenue, 90% of them are privately held, not private equity owned, privately held and they create 80% of the new jobs. So that's the guts of the economy. But yet we've not really paid much attention to how to harness that, right. That not all of those companies think that leaders think that way. But let's say 10% of them think like Fred Keller. That's a lot of companies. And we can organize them, number one. And we can also engage them in thinking creatively about how to make systemic shifts just like Fred has and to be able to grow. And so we're organizing these things called Pivot Labs to develop more systemic innovations for shifting the way business runs and then and creating an online platform to share those innovations and then looking to build a community of those leaders.

[Interviewer]

I mean, I think paying attention to the privately held companies is very, very important. As we spoke about earlier, I think they're probably bigger extremes on both sides because there is more freedom for them to operate. You're going to probably find some of the worst actors possible, some of the best actors in privately held companies.

[Stuart Hart]

But if we're able to identify, you know, really aim toward the best actors, right, and build a community of them and if they're able to generate innovative ideas then. And if they get involved in the, in the policy process, they can have impact, right? In other words, they. Our. Our thesis is that if you get, you get a dozen CEOs of companies going to state capitals in Washington, they're going to end up being more persuasive than a bunch of paid lobbyists.

[Interviewer]

And we need that. We need to change governments. Governments are a big part of this. So this has been great. We could keep going. I know this could last all afternoon, but we have to bring it to a close. And so that was Stuart Hart, author.

[Alfred Marcus]

Of Beyond Shareholder Remaking Capitalism for a Sustainable Future. This isn't just a book about reforming business. It's a book about rethinking capitalism itself. Shifting from an extractive shareholder first model towards a regenerative, purpose driven system. Stewart calls this our third capitalist reformation. A project as ambitious as it is urgent.

[Interviewer]

So I'm Alfred Marcus for the New Books Network.

[Alfred Marcus]

Thank you for listening and I hope you'll join us again soon for another conversation on the idea shaping strategy, ethics and our collective future.