Grow the Pie | Alex Edmans

Summary of: Grow the Pie: How Great Companies Deliver Both Purpose and Profit
By: Alex Edmans

Introduction

Dive into the world of ‘Pieconomics’ with the riveting book ‘Grow the Pie: How Great Companies Deliver Both Purpose and Profit’ by Alex Edmans. Uncover how successful businesses increase societal value while boosting profits. The book contrasts the actions of companies like Merck, known for expanding the pie, with the more infamous Turing Pharmaceuticals, which adopted a pie-splitting mentality. This summary will help you understand the necessity for businesses to fundamentally change their approach, prioritizing value-driven operations over empty charitable acts, and exploring the concepts of purpose, stewardship, and value creation.

Pie Growers vs. Pie Splitters

The book discusses the concept of businesses as economic pies and their responsibilities towards society. The author compares the actions of Martin Shkreli, the former CEO of Turing Pharmaceuticals, who raised the price of Daraprimby 5,500%, and Roy Vagelos, the former CEO of Merck, who established the Mectizan Donation Program to provide free medication for river blindness patients. Shkreli’s behavior shows a “pie-splitting” mentality, where he wants to maximize profits for investors at the expense of other stakeholders. In contrast, Vagelos is a “pie grower,” who sought to increase societal value and profits. The book emphasizes the importance of businesses acting as “pie growers” to offer benefits for the public as well as investors and stakeholders.

Pieconomics: Creating Social Value

Pieconomics is an innovative approach to business that centers on creating value for society. The book highlights the importance of assessing whether a company’s profitability is built on ignoring the environment and whether its offerings command higher prices because they dominate the market. According to the author, Pieconomics has an edge over corporate social responsibility (CSR) since it is not just a separate donation function, and it focuses on societal change. The book challenges business leaders to have a shift in attitude towards social value creation and highlights that any business can increase the size of the pie by pursuing excellence in their operations. The book urges business leaders to aspire to benefit society and carve the social pie differently, which may require significant financial reserves. Overall, Pieconomics offers a compelling alternative to CSR and provides a blueprint for businesses to create profits while creating value for society.

Expanding the Pie

Successful companies need to focus on purpose and growth to avoid failure. Inaction and complacency can lead to a downfall. Kodak’s downfall due to its executives’ unwillingness to expand the pie and embrace change, highlights the importance of taking risks and growth for companies to thrive. Companies need to understand that CSR goes beyond refraining from causing harm. Purpose unifies an enterprise and motivates it to go beyond contractual demands.

Purpose and Profit

A corporation’s purpose indicates how it intends to contribute to its community. Pieconomics suggests a company can profit without exploiting society. High profits are often the result of expanding the pie. Amazon’s decision to pull out of its plan to build a new headquarters in Queens highlights the importance of balancing purpose and profit. By opposing Amazon’s proposal, leaders impeded the expansion of the pie and harmed the community.

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