Is There A Place For Morals In Startups?

Classical free-market economic theory tells us that the only job of a company is to generate profits for its shareholders, and that market forces will ensure that this goal results in value generated for society.

On one hand, this view can easily be criticized as crude and reductionist – the greedy corporate executive pursuing profits at all cost is a cliché for a reason.

On the other, it’s hard to argue against this notion because the free market is quite clearly one of the main engines of the age of material prosperity we are living in.

A more recent wave of business and economic thought argues that companies are responsible for the impact of their actions on all of their stakeholders, giving birth to the notion of corporate social responsibility. Combined with the fact that technology is rapidly changing our day-to-day lives, it’s not a surprise that a lot of young entrepreneurs are motivated not only by monetary gain but by the goal to change the world for the better with the companies they are founding.

“Don’t be evil. We believe strongly that in the long term, we will be better served—as shareholders and in all other ways—by a company that does good things for the world even if we forgo some short term gains.” – An Owner’s Manual for Google’s Shareholders

Either side of the argument, however, usually gives you a black or white answer, which might not be reflective of reality.

1. Morals In Companies Are An Inevitability

Even if you wholeheartedly believe that the only job of a business is to make money, this is not that easy to put into practice.

Organizations are nothing more than a group of people working toward a common goal. Since the actions of each person are motivated by their values, the actions of the company as a whole emerge from the values of the people involved in the business.

The fact that values and morals are an inevitable part of a business doesn’t mean that they don’t have to be managed. It’s quite easy to see why putting greater importance on social activism than on running the actual business of the company can lead to bad outcomes in the long run.

This is the reason why building a productive startup culture is one of the most important steps for building a successful startup.

2. Failing To Manage Cultural Conflict In Companies Can Be Deadly

The inevitability of morals in an organization suggests that an internal clash of values is similarly unavoidable.

For example, a period of sharp political divide in any society (e.g. highly contested elections) would have a direct effect on the organizations which operate within this society. If the people working in the company have an irreconcilably different vision of the future, this would make it very hard to choose a clear path forward and to continue internal cooperation.

The attempts of companies like Coinbase and Basecamp to remove the political discussion from the workspace is an attempt to fight the destructive effects of such conflicts. And while the two companies lost a lot of employees because of their stance against political activism in the workspace, this might have been the right move in the long run if internal cultural friction was getting out of hand.

Because of this, if you are managing a startup, it makes a lot of sense to be as transparent as possible with the values that are motivating you and the vision of the future for which you are fighting. This way, people who hold fundamentally different values simply won’t get involved in your business, which can help you avoid major internal cultural conflicts in the long run.

In summary, values and morals will be an inevitable part of your business. Because of this:

1. Transparently communicate your values and vision for the future to attract like-minded people.
2. Actively try to build a productive culture and if necessary – manage internal cultural conflicts.