When a man overseeing $5.7 trillion speaks, the global business community tends to listen. So when BlackRock founder Larry Fink, head of the world’s largest asset management company, posted a letter to CEOs demanding greater attention to social impact, it sent shockwaves through corporations around the globe. In the letter, titled “A Sense of Purpose,” Fink wrote,
We … see many governments failing to prepare for the future, on issues ranging from retirement and infrastructure to automation and worker retraining. As a result, society increasingly is turning to the private sector and asking that companies respond to broader societal challenges. … Society is demanding that companies, both public and private, serve a social purpose. … Companies must benefit all of their stakeholders, including shareholders, employees, customers, and the communities in which they operate.
Fink’s letter dropped just days before the 2018 World Economic Forum, an annual gathering of the global financial elite in Davos, Switzerland. I was attending the forum and watched as CEOs anxiously discussed the stern warning from a man whose firm controlled substantial ownership stakes in their companies. Many publicly professed sympathy for Fink’s message but privately declared his emphasis on broader social welfare to be anathema to the logic of private enterprise.
Looked at narrowly enough, they’re right: publicly traded companies are in it to win it, bound by fiduciary duties to maximize profits. But in the age of AI, this cold logic of dollars and cents simply can’t hold. Blindly pursuing profits without any thought to social impact won’t just be morally dubious; it will be downright dangerous.
Fink referenced automation and job retraining multiple times in his letter. As an investor with interests spanning the full breadth of the global economy, he sees that dealing with AI-induced displacement is not something that can be left entirely up to free markets. Instead, it is imperative that we reimagine and reinvigorate corporate social responsibility, impact investing, and social entrepreneurship.
In the past, these were the kinds of things that businesspeople merely dabbled in when they had time and money to spare. Sure, they think, why not throw some money into a microfinance startup or buy some corporate carbon offsets so we can put out a happy press release touting it. But in the age of AI, we will need to seriously deepen our commitment to—and broaden our definition of—these activities. Whereas these have previously focused on feel-good philanthropic issues like environmental protection and poverty alleviation, social impact in the age of AI must also take on a new dimension: the creation of large numbers of service jobs for displaced workers.
about the author
Kai-Fu Lee is the chairman and CEO of Sinovation Ventures, an investment firm focusing on developing the next generation of Chinese high-tech companies. Before founding Sinovation in 2009, Lee was the president of Google China. Previously he held executive positions at Microsoft, SGI, and Apple.
As a venture-capital investor, I see a particularly strong role for a new kind of impact investing. I foresee a venture ecosystem emerging that views the creation of humanistic service-sector jobs as a good in and of itself. It will steer money into human-focused service projects that can scale up and hire large numbers of people: lactation consultants for postnatal care, trained coaches for youth sports, gatherers of family oral histories, nature guides at national parks, or conversation partners for the elderly. Jobs like these can be meaningful on both a societal and personal level, and many of them have the potential to generate real revenue—just not the 10,000 percent returns that come from investing in a unicorn technology startup.
Kick-starting this ecosystem will require a shift in mentality for VCs who participate. The very idea of venture capital has been built around high risks and exponential returns. When an investor puts money into ten startups, they know full well that nine of them most likely will fail. But if that one success story turns into a billion-dollar company, the exponential returns on that one investment make the fund a huge success. Driving those exponential returns are the unique economics of the internet. Digital products can be scaled up infinitely with near-zero marginal costs, meaning the most successful companies achieve astronomical profits.
Service-focused impact investing, however, will need to be different. It will need to accept linear returns when coupled with meaningful job creation. That’s because human-driven service jobs simply cannot achieve these exponential returns on investment. When someone builds a great company around human care work, they cannot digitally replicate these services and blast them out across the globe. Instead, the business must be built piece by piece, worker by worker. The truth is, traditional VCs wouldn’t bother with these kinds of linear companies, but these companies will be a key pillar in building an AI economy that creates new jobs and fosters human connections.
There will of course be failures, and returns will never match pure technology VC funds. But that should be fine with those involved. The ecosystem will likely be staffed by older VC executives who are looking to make a difference, or possibly by younger VC types who are taking a “sabbatical” or doing “pro bono” work. They will bring along their keen instincts for picking entrepreneurs and building companies, and will put them to work on these linear service companies. The money behind the funds will likely come from governments looking to efficiently generate new jobs, as well as companies doing corporate social responsibility.
Together, these players will create a unique ecosystem that is much more jobs-focused than pure philanthropy, much more impact-focused than pure venture capital. If we can pull together these different strands of socially conscious business, I believe we’ll be able to weave a new kind of employment safety net, all while building communities that foster love and compassion.
Excerpted from AI Superpowers: China, Silicon Valley, and the New World Order by Kai-Fu Lee. Copyright © 2018 by Kai-Fu Lee. Used by permission of Houghton Mifflin Harcourt. All rights reserved.