I like Fast Company magazine. I find it a bit shallow, but it is useful to get a sense of current trends in business. The article in the url below is a good example – it is a response to the sudden increase in children who now need to be schooled at home:
"In the midst of COVID-19, schools across the country have closed their doors, and a majority of the 50 million K-12 students are now learning from home. For many, that means logging on to laptops to teleconference teachers who take digital attendance, then accessing lessons and homework to do on their own."
One of the main challenges this creates, of course, is that many of those children do not have access to the hardware (or internet connection) they need to study properly:
"The crisis will be the great stress test of digital learning, but one failure is already known: Roughly one in five teens reported having difficulty doing their homework because of a lack of access to computers and the internet. Chicago Public School principals are begging for hardware for students, while hundreds of thousands of children in NYC are still without laptops as teaching goes virtual."
Given this problem, the author has a potential solution:
"Ten million students need computers and internet access now. So who should provide it? Three of the most valuable companies in the world, each with more than $100 billion in cash for a combined pile of over $400 billion to weather the storm. Apple, Google (Alphabet), and Microsoft. Together, they could buy every vulnerable student in America a $1,000 laptop. Actually, they could buy every vulnerable student 40 laptops, or every K-12 student eight laptops, or every single American a laptop and then some. … At the bare minimum, each company could chip in $3.3 billion dollars to outfit the 10 million low-income students with a laptop or a tablet with a keyboard. Better still, these devices would be bundled with free LTE internet access."
And, from the author's perspective, this was not a request, but a demand:
"… the big three have enough cash on hand to outfit every student in America with respectable technology to learn remotely, without depleting their generous cash reserves. And let me be clear: They should. Each of these companies is individually wealthy enough to tackle this challenge entirely on their own, or they could team up. As we face this pandemic, the three greatest American technology companies should be paying back their profits, not to stockholders on dividends, but to the consumers who stacked their profits in the first place."
Of course, these are complicated issues and there are other nuances I could mention, but I had three responses to this core idea that came immediately to mind:
First, the way the article is written suggests that the money is just sitting around or would otherwise be wasted if the companies did not 'donate' it to all these kids. Of course, that is not the case, and Apple and Google are some of the largest companies investing in R&D (as well as distributing their profits to many other stakeholders in different ways). So the money is still circulating and adding value, even if the companies do not do what the author suggests.
Second, the key question the article raises is, which option creates the most value (and for whom)? Should the companies donate the money to help the kids or should they reinvest it in their businesses? This is the essential question from a societal perspective. Companies are not the government and do not run the educational system. That is the responsibility of the government and you could easily argue that the government could/should buy the laptops for every kid instead of buying a few nuclear weapons (not recommending that, just saying the opportunity cost is high). The 'responsibility' of the firm is to create value for its broad set of stakeholders. If a firm has an extra $1 to spare, therefore, they should invest it in the way that creates the most value for the most stakeholders. One reason for the firms' collective success (which the author seems to suggest is a gift from society), is that they already create so much value. So, you could argue that the largest benefit gained from an extra $1 would be to reinvest it in their core business – making their products and services even better than they already are.
This leads me to my third point: It is no doubt that the companies would create value by making this donation, but what would their 'return' be? If a fraction of those kids or their parents became lifelong fans (and customers) or future employees, maybe that would be worthwhile. The danger, from the companies' perspective however, is that 'society' would simply pocket the gift and give the companies nothing in return. This would be a very expensive way to get a headline in the papers. I think a potential 'return' on the investment could be measured in many ways (it is not simply a matter of a direct exchange of money). Customer loyalty, for example, is an 'investment' made by the customer in the company, and the company values it and returns it to the customers in terms of express delivery, better service, etc. – in other words, capitalism at its best! :-)
There are many new challenges we are all facing as a result of the current pandemic and associated economic dislocation. As ever, for-profit firms are often the best answer to these challenges, but we do not need to throw out economic principles in order to access those solutions.
Take care
David
David Chandler
© Sage Publications, 2020
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Apple, Google, and Microsoft are failing U.S. students during the COVID-19 crisis
By Mark Wilson
March 30, 2020
Fast Company Magazine
