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 An Interview with Alex Edmans

An Interview with Alex Edmans

by Alex Edmans

Professor of Finance at London Business School.

Jun 07, 2023

Compendium

Q: Can we start by talking about your views on the importance of purpose for companies?

A: While I’m a strong advocate for purpose, it’s important to acknowledge that purpose is not a panacea, nor is it a 180-degree turn from traditional approaches to business. Businesses can both do good, and do well, by focusing exclusively on profits and nothing else. This might seem like sacrilege in 2023, when it’s almost a requirement to bash Milton Friedman to be accepted into polite society. But Friedman’s argument is much more nuanced than it’s often portrayed. He argued that “the social responsibility of business is to increase its profits” because the only way that a company can increase its profits, at least in the long term, is if it serves society. It has to provide customers with high-quality products, or they’ll stop buying; pay its workers fairly and treat them with dignity and respect, or they’ll leave or underperform; and be a responsible steward of the environment, otherwise customers, employees, and investors will walk away. 

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