𝗪𝗵𝗮𝘁 𝗪𝗼𝘂𝗹𝗱 𝗠𝗶𝗹𝘁𝗼𝗻 𝗙𝗿𝗶𝗲𝗱𝗺𝗮𝗻 𝗧𝗵𝗶𝗻𝗸?

As a young reporter for Bloomberg News, I tried to interview every prominent economist to divine how the Federal Reserve might change interest rates. No get was bigger than Milton Friedman. 

Winner of the Nobel Prize for Economics in 1976, Friedman has loomed large over policy issues we're still debating since he emerged as a fierce defender of free markets 75 years ago. Most notably, he was the loudest voice preaching that CEOs have one overriding purpose – to increase profit.

He was also notoriously frugal. 

To get an interview, I would call his office at Hoover Institution, Stanford University and negotiate with his very patient assistant. She would instruct me to expect a call at a specific time and day. And at exactly that moment, my desk phone would ring and I would chuckle upon hearing these words:

“Will you accept a collect call from Milton Friedman?”

In Friedman’s view, his time was valuable, and because I wanted it, I should pay. And I (Bloomberg) did, happily. 

I’ve been thinking a lot lately about Friedman, who died in 2006. He would be amused by the kabuki dance that is today’s corporate America.

In 2019, for example, Business Roundtable publicly redefined corporate purpose, moving away, in their words, from "shareholder primacy” by embracing "a commitment to all stakeholders.” Yet many companies have suddenly become shy about publicizing this approach, given the current mood of the country. This must be frustrating to the stakeholders they vowed to serve just six years ago.

Friedman would have found this situation wonderfully ironic.

In a 1970 New York Times article, he famously argued that the CEO's job “is to conduct the business in accordance with [the owners’] desires, which generally will be to make as much money as possible while conforming to the basic rules of the society, both those embodied in law and those embodied in ethical custom.”

That phrase – 𝘦𝘮𝘣𝘰𝘥𝘪𝘦𝘥 𝘪𝘯 𝘦𝘵𝘩𝘪𝘤𝘢𝘭 𝘤𝘶𝘴𝘵𝘰𝘮 – bridges the Friedman of 1970 with today’s reality. 

While exhorting CEOs to prioritize profit, Friedman doesn’t prescribe 𝘩𝘰𝘸 they should do so. And if ethical customs change over time such that certain behaviors boost profit, the entirely rational Friedman would have argued that CEOs should follow those customs that make the most money. Exhibit A: Costco Wholesale, whose commitment to inclusion is helping steal share from vacillating competitors. 

It’s easy to dismiss Friedman as caring only about profit to the exclusion of purpose. I say that gets him wrong. He understood that only profitable companies benefit society on a sustained basis, through the jobs they create and the taxes they pay. 

I had a front-row seat to Eastman Kodak Company’s bankruptcy. We slashed the philanthropy budget long before filing Chapter 11. As Friedman would no doubt agree, broke companies can't fix what's broken in society.