Grow the Pie

by Alex Edmans

A Financial Times Book of the Year 2020! Should companies be run for profit or purpose? In this ground-breaking book, acclaimed finance professor and TED speaker Alex Edmans shows it's not an either-or choice. Drawing from real-life examples spanning industries and countries, Edmans demonstrates that purpose-driven businesses are consistently more successful in the long-term. But a purposeful company must navigate difficult trade-offs and take tough decisions. Edmans provides a roadmap for company leaders to put purpose into practice, and overcome the hurdles that hold many back. He explains how investors can discern which companies are truly purposeful and how to engage with them to unleash value for both shareholders and society. And he highlights the role that citizens can play in reshaping business to improve our world. This edition has been thoroughly updated to include the pandemic, the latest research, and new insights on how to make purpose a reality.

Genres: Business, Nonfiction, Economics, Finance, Sustainability, Buisness, Leadership

540 pages, Paperback

Published November 11, 2021

Reviews

[Mark Kissack · Rating 5 out of 5]

Alex Edmans' "Grow The Pie" is a timely reminder that purpose driven businesses are not sacrificing profit, but are finding ways to increase their profits by innovative business models. I thoroughly recommend this book for those who want to know more about purpose-driven businesses.

[Megan · Rating 5 out of 5]

Alex Edmans is Professor of Finance at London Business School. I first came across him via the Gresham College lectures on leadership he delivered last year. He is an exceptionally researched and balanced author in the field of business so I was excited to read his first book Grow the Pie.

Grow the Pie is for anyone who believes, wants to believe or wants to be challenged to believe that the best companies can deliver both value to society (via a clear socially positive purpose) and profit.

The Pie represents the value an enterprise generates for society. The book then primarily discusses those that believe that the pie is fixed (if you benefit one stakeholder it must be to the detriment of another) or that the pie can grow (all stakeholders can benefit if you manage your company properly).

What ensues is what feels like Alex's combined career to date worth of research and study. A magnum opus. And it's a good one.

Alex writes like Cordelia Fine, one of my favourite researchers in gender; this means he presents all the primary arguments around a position, before presenting where his argument fits, and then backs it up with evidence that you can check for yourself. I love how he says "evidence is not proof". That proof is universal, while evidence shows that something may work in a specific situation or geography and can't be held to be universal. He is prepared to be challenged, and challenges his own thinking.

Alex challenges the mainstream thinking of both the right and the left, making simple polarisation and populism seem ridiculous. He sees the world as complex with no simple answers, business is hard work, but it is doable. And his work on executive pay is outstanding.

I felt challenged and skeptical many times. I've worked in operational businesses for over 30 years and am now a leadership and team effectiveness coach, and so many of the people I work with may intellectually agree with him but fail to implement. This failure to implement is what drives me every day to do what I do. There's so much to do.

I was reminded of my favourite children's book "The Three Little Wolves and the Big Bad Pig" in which the little wolves (the enterprises) build bigger and bigger defences against the Big Bad Pig (the investors, other stakeholders) until they realise that it is easier and more profitable to their wellbeing to set down their defences, build a house of flowers and invite the Pig to stay, building a lifelong friendship.

Ultimately this book provides a blueprint for excellent purpose driven and profit filled leadership. I'd love to see this as the primary culture in business. I think we have a LONG way to go.

A great book for anyone in business, especially those starting a business from scratch. In this book is a great manifesto to ensure you start on the right path.

This review is for the Audiobook version narrated by Alex Edmans. I'm not normally an audiobook fan however this was a great way to listen as the book is full of quite dense information made easier by being narrated. Much like his lectures. I have since bought the Kindle version.

[Leonard Burger · Rating 5 out of 5]

Definitely believe any and all (aspiring) leaders in business should be reading this book. This together with some other books form a great body of knowledge of how private and public sectors should move forward to create a 'better' world for the many, one that is in-sync with the planet and it's people.

Go read it and get inspired :)

[Brendan McLean · Rating 5 out of 5]

Excellent book for readers both beginning to research this concept as well as advanced practitioners. Provides practical and tangible methods to identify good stewardship that can improve investment opportunities. It was an enjoyable, insightful, and easy read.

[Rishabh Sinha · Rating 5 out of 5]

Lucky enough to be lectured by Professor Edmans at LBS, and to have seen him speak at the launch for this book. His excitement and passion for the topic translates onto the page fantastically well, and the new approach to these important issues is brilliantly argued and makes for great reading

[Chris Jones · Rating 5 out of 5]

Purpose is a word banded about all over Linked-In with all sorts of meanings. The pandemic and global warming have accelerated the conversation to a point where there is a general consensus that things must change. What this leads to is a rolling bandwagon of slogans and best intentions to shift the corporate focus from profiteering to social engineering for benefit. The trouble with this type of bandwagon is that many companies jump on to tick the box that maintains marketing traction with their customers and protect their profits.

Grow The Pie is a excellent collection of empirical evidence that not only shows profit WILL FOLLOW social purpose, but through the exposition of the three principles of MULTIPLICATION, COMPARATIVE ADVANTAGE and MATERIALITY, Professor Edmans gives a methodology of how to allocate resources to maximum pie growing effect.

The book's presentation is exceptionally helpful, giving suggested focus readings for different types of readers. The 'In a Nutshell' sections at the end of each chapter are excellent, and if you did nothing apart from take an hour to read all 11 of them, you will have learned a great deal and got your money's worth from the book.

My focus for reading the book was the research conducted on how the companies listed on the 'Fortune Magazine 100 best companies to work for list' performed financially as a result of heavily investing socially in their staff. What you get from Edmans is a rigorous analysis of 28 years of data that took him 4 years to complete. He presents the data and the case for purpose with such strength that I have based a corporate training course on 'Purpose & Culture' on his research. Grow The Pie is an academic level study presented for everyone. Edmans blends his skill of economic research with his knowledge of the businesses and individuals that make up the corporate world. There are many stories of CEOs and companies that bring the pursuit of purpose to life and help us understand 'how great companies deliver both purpose and profit.'

If you are an ENTERPRISE, an INVESTOR or a CITIZEN Edmans gives specific advise on how you can effect the social direction that companies take. This is a book of great practical use and i would wholeheartedly recommend it to anyone who is interested in helping to influence the corporate world to better serve social community needs.

[David Steele]

I’m being naughty and shelving this one unfinished. So much great information to learn from and adapt, but the second half is not aimed at my level. I’ll shelve this one until I’ve learned more. I would highly recommend this book, but make it policy never to leave a star rating for anything I haven’t finished.
I absolutely love that this isn’t an anti-business or anti-profit book. It does an excellent job of explaining that successful and profitable companies are best placed to deliver social, economic and environmental value.

[Ryan Bourne · Rating 5 out of 5]

Grow The Pie navigates some of the most crucial corporate governance debates of our time with a focus on data, rather than dogma. A must read to challenge your preconceptions, whether you are someone who believes in the primacy of shareholder value, or else someone who downplays the social value of profit.

[Mustafa Olomi · Rating 3 out of 5]

A good book on stakeholder capitalism and understanding the mindset of successful companies. The main premise is to make business decisions that incrase social value, not just profit. Very much the enlightened business view, how companies like Google, Costco, etc operate. It dissuades looking at the pure cost-benefit analysis, but instead encourages making investments with long-term value for stakeholders, something that is pareto improving for most parties involved, i.e. what he calls growing the pie or (the more cringey) pieconomics.

Overall if you are an investor or work in the finance industry then I'd say this is an important book that will help you understand how the Davos finance crowd is thinking, or at least want to believe they are thinking. A well-researched book that uses leading research, mostly on large public companies, which I think makes it have selection and media bias. Either way, for business it makes the case for stakeholder capitalism, investor stewardship, corporate engagement, executive compensation, share buybacks, less regulation and more guiding frameworks to achieve sustainability, and encourages more companies to behave like the benevolent 100 best companies to work for list.

[Neil Krikul · Rating 5 out of 5]

When I saw how thick this book is, I thought it was gonna take me a while but not at all! It’s a real page turner and has made its way to my top book of the year.

Similar to Adam Grant, Give and Take, this book builds a case on how profit is a by-product of a purpose-driven company. And how doing CSR to tick the box simply isn’t enough, it’s about adopting the mentality as an organisation for the shared purpose, to create value for the pie, rather than taking it away.

This book is also backed up by many easy to understand evidences and analysis, making it really easy to follow.

Lastly, this book is exactly what all the organisation leaders need to read right now.

[Skye · Rating 4 out of 5]

Read this initially as a required reading for my sustainable finance course, but the message of Pieconomics and pie-growing mentality turns out to be quite solid and convincing imo. For sure changed my perspective on what businesses should shrive for, and how they should operate for the sake of social value.

[Maarten Smit · Rating 5 out of 5]

Complete and rather convincing argument about how business can create profit through pursuing purpose (ie, serving their stakeholders). While the individual company examples provided are appealing, I especially appreciate the author’s scientific rigor in approaching this debate.

[Rob · Rating 3 out of 5]

Fantastic first couple of chapters but the book could probably be half the length. I bought the book and also the digital version for the Covid update which was fascinating.

[Jung · Rating 5 out of 5]

In "Grow the Pie: How Great Companies Deliver Both Purpose and Profit," Alex Edmans explores the evolving role of businesses in society, advocating for a mindset shift towards long-term, inclusive growth. The book argues that companies can achieve sustainable success by prioritizing the well-being of all stakeholders—customers, employees, communities, and the environment—over short-term profit maximization. This "pie-growing" mentality emphasizes creating overall value rather than merely redistributing existing value, leading to better financial performance and societal benefits.

The author contrasts the pie-growing mentality with the pie-splitting mentality through real-world examples, such as the controversial actions of Martin Shkreli's Turing Pharmaceuticals, which prioritized investor returns over patient health. In contrast, Merck's decision under CEO Roy Vagelos to distribute ivermectin for free to combat river blindness illustrates how businesses can serve society while enhancing their reputation and long-term success. This highlights the potential for companies to integrate social responsibility into their core operations, innovate continuously, and prioritize long-term societal benefits alongside profits.

The book further discusses the importance of effective incentives, particularly in the context of executive compensation. Edmans emphasizes that incentives should promote long-term value creation rather than focus solely on high executive pay. For instance, Bart Becht's tenure as CEO of Reckitt Benckiser, despite controversies over his compensation, was marked by significant company growth and environmental initiatives. The author argues that CEO pay should be linked to long-term performance, with simple pay structures like restricted shares being more effective than complex bonuses.

Edmans also delves into the contentious issue of share buybacks. While often criticized for prioritizing short-term gains, buybacks can be a strategic tool when executed correctly, reallocating resources to more valuable areas and signaling confidence in a company's prospects. The book clarifies common misconceptions, arguing that buybacks do not necessarily come at the expense of wages or investments and can actually increase long-term stock returns and ownership concentration.

The concept of purpose-driven excellence is another key theme. The book highlights cases like Vodafone's M-Pesa service in Kenya, which provided vital financial services to remote communities and significantly improved livelihoods. Similarly, Unilever's global handwashing campaign demonstrates how even companies selling everyday products can contribute to societal well-being. Edmans stresses the need for companies to define and communicate their purpose clearly, using integrated reporting to provide a comprehensive view of their performance and commitment to social responsibility.

Finally, the book emphasizes the power of citizens in shaping business practices. Whether as investors, employees, customers, or policymakers, individuals can influence companies by choosing those that align with their values and advocating for responsible practices. The author encourages readers to engage with businesses and policymakers, highlighting the role of media and think tanks in shaping public opinion and holding companies accountable.

In summary, "Grow the Pie" argues that businesses can achieve sustainable success by adopting a pie-growing mentality that balances purpose and profit. This approach involves integrating social responsibility into core operations, aligning executive incentives with long-term goals, and using practices like share buybacks strategically. By empowering citizens to engage with businesses and influence their practices, a fairer and more sustainable economy can be built, demonstrating that everyone has a role in growing the pie and achieving lasting positive impact.

[Sarah Cupitt]

WIP -meh - By working together, individuals and businesses can build a fairer, more sustainable economy, demonstrating that everyone has a role in growing the pie and achieving lasting positive impact.

Notes:
- By prioritizing the well-being of all stakeholders – meaning customers, employees, communities, and the environment – businesses can achieve sustainable success that benefits everyone involved.
- pie-growing mentality – a philosophy where businesses strive to expand their overall value rather than merely redistributing existing value
- aligning business practices with broader societal goals can create a more equitable and prosperous future
- pie-splitting mentality, where businesses view value as a fixed pie to be divided. Shkreli’s strategy aimed at increasing investors’ share, even if it meant reducing the shares of other stakeholders such as patients and healthcare providers. This mentality often results in exploiting customers, workers, and suppliers to boost profits
- Consider Roy Vagelos, the former CEO of Merck, another pharmaceutical company. In the late 1970s, Merck discovered that ivermectin, a drug for livestock, could cure the parasitic disease known as river blindness in humans. Despite the high cost of distributing the drug to impoverished communities in Africa, Vagelos decided to give it away for free. Driven by a commitment to serve society, this decision saved millions of lives, enhanced Merck’s reputation, and attracted talent and investors, ultimately benefiting the company in the long run.
- Share buybacks occur when companies use spare cash to repurchase their own shares rather than investing in growth or increasing wages.

[Mir Shahzad · Rating 4 out of 5]

Summary:

Businesses can achieve sustainable success by adopting a pie-growing mentality, where the focus is on creating value for all stakeholders rather than just maximising profits for shareholders. This approach involves integrating social responsibility into core operations, aligning executive incentives with long-term goals, and strategically using practices like share buybacks to foster growth. Empowering citizens to engage with businesses and influence their practices is also crucial. By working together, individuals and businesses can build a fairer, more sustainable economy, demonstrating that everyone has a role in growing the pie and achieving lasting positive impact.

[Ithmam Hami · Rating 4 out of 5]

Not being a student of economics, I may not have grasped the entirety of the book the way I was supposed to. Yet, it was a fantastic read as I got to learn a lot from it - for instance, buybacks and their pros and cons.

The book is something to get immersed in. The unconventional idea of growing a pie is likened to broadening your horizon when it comes to promoting purpose-driven business - which was clever.

To the author, everyone is important in administering change in business practices. I just wish the book addressed the critical terms more fluidly so laymen and entrepreneurial enthusiasts like me could extract more out of it.

[Synthia Salomon · Rating 3 out of 5]

“Businesses can achieve sustainable success by adopting a pie-growing mentality, where the focus is on creating value for all stakeholders rather than just maximising profits for shareholders. This approach involves integrating social responsibility into core operations, aligning executive incentives with long-term goals, and strategically using practices like share buybacks to foster growth. Empowering citizens to engage with businesses and influence their practices is also crucial.

By working together, individuals and businesses can build a fairer, more sustainable economy, demonstrating that everyone has a role in growing the pie and achieving lasting positive impact.”

[Andreas Holmer · Rating 4 out of 5]

This book is incredibly well researched and the author takes great care to consider every fact from multiple points of view. Admirable; hence four stars. But the book is consequently on the long side and I found myself skimming chapters I found to be less relevant to me personally. But that worked well, I think, thanks in large part to the “In a nutshell” summary that caps each chapter. I read the book because I wanted to know what I can do as a founder to grow the pie. So I focused in on certain chapters (e.g., incentives, purpose) and browsed the rest (e.g., repurchase, stewardship). With any luck, I’ll have reason to revisit those chapters in the not too distant future.

[Natalía Reynisdóttir Vilche · Rating 3 out of 5]

Myndi einblína á ákveðna kafla sem er viðeigandi fyrir þig. Ég var hrifnust af “Part IV: The Bigger Picture”, sérstaklega kafla 11, hann var ágætur en innihélt ekkert groundbreaking. Setti bara margt varðandi grósku hugarfar ( “growth mindset” ) og fleira til að huga að tilgangi og gildum á starfsvettvangi í samhengi. Zone-aði út fyrir allt sem viðkom stjórnendum fyrirtækja. Kaflar 1,3,4,8,10,11 eiga víst að höfða mest til hinum almenna borgara skv höfundi. Fannst gaman af bakgrunni höfundar.

[Fernando Barriga · Rating 4 out of 5]

A thoughtful and timely exploration of the purpose-versus-profit debate. Edmans makes a persuasive case that enduring success and societal impact not only coexist, but reinforce one another. Clear-sighted and grounded in reality, the book distinguishes itself through depth, relevance, and nuance. Essential reading for leaders, investors, and all who care about the future of business.

[Ben King · Rating 3 out of 5]

I read about half of this as the other half wasn't applicable to me yet - so the 3 star rating is purely a placeholder

This book is very well researched and I like how the author presents his arguments as very complex and nuanced. Gives me some hope for the future of this world

[Sara Vicente Barreto · Rating 5 out of 5]

Great detailed book going through the ways in which purpose is indeed delivering greater value and how a pie-growing mentality outperforms.

[Līna · Rating 1 out of 5]

The main idea (to grow the pie) - great! The rest? Not so much. Insufferable at times.

[Fernando Iberico · Rating 5 out of 5]

Grow the Pie (updated and revised)

Durante un buen tiempo, buscaba leer a profundidad sobre los criterios ESG (Environmental, Social y Governance), aunque alejado del hype que evoca en casi todas las instituciones financieras o personas que conozco. Demandaba rigurosidad sobre todas las características deseadas, así como un enfoque práctico. Encontré en #AlexEdmans un benchmark al que los más interesados en estos tópicos deberían consultar. Grow the Pie aglomera una amplia bibliografía académica que respalda los puntos de vista del autor de manera convincente.

La principal tesis del libro es sobre la mentalidad de “hacer crecer el pastel”, cuya visión es que éste no es fijo. El pastel representa el valor que una compañía crea para la sociedad (no necesariamente medido en dinero). Un ejemplo es el siguiente: al invertir en los grupos de interés (stakeholders), una empresa no reduce la porción del pastel de los inversores (stockholders); por el contrario, permite ampliarlo y, en última instancia, beneficiar a los inversionistas (escenario win-win).

Tres partes del libro que me gustaron:

1. El debate sobre el argumento de Milton Friedman respecto a que la única responsabilidad social de una empresa es incrementar las ganancias. Edmans brinda el contexto y los supuestos necesarios para que lo descrito por Friedman se dé (y cuando no es el caso). El autor, además, profundiza en otras corrientes alternativas y subraya la incorporación de las externalidades en la toma de decisiones empresariales (análisis costo-beneficio).

2. No todo proyecto o iniciativa empresarial puede calcularse a través de la regla Net Present Value (NPV) > $0. Incluso siendo un concepto útil, existen circunstancias en el que cuantificar todos los impactos es sumamente dificultoso. Por el contrario, optar por principios (multiplicación, ventaja comparativa y materialidad) para las decisiones empresariales son un filtro sencillo que fomenta la rendición de cuentas de los líderes de una organización.

3. Los estudios académicos que se muestran a lo largo del libro. Es más, Edmans detalla el laborioso proceso que supone la publicación de dichos trabajos (tiempo, recursos, revisión de pares y estándar de calidad). El por qué la academia, pese a sus limitaciones, es la mejor fuente para sacar conclusiones sobre el efecto de los criterios ESG en las variables financieras y no-financieras que uno quiere examinar. Esto en contraposición con las divulgaciones que abundan en medios y redes sociales, cuyas conclusiones carecen de rigor en la mayoría de los casos.

[Kaitlin · Rating 4 out of 5]

Helpful to not think about business, and labour market really, as a finite resource.

[Jacki Johnson · Rating 5 out of 5]

inspiring book based on research on how Purpose can create value

This book is well written and backed by research. It provides evidence and practical advice on how company and personal purpose can create long term value. The review of each stakeholder and the difference each can make is thought provoking. In particular the section on how to navigate your career through personal purpose is useful to early, mid and late term careers .

[Candy · Rating 3 out of 5]

Read this shit for a business ethics class. Expected it to be way worse, but it wasn’t that bad. The examples used were very interesting. It felt kinda long at some points, but overall not the most boring business book I’ve read.

[Roel Jacobs · Rating 4 out of 5]

Likely to become a classic textbook in the field of sustainable finance. Solid and well argued even if sometimes the prose is a little 'dry'.

[Rutger Van Wesel · Rating 5 out of 5]

A timeless truth about how purpose driven activities for the better of society merit more than personal gain.