What Business is For

It has signed a social contract that cannot be undone.

“Medicine is to health, law is to justice, and business is to…?”

In confirming our enrollment at Harvard Business School, we all already have answered this question. Innocuous in appearance, it invited no easy answer, likely by design, given the melting pot of perspectives that comprise our incoming class. Yet for Milton Friedman, one of the twentieth century’s two most influential economic thinkers, the answer was unequivocal.

In 1970, writing in the pages of The New York Times Magazine, Friedman declared, “There is one and only one social responsibility of business—to use its resources and engage in activities designed to increase its profits.” Business was not a vehicle for charity. It was not a substitute for government. Collective ends, he insisted, were to be pursued by collective means. Business, where the CEO reigns as elected dictator, was to profit.

This thesis, when first written, was controversial. But like so many doctrines in American life, once it was adopted, it became orthodoxy. In the half-century since its publication, Friedman’s words have shadowed the every decision of a generation of corporate executives, Wall Street financiers, and managers, all cranked out by the dozen from America’s top business schools. What began as one cornerstone of a benign libertarian philosophy hardened into creed. And as with all creeds, its founding ideals would warp to fit its followers’ fancies. If we are to blame Karl Marx for the ills of communism, then we must blame Milton Friedman for the ills of profit, for his provocation has armed ransackers and raiders. His influence must be measured not in words but in consequence.

One man who absorbed the creed more fully than most was Jack Welch. In 1981, he stepped up as General Electric’s youngest-ever chief executive, and for many of the next twenty years, he would be celebrated as the pinnacle toward which all other CEOs strove. “Neutron Jack,” Wall Street called him — a reference to the neutron bomb, a weapon that targets people while leaving infrastructure intact. 

To cut costs, Jack’s strategy did something similar to communities. “Ideally, you’d have every plant you own on a barge,” he quipped. Over the course of his career as chief executive, Jack laid off tens of thousands of, if not a hundred thousand employees, in the United States. He demanded that the bottom 10 percent of every department be fired every year in a management innovation he called the “vitality curve” and what most everyone else came to sordidly dub the “rank and yank.” He demanded that every quarterly earnings report meet or exceed analysts’ expectations, even if it meant resorting to accounting maneuvers that, with hindsight, stretched credibility. After all, what company’s earnings could so consistently match or beat consensus by at least a penny through every business cycle? 

For a time, though, it all worked out. With profit as North Star, General Electric’s stock ripped and roared. Its market value grew from $12 billion to $410 billion. Neutron Jack’s face plastered the front pages of media from Fortune to The Wall Street Journal. In 2001, as dot-com stocks swooned, General Electric moved to increase its dividend as it had the previous year and the 24 years before that. Yet numbers and the headlines cheering them on masked a deeper rot. A company of engines and appliances had gradually hollowed itself out and stuffed the void with GE Capital, a profit-cranking financial services business that could turn water into wine come earnings time. Jeffrey Immelt (MBA ‘82), Welch’s chosen successor, oversaw seven more years of its continued expansion. In 2008, however, the Great Recession plunged GE Capital into crisis, and the rest of the company followed, its erstwhile-crown jewel hanging around Immelt’s neck like an albatross. A decade of strategic reversals could not fix what had been done. By 2020, America’s “everything company” had been booted from the Dow Jones and split into three.

The philosophy that Jack Welch so dearly took to heart was not content to stop at General Electric. Globalization and alpha-seeking financial markets opened doors to its miasma, which seeped into the American industrial landscape. Given cover by the new paradigm, companies like Boeing dismantled their industrial hearts in the shadow of shareholder primacy. Cities that had boomed in the era of homegrown metal and machinery fell into decline. And what was known as the Steel Belt corroded into Rust. Friedman’s rhetoric was reality, and its cost — for, in his own words, no lunch was ever free — was carved into the faces of workers who had made lives around companies that no longer wanted them. They, on whose backs the Blue Wall was built, would eventually take their hammers to it and deliver the White House to the promise of making America great again.

While factories shuttered in the East, a small tremor ran West. Innovation, which, for a time, called Detroit, Cleveland, and Pittsburgh home, had already begun its emigration to a thin strip of land that stretched from San Jose to San Francisco. Silicon Valley was born of a different history: from the marriage of government and academia during World War II. Universities, semiconductor manufacturers, and defense research dollars laid the foundations for a new economy.

By the turn of the century, this new economy was presenting itself as nothing less than a new renaissance. Contrarians like Steve Jobs spoke not only of profit but also of progress. Boasting muscular engineering cultures with no place for MBAs and the lords of strategy, this new breed of business made a series of vows. Technology’s purpose was to democratize information. It would empower the individual and safeguard human freedom. Apple’s 1984 Super Bowl commercial, which introduced the Macintosh personal computer as a rebellion against Big Brother’s control, mythologized the industry’s self-image. Though libertarianism suffered defeat after defeat at the ballot box, it sounded victory in the Valley. For the first time, profit could march in lockstep with liberation. 

In one respect, Silicon Valley succeeded beyond its wildest imagination. The dot-com boom was but a taste of what was to come. Instead of managing earnings and cutting costs, the play was to go deep in the red early on to generate hypergrowth and enduring profit in the long term. Bets paid off. Valley institutions grew into the most efficient money-making machines in human history. Today, Apple, Microsoft, Nvidia, Google, Amazon, and Meta rank among the most valuable corporations on earth. Each spends as much on R&D as the market capitalizations of the industrial giants that preceded them. Their products, the foundations of the Information Age, reshaped the world from how we pay taxes and work and convene and relax and buy, to how we know.

Yet in another respect, the revolution went the way all utopian promises go: the Valley’s libertarian fantasies ultimately bent the knee to profit. Then-millionaire, now-billionaire Peter Thiel, for example, once imagined PayPal would end the U.S. dollar and government’s “monetary sovereignty” over the individual. It instead became a conventional payments processor that turns a tidy $5 billion in operating profit per year. Social media companies pledged to connect humanity, yet they have only but in name. Study after study shows that America has scarcely been lonelier, more depressed, and more polarized, with technology a major culprit. So is the cost of our addiction to convenience. 

As profits continue to climb, Friedman’s grip over the corporate conscience shows no signs of weakening. All else appears as window dressing, from technoutopian dreams to the ESG movement, tacked on by fashion and removed by profit’s pressure. Might that be the takeaway? Profit, after all, is the necessary condition of business. Remove profit, and business is no longer business. The question — what business is to — has been answered by its own history.

Yet the question our survey silently posed — what is business for? — remains. Few believe that the ultimate purpose of our time here on Earth is reproduction, though reproduction is all life’s biological imperative. Many insist there must be something more. Business likewise cannot be reduced to solely its biological nature. That would surrender any possibility of shaping it toward a higher purpose. Is business a dog on a leash? No! For business possesses agency — agency assumed when it, in the pursuit of profit, anchored itself to community, culture, and civic life. Today’s increasingly all-encompassing definition of what constitutes a good and a service has forced business into a social contract with the people.

That is why the question matters. Our challenge as aspiring leaders in business is not merely to master its means and the tools of its trade. It is to ask of its end: of whether business can be a guarantor of plenty beyond profit; of whether it can serve not only Silicon Valley and Wall Street but also Main Street; of whether it can do so for generations to come. In keeping with this spirit, if business is to provide to society as medicine does health and law justice, then we must instill in it a raison d’être beyond survival and progress for progress’ sake. Such is the responsibility of today’s prosperity to posterity.

Alex Qi (MBA '27) hails from Irvine, California. He studied philosophy and physics at New York University, graduating with honors in 2020. Prior to HBS, he worked in corporate strategy and M&A at Northrop Grumman in Falls Church, Virginia and previously in deep tech ventures.