The concept of “capital” is one of the cornerstones underpinning the study of economics and business. The world revolves around the question of how to maximize capital- whether it’s fixed, financial or human capital. However, a Harvard Business School (HBS) professor has developed the idea of “altruistic capital”- “the idea that every individual has within them an intrinsic desire to serve”.
Traditionally, theories of how to manage employees rest on the premise that employees are motivated by financial rewards and increasing revenues. Nava Ashraf, a behavioural economist and HBS associate professor develop argues that a practical problem with this theory is that many organisations, especially those with a social and non-profit focus cannot afford to provide these financial incentives. Ashraf challenges these assumptions and argues that these organisations can overcome issues with motivating workers through tapping into their altruistic capital, by demonstrating how their work helps other people.
One of Ashraf’s field studies in Zambia demonstrates the potential for altruistic capital. This field experiment involved hairdressers who provided HIV/AIDS education and sold female condoms in their salons. The hairdressers were divided into four incentive groups. One group received no incentives whatsoever. Another group received a small financial margin of 10% for every condom sold while another group received a large financial margin of 90%. In the fourth group, the rewards were nonfinancial but received a visual measurement of how many condoms they have sold and how their sales have contributed to AIDS prevention in their communities. The results confirmed that there are other incentives that can be more powerful than money. On average, the group motivated by the visual measurement of their contribution sold twice as many condoms as the other hairdressers in the group. Commenting on the results, Ashraf says “I think we’ve deeply underestimated the desire of individuals to serve others”.
I believe that this concept has great implications on how society functions as a whole, and both for profit and non-profit ventures. First, in light of the financial crisis, how can altruistic capitalism be effectively utilized within our capitalist system? We’ve seen companies and economies crumble, partly because of greed and employees making decisions and taking risks based on financial considerations. But imagine what the world would look like if employees were encouraged by their companies to make decisions based on their altruistic capital.
Second, considering the ever-increasing problems that have global impact, how can altruistic capital be harnessed so these problems can be better addressed? As the HIV/AIDS experiment revealed, harnessing altruistic capital would have a radical impact in managing not only volunteers in non-profit organisations, but also socially-focused enterprises. If these organisations can better mobilize and harness people’s desire to address community problems, then perhaps the success of these organisations will be accelerated. Altruistic capital may be more effective in solving world problems such as poverty, pandemics, sustainability and effects of natural disasters.
The third implication is how the concept of altruistic capitalism can be applied in our lives. How can we mobilize altruistic capitalism in our workplace, university and in our lives in general? How can we appeal more to people’s intrinsic desire to help, and how can we use this knowledge for good? This concept has particular usefulness for nonprofit organisations that need alternatives to financial rewards for motivating their members. However, this concept can be equally relevant in profit-driven sectors, in order to build cohesiveness and solidarity among employees and motivate them towards the company vision. This concept can also be useful, especially as many factors now produce pressure on profit margins and companies have to be more innovative in how they can maximize their “capital”.
To conclude, the idea of “altruistic capital” is another unconventional concept that has potential to change the status quo. Altruistic capital challenges the notion “money makes world go round”, and perhaps we should be considering how we can better mobilize and harness altruistic capital in society.