Clearly, since the recurrent financial, economic and social crises since the 1970s, our market functioning has been under pressure.

Historically, and I don't need to explain this to you, there are two views on how the market should develop and stay in balance. Either we start from the idea of profit and performance. Good companies achieve good results and set the standard of how things should be done. This is the concept behind free market theory. Another view departs from a standard, or an ideology, and aligns results and efforts accordingly. We find this ideology in some market economies, of which communism is an example. And historically, neither led to satisfactory results.

Let's start with the idea that good results lead to healthy self-selection and setting the standard. That sounds nice but Churchill said it back in 1945 'the inherent vice of capitalism is the unequal sharing of blessings'. In 2018, 26 business tycoons owned as much as the world's 3.8 billion poorest people. And like top management salaries, the environmental cost, now estimated at $4.7 trillion, continued to rise exponentially. By the way, I thought it was better to use the word top management rather than CEOs in this context. To the CEO reader: you can thank me later. Socially, we are in a situation where there are as many as 4 million people working in slavery and that figure is increasing, not decreasing, by 2022. So that good results ensure that quality rises to the top, or leads to a standard to be emulated, is a myth. The standard simply becomes getting more and more results, at the expense of more and more inequality.

So is setting a regulated standard a better option? Well, before the limited bevy of leftist slobs in this readership pull out their Che Guevara t-shirts to answer this question in the affirmative once again the words of Churchill. Who said 'the inherent virtue of socialism is the equal sharing of miseries'. Take the example of China. By the late 1970s, the continent was 40% dependent on imported grain. Production of other crops was also far below international averages leading to poverty and inequality. Reform in 1978 gave farmers ownership and the mandate to create higher yields.  The harvest increased by 102 million cubic metres ánd the average farmer's salary tripled. Unfortunately, in addition to increased yields, this led to even greater inequality among farmers.

So what do we learn from this? Well, Alex Edmans (Professor of finance, LBS) puts it nicely in the metaphor of the cake. The pie is a representation of the value a company creates today by distributing profits to shareholders and adding value at the societal level. Traditionally, the distribution of the pie results in inequality.

In a highly regulated economy, a limited group chooses who gets pie and who does not. In a liberal economy, things are already not much better. Do shareholders want more profits distributed?  Well, then give them a bigger piece of the pie and reduce the slice of society's pie. 'Pieconomics' assumes that if we dare to think in the long term, and not make the share of social value smaller, everyone will benefit. A great example of this is the circular economy. Reusing scarce raw materials creates a new business model that generates both classic profit and social profit value. So let's make the cake bigger for everyone and move away from the traditional growth model where more profit for one party means loss for another.