- Companies that create value for all their stakeholders, not shareholders alone, have outperformed the market over time. The Firms of Endearment portfolio returned 1,681% over fifteen years against 118% for the S&P 500, and a peer-reviewed study found the best companies to work for beat the market by about 3.5% a year.
- The default AI story is to cut: fewer people, lower cost, the same output. It is the smallest prize and the hardest on culture, and it is not the only option on the table.
- Treating employees, customers and suppliers as people to serve, rather than costs to trim, tracks with stronger long-run returns (Edmans, 2011; Sisodia and colleagues).
- Purpose is not softness. It is a way to grow the whole pie, so profit arrives as a by-product of serving people well rather than by taking a bigger slice from them.
- AI makes the better model more reachable, not less. The same tools that remove a role can lift capacity, service and craft. The choice is yours, and it is being made now.
There is a version of the AI conversation that sits badly with you, even if you have not said so out loud. The one where the whole point is to get the same work from fewer people. Do more with less. Trim the team. Report the saving. It tests well on a spreadsheet, and something in you still resists it.
Trust that instinct. It is pattern recognition, not sentiment. The businesses that endure are rarely the ones that cut their way to greatness. They are the ones that build something people want to be part of, and the numbers back that up more firmly than the cost-cutting story admits. There is a better way to use this moment, and it happens to be the one that pays.
Why does the cut-costs version of AI feel so hollow?
Because it aims at the smallest prize. Taking cost out is real value, and it is the cleanest to count, which is why it tempts. It is also the most fragile, and the hardest on the people who remain. When the pitch is "a team of twenty becomes four," it lands as a threat rather than a result, and threatened people do their most guarded, least inventive work.
There is a deeper problem. A business is not only a cost structure. It is a web of relationships: the staff who know how it really runs, the customers who choose it again, the suppliers who go the extra mile, and the community that grants it a licence to operate. Strip-mine any of those to flatter a quarter, and you spend something that took years to build. This is the same trap underneath the extractive default in the sovereignty debate: value designed to concentrate rather than to circulate.
Do companies that treat people well actually perform better?
Yes, and the evidence is sturdier than the cynics expect. Alex Edmans, now a professor of finance at London Business School, tested it properly. In a study published in the Journal of Financial Economics in 2011, he tracked the "100 Best Companies to Work For in America". That portfolio beat its peers by about 3.5% a year from 1984 to 2009, and the effect held even after he allowed for size, risk and industry. The market never fully priced those happy workforces. They quietly compounded.
The broader pattern is just as striking. In Firms of Endearment, Rajendra Sisodia and his colleagues tracked companies loved by all their stakeholders, names like Costco, Patagonia and Southwest. Their public firms returned 1,681% over the fifteen years to 2011, against 118% for the S&P 500. That set was chosen by the authors rather than drawn at random, so read it as direction rather than proof. Both point the same way. Care is not the enemy of returns. Over a long enough horizon, it looks a lot like the cause.
| Source | Finding on serving stakeholders, not shareholders alone |
|---|---|
| Edmans, Journal of Financial Economics (2011) | A portfolio of the "100 Best Companies to Work For in America" earned about 3.5% a year above the market from 1984 to 2009, after adjusting for size, risk and industry |
| Sisodia, Wolfe & Sheth, Firms of Endearment (2nd ed.) | Stakeholder-loved public companies returned 1,681% over fifteen years, against 118% for the S&P 500 (an author-selected set, so directional) |
| Edmans, Grow the Pie (2020) | Profit is larger when it is pursued as a by-product of serving people well, rather than by taking a bigger slice from them |
Let us have a conversation about doing this better
If the cut-only version of AI sits wrong with you, there is a stronger path. We can map where AI could lift your people, your customers and your margins together, not one at the cost of another.
Start the conversationWhat does building instead of cutting actually look like?
It starts as a stance, before it is a plan. You treat the people inside the business, and the people it serves, as the point of the exercise rather than the cost of it. Then you aim the technology at that. The same model that could remove a role can also take the grind off a team, so that the people who stay are freed to do the work only people can do. One choice shrinks the business. The other grows it.
So change the opening question. Not "how many roles can AI take out," which is the reflex the market trains into you. Ask instead what your best people could make possible if the machine carried the load they dread, the analysis, the drafting, the endless first passes that swallow their week. That is the move from out-hustling the machine to leading it, and it changes what you build. The mechanics differ by business, and that is the part worth a proper conversation. The stance is the same everywhere. Grow the pie; do not just carve it thinner.
No company ever shrank its way to greatness. The businesses that last use AI to make more possible for more people, not to make the same thing with fewer of them.
What if AI is the chance to build the company you actually wanted?
Picture the version of your business you would be proud to leave behind. People who stay because the work is good and they are trusted with it, customers who choose you again because the care is real, suppliers who treat you as a partner, and a margin that holds because none of it was borrowed from the future. That is not a charity. It is a stronger, more durable machine, and this shift is a large part of what replaces business as usual.
AI is the lever, either way. Point it only at cost, and you get a smaller company that runs a little cheaper. Point it at the whole web of relationships, and you get a business that compounds. Technology's highest purpose is to serve human life, and the market, over time, tends to reward the companies that remember it.
You already felt this at the start. The instinct that the cut-only story was too small was the right one, and the evidence agrees with it now, as does the long game that rewards the businesses built to last. The better way to build is also the one that wins.
Frequently asked questions
Do purpose-driven companies actually perform better?
What is a firm of endearment?
Is stakeholder capitalism better than shareholder capitalism?
- Edmans, A., Does the Stock Market Fully Value Intangibles? Employee Satisfaction and Equity Prices, Journal of Financial Economics, 2011
- Sisodia, R., Wolfe, D. and Sheth, J., Firms of Endearment: How World-Class Companies Profit from Passion and Purpose, 2nd edition
- Edmans, A., Grow the Pie: How Great Companies Deliver Both Purpose and Profit, Cambridge University Press, 2020
About the author
British technology futurist, AI keynote speaker and advisor. Thirty years across enterprise technology and AI strategy, helping leaders navigate the future of work. The futurist who died.