There are a thousand hacking at the branches of evil 
to one who is striking at the root.

 

Henry David Thoreau

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It’s a bold claim to say that one major cause lies behind so many of our economic and social problems — that everything else is just a symptom. Yet the evidence points squarely to a single root: the design of our economic system.

The balance of this book is devoted to tracing that root cause and showing how it can be replaced.

Problems like poverty, wage stagnation, environmental degradation, and even bloated government are not random or isolated. They are self-organizing phenomena— predictable outcomes of an economy built primarily on self-interest rather than virtue.

Just as the roots of a tree determine the health of its branches, the foundational rules governing how we do business determine the outcomes we see in people’s lives, families, and society as a whole.

Let’s now examine three sets of economic “rules,” each producing profoundly different results. This will give us shared language for what “self-interest” and “virtue” mean in real-world practice. Chances are, the first will look most familiar.  

By examining how each of these systems works — and the contrasting societies they tend to create — we can begin to see why a forward economy strikes at the root itself, offering the means to heal and renew our nation.

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To understand how, we must begin where we are — with the dominant model that defines our modern economy.

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Self-Interested Free Enterprise
(Also known as the Shareholder-Value Model of Capitalism)

In today’s dominant form of free enterprise — capitalism driven primarily by self-interest — two rules define corporate purpose:  

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Rule 1. Offer a useful good or service at a competitive price.

Rule 2. Generate as much profit as possible for the shareholder, within the limits of the law.

 

Sound familiar?  

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Rule 1 anchors free markets; it rarely changes.

Rule 2 has long been treated as a necessary condition — investors take the risk, so they should reap the rewards.

But it’s also a Faustian bargain. It explains much of the behavior that now undermines trust in capitalism itself. Rule 2 is the weak root: solid-looking on the surface, with termites hollowing it out beneath.

In 2018, for example, General Motors laid off 15,000 employees weeks before Christmas — immediately after posting $2.5 billion in quarterly profit and $8 billion for the year. CEO Mary Barra justified the layoffs as part of GM’s focus on “creating shareholder value.” Wall Street rewarded the move with a 5 percent stock jump that day.

The 15,000 employees and their families, local communities, and taxpayers who had funded GM’s $50 billion bailout a decade earlier were left behind. What mattered was shareholder profit. Period.

How could executives justify such a decision? Simple: they followed the rules. Those rules say, “Care for the shareholder.” They say nothing about anyone else.

Milton Friedman, the influential University of Chicago economist and Nobel laureate, articulated this view in 1970 with his doctrine of shareholder primacy — the idea that a company’s sole purpose is to maximize returns for its owners. Stakeholders outside that narrow circle — workers, communities, the planet — are deemed irrelevant to the corporation’s purpose.

Exxon followed the same rulebook when it buried internal climate-science findings in the 1970s and financed decades of misinformation to delay regulation. Profit came first; planetary survival, last.

This conflict of interest — between private gain and public good — is the central flaw of capitalism based solely on self-interest. It divides society, corrodes democracy, and imperils the planet. The balance of this book is devoted to showing why this is so — and how a forward economy can resolve it.

Even so, signs of change have been emerging for some time, but are not yet enough. A growing number of companies are beginning to experiment with virtue — not yet transforming the system, but hinting at what’s possible. 

Let’s take a closer look at these models.  

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Self-Interested Free Enterprise Trending Toward Virtue 
(Also known as Shared Capitalism)

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There’s nothing inevitable about a conflict between business and society. It’s an error in design — one we can fix.

The imbalance arises from basing our current model primarily around the pursuit of self-interest. Left unchecked, self-interest too often drifts into selfishness. The Founders of our democracy understood this danger firsthand and built checks and balances into our system of governance. We must do the same with capitalism — by designing guardrails so unchecked freedom does not collapse into excess of rewards for the few.

Fortunately, aligning the interests of all stakeholders isn’t technically hard; but is does require better rules.

But first, we must escape our current paradigm. We’re so accustomed to the existing model that we mistake the map, which is replete with errors, for the territory. 

Our language constrains us, too. English has a single word for snow; the Inuit have dozens. Similarly, we often speak of “capitalism” as if it were one thing, when in fact it has many forms.

Economists R. Edward Freeman, Joseph Blasi, and Douglas Kruse have written extensively about a second form — shared capitalism — a variant of free enterprise trending toward virtue.

Its rules look like this:      

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Rule 1. Offer a useful good or service at a competitive price.

Rule 2. Generate profits for shareholders.

Rule 3. Distribute a portion of those profits to other stakeholders — through profit-sharing, reinvestment, or focused giving.  

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Rule 1 remains constant, but Rule 2 softens and Rule 3 introduces virtue. Outcomes begin to shift.

Examples abound:  

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• Profit-sharing. Roughly 20 percent of U.S. companies share profits with employees. Southwest Airlines, Whole Foods, FedEx, and especially Publix Supermarkets (which shares all profits) demonstrate that sharing strengthens loyalty and competitiveness. ​

• Profit reinvestment. Amazon and Tesla both reinvest essentially all profits into growth and innovation. Historically, about 40 percent of U.S. investment income is recycled into new ventures — but as Amazon’s post-recession surge shows, reinvestment can galvanize entire economies.   ​​

• Support of noble causes. Corporate giving remains below 1 percent of U.S. profits, yet companies like Newman’s Own show what’s possible. Since 1980, it has donated over $600 million to human-centered causes.    

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As R. Edward Freeman observes, when the meaning and purpose of work are aligned with stakeholder well-being, success becomes mutual — and self-reinforcing.   

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Forward Economics

(Virtues-Based Free Enterprise)

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This book’s central thesis is that a far better world lies within our reach — not through politics, but by improving the rules that govern free enterprise itself.

If businesses are structured to share all profits internally, continually reinvest both within and beyond themselves, and support noble causes, they can transform the broader economy from within.

A second thesis follows: virtuous behavior in business can be engineered by design, not left to chance. Instead of naively hoping that profit-sharing or giving will arise from the good will of owners and shareholders — or from some invisible (or non-existent) hand — we can make them core features of how enterprise itself operates.

Legislation could enforce such rules, but this book’s focus is different: to show how virtue can achieve the same result by fully leveraging its formidable competitive advantages. Companies organized to always reinvest and share will, over time, outperform and outgrow those that don’t.

Seed a small number of such firms — bound by a common fund that perpetually reinvests profits — and over decades, a self-propelling transformation can occur. Roots take time to grow, but the tree they produce can change the landscape, especially once it begins to seed others.  

Skeptics may doubt that virtue can wield such power. Yet history says otherwise: democracies founded on virtuous constitutions have long out-competed monarchies and dictatorships while providing better lives for their citizens. There’s every reason to expect the same from virtue-based enterprise.

Before defining the rules of Forward Economics, a caveat: these rules serve as a foundation, not a cage. The goal is to inspire many similar – but not identical – approaches, not to legislate dogma. Free markets thrive on experimentation, and a forward economy should as well. 

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The Rules of Forward Economics

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Rule 1. Offer a useful good or service at a competitive price.  

Rule 2. Reinvest all profits back into the economy, either by:

a. Strengthening the core business, and/or

b. Sharing the remaining profits through a pre-set formula that directs portions to:

i. Workers

ii. Management

iii. An investment fund required to reinvest in new forward enterprises

iv. A noble cause chosen by each worker

 

That’s it. An economy built on these rules should share wealth broadly and self-organize to solve most of society’s recurring problems. The key is simple: reinvest everything forward.

It’s a bold claim — and the evidence follows in the chapters ahead.  

Our first stop will be to explore why forward businesses are likely to dominate the economy in a free market over time. 

From there, the chapters will review our most pressing problem, one by one.  For each problem we face, we’ll examine how it arises naturally from the backward model, yet will just as naturally resolve in a forward economy.      ​