My very special guest on this episode is Sir Ronald Cohen, a pioneering philanthropist, venture capitalist, private equity investor and social innovator and now with his new book, Impact: Reshaping Capitalism to Drive Real Change, a best selling author.
Welcome to the The Voice of Retail , I’m your host Michael LeBlanc, and this podcast is brought to you in conjunction with Retail Council of Canada.
My very special guest on this episode is Sir Ronald Cohen, a pioneering philanthropist, venture capitalist, private equity investor and social innovator and now with his new book, Impact: Reshaping Capitalism to Drive Real Change, a best selling author.
In a fascinating and wide-ranging conversation commensurate with the scope, scale and well, the impact of Impact Capitalism, Sir Ronald takes us through a vivid career launched from Oxford and Harvard into essentially creating the private equity industry in the U.K. He then lays out the principals of investing with impact, and how consumer and retailers can participate in one of the biggest movements in modern society to reform our value system
Let’s listen in.
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Thanks for tuning into today’s episode of The Voice of Retail. Be sure to subscribe to the podcast so you don’t miss out on the latest episodes, industry news, and insights. If you enjoyed this episode please consider leaving a rating and review, as it really helps us grow so that we can continue getting amazing guests on the show.
I’m your host Michael LeBlanc, President of M.E. LeBlanc & Company, and if you’re looking for more content, or want to chat follow me on LinkedIn, or visit my website meleblanc.co!
Until next time, stay safe and have a great week!
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Sir Ronald Cohen is a preeminent international investor, entrepreneur, philanthropist, social finance innovator, and impact pioneer, who is driving forward the global Impact Revolution.
https://sirronaldcohen.org/
He is the author of 'IMPACT: Reshaping capitalism to drive real change' - a Sunday Times Bestseller. His previous book 'The Second Bounce of the Ball' was described by the Financial Times as “One of the best books written on entrepreneurship in recent years.”
He serves as Chairman of the Global Steering Group for Impact Investment and The Portland Trust. He is a co-founder of Social Finance UK, USA and Israel; and co-founder Chair of Bridges Fund Management and Big Society Capital. He chaired the G8 Social Impact Investment Taskforce (2013-15), the UK Social Investment Task Force (2000-10) and the UK's Commission on Unclaimed Assets (2005-2007). In 2012 he received the Rockefeller Foundation's Innovation Award for Social Finance.
He was the co-founder and Executive Chairman of Apax Partners Worldwide LLP (1972-2005), a global venture capital and private equity firm, and co-founder of the British and European venture capital associations.
Oxford and Harvard educated, Sir Ronald was born in Egypt and left as a refugee at the age of 11, when his family came to the UK. He is based in Tel Aviv, London and New York.
Follow on twitter @SirRonnieCohen.
Michael LeBlanc is the Founder & President of M.E. LeBlanc & Company Inc and a Senior Advisor to Retail Council of Canada as part of his advisory and consulting practice. He brings 25+ years of brand/retail/marketing & eCommerce leadership experience, and has been on the front lines of retail industry change for his entire career. Michael is the producer and host of a network of leading podcasts including Canada’s top retail industry podcast, The Voice of Retail, plus Global E-Commerce Tech Talks and The Food Professor with Dr. Sylvain Charlebois. You can learn more about Michael here or on LinkedIn.
Michael LeBlanc 00:04
Welcome to The Voice of Retail. I'm your host Michael LeBlanc. This podcast is brought to you in conjunction with Retail Council of Canada.
Michael LeBlanc 00:10
My very special guest on this episode is Sir Ronald Cohen, a pioneering philanthropist, venture capitalist, private equity investor, and social innovator, and now with this new book, Impact: Reshaping Capitalism to Drive Real Change, a best selling author.
Michael LeBlanc 00:24
In a fascinating and wide range of conversation commensurate with the scope, scale, and well the impact of Impact Capitalism. Sir Ronald takes us through a vivid career launch from Oxford and Harvard, into essentially creating the private equity industry in the U.K. He then lays out the principles investing with impact, and how consumers and retailers can participate in one of the biggest movements in modern society to reform our value system.
Ronald Cohen 00:48
If you point to your phone, which you can now do in France, through an app called Yuka, add a food product or cosmetic product, you can find out what positive or negative impact that company bringing you the, you know the product is the delivered
Michael LeBlanc 01:12
Let's listen to now.
Michael LeBlanc 01:15
Sir Ronald, welcome to The Voice of Retail podcast. How are you doing this morning?
Ronald Cohen 01:18
Very well. Michael, good to be with you.
Michael LeBlanc 01:20
Well, it's a morning where I am, I think you mentioned, your, today I was gonna ask you where you were? Because it looks like you've traveled between Tel Aviv and New York and, and London. It sounds like you're in France today.
Ronald Cohen 01:32
Yeah, I managed to get away for a brief holiday in the south of France.
Michael LeBlanc 01:36
Well, wonderful. Well, thank you for interrupting your holiday to talk, talk to me. That's, that's really the really kind of, you know, I'm really looking forward to our interview. You're, you're I've had a couple of interviews with people and thought leaders who have talked about different forms of capitalism. I don't know if you know, you're in France, Hubert Joly, who is CEO of Best Buy?
Ronald Cohen 01:58
Of course, I do. Yes.
Michael LeBlanc 02:00
And I talked to him about his great book that you know, and his journey from, you know, the hardcore McKinsey consultant into a new form of capitalism, very people-centric, and Roger Martin, he talks about a different, you know, capitalism. So, I'm really looking forward to this. So, really, you know, we're gonna talk about your book Impact, we're gonna talk about, a bit about yourself, why don't we start there, you've got, boy, you've got a long and vivid career founder, private equity author, give the listeners a sense of your background.
Ronald Cohen 02:29
So, my life is difficult to predict. In my case, at the age of 11, I was kicked out of Egypt as a refugee and landed in the UK with my parents, I couldn't speak English. I got education that the cost of the state in grammar school and then a teacher believed in me, called Richard Farley, a history teacher extremely widely read. He thought I should go to Oxford, they prepared me for the entrance exams. And thanks to him, I got in. And then from there, I got a scholarship to Harvard Business School. And I suppose it's, sort of, given me a sense of gratitude for having been helped along the way, therefore I'm motivated by a similar sense of helping others in need.
Michael LeBlanc 03:23
You stayed connected to academics, too, I wrote that you were on the same governing boards or connected to Harvard. Right? So, you've stayed at, at a governance level connected to education? Yeah.
Ronald Cohen 03:33
Yes, I have both with Oxford and with Harvard, I served on the Board of Overseers for six years at Harvard, which looks at both the academic activities of the university. And then I was on the board of the Harvard management company, which manages its $40 billion endowments.
Michael LeBlanc 03:53
Well, I was gonna say talk about, talk about an endowment and, and let's talk about your, your experience in private equity you, you know, your book is Impact: Reshaping Capitalism to Drive Real Change. Clearly, capitalism in one form or another has worked for you, you've, you've been very successful. Talk about your private equity experience and the companies that you started, just to give the listeners a bit of context.
Ronald Cohen 04:15
Sure. So, when I was in my early 20s, I was at Harvard Business School and I sensed something was in the air and it's what became known as venture capital. And I was lucky to be in my 20s when the tech revolution and venture capital began their rise. And then later I got into the world of private equity. So, from having backed companies like the company, which cloned the Dolly the sheep and, and they can radio and, and some tech companies, Apple and AOL, were backed by my US, partner. Alan Patricof, I also added to that private equity. So, investing in big companies or bigger companies, and improving the efficiency and what had driven me to go to both of these activities was a desire to do good and do well. At the same time. At the time, when I got into venture capital, the UK had millions on employing, this was a way of creating jobs. I suppose. As the years went by, I realized I was giving people with no money, the opportunity to become wealthy, successful entrepreneurs and to enrich people around them. But it wasn't reducing the gap between rich and poor. And that, that is something that I began to focus on from 20 years ago from the year 2000.
Michael LeBlanc 05:54
Well, it's, it's interesting, you bring that up, and I read, I've had the opportunity to read your book. And, and you, you, you touch on Adam Smith, for example, about how, you know, the invisible heart and the invisible hand. And, and you remind me of what he talks about, enlightened self-interest. Is that, was that your guiding principle or was it something different?
Ronald Cohen 06:14
No, it was my guiding principle. But it turns out that Adam Smith was proud of his first book, The Theory of Moral Sentiments, I actually have a copy near my desk, which was about altruism, and how human nature leads people to have empathy towards others and to help them when he was about the Wealth of Nations which introduced the invisible handed the market. And what we've realized with economies, that seek profit only, is they create terrible damage along the way, they do help to create growth and to bring people up from poverty.
Michael LeBlanc 06:55
Yeah.
Ronald Cohen 06:56
But they do create terrible environmental damage and often terrible social damage along the way. And so I began to work 20 years ago on this idea of bringing investment to people who want to improve lives and I realized, when we invented the social impact bond in 2010, after 10 years of effort, and the social impact bonds, as you may know, Michael, is, a security where your return as an investor depends on achieving an improvement. And in the case of the first sector, the pipe bomb, a reduction in the number of young people going back to jail.
Michael LeBlanc 07:39
Right.
Ronald Cohen 07:40
And that was really the first time we had a financial instrument that optimize risk-return and impact. And with the years I began to realize our whole economies are going this way when I chaired the G8 Task Force, I began to realize that ESG investing, which was then that 10, you know, trillion dollars, today, 40 to $70 trillion, it was trying to do the same thing with return and impact. And when you look that investors signing up to the United Nations Principles for responsible investment, the figure was 40 trillion today, it's over 100 trillion. And so we coined the phrase, the invisible heart of markets.
Michael LeBlanc 08:32
Yes.
Ronald Cohen 08:32
2014, to say, look, if you measure impact, and bring it to the center of your economies, then you bring businesses to bring solutions to do good and to do well, instead of creating problems. And so impact is the invisible heart of markets that guide Adam Smith's invisible hand.
Michael LeBlanc 08:54
You know, to stay in the realm of, of economics, the concept of economic rents are something I think about a lot, you know, particularly in the retailer's line of business, you have to be careful of the, as you say, the impact of what you're what consumers are asking and what you're delivering, right that, so to speak, the damage, maybe, maybe there's, you know, the societal damage or whatever, unintended consequences, but still, this is this also what you, you hope to resolve or hope to guide through, right?
Ronald Cohen 09:27
So I see three major forces today at work to change the world and actually to improve it, hugely. The first is a massive change of values to which you've referred and retailers, like everyone else, are aware of it, people don't want to buy any more in the way they used to, I got from economies creating harm or to work for them. Investors realize this and we have these trillions of ESG money flowing now to companies that create less harm or preferably, create some positive good.
Ronald Cohen 10:02
As a second force of technology, artificial intelligence, machine learning or augmented reality, the genome, and computing, which enabled us to do things we've never been able to do before that deliver impact, so, you think of what we've begun to witness through COVID, communicating through zoom, tele-medicine, tele-education, and so on, and so forth.
Ronald Cohen 10:30
And then the third force using this technology to measure the impact of companies in a granular way. And this comes to the answer to your question.
Michael LeBlanc 10:43
Do you see, do you see these ideas, concepts, starting to go into the minds of consumers? You know, like, the paradox is consumers, on one hand, love, love to know where products are made, and more and more have, are invested in the products but at the same time, they're looking for sometimes, the biggest, best value or the cheapest price, and sometimes those things are a bit of a disconnect. Do you, do you see a distant-, a disconnect, at the society level?
Ronald Cohen 11:12
I actually don't see a disconnect because if you point your phone, which you can now do in, in France, through an app called Yuka, add a food product or cosmetic product, you can find out what positive or negative impact that, the company bringing you the you know, the product is, is, is delivered. And that enables us to make discriminating choices. There's often no difference in price level. I'll give you an example. I'm British, I drink tea. If you if you look at the box of Twinings Tea, and you know the numbers because you can point your phone at it and get it, we're not quite there yet with, with regard to Twinings Tea, I don't think, but you'll realize, associated British foods, creates $1.8 billion of damage a year environmentally, and makes 1.6 billion of profit. So, you move along the shelf, and you go to Lipton, which is made by Unilever, which has a much better environmental record. So, I think we're on the verge now, of apps that enabled us to do that, for a very wide range of products. And in the next two or three years, in my view, we will have access enable us to do this for virtually every product.
Michael LeBlanc 12:42
Interesting. Let's, let's, talk about your book for a second im-, as I said, its Impact: Reshaping Capitalism to Drive Real Change. What, what prompted you to write the book, did you, you think there was a gap on the shelves? What, after all this, you just had a book, you needed to put it out there? Talk about that.
Ronald Cohen 12:59
Yeah, what prompted me to write the book, Michael, was a sense of urgency, but we cannot continue to do things in the way we're doing. Creating huge problems for the planet. We were chatting about the weather changes that Canada has as experienced where your, your based and the social issues, the inequalities that come from the employment practices of companies. And I felt that the work I had been doing a from 2000 to 2010. And the social impact bond had brought this paradigm shift of 2000. Since 2000, of shifting from risk-return economies to risk-return impact economies and what's driving that is the actions of investors today, investors are changing the behavior of companies. And I thought, if I can explain this simply, then if people shift to understanding what's happening in the world, it will accelerate the process. And we will get sooner to a world that has a built-in capacity to improve itself instead of creating and aggravating problems.
Michael LeBlanc 14:23
Where did capitalism go wrong? When I think back to the last century and a half, I think of you know, the Halcyon Days of a strong middle class in America, for example, after the Second World War, but capitalism seems to more and more be serving very few and where did it go wrong? Where did that, this isn't a history lesson podcast, but in your mind, how did, how did it come off the rails and be so, it feels very distorted right now a lot of winners, like it's a win-lose economy. How did, how did it, how do we get here?
Ronald Cohen 14:54
Well, at the most basic level, you could cope with the consequences. of capitalism when they were reasonable with globalization, even government can't cope with them, like governments can't cope with climate change, or governments can't cope with social inequality, right, the system just keeps aggravating, aggravating both. So, the fact that the consequences are so huge makes it go wrong you can't, you can't continue like this.
Ronald Cohen 15:25
However, we've also had the arrival of technology, and technology requires a lot of training for you to be able to get a job or be successful in it. And so that's led to disparities in remuneration. Between those who have benefited from a very technical education and others at the same time, we've had very cheap financial markets, that's enabled anybody in finance to make a ton of money. And then these huge sums have spilled over into the remuneration of corporate executives. And so even if the multiple of salary of the average salary within the firm go from 42 times between the CEO and either the average or the lowest employee to over 300 times over a period of 20, 25 years. So, these two things together, are now stressing the planet, and societies around the world.
Michael LeBlanc 16:33
Yeah, I've heard, I've heard it's a Roger Martin talk, I talked to Roger Martin about this. And he focuses a lot on understanding distortions in, in payment and leadership and even things like financial structures, like options, and these things, and just other tax structures seem to have really distorted that top-level compensation in certain parts of the world. And I mean a big contributor too.
Ronald Cohen 16:56
Yeah, I think, I think that's, sort of, come in from the private equity industry into mainstream business, because the private equity industry was competing for management talent with big companies and big companies had to start adjusting in order to hold on to that talent.
Michael LeBlanc 17:18
I think about libertarianism and your version of impact capitalism, are they are they opposites? Is there, where on that spectrum do you see them, I mean, I when I, when I think of, you know, Silicon Valley, I think of a lot of libertarianism, and I think that that's driven a lot of things and, and venture capital to do you. Do you see these two as opposites? Is your impact capitalism a solve for that?
Ronald Cohen 17:41
I think they aren't opposites, today. I think those who worry about only risk or return, are opposite with those who worry about risk-return impact, because they're in danger of aggravating our social and the environmental issues, and the ESG and impact investment flows that we see and the impact entrepreneurs like Elon Musk, who are disrupting industries today are seeking to bring solutions, as well as make money.
Michael LeBlanc 18:22
Yeah, you, you call him in the book, the best-known impact entrepreneur and I was surprised at that, you unpack it as in because he's created an electric automobile industry, basically, he is had more impact than pretty much anyone, he does other things, which are, you know, a little bit more libertarian, but he still fits in your model?
Ronald Cohen 18:41
He fits in my model because his motivation for getting into the automobile industry wasn't just to make money. His motivation was to bring a better engine, an electric engine that reduces the pollution from cars. And he's single-handedly changed the product offerings of every automobile company in the world.
Michael LeBlanc 19:07
Yeah, and, and undeniably, right, undeniably, I can't have you on the mic. Last couple of questions. I can't have you on the mic without getting your feedback and thoughts around this COVID era has changed as it accelerated, has it as many things as it's celebrated people's. The industry is focused on impact capitalism, what, what, how do you think about what just happened to us and what continues to happen in many parts of the world?
Ronald Cohen 19:29
I think it's been a huge accelerator. Like in 18 months, we've had 10 years worth of acceleration in the use of technology, in the concern about the environment in the concern about social issues, perhaps because we've been stuck with a sense of solidarity has grown, which makes other people feel that you have to do things that are in the common good, and it's very interesting that the millennial and Gen Z, members of, you know, that population today account for 60% of the US workforce. So we've got to make a massive change of values, which has been accelerated by COVID.
Ronald Cohen 20:21
And I think it presents us with the opportunity now, to take some bold steps in shifting economies to become impact economies, the major one is really to mandate that all companies publish impact weighted accounts, that reflects in currency terms and dollar terms, the impact companies create, through their operations on the environment, through the employment practices, of people and through their products, on people and the environment. And I hope that either the EU, or the US administration, or some of the European countries or Canada, which have thought a lot about this change in economic paradigm, will take the bold step now of mandating transparency on the impact, because it is that which will harness the force of investors to change the behavior of companies.
Michael LeBlanc 21:26
I also think about harnessing the power of consumers, of course, I think of retail a lot, which is very consumer-driven. You talked about the, the the idea of being able to scan two types of tea and understanding different impacts. Is that really what it's going to take, is it, is it government's role to mandate it, and then the consumer has to actually adopt that as in, in real terms in terms of how they make choices.
Ronald Cohen 21:49
Yeah, I mean, it started like that, Michael, it start-, this whole thing started with young consumers changing their preferences for the products they buy. And, and then it began to shift from consumers and talent to investors. After that consumers are crucially important, which is why the arrival of these new apps that enabled you to become aware of the impact products create or the companies that manufacture them create is going to be, be so significant, this revolution is going to be driven by consumers, talent and investors, some business leaders realize it's important and likely arrival of technology that wants to be disrupted by, by, by the arrival of impact when they're creating negative impact, but it's being driven by consumers, talent and investors.
Michael LeBlanc 22:53
So, I guess that transparency or visibility to the impact is one step. You know, thinking a couple of levels down so to speak, many retailers have very robust and comprehensive CSR initiatives, corporate social responsibility initiatives, any advice for the listeners around how to think about those in the context of, of your theory around capitalism and impact capitalism? How do they, are they close cousins to each other, it's just a matter of degree?
Ronald Cohen 23:20
No, they're distant, they're distant cousins, very distant cousins. CSR is a branch of philanthropy. Impact, investing, or impact entrepreneurship, for that matter, involves the intention to create impact, and the measurement of the impact created. So, it uses investment capital, entrepreneurship, innovation. And so, CSR, frankly, has become viewed as a marketing tool of companies away for companies to spread money around relevant communities and increase their popularity, it doesn't really change the world and companies are understanding this.
Michael LeBlanc 24:06
You open your book, which I think I know how long it takes to get books from, from your, you know, from your hand into the, onto the market, you open your book with a quick opening, because I think it was released just as COVID was starting, Impact. And, you know, you made a wish, basically at the beginning of the book saying I hope governments do the right thing, in terms of how they handle the economy and take care of people. First. I'm summarizing, of course, a little bit. How would you again, now we've got 18 months of experience, you've seen major, you've seen how governments have handled this crisis, how would you rate them on, you know, going back to your academics, would you give them A to F, how would you rate governments globally?
Ronald Cohen 24:46
I think governments have become aware of ESG and impact and the need to measure impact, but I don't think they've understood fully just how much they need it. Governments are coming out of COVID with huge debt, their budgets a hugely constrained. At the same time, the scale of the social and climate issues they face is unparalleled. And so they need to bring the private sector, investors and businesses and entrepreneurs, and consumers and talent alongside them to help bring solutions to achieve their goals. And so I'm hopeful that with the G7, under the UK, his presidency today establishing an Impact Task Force, to look at the impact transparency and integrity and how we boost impact capital flows, how we bring impact measurement to ESG, that 40 to 70 trillion loggers that that is flowing.
Ronald Cohen 26:00
I'm hopeful the government's will now begin to seize this issue and notice. Now you hear the SEC making pronouncements about environmental transparency, you see the EU introducing taxonomies, as they call them to differentiate between industries that create negative impact and those that don't. But we need them to go a lot further than that. We need them to say as Roosevelt said, and you know, in 33, we're going to establish generally accepted impact principles, then it was accounting, financial accounting, that are supposed to give transparency on the impacts of companies now that Roosevelt brought transparency on the profits of companies.
Michael LeBlanc 26:50
So, that allows us all to be able to understand on an equal level playing field one equals one, no matter where and what company we're looking at. Right? That's, that would be your [Inaudible]
Ronald Cohen 26:59
Exactly.
Michael LeBlanc 27:00
Right. And so, this is a great discussion, I encourage everybody to pick up the book, the book is Impact: Reshaping Capitalism to Drive Real Change, where can, of course, people can, as I did, get the book at most popular bookstores, but if they want to learn more about your ongoing work, where should they go?
Ronald Cohen 27:19
Well, they can go to my website. And they can, wherefrom which they can download, free a Guide to the Impact Revolution. But if they're technically inclined, they should go to the Harvard Business school site, IWA Impact Rated Accounts to get a peep into the future of impact accounting.
Michael LeBlanc 27:43
Sir Ronald, it was such a treat. Thank you for taking time to speak with me. It was a great discussion and I really enjoyed your book. And I encourage everyone to pick up a copy and thank you so much for spending time and, and explaining this and congratulations, and I wish you continued success.
Ronald Cohen 27:58
Thank you very much, all the best, Michael.
Michael LeBlanc 28:00
Thanks for tuning in to today's episode of The Voice of Retail. Be sure to follow the podcast on Apple, Spotify, or wherever you enjoy podcasts, so you don't miss out on the latest episodes, industry news, and insights. If you enjoyed this episode, please consider leaving a rating review as it really helps us grow so that we continue to get amazing guests onto the show.
Michael LeBlanc 28:19
I'm your host Michael LeBlanc, President of M.E. LeBlanc & Company Inc. and if you're looking for more content or want to chat, follow me on LinkedIn or visit my website at visit my website meleblanc.co!
Michael LeBlanc 28:29
Until next time, stay safe and have a