Narrator: In 2015, a life-saving drug called Daraprim, used to treat a parasitic infection that can be fatal for infants and AIDS patients, saw its price skyrocket overnight. A single pill went from $13.50 to $750—a 5,500% increase. The man behind the decision, CEO Martin Shkreli, defended his actions by stating, "My investors expect me to maximize profits." This act of blatant price-gouging became a symbol of a broken system, one where a company’s success seems to come directly at the expense of society. But what if this zero-sum game is a fundamental misunderstanding of how value is created? What if the most successful companies aren't the ones that take the biggest slice of the pie, but the ones that work to make the pie bigger for everyone?

In his book, Grow the Pie: How Great Companies Deliver Both Purpose and Profit, economist Alex Edmans challenges the deep-seated belief that business and society are in opposition. He argues that the most enduring and profitable companies are those that are driven by purpose, creating value for society first, with profits following as a natural consequence.

Narrator: The dominant view of business for decades has been what Edmans calls the "pie-splitting mentality." This framework sees the value a company creates as a fixed pie. For a company to increase its slice—its profits—it must take a larger piece from someone else. This might mean cutting employee wages, squeezing suppliers on price, or charging customers more. From this perspective, business is a battle, and society often loses.

The story of Martin Shkreli and Turing Pharmaceuticals is a stark illustration of this mindset. By hiking the price of Daraprim, Shkreli wasn't creating new value; he was simply re-slicing the pie in his favor, transferring wealth from vulnerable patients and the healthcare system to his company's investors. This approach is also seen in corporate scandals like Volkswagen's emissions cheating or PG&E's neglect of its equipment, which led to deadly wildfires. In each case, the pursuit of profit led to immense social harm. This mentality creates a false choice: a company can either serve shareholders or serve society, but not both.

Narrator: Edmans proposes a radical alternative: the "pie-growing mentality." This approach starts with the idea that the pie is not fixed. A company's primary goal should be to create value for society—to serve its stakeholders, including employees, customers, suppliers, and the environment. By focusing on this purpose, a company can grow the entire pie, leading to greater long-term profits for investors as a byproduct.

A powerful example of this is the story of Merck and the drug Ivermectin. In the 1980s, Merck scientist William Campbell discovered that Ivermectin, a drug for animals, could cure river blindness, a disease that had devastated communities in developing countries. The problem was that the people who needed it most couldn't afford it. Instead of abandoning the project, Merck's CEO, Roy Vagelos, made a landmark decision. He announced that Merck would donate the drug, now called Mectizan, for free, "as much as needed, for as long as needed." This decision seemed to defy business logic, costing the company millions. However, it had profound long-term benefits. The Mectizan Donation Program has since delivered billions of treatments, preventing blindness in millions. This act of purpose boosted Merck's reputation, attracting top talent and loyal investors, who have enjoyed an average annual return of 13% since the program began. Merck didn't choose between purpose and profit; it chose purpose, and profit followed.

Narrator: Shifting to a pie-growing mentality doesn't mean a company should pursue any and every social cause. Edmans provides a practical framework for decision-making, grounded in three principles, to ensure that a company's actions genuinely create value.

The first is the Principle of Multiplication. This asks whether spending a dollar on a stakeholder creates more than a dollar of value for them. For example, a company-run gym might cost $500 per employee but only provide the same benefit as a $100 local gym membership. In this case, it would be better to give employees the cash.

The second is the Principle of Comparative Advantage. This asks whether the company is better suited to perform an activity than anyone else. A company donating cash to Greenpeace fails this test, as investors could donate that money themselves. However, Coca-Cola’s "Project Last Mile" passes with flying colors. The company uses its world-class logistics expertise—the same network that gets Coke to remote villages—to help deliver life-saving medicines in Africa, something no other organization could do as effectively.

The third is the Principle of Materiality. This asks whether the stakeholders being served are material, or relevant, to the company's core business. For a food company like Danone, investing in sustainable packaging is highly material, as packaging is central to its operations and environmental footprint. This focus ensures that a company's purpose is integrated into its core strategy, not just an ancillary PR activity.

Narrator: To make pie-growing a reality, the structures that govern a company must be aligned with its purpose. This starts with executive pay. Edmans argues that the debate over pay is too focused on the level of pay and not enough on its structure. Complex bonus schemes tied to short-term targets often encourage pie-splitting behavior, like cutting R&D to hit an earnings goal. The solution, he suggests, is simpler and more powerful: pay executives with restricted stock that they can't sell for many years. This automatically aligns their interests with the company's long-term health and the value it creates for all stakeholders.

Investors also have a critical role to play as stewards. Instead of being passive, they must actively engage with companies to ensure they are focused on long-term value. This means moving beyond simple ESG screens and practicing deep, informed monitoring. When investors like Warren Buffett hold companies accountable for their long-term strategy—as he did when he fired a CEO at Benjamin Moore for threatening to break a promise to its independent dealers—they protect the company's purpose and grow the pie for everyone.

Narrator: The responsibility for growing the pie doesn't just lie with CEOs and investors; it extends to every citizen. We have agency through our various roles in society. As employees, we can push for innovation and a purpose-driven culture from within. The "Bright Ideas" program at New Belgium Brewing, which empowered an employee to suggest eliminating cardboard dividers in boxes, saved the company $1 million and significantly reduced its environmental impact.

As customers, we can choose to support companies that align with our values. As investors, even through our pension funds, we can demand that our asset managers practice responsible stewardship. And as voters and influencers, we can advocate for policies that encourage long-term thinking and hold companies accountable. The pie-growing mentality is not a top-down mandate; it's a collective effort to build a form of capitalism that serves all of society.

Narrator: The single most important takeaway from Grow the Pie is that the perceived conflict between profit and purpose is a dangerous illusion. The most successful, resilient, and innovative companies are those that understand their fundamental role is to create value for society. Profit is not the objective; it is the result of serving a purpose with excellence. This isn't about charity or corporate social responsibility as a side project. It's about embedding purpose into the very core of a company's strategy, culture, and operations.

The book challenges us to rethink our own roles. Whether as a leader, an investor, an employee, or a customer, we have the power to move beyond a zero-sum, pie-splitting world. The critical question it leaves us with is this: are we willing to champion and reward the companies that focus not on how to claim the most value, but on how to create the most value for us all?