The Much-Needed Return of Honest Capitalism

Capitalism is known to be an economic system where investments and the distribution of goods are determined by competition in the free market. As history has shown us, capitalism stands out as an effective system, as supply and demand in a free market should give consumers products at fair prices. Suppliers can also receive healthy returns as long as customers are happy with them.

However, things seem to have gone astray in recent years. Capital market mechanics have become skewed; the old school supply-demand equilibrium starts to malfunction when products and services are offered at unrealistically low prices or even for free. I call this practice ‘narcissistic capitalism’–a system utilizing capitalist infrastructures to create companies that monopolize the industry by unnaturally pricing out the competition. The enabler is the accumulation of capital, in vast abundance.

With this capital, companies can first create the supply and then acquire customers by offering exceptionally cheap products. By employing a predatory pricing strategy, these companies can eliminate or buy out their competitors.

So, what happens after the monopoly has been created? A price increase, of course. Consequently, a select few companies get bigger and bigger, and the smaller players disappear altogether–a narrative that is playing out with increasing frequency.

The problem is perpetuated by the fact that investors continue to inject capital into these companies despite their already-outrageous valuations, knowing they possess mindshare and control over the market and their customers (looking at you, Facebook). Many companies have failed in this endeavor–WeWork being the most notable example in recent years–but more should and can be done to put an end to this trend.

As a responsible stakeholder in the market–whether one is a customer or business owner–it’s crucial to support sustainable growth. Fellow entrepreneurs should focus on business profitability first. A proper valuation will come if you have a robust business model. Do not get distracted by achieving high valuation, or go down the route of creating unrealistic projections to get investment from VCs. What’s even better is to build businesses that deliver double (financial and social impact), or triple (financial, social, and environmental impact) bottom lines.

As consumers, we should also support responsible companies by making smart purchase decisions. We should know to look beyond the price tags, marketing, and packaging; instead, taking the time to understand more about the vision and values behind the product. Be a smart consumer, and spend your money wisely by supporting causes that you believe in.

As an animal lover, I have been buying cruelty-free products for years. Recently, I’ve noticed a broader trend in the cosmetic industry, where almost all brands are adopting a more ethical stance. This shift is a direct result of education on the part of consumers, and every industry has the potential to transform.

If we all do our part and be more honest with ourselves, significant change can happen.