My Turn: AOL's Ted Leonsis on Happy Companies

David Brabyn / Corbis

Wall Street was perplexed last month when Google decided to flout China's censorship laws, routing Web users to an unrestricted search page based in Hong Kong. In the short term, the move threatens the company's foothold in the biggest Internet market in the world. By my lights, however, it's a brilliant long-term plan.

I have followed Google for more than a decade—first as one of the earliest investors (pre-IPO!) in the company and later as an AOL executive who helped arrange a pair of big partnerships with the search giant. But my interest has always been more than merely financial. Google is a prime example of what I call a double-bottom-line company—an organization that measures its success by both its fiscal results and its positive impact on humanity. Google aims to make money, of course, but it also has a motto ("Don't be evil") and a higher calling: to organize the world's information and make it universally accessible. By refusing to participate in Chinese censorship, the company imperiled billions of dollars in future profit. More important, it protected its status as a happy company at peace with its values—and happy companies are more, not less, likely to continue being successful.

The notion of championing principle over profit may strike some people as naive. But I'm no socialist or sap. I realize that "doing the right thing" is meaningless if it doesn't keep the lights on. My 25 years as an entrepreneur and investor, however, have shown me firsthand the link between pursuing happiness and achieving financial success.

AOL offers one of the best examples of my happiness model at work. When the company pursued the higher calling of spreading Internet access, both our bottom lines were healthy and our company was happy. When we got off that path and worshiped the false god of the short-term earnings bump, we lost our way. We sold off businesses we had pioneered, such as the online dating service Love@AOL. We walked away from a 20 percent stake in, because another retailer offered us a way to impress Wall Street with better quarterly profits. And we ultimately entered a merger with Time Warner, a move that I opposed in part because it subverted our goal of building a global medium and catered to financial analysts instead. We were no longer asking ourselves, "What great product did we release this week?" Everything—everything—was about whether we were going to send enough money to New York to help our corporate parent impress investors. I remember coming out of meetings and saying to people, "We could be making nuclear-power plants, for all you could tell from that meeting."

I utilize double-bottom-line thinking in my personal investments as well. As the principal owner of the Washington Capitals hockey team, I probably could have earned short-term praise by lowering our already low ticket prices in recent years. But the team would soon have lacked the financial resources to put a Stanley Cup contender on the ice. So in order to generate enough money to win—and make our fans really happy—I raised ticket prices. Now we have a happy team, happy fans—and a shot at a championship.

Admittedly, the concept of the double bottom line is unlikely to pop up in business schools any time soon. To people who talk in terms of "the hurdle rate of return" and "maximizing shareholder value," the idea of pursuing happiness seems woefully out of place. But consider that no less than Charles Forbes—founder of Forbes magazine—has said that business originated to produce happiness. He might have added that happiness can produce business as well. Revenue growth, after all, is central to the service of a company's higher calling—a fact that Google certainly appreciates, even as it seems to be walking away from easy profits.

Leonsis is a former AOL vice chairman, the principal owner of the Washington Capitals, and the author of The Business of Happiness.