COLUMN-Business and the common good-Chrystia Freeland
(Chrystia Freeland is a Reuters columnist. The views expressed are her own.)
By Chrystia Freeland
NEW YORK May 12 (Reuters) - Roger Martin is an unlikely revolutionary: he is the dean of the Rotman School of Management, the University of Toronto's business school, he sits on blue-chip corporate boards and he has worked as a consultant for big traditional companies like P&G and GM.
All in all very much the CV of a pillar of the corporate establishment. (Disclosure alert: I am a member of the Rotman School's advisory board.)
But this month Martin has published a book whose gentle tone belies its seditious content. Here's what is radical about "Fixing the Game: Bubbles, Crashes and What Capitalism Can Learn from the NFL" -- instead of asking how businesses can organize themselves to be more effective and more profitable for their shareholders, Martin wants to figure out how society should organize business to be more effective for all of us.
The corporate intelligentsia -- business school professors, management consultants and many of us scribblers and squawkers of the business press -- focuses nearly all of its attention on the first question. That is a perfectly worthy subject. Indeed, the huge and continuing improvements in business productivity over the past 200 years -- since the industrial revolution -- have made more of us richer and healthier than human beings of the previous two millennia could have imagined.
That's why there is such an avid audience for thinking about how to run your business -- whether it is a listed company, a start-up, or your own career -- better. And this type of work has the further virtue, for both its practitioners and its users, of not really threatening anyone. It is technocratic, not political, and it often offers the additional feel-good fillip of a practical path toward improvement. It is a universe of engaging stories and ultimately uncontentious outcomes -- think the wildly popular oeuvre of Malcolm Gladwell.
Even the harder edge of the business commentariat -- muckraking journalists, for example -- operates largely within this paradigm. The questions we usually ask are about whether laws were broken or investors were deceived.
But the business world also presents an entirely different set of issues: how well the existing rules are working for the common good. This is a deeply political question and it is a central preoccupation of politicians and policy-makers.
But inside the business community -- not so much. That is more than a shame. It is dangerous, because surely the lesson of 2008, and maybe even of 2001, is that the American version of capitalism contains some pretty serious systemic flaws.
The power of Martin's book is that he steps outside our existing paradigm to ask whether the rules of the game are working for the system as a whole. That's a departure for Martin, whose previous writing and consulting work was mostly from the more traditional -- and safer -- perspective of how to make your company work better within the existing order. Venturing onto this more controversial terrain is a risk for Martin, and he knows it.
"This book represents a departure from my previous three books in that they were largely devoid of criticism," Martin writes. "In this book, I am critical of some institutions (for example, hedge funds). However, I want to be clear that I bear no ill will to the people inside them."
That final sentence is sure to enrage the guillotine crowd, whose chief complaint about the aftermath of the financial crisis is that not enough of the guilty have been punished. If that is your view, Martin's discomfort about naming and shaming may seem like a cop-ut.
That couldn't be farther from the truth. While Martin's approach may be less viscerally satisfying, it is actually more radical. The central insight of his book is that the rules of capitalism aren't about God-given rights a la Hayek, Ayn Rand or the Tea Party. They are a social construct and it is the right -- indeed the duty -- of society to ensure that they are working for the common good.
Martin's unifying metaphor -- and here I do see a reach for the best-seller list! -- is a comparison with the NFL. The league's commissioners, he argues, are constantly tweaking the rules of the game to ensure the right collective outcome. When a brilliant coach or player devises a technique to strengthen defense, for instance, the commissioners alter the rules to offset that advantage. Capitalism's rule-makers, Martin believes, must be likewise perpetually alert to these sorts of business innovations -- the kind of thing lionized in the traditional business advice best-seller -- and change the rules of the game to neutralize their impact.
Martin has stuck to the business book convention in one way -- notwithstanding his jabs at a few business titans (notably GE's Jack Welch and hedge fund giant Stevie Cohen), his is ultimately a sunny, can-do tone. " In doing so, we can restore the core of business and capitalism. We can fix the game -- until the next time we need to tweak it!" he concludes with a jaunty exclamation point.
Those of a more skeptical bent should follow Martin's book by reading an essay by Tyler Cowen, the prolific and provocative libertarian economist, published earlier this year. His theme is income inequality and he concludes with the scary thought that the rise of the knowledge economy, and of superstar salaries for its gladiators, may mean that the players will permanently outfox those charged with tweaking the rules to keep them in check.
"It is naive to think that underpaid, undertrained regulators can keep up with financial traders, especially when the latter stand to earn billions by circumventing the intent of regulations while remaining within the letter of the law," Cowen writes. "That's an underappreciated way to think about our modern, wealthy economy: Smart people have greater reach than ever before, and nothing really can go so wrong for them. As a broad-based portrait of the new world, that sounds pretty good, and usually it is. Just keep in mind that every now and then those smart people will be making -- collectively -- some pretty big mistakes."
Good luck mustering the political will to keep them in check. (Editing by Jonathan Oatis)
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