From time-to-time, I find myself in a philosophical discussion with colleagues about our economy and our brand of capitalism. There are, of course, the two extreme views on this subject: (1) markets should be the only determination of value with no interference from government and (2) free markets are bad and central planning is the way to make sure people are protected from greed. Most of the folks I know are not at either end on this spectrum but are much more towards the center.
After one such conversation, I found myself saying to a colleague that, “An economy without capitalism is lame; capitalism without regulation is a cancer.” I liked that comment so well that I decided to use it on my e-mail signature for awhile. It seems very obvious to me that we can not, do not and never have had a totally free market version of capitalism. Certainly the headlines exposing company and government excesses proves the point that it isn’t wise to let things go unregulated. The question always seems to be how far do we go with the regulation? How much do we allow government (local, state and/or federal) to interfere by favoring industries or businesses within those industries? How much do we allow businesses to influence government through lobbying? The amount of money involved will certainly corrupt those who are governing and lobbying.
It seems clear to me that the U.S. government at many levels is almost as corrupt as just about any other government; we just call it lobbying. I’m not alone in this view (see blog post). It also seems to me that businesses, as they grow to become “big business,” will always cater to the shareholder often with reckless disregard for the greater good and long term view of stakeholders. I wish to note that organized labor is also big business and should be included in that category for the purposes of this essay. The gift we’ve had so far seems to be that we have been able to balance those two diametrically opposed ideals of a free market and protection for stakeholders. But the time has come for us to re-evaluate things. Both because of the force of global connection and because our country is now seeing a vexing problem of concentration of wealth in a minority of stakeholders. In other words; whether you agree or not, the perception by a growing majority (and perception is reality) is that the system is no longer “fair.” We who believe in our system and wish to see it and our country thrive, ignore this reality at our own peril.
My point here is that we are at a crossroads. Enterprising people will take advantage of the opportunity presented by the disenchantment with how things are going. I don’t know what form that will take for the entrepreneurs among us, but I suspect it will have something to do with building a business that is recognized as embracing a “high ethical standard,” will be sustainable (and all that that means in terms of environment, resources, etc.) and will provide an exciting, challenging workplace. Employee motivation will follow the concepts that Daniel Pink outlined in “Drive” minimizing the emphasis on money. CEOs will earn a reasonable multiple of the employee salaries.
The New York Times Business Day section on 10/29/2011 published an essay by Jim Collins and Morten Hansen titled, “What’s Luck Got to Do With It?” I was impressed with the response that Progressive Insurance Company had to California’s proposition 103 which definitely slammed the insurance industry. I think we would all do well to look at our businesses (large or small, private, public, for-profit or not-for-profit) and see how we can best respond to the Occupy Wall Street mentality. It does us no good to rail against it. Nor does it help to declare how “they don’t get it.” Instead, we can use this opportunity to our competitive advantage and rebuild our business to one which is truly admired by customers and competitors alike.