The Evolution of Capitalism

Dinosaurs fightingIn 1986, I attended my 10th MBA reunion. I sat in a class taught by Joseph Bower, along with the classes of various years ending in a “6” or a “1.”

Bower talked about global over-capacity in the chemical industry and what could be done about it: “co-opetition” was his solution. The 5-year people looked somewhat bored by it. I found it quite fascinating, as did others in my year.

But the old guys were apoplectic. They spluttered and muttered things like ‘what has this school come to, don’t they know it’s a business school,’ and the like. To them, it was but a short hop to socialism.

It was never that simple. At that time there were already newspaper company joint operating agreements, which amounted to co-opetition in the very newsprint these old gents held in their hands at the Club in the evening. But no matter, ideology dies hard.

Their form of ideology—competition to the death, but in a gentlemanly kind of way—went through a resurgence in the 1980s with the advent of competitive strategy. We heard some about strategic alliances, but as far as I was concerned, co-opetition didn’t get back to the front page.

New Assaults on Old Business Ideologies

But as Michael Jackson once said, that was then: this is now. Now there is some serious re-examination going on about the nature of capitalism.

Umair Haque, who’s based in London, is burning up the Harvard Business Review blog scene by writing about constructive capitalism and about the economics of good and evil

At Harvard itself, Bruce R. Scott  writes with great perspective and wisdom about the complex relationship between democracy and capitalism. Sorry, die-hard fans of Adam Smith’s invisible hand; it just ain’t that simple.

And speaking of the Invisible Hand, Adam Smith first used that metaphor in his earlier book, the Theory of Moral Sentiments. He used it to describe the natural working of human sympathies for each other. Over a decade later he resurrected the metaphor to do double duty in Wealth of Nations, where he used it to describe the workings of a competitive market.

At the Boston Consulting Group, Philip Evans and team have done great research into just how it is that Toyota is so much more cost-effective than Detroit at building cars. It’s not pension and health care costs—it’s more effective process innovation, which in turn comes from—omigosh, collaboration. I imagine the old-timers from my reunion popping a blood vessel over that one.

I’m currently reading Winner Take All: How Competitiveness Shapes the Fate of Nations,  by Richard Elkus. Elkus was present at the creation—and destruction—of the US consumer electronics industry, working for Ampex.

Ampex coulda been Sony, or Toshiba. The reason it wasn’t is excruciatingly obvious as Elkus tells the tale of US management doing its best: valuing the transaction over the relationship, focusing on competition not collaboration, channel-loading and fudging costs, and converting all business issues into present value financial calculations.

Up against an Akio Morita, who actually believed in alliances and collaboration, who understood interconnection in technologies, and who worked for the long term, Ampex didn’t stand a chance. Nor Zenith. Nor, I would add, Detroit. The colossal disadvantage of our national economy at this point, he argues, is that we have sold all our technology for licensing fees, outsourced all our manufacturing for low input costs for quarterly earnings, and made ourselves little else but master marketers and consumers.  We exited what BCG called ‘dog’ businesses, and ended up dog food.

The Coming of Collaborative Capitalism

I’ve played around with various terms for it, but I’m liking “collaborative capitalism.” It’s light-years beyond 1986’s co-opetition, because it’s not just capacity-sharing.  It’s true collaboration and trust, working beyond corporate walls and across companies.  Many of us are seeing this trend at the same time.

Way back in 2002—a couple recessions or so ago—I wrote a little article called The Death of Corporations.  It basically said companies who competed against each other were, to use Robert Frost’s metaphor, disappearing not with a bang, but a whimper, as commerce gradually begins to operate across and through companies, rather than in the form of mega-goliath companies clumsily "competing" against each other, spouting their platitudes.

I still think that article’s going to be an overnight sensation, it just needs a little more time…

 

4 replies
  1. Drew Marshall
    Drew Marshall says:

    The concept of collaborative capitalism strikes a disconcerting chord. One of the challenges of trying to change the way we perceive current business practices is that the weight of the language we use can play havoc with our intended meaning. In this case the concept of reinforcing and in some cases restoring collboration to the practice of a better form of commercial exchange will struggle against the word "capitalism" and its attendant baggage. Capitalism simply carries more weight.

    To profoundly change the way we behave, to replace subterfuge and transaction with trust and transformation, we may need to ditch the word altogther. That said, the limits of language are such, how do we capture the freedom of individual rights and ownership that lie at the heart of capitalim without sacrificing our best effort to change common practice?
     

    Reply
  2. John Gies
    John Gies says:

    Charles

    Thank you. I have been having a similar conversation with colleagues now for the last year or so. It is hard for many of us who grew up with Reagonomics and the ethos of the "free market", to get the idea that humans and societies are bigger than income, profit and growth.

    We have the talent and capabilities to help everyone experience better health, freedom, education, job satisfaction and growth. And we don’t need to do it with a government program.  The challenge is that the old way (either side of the aisle) won’t get us there. We need to as you say re-think how we do that. And the most powerful force capable of achieving that is Business.

    Thanks for your insights and take good care,

     

    John

    Reply
  3. Charlie (Green)
    Charlie (Green) says:

    John, I agree with you (for what that’s worth).  If business can move its thinking to encompass broader concepts, it is the most powerful force out there, and it’s generally preferable to have that impetus come from business than from regulators or government forces.  That said, the level of thinking at this moment is still very much unconsciously incompetent–keep up the good fight, we’ve a ways to go.

     

    Reply
  4. Charlie (Green)
    Charlie (Green) says:

    Drew, you raise a really interesting point.  You’re suggesting that throwing "collaboration" up against "capitalism" is only going to result in less impactful collaboration–that our language is so strongly imbued with "capitalism" that it will win out.

    I think the subject–the impact of vocabulary on change–is really important, and welcome your thoughts on this.  And just to stimulate the discussion, let me suggest precisely the opposite may be true.

    Precisely because "capitalism" is such a strongly experienced word, when we combine with a cognitively differing word, we create dissonance.  Or so I would argue.

    I went through precisely this decision when titling my last book, Trust-based Selling.  At least one client told me they wouldn’t buy a book with ‘selling’ in the title, because they didn’t want to have ‘selling’ around their firm.  Obviously I didn’t take their advice, because the point I want to make is that what sounds like a contradiction in fact doesn’t have to be. 

    The downside of just skipping "capitalism" altogether in favor of a new word is that it looks disingenuous.  The truth is, people ‘sell’ all the time, and calling it "business development" sounds like title inflation.  Or at least it does to me.

    Ditto with collaborative capitalism.  Are we really talking about a non-capitalist substitute?  I don’t intend to be; I intend more to convey they we need to get back to roots and basics, and that properly understood capitalism can be far better than we have settled for.

    All that said, that’s just my point of view.  I love that you raised the issue of the power of vocabulary, and would love to hear more from you and others on it.  Thanks.

    Reply

Leave a Reply

Want to join the discussion?
Feel free to contribute!

Leave a Reply

Your email address will not be published.