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David Hurst delivers multimedia presentations and a range of customized experiences that will inform and inspire your people and help them learn from the past, master the moment and create the future. For a recent sample of a short keynote to the 10th Annual Global Drucker Forum see the embedded link.
2020 marks the 50th anniversary of Chicago economist Milton Friedman’s famous (or infamous, depending on your point-of-view) claim that the only social purpose of business is to increase profits. This doctrine proved immensely popular among corporate managers but has been increasingly challenged as being harmful to society. McGill management professor, Henry Mintzberg was an early critic and has been a consistent advocate of a broader approach to social purpose.
Victorian political commentator Walter Bagehot (1826-1877) once wrote “The whole history of civilization is strewn with creeds and institutions which were invaluable at first, and deadly afterwards.” That describes Milton Friedman’s work – very helpful in the beginning but a hindrance subsequently.
I graduated from Chicago’s MBA program in 1972, imbued with the idea that management was all about the allocation of resources, as assessed by the Capital Asset Pricing Model (CAPM). I had majored in finance, studying with Gene Fama his newly-developed Efficient Market Hypothesis that was shaking up the world of finance. I was ready to change the world of management….
I soon found that practicing managers weren’t using theory to tell them what to do – they were using it to rationalize what they already wanted to do. Back then it was clear to young managers like me that the great post-war boom in economic activity was slackening and that the large corporations had accumulated a great deal of fat and were guided by a fuzzy sense of purpose that supported a relaxed ‘country-club’ approach by managers. We young Turks wanted to change that and make corporations more efficient. Fama and Friedman’s perspectives and theories proved invaluable in cutting through tired old stories with a powerful counter-narrative. The era of conglomerates, leveraged buyouts and private equity was launched on this new logic.
At first this new approach seemed very successful. Conglomerates thrived and their founders like “Tex” Thornton of Litton Industries, Hal Geneen of ITT and Jim Slater of Slater Walker (in the UK) became business folk heroes. The exploits of LBO firms like Kohlberg Kravis and Roberts (KKR), fueled by junk bonds, were celebrated in the press and their billionaire principals regarded as geniuses. But it didn’t last: monolithic concepts taken to their (il)logical conclusions never do. One has to take time, change and people into account: nothing lasts unless it is incessantly renewed.
It seems that enterprises (and both democracy and capitalism can be thought of as giant enterprises) are conceived in passion, born in communities of trust, grow through the application of reason and mature in power. The young become old and success is followed by excess. Gradually control of the corporation was taken over by elites, who used concepts like Friedman’s to rationalize their actions. Ideas once used to challenge outdated attitudes were now used to justify the new, emergent status quo. In recent times in Anglo-American business the result has been the steady liquidation of productive enterprises, the creation of oligopolies and the emergence of a bloated financial sector. Value extraction has replaced value creation.
Deadly indeed, but we know the enemy and it’s not Milton Friedman: it’s us.
A few months ago I had the pleasure of meeting Hunter Hastings online. Hunter is an economist by training, a member of the Mises Institute and a follower of the Austrian School of economics. We got to chatting and he saw my presentation When the Science is Uncertain Turn to the Humanities, which I delivered for the I4J Leadership Group. As a result he asked me to do a podcast for the Mises institute
The podcast has now been published as Business School Fallacies: Acting Your Way To Better Thinking.
Thanks Hunter – it’s been a pleasure working with you!
Too little, too late
Only a local doctor and his colleague recognized the pattern – a plague was beginning to sweep through the population. They tried to alert the authorities, but the government was reluctant to sound the alarm. Some action was taken, but the language was optimistic and politicians downplayed the seriousness of the problem. It took a jump in the death toll before serious measures were taken: the town was sealed, and a plague officially declared. The pestilence went on to ravage the city, as usual affecting the poor the most.
From allegory to analogy
You may recognize this story outline from Albert Camus’ The Plague (1947). Anyone who has read his newly popular allegorical novel would know what to expect during a pandemic. At the onset of the current coronavirus pandemic, when there was little data, experts conducted what can be thought of as an analogical inquiry, using the liberal arts.
They consulted historians who had studied the flu pandemic of 1918 and other plagues from the past. They looked for comparable coronaviruses, like SARS and MERS. They began to compare experiences in different countries with similar circumstances. They searched for metaphors and analogies, even fiction like The Plague for ideas that might be relevant.
Action before data
Like so many entrepreneurs, it seems clear that those countries whose leaders took early decisions to quarantine their societies, based on wise judgement, had much better experiences. They were willing to commit to action, rather than wait for the inevitable delay for data and calculation. Only once data was available could they claim to be ‘guided by science’ and ‘evidence-based’. But because of the exponential growth of the virus, a few days delay could make a huge difference.
What really matters
“There are only two or three human stories,” wrote Willa Cather, “and they go on repeating themselves as fiercely as if they had never happened before.” We are living through just such a story right now.
The universe may be made of matter, but we humans live in a world of value and significance, of ‘what matters’. Science deals with fact, narrative deals with truth. As screenwriter, Robert McKee explains, “What happens is fact, not truth. Truth is what we think about what happens.”
Leadership requires empathy and decency
This is the power of analogical inquiry. The liberal arts help us learn from the experiences of others, to feel what they felt and to think what they thought. We call the quality ‘empathy’, the essence of what it means to be alive and the critical ingredient of effective leadership – a preoccupation with “what matters”.
This is Camus’ message: the “plague”, ill-fortune and injustice in its many forms, comes and goes but never completely disappears. It is the underlying human condition, to which our response must always be one of caring – ‘common decency’ “There is no question of heroism in all this,” says Dr. Rieux, Camus’ narrator, “It’s a matter of common decency. That’s an idea that makes people smile, but the only means of fighting a plague is – common decency.”
Drucker Forum 2020
On June 17, 2020 from 1pm to 2pm. Eastern Time I will be giving a TED-style talk and hosting a discussion with i4j. The password is i4jcommunity. i4j Innovation for Jobs is a global leadership forum organized by the IIIJ Foundation, a 501(c)3 non-profit organization with headquarters in Silicon Valley.
At the onset of the coronavirus pandemic, when there was little data, world experts conducted what can be thought of as an analogical inquiry, using the liberal arts. They consulted historians who had studied the Spanish flu pandemic of 1918 or the Black Death in medieval times. They look for other coronaviruses that might be comparable, like SARS and MERS. They began to compare experiences in different countries with similar circumstances. They searched for metaphors and analogies, even fiction (e.g. Albert Camus, The Plague) that might be relevant. Only once data was available could they claim to be ‘guided by science’ and ‘evidence-based’. In this presentation I suggest that analogical inquiry is at the root of all learning in conditions of uncertainty a.k.a. ‘life’. As information becomes available, abstraction and analytical thinking allow us humans to turn uncertainty into risk that can be managed. But it all begins (and ends) in uncertainty….
My latest article, Forces of Nature, has just been published in Strategy+Business. In it I discuss Canadian ecologist, “Buzz” Holling’s adaptive cycle and how, transformed into the ecocycle, it can help us understand the dynamics of complex adaptive systems.