Reversing Our Declining Standard of Living
From the time of Christ to the mid 18th Century little happened to improve the quality of life of the average person. However, by 1880, the most innovative, entrepreneurial, and technological period in the world’s history was in full swing. The era from 1920 to 1970 brought the “Glorious Period,” a time of miraculous development. It created sustained economic growth and a dramatic improvement in the standard of living, radically transforming the average person’s life.
Since then, our growth has run out of fuel. After 1970, except for a brief period where the advent of personal computers and the internet launched a growth revival, progress was reduced to a crawl. It is currently all but stalled.
Today, anxious parents of school aged children struggle with the thought that their children will not be as well schooled, as healthy, or as wealthy as themselves. They expect their children’s standard of living to decline.
Yesterday’s “Giants of Enterprise”
The “Glorious Period” of the 20th Century was built on innovation and entrepreneurship. Andrew Carnegie, George Eastman, Thomas Edison, Graham Bell, Henry Ford, Thomas J. Watson Sr., Charles Revson (Revlon), Sam Walton, and Robert Noyce were the “Giants of Enterprise” of this era. Between 1862 and 1957, they and many others created an era of unrivaled prosperity.
They were individuals of exceptional drive and ambition: risk takers, innovators, experimenters. Hungry for success they overrode their fear of failure. They believed in themselves, placed no limits on their talent, and were not afraid to break old rules and make new ones.
These Giants sought new ways to solve old problems, generally by exploiting technology. They sought to serve their markets with their inventions, and where there was no market, they created them.
Helpful was the British and American cultures which encouraged individualism and personal financial success. Individuals were rewarded for directing their efforts into business and fully venting their talents. These “Giants of Enterprise” were the engines of prosperity that displaced a harsh standard of living.
Who Are Today’s Giants of Enterprise?
In today’s business landscape, we more often see fake business conducted on TV than the true entrepreneurial business that took us to where we are. Shows such as Shark Tank regularly engages in bogus deals that are hyped as if real business is being conducted. The Apprentice makes viewers believe that successful business is about “The Art of the Deal” rather than serving customers.
In this bogus world of the Fortune 500, corporate life is not a long-term enterprise, but a life of quarterly reports where the model of corporate governance is shareholder value. It is a world where corporate fraudulent behavior, such as that of Wells Fargo, is excused as a mistake by none other than Warren Buffet. A world where CEOs are the acolytes of Wall Street; a cabal that enriches the managerial class at the expense of employees, customers, suppliers, and communities.
Fortune 500 corporations are the captives of Wall Street. To the drum beat of profit-obsessed banks and hedge fund managers, they are marched into valueless mergers and acquisitions. The only interest served in these deals is that of the “Financial Engineers” and the “Corporate Leadership Class”. Generally, no new value is created. What they do create is a rich stream of fees for banks and hedge funds. CEOs, like spin doctors, tout their acquisitions or mergers as far-sighted growth strategies. Which only serves to enrich banks, hedge funds, and corporate leaders.
Businesses’ Twilight Zone
The current environment for CEOs is a mystical twilight zone having few touch points with reality. Wells Fargo’s former President John Stumpf, in a moment of fantasy, suspended reality and blamed 5,000 employees for the bank’s recent fraudulent behavior which he had abetted. The make-believe world of today’s business is not limited to Wells Fargo. In recent years, there has been a litany of corporate scandals across a wide range of sectors, including: banking, utilities, technology firms, media, engineering, consulting, and auto manufacturing.
In the auto sector, for example, there is an on-going and persistent crime wave. Think of GM’s recent ignition key cover-up that resulted in the loss of 124 lives. Volkswagen and Audi and their almost-successful emission standards deception. Then there is the biggest business fraud in recent memory: the mischief of the mortgage lenders in 2008 that resulted in the near collapse of our economy. In reviewing fines paid by these corporations, one cannot help but think big business has concluded it’s “cheaper to cheat and pay” than to conduct business ethically and legally. In short, Big Business is living in a dream where economic reality is suspended as a matter of course.
Who will be the Successful 21st Century Corporations?
If we really want our economy and standard of living to grow again, we must say enough. Business leaders must now make the tough-minded decision to cease their anal concentration on shareholder value. The focus must be shifted towards creating a prosperous society where wealth is shared equitably. To do so requires:
- A focus on innovation and entrepreneurship;
Prosperity depends on the development and commercialization of ideas. The task therefore is to bring innovative ideas generated in the lab to market. This requires an enabling culture that supports rational thought and relies on empirical observation. Second, society must support the full venting of entrepreneurial talent. Third, corporate leaders must shift their organizations from a managerial to an entrepreneurial model.
- Creating a culture that demands constant revolutionary change;
Leaders must focus on shifting organizational thinking from one that relies on evolutionary progression to constant revolutionary change. Constant revolutionary change is what creates limitless prosperity. It fosters economic development and job creation. It is also systematic, purposeful, and entrepreneurially driven.
- Destroying the enemy of prosperity: mindless bureaucracy;
A large proportion of Fortune 500 corporations have devolved into senile decay, bankrupt of ideas. They have failed to adapt and renew themselves, instead becoming rigid artifacts, afflicted with an inability to change. Instead of planning for the future, they obsessively cling to business models that are increasingly outdated. Their only hope for growth is to merge or acquire. The alternative is for leaders to turn their organizations into the vibrant, innovative, entrepreneurial enterprises they once were.
- Changing the Mindset;
Corporate leaders and our politicians promote capitalism as one of our fundamental institutions. This is too narrow a view. Rather, leaders need to promote the merits of an entrepreneurial, innovative society. Innovation and entrepreneurship must be our sustaining organizational activity. They must be the norm, an everyday activity of public and private sector organizations. It must permeate the culture of society and of organizations.
In sum, I am calling for a radical change in our thinking, particularly amongst our largest businesses and organizations. It is not so much about defending capitalism as a way of life, but about focusing on what truly creates prosperity and economic development. To continue improving our quality of life, our focus as a society must be on innovation and entrepreneurship as a life-sustaining organizational activity. Only then will we halt the decline in our economic development and create a prosperous society with an ever-increasing standard of living.
Eamon Hoey is a business consultant, author and speaker. He delivers insightful ideas and strategies to solve the 21st Century’s complex business problems. Eamon cuts to the core of how to achieve sustainable long-term growth, corporate longevity, and above-average corporate performance. Find out more at www.hoeyassociates.com