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P H I L O S O P H Y F O R B U S I N E S S ISSN 2043-0736
http://klempner.freeshell.org/businesspathways/
Issue number 30
17th June 2006
CONTENTS
I. 'Overcoming Fundamentalism in Business' by John Renesch
II. 'The Way of Business: McDonald Story' by Tom Veblen
III. Alasdair MacIntyre's Revolutionary Aristotelianism: 2007 Conference
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EDITOR'S NOTE
The first person I met when I checked into my hotel for the Club of Amsterdam
Summit for the Future 2006 was John Renesch, a veteran San Francisco
businessman turned business philosopher who these days spends much of his time
writing books and speaking at conferences around the world. A fascinating
discussion ensued, and John agreed to write an article on some of the ideas and
themes we talked about.
It was during this discussion that I stumbled upon a distinction between the
'hard bottom line' and the 'soft bottom line'. The hard bottom liners say that
every business decision must be justified by bottom line forecast. The soft
bottom liners say the same thing that philosophers say about happiness -- the
best way to attain it is not by aiming for it. In other words, if you do lots
of other worthy things, ultimately your efforts will be reflected in the
balance sheet.
That question, whether we are talking about the hard or soft bottom line hangs
over both John Renesch's article and also the extracts which Tom Veblen has
kindly give permission to reproduce from his new book, 'The Way of Business'.
Business 'superiority' according to Veblen requires attention to values and the
interests of stakeholders. However, the question that the reader will be asking
throughout this provocative book is, 'Why should I want to be a superior
business practitioner?' Is this an appeal to the soft bottom line, or the more
radical claim that business success is not measurable purely in financial
terms? If the latter, then it is open to the sceptic to say, 'I'm not
interested in being "superior" in your sense, I just want my business to
succeed in financial terms.'
Alasdair MacIntyre is well known to generations of philosophy students as the
author of one of the best introductions to moral philosophy, 'A Short History
of Ethics.' His book, 'After Virtue' inspired a generation of virtue theorists.
His work has provided ammunition to writers on both the left and right of the
political spectrum; which is evidence, if more were needed, how useless these
labels are. As if to prove the point, the Human Rights and Social Justice
Research Institute are organizing a conference on 'Alasdair MacIntyre's
Revolutionary Aristotelianism' to be held at London Metropolitan University,
which is aimed at demonstrating MacIntyre's 'powerful contribution to the
contemporary resurgence of radical politics'. If you are interested in
presenting a paper, contact the organizers via their web address, below.
Geoffrey Klempner
-=-
I. 'OVERCOMING FUNDAMENTALISM IN BUSINESS' BY JOHN RENESCH
Repossessing Enterprise from Perverse Absolutism
Adam Smith, considered by many to be the 'father of capitalism' and the creator
of the 'invisible hand' metaphor for the free marketplace, was a moral
philosopher. He lived in the 18th Century before mass advertising, the practice
of 'creating demand' and the proliferation of publicly-traded stocks and stock
exchanges. He could not have envisioned how the marketplace could become so
manipulated, or 'un-free.' Neither, I suppose, could he have envisioned the
myopic focus on ever-growing profits and such short-term thinking as we find in
today's business climate.
Fundamentalists in business are fond of referencing Smith's invisible hand as a
traditional rationale for their strict adherence to bottom-line fixation. They
like to cite experts, as if quoting holy scripture, usually in short passages
or phrases. In the 1970s, U.S. Presidential Economic Advisor Milton Friedman
opined the only social responsibility for a business is to produce profits for
its owners. Invisible handers were quick to echo Friedman's opinion. After all,
Friedman had won the Nobel Prize! How could he have it wrong?
About the same time, American transformation theorist George Land published
Grow or Die in which he compared growth patterns in Nature with organizations.
Birth, death and transformations were explored as organic and evolutionary.
Recent decades have seen a radicalized interpretation of growth in
organizational leadership. 'Grow or die' has taken on a sort of imperialism in
boardrooms around the world. The fact that things in Nature are constantly
expanding, growing, dying and evolving has become narrowly defined as economics
being the sole benchmark for business. Or, as we often hear, 'It's all about the
money!' To 'grow or die' is no longer a theory or philosophy in business; it is
now the accepted 'reality' of the day in the eyes of all but a few exceptional
business leaders. It is such a common assumption in the mainstream that the
media and the general public accept it as normal.
In addition to this growing bottom-line absolutism there's been an
intensification of pressure to generate greater profits in a shorter period of
time. Not only is growth expected to be non-stop, so is the rate of increase!
Exclusive focus on the financial bottom-line is the epitome of fundamentalism
in business, adhering to an absolutist viewpoint with a certainty that rivals
papal infallibility. Trees and animals in Nature are constantly growing or
aging, this is true. New leaves grow while older ones die. In the animal
kingdom, skin and fur are shed while new growth takes their place. Some growth
is visible; some not. There is always something dying and something being born.
This is how Nature works. But focusing exclusively on economical measures, which
is unnatural, will eventually kill the organism we call corporation like cancer
cells running amuck.
Profit and economics are an essential part of any business. But they are not
the ONLY reason business exists. To take such a fundamentalist point-of-view is
akin to saying the sole purpose of the human body is to circulate blood.
Oxygenated blood is essential to staying alive but our bodies have many other
functions. Similarly, businesses serve their markets by filling a need or
improving upon some product or service. They provide noble engagement for their
members and, generally, aim to improve the human condition in some way. They
provide environments where their workers learn and grow, contribute to their
communities and, as all businesses must, deliver a return on investment to
their owners.
Grow or Die was a compelling title for Land's book which may explain why it was
so widely adopted as a mantra for those who like to 'quote the scriptures.' Thus
Land joined Smith, Friedman and others as oft-cited authorities for the
fundamentalists who love sound bytes that reinforce their cherished beliefs,
even if they take the authority's words out of context.
An interesting trait of the human mind is to put to use any dogma which
reinforces one's worldview or beliefs. This is how fundamentalism is born,
whether the beliefs are about religion, the law, medicine, government,
education or business. Any beliefs held as superior and reinforced by dogma can
become fundamentalist. In the case of business, if anyone has a propensity to be
greedy, selfish or in a hurry to get rich, one only has to find a way to justify
one's behavior. What better way to justify than to regurgitate Adam Smith's
'invisible hand,' Nobel Laureate Friedman's decree for exclusively seeking
profit, or Land's challenge to either 'grow or die'?
Visionary futurist and social scientist Willis Harman would compare such a
fundamentalist approach in business to the absurd notion of the human heart
asserting that it was the most important part of the body. Based on this
assertion, therefore, it should receive all the nourishment. All other parts of
the body would be starved because they weren't as important in the view of this
imperious heart. Can you imagine how long a person's heart would last if the
kidneys, lungs, pancreas, brain and other vital parts were starved of
nourishment in deference to the royal heart?
Corporations are human-made organisms, associations of human beings. To see
this association as having one solitary purpose and responsibility, to grow
only in economic terms, is such an extreme view that implosions like what
happened to Enron, WorldCom and other corporate collapses will become more and
more commonplace.
The business philosophy expressed by Adam Smith in the capitalists' bible, The
Wealth of Nations (1776), was set in a context of morality. You rarely hear the
fundamentalists reference his other book which was published a few years
earlier, Theory of Moral Sentiments (1759). Smith's genius allowed for a truly
free market to self-correct and ultimately serve everyone's welfare. The
pursuit of self-interest was not incompatible with morality. Modern capitalism
has devolved over the past two and a half centuries into a Darwinian means of
getting as much as possible for a few at the expense of the many. Many
businesses rely more on complying with laws and regulations that they do on
their own consciences, or morality. This is not only a mutation of what Smith
had in mind, it is unsustainable.
It is time for an explicit business cosmology that echoes Smith's principles
and reflects the realities of the day. This cosmology would recognize: 1.
people can be manipulated to make certain buying decisions through clever and
subliminal advertising, 2. laws and regulations favor some classes over others
and 3. day-trading speculation has replaced the true investment of capital.
The healthy organism, human-made or Nature-made, is balanced, vital and
sustainable, with all its components or cells functioning in collaborative
harmony. There are many ways to grow, ways that may not fit into the single
focus on the fiscal bottom-line. Nourish all parts of the organization and it
will be a healthier place to work, people will have more fun and it will likely
last longer if it is satisfying a real market need.
This is when enterprise comes alive, when people are openly excited to be
working in, doing business with and investing in enterprise.
---
The work reproduced here is licensed under a Creative Commons Attribution
NonCommercial 2.5 License.
(c) John Renesch 2006
E-mail: john@renesch.com
Web site: http://www.Renesch.com
-=-
II. 'THE WAY OF BUSINESS: MCDONALD STORY' BY TOM VEBLEN
Extract from the Preface:
... we want to seize the value and Perspective of passing
things, and so to pull ourselves up out of the maelstrom of
daily circumstance. We want to know that the little things
are little, and the big things are big, before it is too
late; we want to see things now as they will seem forever -
"in the light of eternity."
Will Durant 'On the Uses of Philosophy'
In 1993 a dozen intellectually curious American business practitioners set out
to better understand the meaning of business and business superiority in our
society. Deciding to pursue the matter dialectically, they formed The Superior
Business Firm Roundtable and launched into a decade-long philosophic inquiry.
The Way of Business presents a synopsis of that inquiry. Providing a unique
perspective on the working of the accomplished business practitioner's mind, it
addresses the totality of business -- the social and natural environments in
which it is embedded, the cultural determinants that bound it, the unique
features of its technique and operations, and the character and aspirations of
its practitioners [...]
No question, business is a social invention of great utility.
A specialized human endeavor, the business firm creates wealth through the
production of valued products and services. Defined in the real world by the
aspirations and capabilities of its customers, owners, managers, and cohort,
the superior firm provides individuals a means to express their instincts for
workmanship, stewardship, and initiation.
Socially compelled (men and women are, after all, social beings), the firm's
stakeholders collaborate to realize its potential and advance its well-being.
Succeeding, they advance as well the well-being of society. And therein lies
the meaning of business-stakeholder virtue, the relation of the firm to its
stakeholders and the other actors in society, the firm's social utility.
Human survival requires that superiority-excellence is one end toward which we
strive, whether as individuals, a species, a society, a nation, or an
enterprise. Though elusive, the determinants of superiority can be mastered.
Take business, for instance. In the marketplace, the business firm demonstrates
superiority by being the most competitively effective firm of its kind:
producing the most valued products and services, being the most profitable firm
in its industry, providing the most rewarding jobs and most satisfying work
environment, providing employees and workers the most satisfying compensation,
and providing owners the best financial returns. In community the business firm
demonstrates superiority by contributing to society: generating taxes, creating
jobs, supporting valued civic ventures, participating in the political process,
enhancing the natural environment, being a good neighbor, and conducting itself
with integrity. Finally, as a cultural artifact, the business firm demonstrates
superiority by expressing its culture's closely held beliefs and values. In the
United States this means that the superior firm accepts change as inevitable
and desirable, adheres to the law, supports the principle of private property,
is progressive, and advances individual sovereignty [...].
---
Extract from 'The Superior Firm in Action':
Creating a Global Agglomerate: Ray Kroc and the McDonald's Corporation
Achievement must be made against the possibility of
failure, against the risk of defeat. Where there is no
risk, there can be no pride in achievement and,
consequently, no happiness. The only way we can advance is
by going forward, individually and collectively, in the
spirit of the pioneer.
Ray Kroc 'Grinding it Out'
Ray Kroc came to maturity in Chicago in the 1920's. By all accounts he was an
ebullient young man, with a natural gift for dealing with people, and he
gravitated naturally to business and to sales. It took a while, but by the end
of World War II Ray had fashioned a modest success jobbing milkshake mixers to
the proprietors of soda fountains and fast food joints.
In 1954 he received an order from the McDonald brothers of San Bernadino,
California for two mixers, their ninth and tenth. Curious as to what a
hamburger stand operator could be doing with that many machines, he decided to
pay them a visit. Arriving at the McDonalds' place at noon, he was startled to
see a line of customers that extended out the door, down the street, and around
the corner. And it was moving. Obviously the McDonald brothers had invented a
better mousetrap.
The brothers' business scheme was simple: industrialize the preparation and
serving of hamburgers. Produce an acceptable hamburger and french fries at a
low price, maintain absolute cleanliness and provide sudden (fast) service. A
localized, endless belt of hamburgers!
Ray Kroc knew a fast food business winner when he saw one. Approaching the
McDonald brothers, he proposed that he take the concept national, becoming the
first national franchisee himself, in Chicago. The McDonalds knew their
'Speedee Service System' was something special. In fact, they had set out to
grow the business in California by franchising. It didn't work. None of their
franchises were able to execute and no lines formed anyplace but outside their
own. By the time Kroc showed up they had given up on the franchising idea and
were more than willing to let someone else give it a try.
Ray Kroc's success with franchising the McDonald brothers' system is well
documented. Tweaking the original concept, devising a more flexible retail
format, and setting a course of disciplined national expansion, Kroc proceeded
then to invent a new style of organization and shape the 'fast-food' industry
as we know it today.
Central to Kroc's business scheme was his intuition that a corporate
organization must 'be at one' with its social environment. The notion was
deceptively simple. The McDonald's corporation would function as the
'architect' and 'conductor' of a fast-food 'system,' engaging independent
retailers and suppliers in the task of executing the McDonald's technical and
service concepts nationally, and then globally. Governance would be grounded in
individual responsibility and accountability. Codifying operations and corporate
management, McDonald's Corporation as conductor of the operation would free the
system's franchised operators to perform as independent business practitioners.
Kroc's way of ordering the McDonald's corporation went beyond the
organizational techniques of his time. He didn't create a proprietorship like
the Hudson's Bay Company or a command-control organization like the Great
Northern Railway. Nor did he, as so many other manufacturers were doing,
slavishly imitate the staff and line/ divisional control mechanisms of General
Motors and General Electric. Nor was his new firm a cooperative, or a
conglomerate. Upending tradition, Kroc took an egalitarian approach. Suppliers
he brought into the scheme with 'a handshake agreement,' rather than a
contract, promising them exclusivity. Management of the individual stores
combined objective performance standards and intense education with the notion
of individual initiative. One aspect of this was the establishment of
'Hamburger University' to train new franchisees.
In short, what Ray Kroc created was radically different with the principles
guiding his venture, knowingly or not, ecological in nature. The result was an
'agglomerate,' with the heads of its freestanding business units acting in
concert (Kroc was, before all else, a salesman), thinking ecologically.
The force of the concept proved to be phenomenal. Starting with just one store
in 1955, the McDonald's system today operates in 122 countries around the
world. Thirty-thousand local locations (more than 70% are owned and operated by
independent business practitioners) serve 47 million customers each day. The
system's annual global sales exceed $35 billion and after 50 years the system
is still growing at 8% annually. Assuming an average of 25 employees per store,
the system now employees something over three quarters of a million people.
The McDonald's system continues its global course, optimizing its great
strengths both in the maturing markets of the United States and Europe and in
the rapidly growing markets elsewhere in the world. In the United States, for
instance, after 45 years of fanatical concentration on the McDonald's brand, it
began the process of acquiring other brands and marketing styles. Overseas,
continuing its agglomerate ways, it continues to outgrow its competitors.
The ripples of Ray Kroc's profound organizational insight continue. Pioneered
by McDonald's and other early adopters, prominently including Cargill,
Minnesota Mining and Manufacturing, Wal*Mart, SuperValu, and ConAgra,
agglomeration has taken hold globally. Whether consciously adopted or not,
agglomeration is now a central feature of business schemes as diverse as Nokia,
the Finland-based mobile phone manufacturer; Mitsubishi, the Japanese
manufacturing and trading conglomerate; Svenska Handelsbanken, Sweden's largest
consumer bank; UBS, the Swiss financial institution; Ikea, the Swedish home
furnishings designer and marketer.
A Note on Stakeholder Quality
Viewing business as a collaborative process, where the objective is to produce
tangible benefits for a venture's stakeholders, the practitioner is accountable
for the effectiveness by which products are produced and services rendered, jobs
provided, and profits realized.
Viewing business as an adversarial contest, where the objective of the game is
to win while competing fairly, he is accountable for living by the generally
accepted rules of the game. Viewing business as a moral drama, where the
objective is to promote the common good, the practitioner is accountable for
the utility of goods and services produced, the wisdom of judgements brought to
bear on political issues, and the support given to social causes.
Make no mistake, business is not the most benign human endeavor, but then, all
human endeavors engender conflict as people act to advance their own
aspirations. Central to human progress [...], human endeavor inevitably stirs
up conflict.
Is it any surprise, given the conflicts engendered by business, that wise
practitioners seek to affiliate with stakeholders who are virtuous, passionate,
and rational in their approach to business problems? Is it any wonder that the
astute practitioner seeks to refine the character, skills, judgment, and
determination of all those associated with the venture; to promote industry,
prepare for enterprise, and contemplate the future; to encourage reason and
virtue (politeness, fidelity, prudence, courage, humility, simplicity,
tenacity, and collaboration)?
In final analysis it is the aspiration and talent of a firm's owners managers,
and workers that determine, in large part, how it will be materialized and
whether or not it will succeed.
---
Note on McDonald's Corporation, 2004
McDonald's is the world's largest food service company with more than 30,000
fast-food restaurants in the United States, Canada, and overseas. Headquartered
in Chicago (Northbrook), Illinois, it has 418,000 employees, with foreign
operations contributing roughly 60% of system wide sales.
Sales and Revenue..........$19,065 million
Total Assets....................$21,790 million
Net Profit........................$2,275 million (12.0% ROTA)
---
Tom Veblen 'The Way of Business: An Inquiry into Meaning and Superiority'
Interface Publishing Minneapolis 2006
ISBN-13: 978-0-9777121-0-6
(c) Tom V. Veblen 2006
E-mail: Superbizrt@aol.com
-=-
III. ALASDAIR MACINTYRE'S REVOLUTIONARY ARISTOTELIANISM: 2007 CONFERENCE
http://www.londonmet.ac.uk/research-units/hrsj/events/conferences/
alasdair-macintyre.cfm
Alasdair MacIntyre's Revolutionary Aristotelianism:
Ethics, Resistance and Utopia
Friday 29th June to Sunday 1st July 2007
Conference Announcement
For more than half a century Alasdair MacIntyre has remained a fervent critic
of the structural injustices of capitalism. Indeed, nothing could be further
from the truth than the all too frequent mischaracterisation of his mature
ethical thought as a form of communitarian conservatism. Rather, from 'Marxism:
An Interpretation' through his essays for the New and Trotskyist lefts of the
1950s and 1960s to 'After Virtue' and subsequent texts, MacIntyre has attempted
to articulate and defend a form of politics that is adequate to the needs of
radicals in the modern world.
In his most recent works, MacIntyre has located a contradiction between, on the
one hand, the critical Aristotelian distinction between people as they are and
people as they could be if they realised their telos; and, on the other hand,
the tendency of capitalism systematically to thwart people's abilities to reach
their potentials. Moreover, he has suggested that radicals need to articulate a
politics of self-defenceā rooted in practices that challenge capitalism's
economic goals, and which are thus utopian in a non-utopian manner.
It is the view of the organisers of this conference that these three themes
within MacIntyre's thought -- his ethics of human flourishing, his politics of
resistance, and his practical utopianism -- suggest a powerful contribution to
the contemporary resurgence of radical politics. It is thus with a view to
exploring the radical and revolutionary implications of MacIntyre's work that
we welcome contributions to a conference on the contemporary relevance of his
ideas.
Further Information
This three-day conference hosted by the Human Rights & Social Justice Research
Institute, will held at the Graduate Centre at London Metropolitan University,
166-220 Holloway Road, London N7 8DB. Tickets cost £115 per person (£20 for
students) and includes the conference pack, lunch on Saturday and refreshments
throughout the conference programme. (Ticket prices are at the discretion of
the conference organisers).
Accommodation is available within the Halls of Residence and will cost
approximately £30 per person per night, in addition to the conference fee.
If you are interested in presenting a paper at the conference, please tick the
appropriate box on the Registration Form and further details will be sent to
you. Please note that speakers are exempt from paying conference fees.
For registration etc visit
http://www.londonmet.ac.uk/research-units/hrsj/events/conferences/
alasdair-macintyre.cfm
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