Before launching into this week’s topic, I want to wish everyone who is celebrating or practicing a Happy Easter, Happy Passover, and Ramadan Mubarak!!!! It is a very special time of year for many people around the world!
Ask Harry #6: Is the free-market capitalist system broken?
Okay, now on to the question for this week: “Is the free-market capitalist system broken?” This question comes up quite often from my Kellogg students, business execs as I give presentations to several companies each week, and even my five children. In one-on-one discussions, the topic comes up in several ways, for example:
- “Harry, it is unfortunate that I have worked for several companies and have no examples of true values-based leaders. I am mostly disillusioned with Corporate America. Maybe I have been working at the wrong places??”
- ”I believe encouraging ‘get-rich-quick schemes’ is a core part of the problem. When it becomes all about the money, ethics are bound to be trampled.”
My opinions on this topic are based on my love of studying history and values-based leadership and focusing on achieving a BALANCED PERSPECTIVE. As I often state in my classes, in the past 50,000 years, I believe no one has come up with a better system than a free-market capitalist system. Look around the world, and let me know if you can find a better system.
HOWEVER, and I really mean “however,” even though I do not believe the system is broken, that does not mean it is a perfect system. Rather than throwing out the free-market system and starting over (by the way, the approach of starting over has never worked well if you study those who have tried), we should recognize that there are several significant issues that need to be addressed.
- It shouldn’t be “all about the money.” Yes, the money is part of the equation, but it needs to be kept in BALANCE. When I ask my students or executives if management should focus on their employees, customers, suppliers, shareholders, community, or society, I always let them know the answer is “YES.” It needs to be “all of the above,” not just the money. When someone responds by saying, “Harry, that is very difficult to balance,” I respond with one of my grandfather’s favorites quotes: “Yes, Harry, that’s why they call it work! That’s why we need more values-based leaders.” When it becomes “all about the money”, bad things happen. Look no further than Sam Bankman-Fried and FTX, Elizabeth Holmes and Theranos, Trevor Milton and Nikola, and Martin Shkreli and Turing Pharma…and for those who have been around for a while, let’s not forget Enron, Arthur Andersen, and WorldCom.
- Be careful what behavior we are rewarding. If the goal of the younger generation is to be part of the “Forbes 30 under 30” or the “Billionaire Club,” let’s not be surprised about the outcome. As stated in a recent Guardian article, 30 under 30-year sentences: why so many of Forbes’ young heroes face jail, ”The problem is the vision of success that we’ve been sold and the fetishizing of youth. ’30 Under 30′ isn’t just a list, it’s a mentality: a pressure to achieve great things before youth slips away from you. The pressure can lead certain ambitious people to take shortcuts.”
- A free-market system must include regulation. I often hear people state that we should minimize or eliminate a lot of the regulations in the free-market capitalist system. My opinion regarding this is very simple: Not a good idea! Once again, it involves BALANCE. Too much regulation can result in inefficiency. However, too little regulation can lead to very bad behavior.
- The key to improving the free-market capitalist system is to encourage leaders to be self reflective and take the time to determine their values and what really matters. If you are working 60-70 hours a week non-stop and are focused exclusively on profit and your company’s stock price, you shouldn’t be surprised about the outcome. I spend a lot of time in class getting students to slow down and ask the important questions so they can distinguish between “activity” and “productivity” and begin to focus on what really does matter. ”What kind of leader do they want to be? What example do they want to set for their teams?”
In summary, I believe a free-market system is the most workable, but it does require values-based leaders to make it work. That’s why I focus so much of my time on teaching VALUES-BASED LEADERSHIP!!!
Illustration by Mike Werner