Capitalism
forever? Why Companies Fail
Sohail
Inayatullah
"Why companies fail," a remarkable
essay by Ram Charan and Jerry Useem in Fortune
magazine (May 27, 2002, 47-58) offers ten reasons to explain the crash
of great companies and three ways to prosper.
While focused specifically on companies, what Charan and Useem
miss is that their analysis can be employed to understand the globalized
system of capitalism that sustains these companies.
"Companies
are born, companies die, capitalism moves forward. Creative Destruction,
they call it." (48), what US Treasury Secretary Paul O'Neill calls
"the genius of capitalism" (48). But economic and meaning
systems (that frame what it is that we do when we wake up in the
morning) also fail. First,
is the problem of success. "A number of studies show that people
are less likely to make optimal decisions after prolonged periods of
success. NASA, Enron, Lucent, Worldcom all had reached the
mountaintop before they ran into trouble." (50). Might not this be
the case with the world capitalism system itself, 500 years of success.
No one can see that it too might fail, we are vested in it, from
superannuation to life in the Plaza, capitalism defines what we do and
how we do it. Fish cannot see water nor can we see life after
capitalism. Those at the center, who are mostly deeply vested in it,
especially can not see its future.
The
basic assumptions of endless consumption and growth is not really
contested. Maybe we might vote green or recycle but our bank account is
still with a bank, which is foundational to the capitalist system. Even
if we bank in a cooperative bank, they too must negotiate the larger
monetary system. But assumptions we must question.
Cisco,
did not, write Charan and Useem. "Cisco,
more than any other company, was supposed to be able to see into the
future. The basis of this belief was the much vaunted IT system that
enabled Cisco managers to track supply and demand in "real
time," allowing them to make pinpoint forecasts. This technology,
by all accounts, worked great. The forecasts, however, did not. Cisco's
managers, it turned out, never bothered to model what would happen if a
key assumption growth disappeared from the equation." (50).
Even when things were looking bad, CEO John Chambers was still
projecting 50% growth. He said: "I have never been more optimistic
about the future of our industry as a whole or of Cisco." (50).
As
14th century macrohistorian, Ibn Khaldun wrote in his classic
The Muqaddimah (An Introduction to Hisory): "
At the end of a dynasty, there often also appears some (show of) power
that gives the impression that the senility of the dynasty has been made
to disappear. It lights up
brilliantly just before it is extinguished, like a burning wick the
flame of which leaps up brilliantly a moment before it goes out, giving
the impression it is just starting to burn, when in fact it is going
out" (Khaldun 1967, 246).
Thus, the paradigm that informs how we see and create the
world is not questioned. Why is this so. For companies that fail, Charan
and Useem, quote Jim
Collins, author of Built to Last
and Good to Great. " The
key sign the litmus test is whether you begin to explain away
the brutal facts rather than to confront the brutal facts head on."
(52).
While for companies the brutal facts are often an
unsustainable business model, cash flow problems, too much risk, and
acquisition lust, for the capitalist system as a whole, the brutal facts
(taken from the United Nations Human Development Report, various years)
are:
·
While there are still 840 million people malnourished and 2.6
billion people have no access to basic sanitation, the worlds 200
richest people more than doubled their net worth in the four years to
1998, to more than $1 trillion
·
The assets of the top three billionaires alone surpassing the
combined GNP of all Least Developed Countries (LDCs) and their 600
million people.
·
People in Europe and North America spend $37 billion a year on pet
food, perfumes and cosmetics, a figure which would provide basic
education, water and sanitation health and nutrition for those deprived.
Writes Sarkar, " When the whole
property of this universe has been inherited by all creatures, how can
there be any justification for the system in which some one gets a flow
of huge excess while others die for a handful of grains?" (www.prout.org
and in Sohail Inayatullah, Understanding Sarkar. Leiden, Brill, 2002).
Of course, it could be that others are
just lazy or just not smart enough or too corrupt or too feudal or too
or perhaps we need to face the brutal facts: (1) capitalism has
succeeded for the last 500 years, recreating the planet, bringing untold
wealth and now placing the entire planet in jeopardy (2) capitalism can
create wealth but distribution remains a quandary (3) all systems come
and go, and new ones can and will be created.
Perhaps it is time to move away the
metaphor of the jungle of evolution (survival of the fittest) and design
and create a system that works for all humans and gaia. And perhaps that would be the greatest genius of capitalism,
self-destruction, so that a new system can emerge.