Why Won’t They Listen?
You’re smart. You’re liberal. You’re well informed. You think conservatives are narrow-minded. You can’t understand why working-class Americans vote Republican. You figure they’re being duped. You’re wrong.
This isn’t an accusation from the right. It’s a friendly warning from Jonathan Haidt, a social psychologist at the University of Virginia who, until 2009, considered himself a partisan liberal. In “The Righteous Mind,” Haidt seeks to enrich liberalism, and political discourse generally, with a deeper awareness of human nature. Like other psychologists who have ventured into political coaching, such as George Lakoff and Drew Westen, Haidt argues that people are fundamentally intuitive, not rational. If you want to persuade others, you have to appeal to their sentiments. But Haidt is looking for more than victory. He’s looking for wisdom. That’s what makes “The Righteous Mind” well worth reading. Politics isn’t just about manipulating people who disagree with you. It’s about learning from them.
Haidt seems to delight in mischief. Drawing on ethnography, evolutionary theory and experimental psychology, he sets out to trash the modern faith in reason. In Haidt’s retelling, all the fools, foils and villains of intellectual history are recast as heroes. David Hume, the Scottish philosopher who notoriously said reason was fit only to be “the slave of the passions,” was largely correct. E. O. Wilson, the ecologist who was branded a fascist for stressing the biological origins of human behavior, has been vindicated by the study of moral emotions. Even Glaucon, the cynic in Plato’s “Republic” who told Socrates that people would behave ethically only if they thought they were being watched, was “the guy who got it right.”
To the question many people ask about politics — Why doesn’t the other side listen to reason? — Haidt replies: We were never designed to listen to reason. When you ask people moral questions, time their responses and scan their brains, their answers and brain activation patterns indicate that they reach conclusions quickly and produce reasons later only to justify what they’ve decided. The funniest and most painful illustrations are Haidt’s transcripts of interviews about bizarre scenarios. Is it wrong to have sex with a dead chicken? How about with your sister? Is it O.K. to defecate in a urinal? If your dog dies, why not eat it? Under interrogation, most subjects in psychology experiments agree these things are wrong. But none can explain why.
The problem isn’t that people don’t reason. They do reason. But their arguments aim to support their conclusions, not yours. Reason doesn’t work like a judge or teacher, impartially weighing evidence or guiding us to wisdom. It works more like a lawyer or press secretary, justifying our acts and judgments to others. Haidt shows, for example, how subjects relentlessly marshal arguments for the incest taboo, no matter how thoroughly an interrogator demolishes these arguments.
To explain this persistence, Haidt invokes an evolutionary hypothesis: We compete for social status, and the key advantage in this struggle is the ability to influence others. Reason, in this view, evolved to help us spin, not to help us learn. So if you want to change people’s minds, Haidt concludes, don’t appeal to their reason. Appeal to reason’s boss: the underlying moral intuitions whose conclusions reason defends.
Haidt’s account of reason is a bit too simple — his whole book, after all, is a deployment of reason to advance learning — and his advice sounds cynical. But set aside those objections for now, and go with him. If you follow Haidt through the tunnel of cynicism, you’ll find that what he’s really after is enlightenment. He wants to open your mind to the moral intuitions of other people.
In the West, we think morality is all about harm, rights, fairness and consent. Does the guy own the chicken? Is the dog already dead? Is the sister of legal age? But step outside your neighborhood or your country, and you’ll discover that your perspective is highly anomalous. Haidt has read ethnographies, traveled the world and surveyed tens of thousands of people online. He and his colleagues have compiled a catalog of six fundamental ideas that commonly undergird moral systems: care, fairness, liberty, loyalty, authority and sanctity. Alongside these principles, he has found related themes that carry moral weight: divinity, community, hierarchy, tradition, sin and degradation.
The worldviews Haidt discusses may differ from yours. They don’t start with the individual. They start with the group or the cosmic order. They exalt families, armies and communities. They assume that people should be treated differently according to social role or status — elders should be honored, subordinates should be protected. They suppress forms of self-expression that might weaken the social fabric. They assume interdependence, not autonomy. They prize order, not equality.
These moral systems aren’t ignorant or backward. Haidt argues that they’re common in history and across the globe because they fit human nature. He compares them to cuisines. We acquire morality the same way we acquire food preferences: we start with what we’re given. If it tastes good, we stick with it. If it doesn’t, we reject it. People accept God, authority and karma because these ideas suit their moral taste buds. Haidt points to research showing that people punish cheaters, accept many hierarchies and don’t support equal distribution of benefits when contributions are unequal.
You don’t have to go abroad to see these ideas. You can find them in the Republican Party. Social conservatives see welfare and feminism as threats to responsibility and family stability. The Tea Party hates redistribution because it interferes with letting people reap what they earn. Faith, patriotism, valor, chastity, law and order — these Republican themes touch all six moral foundations, whereas Democrats, in Haidt’s analysis, focus almost entirely on care and fighting oppression. This is Haidt’s startling message to the left: When it comes to morality, conservatives are more broad-minded than liberals. They serve a more varied diet.
This is where Haidt diverges from other psychologists who have analyzed the left’s electoral failures. The usual argument of these psycho-pundits is that conservative politicians manipulate voters’ neural roots — playing on our craving for authority, for example — to trick people into voting against their interests. But Haidt treats electoral success as a kind of evolutionary fitness test. He figures that if voters like Republican messages, there’s something in Republican messages worth liking. He chides psychologists who try to “explain away” conservatism, treating it as a pathology. Conservatism thrives because it fits how people think, and that’s what validates it. Workers who vote Republican aren’t fools. In Haidt’s words, they’re “voting for their moral interests.”
One of these interests is moral capital — norms, practices and institutions, like religion and family values, that facilitate cooperation by constraining individualism. Toward this end, Haidt applauds the left for regulating corporate greed. But he worries that in other ways, liberals dissolve moral capital too recklessly. Welfare programs that substitute public aid for spousal and parental support undermine the ecology of the family. Education policies that let students sue teachers erode classroom authority. Multicultural education weakens the cultural glue of assimilation. Haidt agrees that old ways must sometimes be re-examined and changed. He just wants liberals to proceed with caution and protect the social pillars sustained by tradition.
Another aspect of human nature that conservatives understand better than liberals, according to Haidt, is parochial altruism, the inclination to care more about members of your group — particularly those who have made sacrifices for it —than about outsiders. Saving Darfur, submitting to the United Nations and paying taxes to educate children in another state may be noble, but they aren’t natural. What’s natural is giving to your church, helping your P.T.A. and rallying together as Americans against a foreign threat.
How far should liberals go toward incorporating these principles? Haidt says the shift has to be more than symbolic, but he doesn’t lay out a specific policy agenda. Instead, he highlights broad areas of culture and politics — family and assimilation, for example — on which liberals should consider compromise. He urges conservatives to entertain liberal ideas in the same way. The purpose of such compromises isn’t just to win elections. It’s to make society and government fit human nature.
The hardest part, Haidt finds, is getting liberals to open their minds. Anecdotally, he reports that when he talks about authority, loyalty and sanctity, many people in the audience spurn these ideas as the seeds of racism, sexism and homophobia. And in a survey of 2,000 Americans, Haidt found that self-described liberals, especially those who called themselves “very liberal,” were worse at predicting the moral judgments of moderates and conservatives than moderates and conservatives were at predicting the moral judgments of liberals. Liberals don’t understand conservative values. And they can’t recognize this failing, because they’re so convinced of their rationality, open-mindedness and enlightenment.
Haidt isn’t just scolding liberals, however. He sees the left and right as yin and yang, each contributing insights to which the other should listen. In his view, for instance, liberals can teach conservatives to recognize and constrain predation by entrenched interests. Haidt believes in the power of reason, but the reasoning has to be interactive. It has to be other people’s reason engaging yours. We’re lousy at challenging our own beliefs, but we’re good at challenging each other’s. Haidt compares us to neurons in a giant brain, capable of “producing good reasoning as an emergent property of the social system.”
Our task, then, is to organize society so that reason and intuition interact in healthy ways. Haidt’s research suggests several broad guidelines. First, we need to help citizens develop sympathetic relationships so that they seek to understand one another instead of using reason to parry opposing views. Second, we need to create time for contemplation. Research shows that two minutes of reflection on a good argument can change a person’s mind. Third, we need to break up our ideological segregation. From 1976 to 2008, the proportion of Americans living in highly partisan counties increased from 27 percent to 48 percent. The Internet exacerbates this problem by helping each user find evidence that supports his views.
How can we achieve these goals? Haidt offers a Web site, civilpolitics.org, on which he and his colleagues have listed steps that might help. One is holding open primaries so that people outside each party’s base can vote to nominate moderate candidates. Another is instant runoffs, so that candidates will benefit from broadening their appeal. A third idea is to alter redistricting so that parties are less able to gerrymander partisan congressional districts. Haidt also wants members of Congress to go back to the old practice of moving their families to Washington, so that they socialize with one another and build a friendly basis on which to cooperate.
Many of Haidt’s proposals are vague, insufficient or hard to implement. And that’s O.K. He just wants to start a conversation about integrating a better understanding of human nature — our sentiments, sociality and morality — into the ways we debate and govern ourselves. At this, he succeeds. It’s a landmark contribution to humanity’s understanding of itself.
But to whom is Haidt directing his advice? If intuitions are unreflective, and if reason is self-serving, then what part of us does he expect to regulate and orchestrate these faculties? This is the unspoken tension in Haidt’s book. As a scientist, he takes a passive, empirical view of human nature. He describes us as we have been, expecting no more. Based on evolution, he argues, universal love is implausible: “Parochial love . . . amplified by similarity” and a “sense of shared fate . . . may be the most we can accomplish.” But as an author and advocate, Haidt speaks to us rationally and universally, as though we’re capable of something greater. He seems unable to help himself, as though it’s in his nature to call on our capacity for reason and our sense of common humanity — and in our nature to understand it.
You don’t have to believe in God to see this higher capacity as part of our nature. You just have to believe in evolution. Evolution itself has evolved: as humans became increasingly social, the struggle for survival, mating and progeny depended less on physical abilities and more on social abilities. In this way, a faculty produced by evolution — sociality — became the new engine of evolution. Why can’t reason do the same thing? Why can’t it emerge from its evolutionary origins as a spin doctor to become the new medium in which humans compete, cooperate and advance the fitness of their communities? Isn’t that what we see all around us? Look at the global spread of media, debate and democracy.
Haidt is part of this process. He thinks he’s just articulating evolution. But in effect, he’s also trying to fix it. Traits we evolved in a dispersed world, like tribalism and righteousness, have become dangerously maladaptive in an era of rapid globalization. A pure scientist would let us purge these traits from the gene pool by fighting and killing one another. But Haidt wants to spare us this fate. He seeks a world in which “fewer people believe that righteous ends justify violent means.” To achieve this goal, he asks us to understand and overcome our instincts. He appeals to a power capable of circumspection, reflection and reform.
If we can harness that power — wisdom — our substantive project will be to reconcile our national and international differences. Is income inequality immoral? Should government favor religion? Can we tolerate cultures of female subjugation? And how far should we trust our instincts? Should people who find homosexuality repugnant overcome that reaction?
Haidt’s faith in moral taste receptors may not survive this scrutiny. Our taste for sanctity or authority, like our taste for sugar, could turn out to be a dangerous relic. But Haidt is right that we must learn what we have been, even if our nature is to transcend it.
William Saletan, Slate’s national correspondent, is the author of “Bearing Right: How Conservatives Won the Abortion War.”
I like the way they think….
Poly-capitalism: what if we aren’t capitalistic enough? | Management Innovation eXchange
We pay lip-service to the importance of many types of capital (i.e., human-, intellectual-, social-, natural- and even spiritual-capital), but our companies are still explicitly and legally designed for the benefit of those who provide financial capital. Poly-capitalism is about recognizing all types of capital—and treating them like capital.
For all the talk about employees being a company’s “most valuable asset,” they don’t seem to feel very valued. Whenever pollsters ask people about how they feel about their jobs, a scary-high percentage report feeling actively or passively disengaged, unmotivated, alienated and/or exploited. Indeed, the perpetual problems of bureaucracy and management often revolve around how to select, motivate, reward, lead and/or assess employees so that they become more productive, responsible and self-motivated contributors to the corporate cause. And we’ve tried all manner things to solve these problems.
- We’ve tried pay-for-performance plans to get people motivated.
- We’ve granted stock-options to align employees’ interests with the firm’s.
- We’ve run team-building exercises and diversity training to facilitate collaboration.
- We’ve provided training and mentors and paid tuition expenses so people could develop their potential.
- We’ve practiced participative management methods to garner employee involvement and commitment.
- We’ve worked hard to create corporate cultures that celebrate our accomplishments and reinforce our values.
- We’ve even crafted mission-statements to give our work purpose and meaning.
And yet we keep searching for new ways to find, fix or fire-up our employees. Companies are now trying things like: phantom stock, SARs (stock appreciation rights), 20% time, sabbaticals, and flexible and/or “virtual” work arrangements. Obviously, we have yet to really solve these problems. Perhaps this is because we are treating the symptoms rather than addressing their root causes.
Symptoms are natural manifestations of underlying causes. Feeling disengaged from a system in which one feels disenfranchised is only natural. Feeling alienated from a company that ignores one’s individuality is only logical. Feeling exploited by a structure which consumes everything in its path is only predictable. And feeling unmotivated to contribute to a process where the lion’s share of rewards accrues to only a handful of participants is only rational. In short, the problems aren’t due to flawed, bored or misguided people; the problems are inherent in, and the consequences of, a flawed system.
 And I include myself in this “we” as I have advocated for, conducted, and/or taught, all of these.
The cause of these symptoms is rooted in the structure of our organizations. Specifically, there is a problem with one of the basic assumptions of our capitalistic system: What counts as capital?
The current economic system was designed with only financial capital in mind. Indeed, it was created at a time when financial capital was scarce while labor and raw material were plentiful; so paying particular attention to financial capital only made sense. But times have changed; and it now takes more than money to compete. It takes talented, focused, creative people who are committed to serving customers, inventing new products and constantly improving processes. It takes partnership with suppliers who integrate their internal systems and processes with yours, take on more responsibility for managing inventory, and contribute expertise to the design and improvement of products. It takes customers who can’t live without your product, tell everyone they know about it and share their suggestions for improvements with you. It takes a local community that provides a stable legal and regulatory context, an efficient transportation system, an educated and motivated workforce, and a healthy, vibrant political process. It takes access to a ready supply of raw materials and natural resources. And it takes investors who share and support your long-term strategic plan for the company. In short, it takes a lot more than money to build a business.
While business people were busy inventing ways to make money; academics (and others) have been busy studying a variety of other types of capital. The list of productive resources (i.e., “capital”) employed by firms to create value includes:
- social capital— the connections and relationships which accounts for a firm’s ability to attract and mobilize resources and provide the framework upon which a productive enterprise is constructed.
- intellectual capital—the cognitive and creative capacity to solve problems and design new products which is presumed to be at the heart of the company’s value-creation process, and therefore driving its earnings and stock price.
- human capital—the uniquely human talents and skills of a firm’s employees which enable them to provide personalize service and produce the company’s tangible outputs.
- natural capital— the store of natural resources and regenerative capacity of the eco-system within which the company operates and upon which it depends.
- spiritual capital— the deeply embedded values and traditions which provide a coherent sense of meaning and moral foundation for people and societies.
The problem with capitalism is a too-narrow conception of the firm as existing exclusively for the benefit of those who provide the financial capital. As a result, we systematically and structurally neglect the investors of other types of capital. The problem with capitalism is that it is not capitalistic enough.
All these alternative forms of capital contribute to a firm’s productive and wealth-creating capacity; but they are not owned by the providers of financial capital. Indeed, these other types of capital belong to, and must be contributed by, other constituencies—employees, customers, suppliers, communities, etc. The problem is that such contributions are not treated like investments of capital at most modern “capitalistic” companies. To be sure, there are efforts in this direction. For example, many companies—especially in the technology sector—recognize how deeply dependent they are upon the talent and ideas of their people (i.e., intellectual capital), so they grant stock-options in order to align and reward employees’ efforts (and often use lengthy vesting periods to keep employees tied to the company). By granting an ownership stake to contributors of intellectual capital, this is a step in the right direction. But as I’ll show, it only taps into one of the Principles of Capital Management.
Poly capitalism is a very simple idea: to treat all forms of capital, as capital.
Principles of Capital Management [PCMs]: Capitalism has been amazingly effective at nurturing, deploying and leveraging financial capital (albeit with a few notable periods of exception). The dynamic energy generated around managing capital—raising it, investing it, managing it and enjoying it—has produced an incredibly productive system. So what can we learn from how we treat financial capital in order to apply it to the other types of capital? I want to highlight 3 basic principles and 1 corollary. I’m calling them the “universal” principles of effective capital management, or PCMs, for short.
1. Return on Investment— The first, and central, principle of effective capital management is that those who contribute capital expect to earn a “return” on their investment. Capitalism is predicated upon private ownership of capital and the construction of corporations which give rights to those who contribute capital. Key among these rights is the right to compensation for the use of one’s capital. Here the distinction between investors and lenders is critical. Lenders have conferred control over their capital to the borrower with the promise that their original capital will be returned to them along with a pre-specified amount for the privilege of using it. In contrast, investors commit their capital to an enterprise without any guaranteed compensation—but with the explicit expectation that they will share in any benefits produced by the enterprise (in proportion to the amount of capital she has contributed relative to other investors). As a result, the rights and returns for investors are very different from lenders. Lenders are entitled to a set return (pre-negotiated and explicitly not dependent upon the performance of the enterprise; and often secured by a lien upon the assets contributed by investors) and in exchange have essentially sold their right to determine what is done with their capital (i.e., control). Investors have no such guarantee of return on their capital investment, but they do have a claim upon the net proceeds generated by the enterprise and a say in the governance of the firm. Therefore, both lenders and investors expect a return on their capital, but of a very different type and/or amount.
Under traditional Capitalism, only those who invest financial capital are granted shares of stock. Until the contributions of other forms of capital are recognized as valid investments, they will not be granted the rights or returns due to them. This has started to change. As mentioned already, many companies are granting stock or stock-options to employees in recognition of the value of their contributions to the productive outcomes of the enterprise. However, this is often conceived of more as a form of additional or deferred compensation for labor than as a return on invested capital. The perception by some financial investors that widespread stock-option grants are tantamount to “gifts” from shareholders to employees (rather than a fair return on investment for committed human and/or intellectual capital) reflects a misunderstanding of this first principle of capital management.
2. Replenishment (or Preservation of Capital)— The second principle of effective capital management is: replenishment. Every wise investment decision always considers not only the rate of return, but also the risk of losing one’s investment. The greater the likelihood of loss (i.e., higher risk), the higher the expected return on investment. There is an underlying assumption that investors expect to recoup their investment—and more. Risk entails the potential loss of capital, which is equivalent to the diminishment of the productive capacity of a resource. So even if it is impossible to physically separate an investor from her capital (e.g., intellectual capital), the value of her capital can still be negatively impacted (i.e., by obsolescence and neglect). Therefore, invested capital must be carefully nurtured, monitored and developed in order to maintain its productive capacity.
The old-fashioned agrarian term “husbanded” seems appropriate. The core idea of this principle is that every form of capital must be actively maintained and carefully managed. Historically, land was a more important form of capital than money. But the productivity of a piece of land is dependent upon several factors: its location, the local weather patterns, the quality of the seeds planted, the skill of the farmer, and the inherent fertility of the land itself. Without proper care the land could be over-worked and soon become unproductive. Only with intentional maintenance and nurturing (and sometimes rest) could the productivity of the underlying asset be sustained. The same principle applies to other types of capital. As we draw upon the resource of a particular form of capital we must be aware of the need to replenish and “re-invest” in the resource in order to maintain its productive capacity—otherwise we risk impairing the value of the capital.
While financial capital is invested in order to be used, it is not “used up.” It is used to build tools, acquire material, lease facilities, hire personnel, fund development, and the like, in order to build a productive enterprise that will continue to yield revenue in an on-going fashion. The financial capital is transformed into productive capacity designed to generate profitable outcomes, which in turn pay dividends to the shareholders and enhance the enduring value of the enterprise (i.e., the stock price). A good use of capital is one that will add sufficient value to more than pay back its original investment—i.e., replenish the original capital as well as pay a return on investment.
To simply burn through capital is to waste it. This would be like spending the principle as well as the interest of a trust account—a short-term “gain” at the cost of long-term sustainability. Wise capital utilization is as concerned about capital preservation as immediate return on investment. To consume one’s capital is short-sighted; yet this is precisely how corporations often treat the non-financial forms of capital. Many employees, who were hired for their talents, experience, motivation and commitment (i.e., human capital), are used-up until they are so burned-out that they are no longer as productive as they used to be. Or an organization’s culture, which takes years to build, but then due to neglect or misguided cost-cutting is dismantled and destroyed. Each is thought of as a valued resource, but neither is typically considered to be capital; nor are the creators and contributors of such capital given the rights or representation necessary to insure that it is maintained (i.e., they are not treated like investors).
Part of the cost-of-capital is the expense of continuously re-investing in the resource to maintain its productive capacity. For financial capital, this means increasing the principle (or stock price) to keep pace with inflation. Similarly, for other forms of capital, it means intentionally maintaining and developing the underlying productive capacity of the resource. However, given the non-financial nature of some types of capital, one cannot simply write a check to replenish it, which leads to the third, corollary principle.
3. In Like Kind (or, the non-fungibility of capital)— The third principle of effective capital management is an extension of the replenishment principle. “In like kind” means that how one replenishes a store of capital depends upon the type of capital. Not everything is reducible to money. The nature of the replenishment must be in keeping with the form of the capital. Many things cost money, but money cannot be substituted for all things. Additional compensation cannot make up for lost time (with one’s family, hobbies or other interests). Cash does not make very good fertilizer for the natural environment. A bonus check does not keep one up-to-date in one’s field; nor does a fat bank account confer spiritual contentment. Therefore, as we think of replenishing each form of capital, we must resist the tendency to reduce everything to the common-denominator of money. Each form of capital requires appropriate replenishment in order to maintain its productive capacity—i.e., “in like kind.”
For example, the “half-life” of technical knowledge and expertise varies by specialty, but is a very real fact of life for many professionals. Unless there is continual renewal and updating (i.e., “keeping current”) there will be an erosion of the value of the intellectual capital. And while a financial return is important to reward those who contribute their intellectual capital, they also need the resources and opportunities to upgrade their knowledge and skills. While doing so certainly costs money, it is a very different sort of expenditure than salary or wages. Too often specialized knowledge and technical skills— because they are expensive to acquire— are so rigorously leveraged as to preclude their needed upgrading. They are “milked” for all they can give and their value is literally sucked out of them; and when they are no longer relevant, or current, they are replaced or discarded.
Similarly, if a local community “invests” social and human capital into creating a healthy, conducive context in which to do business—i.e., a highly educated workforce, efficient social infrastructure, a stable regulatory environment, etc.—then to avoid paying taxes is tantamount to robbing one’s investors of their return on investment and capital preservation. But beyond paying taxes, participating in the life of the community through “citizenship” or CSR-type initiatives is not simply some charitable, “do-gooder” activity, but rather it is an “in like kind” replenishment to the community’s store of social- and/or human-capital.
It is important to point out that, when it comes to financial capital, these first 3 principles tend to collapse simply into financial pay-back—i.e., return on investment, replenishment and “in-like-kind” all boil-down to money. But when considering other forms of capital, it is important to maintain these distinctions… and manage them deliberately.
4. Control— The fourth and final principle is that investors have a say in how their capital is utilized. This might also be called the ownership-principle. Investors are granted voting rights with each share of stock and, as a group, have representation in setting the strategic direction of the firm and exercise executive oversight via the Board of Directors. In the same way, those who invest other forms of capital deserve a voice in how the collective enterprise is operated. The exact shape of their role in governance or the extent of their voice in the enterprise needs to be worked out (and will probably be different depending upon their role in the company); but the basic principle still applies: those who invest their capital in a firm have a right to help decide how it is utilized.
With this basic framework of principles in place, let’s turn our attention to applying these principles: how do our management innovations rate on these 4 PCMs?
Since companies require some amount of these various types of capital in order to operate effectively, they have had to figure out some way of acquiring them. Companies have tried a whole range of ways to induce people to commit their resources (i.e., capital) to the firm.  These miscellaneous methods should be seen to be the forerunners to a full-blown Poly-capitalism. But where they have typically addressed the symptoms, Poly-capitalism is an attempt to solve the root of the problem.
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Stock-options do a great job of providing employees with a way to share in the financial value created by their collective efforts (to the extent that it is reflected in an increasing stock price). But because it fails to replenish (in any way) or confer control (since it is a warrant to purchase stock at some future date, without any voting rights), it only satisfies one of the PCMs. In an even more immediate fashion, profit-sharing programs provide employees with a financial return-on-investment for their contribution to the company; but again, without any consideration for replenishment of the invested capital nor any meaningful control over the operation of the company (at most, employees can control their own level of effort, but have no say in the strategic direction or tactical decisions taken by senior management).
Tuition-reimbursement programs are on the decline due in part to difficult economic times, but they have been popular benefits at many companies for a long time. Curiously, some companies have treated their employees’ enhanced educational attainment as merely part of the basic suite of benefits—like dental coverage—i.e., something that every company is expected to provide. Rather than seeing tuition reimbursement expenditures as a mechanism to maintain and even increase the human and intellectual capital of employees, it has often been perceived to be “just” another expensive benefit employees can use if they want to. Education is certainly one of the important ways to replenish non-financial capital, it does not necessarily qualify as “in-like-kind” because often people enroll in classes precisely in order to add new capabilities to their portfolio (and thereby increase their marketability, promotion prospects, or enable entry into a new field altogether). In other words, it is often utilized to build new stores of capital, not necessarily replenish invested capital.
Sabbaticals, on the other hand, are both replenishing and often in ways that directly relate to a person’s current capabilities and interests. Extended periods of paid time-off from work enable people to travel the world, volunteer in their communities, or simply rest, read and relax. Time away from the constant work-a-day “grind” restores and rejuvenates people, such that they come back more energized, more committed and more capable than when they left. Sabbaticals can truly be a well-earned and much-needed change-of-pace from the routine. As such, they fulfill both replenishment and in-like-kind principles.
We could keep going down the list, but I think you get the idea. Looking at these innovations in light of the 4 PCMs we can see how some corporate programs do a better job of treating capital as capital than others. But none goes all the way. Some share a portion of financial returns (e.g., stock-options and profit-sharing) but without any of the other considerations. Others provide voice and opportunities for input (e.g., open-book mgmt, 20% time), while yet others focus on replenishment (sabbaticals, tuition reimbursement) and some in-like-kind (e.g., mentors and paid volunteer-time).
Of course, companies practice many of these methods all at the same time; so wouldn’t a combination of programs suffice to “cover the bases” for all 4 PCMs? How do companies, as a whole, rate on the PCMs? According to FORTUNE magazine, the “Best company to work for” in 2011 was SAS. A perennial presence on the list, SAS is an interesting case-study in Poly-capitalism. Their 35-hour work week, on-site daycare and health clinics, lavish exercise facilities, generous benefits and supportive culture all enable employees to focus such that they can be as productive in their short work-week as most others are in the typical 50+ hour-work-week. An extremely flat organizational structure and recognized accountability also provide employees with a meaningful level of control over their work. The ability to lead healthy, balanced, productive lives results in a fraction of the typical turnover—from which the money saved more than pays for these lavish perks. As a privately-held company, there is no equity-sharing or stock-options. But the combination of all these other factors more than compensate for the industry-average salaries—indeed some people take reduction in salaries in order to join the firm. Obviously, the trade-off of other types of “returns” (i.e., in like kind) are worth more than a bit more money. Even though SAS doesn’t pay exceptional salaries nor offers stock-options, it is still consistently rated as one of the best places to work because of the way it takes seriously the other aspects of life.
You don’t have to run a high-margin, high-tech software company to move in this direction. Hamel’s recent HBR cover-story about “the world’s most creatively managed company” described Morning Star, a tomato-growing, hauling and processing company in central California. They are pushing-the-envelope in terms of giving workers control—over their own jobs, their colleagues’ compensation, the company’s purse, who gets hired and the terms of how they will work together. It is a radical example of how much control one can grant to the rank-and-file workers. It was unclear how much the employees share in the profits, but they are paid above-market wages. They are also encouraged to learn new skills and expand the scope of their responsibilities. And the result is a workforce that feels anything but disengaged, unmotivated or exploited.
Of course, everyone is familiar with Google’s over-the-top employment practices. They do most of the things SAS does plus they offer stock-options, bonuses and something called “20%-time.” The freedom to spend one-fifth of your time working on a project of your own choosing is not just about control, but about pursuing your own passion and vision—which often entails learning new skills and maintaining old ones. And best of all, the most promising 20%-time projects are granted backing from the company; and successful ones have been known to earn their innovators 7-figure bonuses! No wonder Google has become the employer-of-choice for a lot people.
These efforts are all movements in the right direction and valuable mechanisms for recognizing and rewarding the valuable contributions made by providers of non-financial capital. But they don’t go far enough. While a combination of programs might treat many of the symptoms and resonate with the PCMs, the lack of a coherent framework for designing and justifying such expenditures means they are left to the “whim” or “generosity” of the current owners/managers. These programs are still considered to be “extras” and “benefits” granted by the company rather than “returns” and “capital gains” earned by those who invest their resources in the firm. Furthermore, these programs extend only to employees—what about vital contributions of capital from other stakeholders? These programs are patches rather than fundamental structural changes.
 Indeed, the broad sweep of management history might well be read as adaptations and innovations to address salient, new forms of capital investment.
Anti-PCMs: To bring this “hack” full circle, I want to point out how violating the PCMs leads directly to the problematic “symptoms” with which we started.
- If instead of earning a return on invested capital people are not compensated for their contributions to the enterprise, they will naturally feel ripped-off and think the system is unfair. So it only makes sense that they would be unmotivated to do anything more than what is absolutely necessary.
- If rather than knowing their capabilities will be nurtured and developed, the company’s incessant demands preclude any opportunity to upgrade their skills, people will experience exhaustion and burn-out. So it’s logical that they feel depleted and exploited.
- If in the work-a-day grind people never have opportunities to build relationships, maintain contacts, learn new skills or get involved in the community their lives become one-dimensional. This neglect of anything other than one’s work persona leaves people feeling that their lives are out of balance. As a result, they feel alienated from the system that fails to respect their personhood.
- Finally, if people are controlled and have no voice in the process, they will understandably feel powerless and disenfranchised. Their actions become disingenuous because they are only doing what they’re told to do. So it is no surprise that people feel disengaged from such a situation.
In sum, a workforce that feels disengaged, unmotivated, exploited and alienated is the direct result of an organizational system that violates the basic principles of capital management.
What we need is an expanded understanding of ownership. One way to accomplish this would be to create a new class of stock; one granted to investors of intangible capital. Let’s call it “class I” stock. Class I shares are not bought or sold in stock markets; they are acquired by committing intangible capital to the enterprise. Because class I shares are not purchased with money, they cannot be sold for money. They revert to the firm when the investor takes her intangible capital out of the company. The firm is free to re-issue them to another capital investor, or not. As long as the capital stays committed to the firm, the investor retains their shares. But such investments are renegotiated on a periodic basis (depending upon the firm’s need for such capital and the demonstrated value of the investor’s capital). The number of outstanding class I shares would represent the store of intangible capital invested in the enterprise. The ratio of class I to class A shares will vary by company. I can imagine some “financial-capital-intensive” companies where there are relatively few class I shares; but I can also imagine some “intellectual-capital-intensive” firms where class I shares outnumber class A shares. Like regular stock, each class I share is entitled to a regular vote in the corporate governance structure and a regular dividend payment out of net revenues. These two rights are key to structurally fulfilling the ROI and Control principles. And once the firm takes responsibility for the committed capital, it would make sense for it to undertake to maintain (i.e., preserve) its productive capacity.
The Poly-capitalism firm would be run “by, of and for” the benefit of all investors. It would be concerned not only with providing a return on investment for financial capital, but rewarding those who contribute social, intellectual, human, natural and spiritual capital, too. Moreover, such investors would have a say in how their capital was utilized—therefore, the strategic priorities of the firm would represent a broader array of interests than strictly financial results. Indeed, one would expect a wider definition of “performance” to be embraced which takes non-financial considerations and outcomes into account. The preservation of capital would become an important concern and expenditures targeting the development of the social infrastructure, environmental sustainability, personal intellectual capabilities or even spiritual development would be viewed as legitimate and valuable. In this way, the monopoly of control exercised by financial investors would give way to a broader basis of ownership with the rights and privileges shared among all investors of capital.
Doing so will require redesigning the governance, ownership and management of our companies. It will require re-thinking the role and task of management. Under Poly-capitalism the role of managers becomes one of mobilizing, monitoring and maintaining the contributions of capital needed by the enterprise. In the process, creating the systems and structures that enable such contributions is, itself, a contribution to the enterprise—a form of “structural capital.” As a result, managers become investors in their own right and should be accorded their rightful share of ownership. Moving managers from “agents” to “co-owners” should go a long way towards alleviating the classic “agency problem” implicit in the traditional organizational structure.
In short, Poly-capitalism is about recognizing and valuing all types of capital—and treating them like capital.
With due respect to Gary Hamel and the MiX project, we don’t just need to “reinvent management.” We need to reinvent the structure of the companies we create. Management is the ACT of organizing, deciding, leading and controlling; our organizations are the ARTIFACTS (i.e., systems and structures) within which we enact our management. So the “flip-side” of reinventing management will be a concurrent reinvention of our companies. We won’t solve our persistent bureaucratic problems until we re-design our companies. In short, in order to manage differently, we need to organize differently. We need a new vision of the corporation; a new logic to our systems and structures; a new organizing principle. Poly-capitalism addresses the underlying flaw of modern capitalism by taking what we’ve learned about managing financial capital and applying it to all the other types of capital. The future of management lies in figuring out how to attract, utilize, reward and nurture the range of capital contributions needed for business to successfully compete in the 21st century.
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Joel Kotkin, Contributor
4/05/2012 @ 10:31AM |803 views
‘Protestant Ethic’ 2.0: The New Ways Religion Is Driving Economic Outperformance
In this season when most Americans are more concerned than usual with spiritual matters, it may be time to ask whether religion still matters. Certainly religiosity’s worst side has been amply on display in recent years, from the fanaticism of Islamic terrorists to the annoying sanctimoniousness of Rick Santorum.
On the surface, religion appears to be losing some of its historic influence. For the first time in a decade, according to a survey by the Pew Research Center, more Americans — excepting the Santorum base — want their politicians to talk less about faith as opposed to more.
Organized religion in particular may be losing its appeal, particularly among the young. According to recent surveys, religious affiliation in the United States appears to be declining somewhat and secularism is on the rise; over the past 40 years the percentage professing no religious affiliation has grown over 140 percent while the percentage of the deeply faithful dropped 15%. The share of the population who claim “no religion” has risen to 15% overall and 22% of those between 18 and 29, notes a 2009 study by researchers at Trinity College. If these trends continue, the non-affiliated could represent a larger part of our population than the largest denomination, the Catholic Church.
In large parts of the high-income world, notably Europe and parts of East Asia, the decline of religion is even more pronounced. Half of all Europeans, for example, have never attended a religious service, compared to just 20% of Americans. Roughly 60% of Americans, notes the Pew survey, consider religion important, twice the rate of Koreans, Japanese, Britons or even Canadians.
Given that some of these countries have performed about as well or better than the U.S. in recent years, one might conclude that the historic link between religious faith and material progress — so central to the work of Max Weber – has been irretrievably broken. Yet in reality, the religious connection with economic growth may be still far more important than is commonly supposed.
Many in the pundit class identify religion as something of a regressive tendency, embraced by the less enlightened, the less skilled, intelligent and educated. Yet some scholars, such as Charles Murray, point out that religious affiliation is weakening most not among the middle and upper classes but among the poorer and less educated who traditionally looked to churches for succor and moral instruction. Secularism may have not hurt the uber-rich or the academic overclass so far, but it appears to have helped expand our lumpenproleteriat.
Some might be surprised to learn that religious affiliation grows with education levels. A new University of Nebraska study finds that with each additional year of education, the odds of attending religious services increased by 15%. The educated, the study found, may not be eschewing religion, as social science has long maintained, even if their spiritual views tend to be less narrow, and less overtly tied to politics, than among the less schooled.
Overall the most cohesive religious groups — such as Mormons and Jews — still outperform their religious counterparts both in educational achievement and income. Both Jews and Mormons focus on helping their co-religionists, providing a leg up on those who depend solely on the charity of others or the state. In countries with a substantial historical Protestant influence such as Germany, Denmark, Sweden and the Netherlands continue to outperform economic the heavily Catholic nations like Italy, Ireland and Spain, according to a recent European study. The difference, they speculate, may be in Protestant traditions of self-help, frugality and emphasis on education. None of this, of course, would have been surprising to Max Weber.
Religious people also tend to live longer and suffer less disabilities with old age, as author Murray notes. Researchers at Harvard, looking at dozens of countries over the past 40 years, demonstrated that religion reinforces the patterns of personal virtue, social trust and willingness to defer gratification long associated with business success.
But perhaps the most important difference over time may be the impact of religion on family formation, with weighty fiscal implications. In virtually every part of the world, religious people tend to have more children than those who are unaffiliated. In Europe, this often means Islamic families as opposed to increasingly post-Christian natives. Decline in religious affiliation — not just Christian but also Buddhist and Confucian — seems to correlate with the perilously low birthrates in both Europe and many East Asian countries.
Singapore-based pastor Andrew Ong sees a direct connection between low birthrates and weakened religious ties in advanced Asian countries. As religious ideas about the primacy of family fade, including those rooted in Confucianism, they are generally supplanted by more materialist, individualistic values. “People don’t value family like they used to,” he suggests. “The values are not there. The old values suggested that you grow up. The media today encourages people not to grow up and take responsibility. They don’t want to stop being cool. When you have kids, you usually are less cool.”
Religious people, prepared to be seen as uncool, are more likely to seek to produce more offspring. In the United States 47% of people who attend church regularly see the ideal family size as three or more children compared to barely one quarter of the less observant. Mormons have many more children than non-Mormons; observant Jews more than secular. “Faith,” the demographer Phil Longman concludes, “is increasingly necessary as a motive to have children.”
This pattern is reflected in the geography of childbearing. Where churches are closing down, most particularly in core urban areas such as Boston or Manhattan, as well as their metropolitan regions, singletons and childless couples are increasing. In more religiously oriented metropolitan areas like Houston, Dallas-Fort Worth, Salt Lake City and Phoenix, the propensity to have children is 15% to nearly 30% higher (as measured by the number of children under the age of 5 per woman of child bearing age– 15-49).
In the future, many high-income societies, whether in East Asia, Europe or North America, may find that religious people’s fecundity is a necessary counterforce to rapid aging and eventual depopulation of the more secular population . The increasingly perilous shape of public finance in almost all advanced countries — largely the result of rapid aging and diminished workforces — can be ascribed at least in part to secularization’s role in falling birthrates.
There may be other positive fiscal effects of religiosity. Religious people donate on average far more to charities than their secular counterparts, including those unaffiliated with a religion. Nearly 15% of the religious volunteer every week compared to just 10% among the secular.
Social networks, much celebrated among the single, might provide people with voices, but religious organizations actually do something about meeting real human needs. Organized religion provides a counterweight to the European notion that we must rely on government for everything. Poor people educated or fed by the charities of mosques, churches, and synagogues relieves some of the burden faced by our variously tottering states and shredding social welfare nets. Aging baby boomers, notes author Ted Fishman, may be forced to rely more on the “kindness of strangers” from religious backgrounds to take care of them in their old age.
Sadly few prominent religious leaders deliver this message effectively, often preferring to scold non-believers. This is unfortunate since what the faithful do in the real world, at home and in their communities, may prove ever more crucial to the viability of our societies in the future.
A Belarussian translation of this essay is here.
Why I Am Not a Libertarian
I thought about entitling this essay “Two Cheers For Libertarianism.” On civil liberties matters, I am perfectly libertarian; in fact, I have just delivered a briefing paper on the pervasiveness doctrine to the Cato Institute, and hope to write more for them on topics such as anonymity and mandatory ratings systems.
But there are other libertarian positions, such as that against anti-discrimination laws, which shock the conscience; like Hayek, I believe that there are things worth doing that the free market cannot do. Here then, is an attempt to outline what is good about libertarianism, and then contrast what doesn’t make sense. The conclusion I draw is that like most human belief systems, libertarianism mixes practicality with some idealism unrelated to human nature. Therefore, as much as I sympathize with most of the diagnoses and some of the prescriptions, I am not a libertarian.
Positions: ( 1 ) A laissez faire economic system works remarkably well at the beginning stage of almost any business, for example computers, but in the past such things as fast food, automobiles, and movies. Freedom to innovate and build business ventures is a great strength of laissez faire.
Corollary: Sometimes government research expedites the process. That is, results from government supported research projects can be borrowed intact and made into successful new businesses, as has happened with the Internet and simultaneously the computer industry itself. This was also true concerning railroads in the 19th century. Corollary: The economic purpose of governance is to create fair markets. This does not always require action by the government per se but often it does because no other system can protect those without access to establishments which hold dominant economic power. Also, government, at least in theory, has a neutral referee function and can act as an impartial adjudicator. While this may sometimes not be the case, the ideal of fair judgement is important in maintaining some semblance of fair play.
( 2 ) In mature industries / businesses, laissez faire has an overwhelming tendency toward monopoly formation and the rise of super-corporations that make it impossible for smaller firms to compete. Hence the dozens of car manufacturers of the early 20th century eventually became just 3, and hundreds of TV enterprises have become just 9 giant businesses today. This happens in every mature industry except businesses that are strictly focused on local markets like restaurants and beauty salons. ( 3 ) A mythology of laissez faire distorts the reality of this system. Proponents of laissez faire tell us , for example, that the Free Market is always fair to all businesses and always self regulates for the common good.
often are false and deceptive. Corollary: According to this mythology, regulations always –maybe a few exceptions are allowed– are harmful to the economy and almost always are motivated by ideology-driven politics that serve the interests of special interest groups, especially labor unions.
( 4 ) Laissez faire, because it is over-lionized by many people, tends to be regarded as almost a God unto itself. Consequently, the market in an advanced Capitalist society tends ( overwhelmingly ) to become outright amoral or even immoral. This harms society generally since all ethical principles are thrown to the winds whenever some unethical “product” is perceived as offering large profits. Hence, marketing of inappropriate goods and services to children, and so forth. Corollary: We can see the effects of immoral market forces in exaggerated form in the functioning of illegal businesses like recreational drugs, “businesses” that indulge in a myriad of criminal activities for the sake of maintaining profit margins. Corollary: Because of worship of the bottom line intrinsic to the laissez faire system even national security may be sacrificed for the sake of quarterly earnings. Hence massive technology transfer to America’s detriment. Hence willingness to agree to business contracts with nations like Saudi Arabia and China which, different as these particular states may be, are alike is seeking advantage in obtaining sensitive military hardware, as in the case of the Saudis, or such things as commercial jet basic assemblies, on the part of the Chinese. Laissez faire economic policy, in other words, can easily result in national disadvantage, which we can now see more clearly than before in the case of auto parts shortages etc, that were the result of the tsunami some months ago. It may be that there is much money to be made through usual laissez faire practices but when this results in national military security or national economic security vulnerabilities, then laissez faire can be seen for what it is, excellent in some ways, terrible in others.
( 4 ) The market simply cannot or will not do some things that are very useful to society. In such cases government may decide to act. Hence, the Interstate highway system, the Intercoastal waterway –the canal system used by Atlantic seaboard states– and Boulder Dam and other hydroelectric projects.
We Need a Conversational Shift
The Present Paradigm
It seems that in most exchanges about politics and issues today, whether they be pundits or shows on TV and radio, debate in Congress, or exchanges among regular folks, the same arguments and accusations are made and impasses reached. Rarely is any new ground covered. Each side is stuck in its perspective.
We tend to look at the other side as the adversary, whose voice we believe must be silenced. And, when we do have an “open” conversation, it’s usually among those who share our thoughts. What I’m describing is the prevailing paradigm of communication, which has been going on for centuries.
Meanwhile, problems keep surmounting, while real solutions remain elusive. Many of the old solutions that once worked, no longer apply. We’re coming to a point in human history, when, in order to come to terms with our problems, we need to shift our thinking and communication to a new paradigm.
• Allegra Stratton and Patrick Wintour
• guardian.co.uk, Sunday 13 March 2011 12.11 EDTNick Clegg has told Liberal Democrat delegates that they are now the party of the “radical centre”, hours after the party voted to commit itself to the traditions and beliefs of social democracy.
In his address wrapping up the party’s two-day conference, Clegg pushed ahead in his attempt to redefine the Lib Dems. His speech rejected the “tribalism of left and right” and instead made its pitch to middle-income earners – “alarm clock Britain”.
Clegg said: “We are liberals and we own the freehold to the centre ground of British politics. Our politics is the politics of the radical centre. We are governing from the middle, for the middle.