Porter showed up at the Waldorf that day with an agenda of hopefulness. He didn’t want to talk about what people were doing wrong. “My view is that there are now very strong forces which can be tapped into,” he said. People knew the old ways of doing business weren’t working. People wanted new ways. “So it’s a question of articulating what’s the ‘should’ rather than what’s the ‘not,’ ” he said. This reluctance toward the “not” was understandable for a man still very much of MarketWorld. But Porter’s ideas on the “not” seemed of greater import, because if it was obvious to millions outside MarketWorld that the business protocols of the last generation had caused so many of the problems the world now confronted, it was, willfully, one suspects, not yet obvious to many within it. Perhaps hearing it from Michael Porter would undercut the plausibility of their denial.
In Porter’s careful, methodical way, he began to lay out how the business approach to life had, over a generation, contributed to some of the very societal ailments for which it now offered itself as a cure. At the heart of his account was a critique of the protocols, and how their piecemeal approach to reality, their rejection of the whole, had harmed people.
Porter spoke of how companies over the last generation had pursued a vision of globalization in which they owed nothing to any community. This was simply because those taught by professors like him at places like Harvard Business School, groomed by consulting and Wall Street and other training grounds, tended to be agnostic about place. You analyzed the data, and then you went where the opportunity was; it didn’t matter if that chase severed you from your own community and your obligations to it. “There were many things that business traditionally did to support the community, from training people to whole sets of other activities that they sort of took responsibility for, which we call investing in the commons,” Porter said. By commons he meant the shared assets of a place—things such as public schools that both industry and average people benefit from. “As people got disconnected from locations, business stopped really reinvesting in that. They thought their job was globalizing.”
This disconnection of which Porter spoke was abetted by the decontextualizing, disaggregating, ocean-boiling-avoiding approach of the protocols—by their tendency to atomize. Before the protocols had come to dominate the world of business, a company might have raised its money from not far away, sourced its inputs from not far away, sold to customers not far away, paid taxes to authorities not far away, and, when growth came, parked the profit in a bank not far away or reinvested it in a new venture with a plant not far away. But in recent decades, that began to change, as technology made it easier to do business with faraway entities, as new markets opened, and—importantly—as the financial wizards and management consultants increased their influence over boardrooms. These protocol-equipped figures pressed companies to embrace a new philosophy: Do each of your activities where it can be best done, wherever that might be. You raised money from Korean investors, sourced from Mexico, sold in France, paid taxes in the Caribbean, and, when growth hit, chose a Swiss bank or ethereal Bitcoins to store the proceeds—or reinvested them in whatever venture on earth promised you the most attractive returns. It was an expansion of commercial freedom. Porter suggested, however, that it had disrupted an older pattern of companies behaving with a sense of citizenship. “There is somehow a detachment because of this notion of globalization—that we’re no longer an American company,” he said. “And the odds are that if you’re operating all around the world, then you don’t have any special requirement to worry about Milwaukee.”
Somewhere on the road to globalization, Porter said, the self-image of business as a pillar of community had yielded to a self-image of “We’re global now, and that’s no longer our problem.” He added, “They started not accepting any responsibility for that community because they didn’t think it was their job, and they could always move somewhere else if that community didn’t want to do its thing.” This was a win-lose: The companies had flourished because of their freedom to escape and the community’s lack of leverage.
Porter’s second area of criticism regarded “optimization.” Thanks in part to the emergent protocols, a new culture of business had developed in which each microscopic element of a company’s activities had to be perfectly optimized, and this, Porter said, had made it easier to mistreat workers and ignore questions about one’s effects on the larger system. These new protocols had succeeded because the business world they began to conquer in the latter half of the twentieth century was often clubby, provincial, and very unoptimized. Many businesses, even big ones, operated like families (which many were still run by): You didn’t sell everywhere you could sell, and at the exact best market price in each place; you sold where you knew someone who knew someone, and charged whatever your best guess was. You didn’t pay workers more when demand spiked and less when it sank; you paid them an even salary.
The management consulting firms, leveraged buyout companies, investment banks, and other bearers of the protocols swept into this rather quainter business world over the last few decades and pressed for each of these pieces to be optimized. They did this through some combination of advisory projects the companies paid for, hostile takeovers after which they forced their new wards to straighten up, and shareholder pressure to lift the stock price. A new ethic of optimization spread across the business world, and at first, to Porter at least, it seemed entirely positive. He said, “We have learned a lot about how to run businesses more productively, and how to operate supply chains, and how to better deploy technology, and how to be smarter about procurement and purchasing.” Over a generation, these efforts, many of which were incubated at Harvard Business School, made the economy as a whole more productive and competitive. Yet it was not a coincidence, Porter said, that as “this slack got run out,” as he put it, over the same period, life grew harder for many workers: “We ended up making business more productive, which allowed wage increases for many, many years, and good things. But we also, without even kind of realizing it, started building a disconnect between the business and their average employees.”
He brought up Starbucks. It had, like so many companies, begun to schedule workers using newfangled “dynamic scheduling” tools, which allowed employers to change schedules more often, so as to constantly optimize. It helped a company pay the smallest wage bill it could to service a given amount of demand. This kind of thing made a company more profitable, but it could bring chaos into workers’ lives. They no longer knew how many hours they would get in a given period of time, which complicated paying bills and making purchases. They had to arrange child care on the fly. Porter said, “Somehow in being efficient and being clever and being productive, people thought they had the license to just stop thinking about the human beings and the well-being of everybody else in the system.” The same shortsightedness, Porter said, could be seen in highly profitable companies’ insistence on low wages: “We turn many of these people into commodities and we just kind of optimized it on us rather than optimize it in any way on them. So a lot of the labor practices, a lot of this idea that you should have contract workers and not have to pay benefits—all this stuff was just too clever and everybody sort of justified it in terms of, ‘Oh, we’re being productive and we’re kind of maximizing our returns, and that’s somehow our job.’ ”
Porter was making clear that “business” is not a fixed quantity. It can be done in different ways, following different approaches. It happened in recent decades to have been taken over by protocols that, in the name of making everything optimal, granted a license to neglect and even hurt others. “We sort of created a cartoon,” Porter said, “which is this view of, if you can force your employee to work overtime without paying them, then you should do it—that’s free markets, and that’s profit maximization.”
Finally, Porter spoke of how the spread of the financial vernacular of the protocols had caused companies to be run more an
d more for the sake of shareholders rather than for workers or customers or anybody else. “When I was first teaching,” he said, “we didn’t talk about shareholder value.” What lodestars guided business back then? “I think it was: The business has to earn a good sustained return, and we’re in it for the long run, and we’re building a great company,” he said, “rather than this notion that it’s the stock market vote every day that determines whether you’re succeeding or not.” Back when businesses were run in a more localized and less scientific manner, they were also run for a variety of people. Shareholders were part of the mix, but the micro-movements of the share price were not the be-all, end-all indicator of a company’s success, nor the guide to how it should be run. Of course, there was waste involved: A lot of capital was not put to the most efficient use. And then in the 1970s and ’80s, as ascendant neoliberalism spawned changes in law and culture, it came to be viewed as the first duty of a business to maximize value for shareholders. “The social responsibility of business is to increase its profits,” the Chicago School economist Milton Friedman declared in the New York Times Magazine in the fall of 1970. Wall Streeters trained in the protocols saw their influence rise as their way of evaluating a company, and their degree of say in how it should be run, gradually took over.
Porter watched this phenomenon, which is often called “financialization,” turn companies into the servants of their owners, to the detriment of other considerations. “The shareholder-value mind-set became very, very strong,” he said. People became “fixated” on it; it pulled them into “short-term” thinking; it caused decisions that might raise the stock price temporarily but actually hurt a company’s long-term prospects or its workers or customers or community. “I’ve been on a bunch of boards,” Porter said, “and I experienced it when I go to board meetings, and we worry about an hour-to-hour score, and we start listening to that scorekeeper, the capital markets, in what they think we should do.”
An argument like “We need to pay workers a steady salary, which will cost us a lot in the low season but will help us retain them over the long term” now could not be justified. An argument like “We need to pay workers a steady salary, which will cost us in both the short and the long term but is the right thing to do” had no chance. “I think we somehow—again, in the pursuit of efficiency, and financial-market sophistication, and modeling and so forth—we found lots of ways to make money,” Porter said, “but it’s somehow detached from what capitalism ultimately at its core is all about, which is about the real economy.” The investing aspect of business had come to dominate those other aspects of it involving building things, serving people, solving problems.
Taken together, these changes had brought a great rationalizing to the business world, in two senses: They were the instruments through which business operations had been rationalized, and, not unimportantly, they were how businesspersons had rationalized their lives to themselves. Much of what Porter described had entered the business world through the atomizing protocols. With their help, businesses had straightened up their act over a generation, analyzing and optimizing everything. Porter was now allowing that some of it had been overdone. “Somehow, many of these generally sensible types of practices in various aspects of business ended up overshooting,” he said.
The result was pain and chaos in so many lives. Now the protocols were turning up at foundations and government agencies and antipoverty consulting firms as the solution to these woes.
* * *
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Some years after his meeting with Porter, Hinton found himself sitting across from another capitalist with concerns about modern capitalism. George Soros needed someone to run his new program on building more inclusive economies—preferably someone who hadn’t bought into the protocols entirely. An ethnomusicologist with years in western Mongolia under his belt who had ended up with McKinsey and Goldman Sachs seemed perfect. Hinton knew his rigorous business training was part of his appeal. But, he added, “Presumably, some of why I’m there is because some of those other things that I did and, hopefully, my Mongolian musicologist bit of me can come out a bit as well, occasionally.”
He took up the new job, dividing his time between New York and London, and making his first forays into the new world of the social sector. He was surprised that so many of the people now tasked with helping the oppressed—whether at the Gates Foundation or the Omidyar Network or the Clinton Foundation—were fellow ex-consulting and/or -finance types like him. He knew how they operated. “One thing that that approach entirely fails to take into consideration,” he said, “is that the people who are the so-called beneficiaries of this help and this insight may themselves have the answer to the problems.” Hinton described the assumption that he saw guiding the protocol bearers in their new, public-serving assignments: “If we assemble enough brainpower and enough money, we can crack this, we can solve these problems.” Then the solutions can “get scaled.” This approach, he said, “just fails to recognize that we are attempting to solve these problems with the very tools and the very minds that constructed the problems in the first place.”
Hinton saw how the protocols, redeployed to the war on hardship, could be very useful to MarketWorld. “If we can suddenly be the white knight and ride in as the savior of the rest of the world, maybe it wasn’t bad, after all,” he said of the system and ideas that MarketWorld upheld. “Maybe it actually was good, and this is the chance to redeem capitalism.”
The protocols’ spread to social questions also gave elites a chance to limit the range of possible answers. “You absolutely constrain the solution set that you’re prepared to look at,” he said. “It’s kind of obvious, isn’t it? If you only have English speakers in the car, then the solution is going to be done in English.” In Hinton’s view, it was not a matter of malice. “It’s the banality of inattentiveness,” he said. “It’s not wickedness. It’s not conscious self-censorship. It’s just habit.” He brought up that meeting of nonexpert experts he had hosted in that conference room above West 57th Street. “I’m guilty of that,” he said. “I’ve got a pretty broad Rolodex. But when you reach out, you reach out to smart, articulate people like yourself. I mean, we all do that. So it self-replicates.”
He wondered aloud whether the larger project and the foundations behind it could be run differently. If he believed the protocols’ spread to be a colonization, what would decolonization look like? “My assumption is that colonization is inevitable,” he said. “I think the idea of independence didn’t even dawn on me. I didn’t even ask the question. I feel foolish. What does decolonization look like? How would you reverse the trend? Well, I think it is necessary but not sufficient to have a dramatic shift in the complexion and the voices that are around the table.” By that, he said, he didn’t just mean the usual push for ethnic and gender diversity, nor the keeping around of tokens. What about having the kind of people the foundations seek to help as part of the leadership? he asked.
He was presently in the middle of constituting his board of advisers for the new Economic Advancement Program. “I haven’t even questioned the assumption that I would be looking for people with depth of experience and elite credentials,” he said. But what if he jettisoned that assumption and put, say, a primary school teacher on the board—one from India? “Actually, I’m going to have a go at that idea,” he said. He said he would try to put an ordinary person—one of the people on whose behalf those private equity and consulting types had been deliberating—on the board. That meant the nature of the meeting itself might have to change to accommodate a wider array of backgrounds. Maybe it was best to avoid PowerPoint. Maybe he would have to present in the form of a narrative talk or story, or show a film. Ideas were churning.
Hinton is a Bahá’í, and the Universal House of Justice, the high council of the religion, had once put out a statement about the appropriate way to seek the improvement of the world and the lives of other people:
> Justice demands universal participation. Thus, while social action may involve the provision of goods and services in some form, its primary concern must be to build capacity within a given population to participate in creating a better world. Social change is not a project that one group of people carries out for the benefit of another.
Hinton believed in that idea. In his own life, he felt his faith to be one of the few forces strong enough to counterbalance the business way of thinking. The great flaw of that way, he said, is “materialism.” The businessperson tended to see work in utilitarian terms, as something people do to feed themselves and acquire things. But there is a spiritual dimension, too: “That work might be the expression of the inner desire to be productive and to be of service to one’s community—and that the idea of denying someone the opportunity to fulfill that is like not letting a tree produce fruit.” Many bearers of the business mind had, like him, a religious or spiritual life on the side, he said, “but I think that somehow that thinking never overlaps with that mind.” He added, “People don’t have permission to think about those things in their working life. We’ve decided that those are separate domains, and it’s kind of not really okay in my circles to talk about religious faith.”
Winners Take All: The Elite Charade of Changing the World Page 17
