Action: What steps can you and others take now to improve the performance of the institution for which you are responsible? Peter F. Drucker
Dr. Drucker is definitely a "free marketer", and he paints a very stark, bipolar picture here. But, are any of us, especially after experiencing the successive failures of the internet, the real estate, and the financial markets over the past ten years still prepared to pay the overall price of this "freedom"? We, as individual market participants have not shown that we will act responsibly and "wisely" given this freedom. I suppose there are still such people. After all, the belief in general economic equilibrium theory is close to being a religion in the US. If we are willing to pay the price of repeated market meltdowns, because the alternative IS the gulag, then I suppose we should continue. But I am having doubts.
Even staunch "cardinals" of the faith such as Allan Greenspan have stated their utter shock at how their assumptions of economic rational behavior by market participants have been shattered by most recent events. The problem is what we game theorists call the prisoners' dilemma. In a game of multiple players (economic or other), what is rational behavior for the individual, does not result in the best outcome for all players including that individual. My economic behavior does impact you, my neighbor. Most assuredly so in this "Flat/Crowded" world.
Is increased regulation tantamount to an inevitable slide into totalitarian tyranny, or does it lead to a stronger economy over time? Do we in Americas Co. have a moral obligation to our neighbors (whose economies melted down with ours) to act more responsibly? How are we going to be held accountable in the future?
There is an real interest in this debate in America. The majority of voters told us this in the last election. Let me remind you that our behavior is "bipartisan". Under President Bush you and I as, taxpayers became the largest owners of financial institutions and under President Obama, you and I all now make and finance cars on a world scale. You tell me whether the free market economy is alive and well in America. We need to take on the responsibility to fix it, because I certainly have seen the ravages wrought by a centrally "planned" economy, and want no part of it. Which is what Dr. Drucker is, I think asking us to ponder, today.
Which brings us back to today's Action call. Maybe we should tag on to it "...in order to prevent the occurrence of future market failures in the industry in which we compete". I'm sure that the "cardinals" are thinking about this big time. How will we contribute to the outcome as business leaders?
This will be difficult, because our current corporate measurement system (the share value of equities) quickly punishes those executives who understand the irrationality of their behavior (Example: Citi Bank) and would like to stop. However, they can't stop because of the immediate negative effect caused by the market and the reaction of shareholders... "Damned if you do, damned if you don't, so stay in the saddle and keep riding in the stampede until all the horses collapse". How can we fix our businesses, so when the next time comes, we can turn and swim against the tide of lemmings going over the cliff? What can we do in our own corporate worlds to perform in a way which avoids the prisoners dilemma? I'm absolutely sure that President Obama would like to hear from those of us with practical proposals NOW. I fear going down the path of regulation.
How about if I hereby asked all public company CEO's and CFO's to stop quarterly financial reporting and updates, and move to a yearly schedule? As some have done.
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