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George Schultz at 99

Over forty years ago, I attended a four session seminar at the Graduate School of Business at Stanford with George Schultz, then moonlighting as a part-time professor while serving as President of Bechtel Corporation. By that stage in his career he had already been a professor at MIT, dean of the Chicago University Graduate School of Business, and served in the US government as both Secretary of Labor and Secretary of the Treasury. Two years later, the Economist’s leading article gave a warm welcome to his appointment as Ronald Reagan’s second Secretary of State, after the disastrous Alexander Haig when the Cold War showed dangerous signs of overheating. The Economist reeled of a list of the world leaders with whom Schultz had built a close relationship over many years, which contributed the dialling down of threats to world peace during and following Schultz’s term of office.

Among the unexpected benefits of the Covid-19 pandemic has been the efforts of organisations to reach out to audiences with webcasts and webinars. My Stanford connections mean that I am on a mailing list for the Hoover Institution where Schultz remains, at age 99, a senior fellow, and to judge by the unmissable half hour session on Monday evening, a very active one.

I recall being put down in 1980 by Schultz when I made a case, the details of which I have long forgotten, for government intervention of some sort and he responded arguing against the approach I’d suggested and made the case for the use of economic, and specifically market levers. It was striking in this week’s interview how wide is the range of areas in which he now argues for intervention in relation to domestic policy, albeit still using economic levers, and international co-operation to address the range of threats to the future of our society, not least climate change and inequality.

As one of the architects of détente in the 1980s, and more recently an advocate for continued international collaboration (arguing for example that Britain should remain in the European Union), it was no surprise that he contrasted both the current deterioration in the relations between the superpowers and the America First foreign policy of the Trump administration with the post World War 2 settlement. He opened his talk by citing the vision both of those who gathered at Bretton Woods in July 1944 to establish a new international monetary and financial order and of the European leaders who met in Paris in 1951 to surrender sovereignty to establish the Europe Coal and Steel Community and thereby laid the foundations of the European Union.

He presented a depressing outlook for the world, given the scale of the climate change crisis and the apparent lack of reason in the approach of too many world leaders. However, I am not sure that I buy all the arguments that he made. In particular, he argued that the ageing of the populations of North America, Europe, China and the more developed countries of Asian (and given the need for population decline to reduce pressure on the environment and address global warming, the inevitability of an ageing of the global population), create the potential for an end to economic growth and squeeze on living standards, which seemed to take little account of the potential for extending productive lives.

But, however interesting his view of the global outlook and whatever the pleasure for me of this trip down memory lane, what justifies including an account of Schultz’s webinar in this blog? The “takeaway” is his account of the importance of personal relationships and human interaction. It is clear from his anecdotes that his ability to rub along with people made a huge difference to the resolution of problems in the United States’ relationship with the rest of the world both when he was Treasury Secretary and, most critically, Secretary of State. The Economist was right in 1982 to hail the appointment of this massively networked figure. Interpersonal skills are important to the management of the interface between organisations, right up to the size of superpowers. They are also critical to the effectiveness of internal operations. In answer to a question about the dysfunctionality of US government and politics today, he observed that the key figures in both executive and legislative branches all lived in Washington for most of the year, and he would regularly meet over dinner with congressmen from both sides of the aisle, in contrast to the situation today. A glimpse perhaps of the Dark Matter that makes organisations work?

My recollection from our encounters in 1980 is of a solidly build man in late middle age (at least from the perspective of a 24 year old) with a gravelly baritone, a contrast with the smaller man of today with a voice pitched an octave higher. There is only so much we can do to hold back physical ageing, but it is inspiring to see that there is every reason for remaining engaged and committed to public debate. Schultz’s recipe for a long and active life was revealed in answer to the final question addressed to him: “Don’t stop working on the things that interest you.” There is no sign that George Schultz intends stopping soon.

Shifting the dial on purposeful business: what can we learn from crises, past and present, in solving the problems of people and planet?

The fifth and final session of the British Academy Future of the Corporation – Purpose Summit was a disappointment after some of the high points of the earlier sessions, but was rescued by an inspiring closing contribution from Mohamed Amersi, whose Amersi Foundation is one of the principal sponsors of the Future of the Corporation programme.

The essential shortcoming of the session was that it failed to address its intended subject or answer the question set in its title. I was left with the impression that, particularly with the backdrop of the Covid-19 pandemic, the organisers felt that they would be failing to notice the elephant taking up most of the room if they didn’t address business purpose in times of crisis. As keynote speaker, Mark Carney tried to combine his experience as a central banker through the financial crisis and its aftermath with his appointment as UN Special Envoy for Climate Action and Finance. He made the case for a strategic reset to deliver “Net Zero” to address climate change, argued for corporations to be required to disclose how they contribute towards reducing carbon emissions, but did not manage to articulate how this relates corporate purpose. In Escondido Framework terms, the appetite of investors and consumers to do business with organisations that are addressing climate change and the restrictions and/or incentives provided by governments reduce carbon emissions shape the market interfaces of the firm, and the interest of the firm in its own sustainability should encourage it to behave sustainably, but they don’t change the corporate purpose.

Following Carney’s contribution, the session moved onto a panel discussion. As CEO of SSE, an electricity utility, Alistair Phillips-Davies had an easy job relating the changes made to his company’s corporate purpose in relation to the climate crisis. He further argued that clarity of corporate purpose helped everyone in his company respond appropriately to the current Covid-19 crisis, albeit that this sounded like a general statement about how it was good for the company’s reputation to be seen to behave responsibly when this latest crisis hit. The session then wandered, as it seemed unclear whether the discussion should be about how companies respond to crises, in particular whether they should be holistic and strategic or driven by short term financial optimisation, or whether companies should become principals in addressing the crises themselves, which seemed to be the line adopted by Ngaire Wood of the Blatavnik School.

I was left frustrated as Colin Mayer tried to sum up both this discussion and the material covered over the three days of the summit, ultimately feeling that we were left with a laundry list rather than an understanding of purpose, and that this final session had left the impression that the purpose of the organisation had been reduced to steering the organisation through the crisis. This may be consistent with the thesis that an organisation can be viewed as an organism whose purpose is to survive, but it falls short of the Escondido Framework understanding the purpose of the organisation is to create value for society than cannot be created through a set of atomised transactions.

Mohamed Amersi was given a few minutes to wrap up the summit and, for me, saved the day. He referred back to the 1850 charter of his family’s business which stated its duty to its “superior creator”, suppliers, those served [ie customers], the state, shareholders, surroundings and society. He described the challenges we face today as planetary sustainability, inequity and technology. He spoke of modern society by way of an analogy with an apartment block containing a flooded basement, crowded middle floors and a growing penthouse, but with a broken elevator. He despaired of top-down organisations in which no-one is actually in control and argued that is up to everyone to act – “If not you, who? If not now, when?”

How can investors and owners support purposeful business?

This, the fourth session of the British Academy Future of the Corporation – Purpose Summit opened with the Colin Mayer as session chair arguing that shareholders should be responsible for insisting that the business in which they own shares following their corporate purpose.

It may not have been his role as chair of the morning session to set out the logic behind the assertion, but it was disappointing that he did go on to frame this not so much as a responsibility of the shareholder as being something that is in their interest. After all, it is in the interest of the shareholder who has invested in a particular business proposition (with the prospect of financial returns that relate to the industry sector, corporate capability, strategy and market position) that the business “sticks to its knitting” and pursues its purpose to the best of its ability. After all, we are taught at business school that the shareholder can diversify their risk by investing in a variety of business and can buy instruments and investment that offer different patterns of return. The purpose of the company is something that attracts the shareholder to invest, and both the company and the shareholder have an interest in the company following its purpose. This proposition is the outcome of Escondido Framework thinking and its model of the firm.

Douglas Lamont, CEO of Innocent Drinks gave us a inspiring account of the Innocent Drinks story including a description of its purpose, vision and values – the why, what and how. He explained how Coca Cola, when it invested in the company in 2009 approached its investment with the intent that the purpose of Innocent should be protected. The relationship should be “connected not integrated” so Innocent could benefit from the positive things that Coca Cola could provide but not be swamped and turned into a fizzy drinks brand. As a consequence, Lamont feels that he has a “strong, trusting relationship with our shareholder” and sees the model of his company’s relationship to Coca Cola being a challenge to big corporates to emulate with their acquisitions and subsidiaries.

Lamont also spoke about the being a “B Corp”, the movement of companies trying to shift the reputation of business from greed to good.

Hiro Mizuro, CIO for the Japanese Government Pension Investment Fund spoke about the relationship between the “owner” of the asset in the shape ultimately of the pension beneficiary, the investor or investment fund and the portfolio company. He posed the question that I see as the beneficiary of some pension funds that are not yet paying out and some that now are, and as the owner of insurance policies and Individual Savings Account investments in tracker funds. To what degree do I take responsibility and, indeed, in relation to the argument from Colin Mayer at the start of the session, can I take responsibility for the purpose. On the other hand, thinking back to my time as chair of the Finance Committee at Versus Arthritis, it was just this approach from the team at Baillie Gifford that attracted me to advising the charity to invest in its Global Stewardship Fund, which proved the best decision I took in my eight years as a trustee of the charity.

The penultimate presentation of this session was Phil Thomson, president of global affairs at GSK. He spoke of joining Glaxo Wellcome, a pharmaceutical company with a strong sense of purpose 20 years ago, but also of an industry that lost its way in terms of its sense of purpose for time. He spoke of how the world had “dodged the bullet” of a pandemic several times in that time but the sense of purpose for the life sciences companies has been restored and reinforced by the current crisis and has helped stabilise and increase the resilience of the business. He argued that embedding purpose takes time and requires consistency but, along with clear values (Transparency, Respect, Integrity and Patient Focus) provides a simplicity that can be understood among the 125,000 employees of the organisation across the globe. Later, in answer to questions, he talked about how the values and the shared understanding of the purpose gave staff a sense of ownership in terms of their responsibility for what the company does and how it does it.

The final speaker was Deb Oxley, chief executive of the Employee Ownership Association. It is her role to promote employee ownership, extolling its virtues, overclaiming for what it can deliver, and blinding her to the competing challenges of other stakeholders to ownership rights and to diversity of types of engagement of people in a workforce – from the casual part-timer, to the person with transportable skills through to “lifers” who have made huge commitments to the organisation and few choices to move elsewhere. The shortcomings in her presentation only highlight the strengths of the alternative way of understanding ownership that underpins the Escondido Framework.

How can technological change serve society through purposeful business?

This third session of the on-line British Academy Future of the Corporation – Purpose Summit was anchored in an interview with Satya Nadella, CEO of Microsoft and, as became clear, a living embodiment of the importance of purpose to business.

He conveyed a strong commitment to the resilience and survival of the corporation, and the place of purpose within this. Early on, he stated “A company should not outlive its social purpose. Its social contract should be sustained.” His final remark, in response to a question about what he wanted to achieve at Microsoft, was that measure of the contribution of leaders to their companies was that they left them with the institutional strength to outlive them. These two observations together add up to a compelling view of the role of the leader to ensure that the company’s purpose, in terms of what it provides to society at large, creates value for society. By implication, strategy is about adapting to ensure that the company’s purpose continues to achieve this.

Nadella, in common with Alan Pole of Unilever in an earlier, reflected on the importance of a company’s purpose in relation to meeting he challenges of the climate crisis and inequality. He spoke of the need for economic growth, but that it needs to serve everyone, to be anchored in popular trust, and to be sustainable – “you can’t have growth and break the planet.”

Nadella spoke repeatedly about the need to earn and maintain the license to operate, a particular concern for the very largest technology companies. They need to be more sophisticated in avoid the harm that is a consequence of their scale – not least to keep regulators and would be regulators off their backs. He spoke of the need for companies like Microsoft look upstream of themselves and see what they can do to ensure that through an embedded culture and value system of their own they do what they can to shape their external environment so that “we can be customers of good stuff”.

He was asked whether the pressures of quarterly reporting imposed short term pressures on Microsoft and compromised its corporate purpose and own long term strategy. He acknowledged that quarterly reporting was a constraint but only insofar as it forced the company to explain what it did and why. He explained that he had no difficulty, for example, justifying to his shareholders why Microsoft invested in local housing projects in Washington since the company need to support its wider workforce, not just highly paid software engineers but also people in blue collar service roles keeping the local economy operating.

Chair of the House of Commons Science and Technology Select Committee and former minister, Greg Clark, had to follow this tour de force. He reflected on the how the Covid-19 pandemic had accelerated some technology trends such as video-conferencing but also commented on the degree to which the recent experience surrounding the popular responses to apps to tracking infected patients had highlighted the importance of face to face contact in service activities.

The third contributor to this session was Ngaire Woods, Dean of the Blatavnik School of Government at Oxford who focussed on the role of government in regulation and the limitation of self regulatory codes in prevent a “race to the bottom”. It was apparent that her underlying thesis is that, notwithstanding the sense of purpose adopted by some business leaders, regulatory intervention is necessary – citing as her example the need for Robert Peel to secure the legislation to ensure widespread adoption of the standards in factories that Robert Own had pioneered. She also highlighted the need for appropriate regulation, in that the cheap solution is not always the best (using the example of the alternative approaches to preventing oil spills: the inexpensive solution of a fining system was ineffective whereas the policeable and expensive solution of requiring tankers to have a double skin has been highly effective). In answer to questions later, she also argued that governments should be prepared to use their power as lenders of last resort in the pandemic to secure responsible and purposeful behaviour by business – an answer that unwittingly brought us full circle back the issue addressed by Nadella of the license to operate.

Role of stakeholders in purposeful business

The second session in the British Academy Future of the Corporation – Purpose Summit took place earlier this afternoon, with a focus on the role of stakeholders in purposeful business. The proposition in the Escondido Framework that what most people call stakeholders should be thought of as customers of the firm is at odds with conventional stakeholder theory, but for the purpose of this review I will talk about stakeholders as conventionally understood.

Some of the richest material in the session came from Victoria Hurth from the Judge Institute, although perhaps I reach this conclusion because the language she employs comes closest to that used in the Escondido Framework model of the firm. She framed her introduction to the session by talking about the relationship of corporate purpose to stakeholders being one in which the role of the market is to mediate the pressures from stakeholders. She also talked about tapping the wisdom of shareholders to give meaning to the purpose of the company, which may be another way of looking at the Escondido Framework view that the organisation exists to resolve the symbiotic needs of the stakeholders. She wrapped her introduction with an argument about need for diversity on boards to help with a paradigm shift away from a shareholder value driven model of the firm to one driven by purpose in the service of stakeholders – but without demonstrating the logic behind her argument. There may well be plenty of meat underlying her assertion, but today she did not have the time to make this part of her case.

Frances O’Grady, from the TUC, made the case for hearing the voice of the workforce on the boardroom, referring back to Theresa May’s proposals for changes to corporate governance and the subsequent review that I contributed to and commented on in 2016 and 2017. She explained that she is agnostic about whether worker representation should be in the context of a unitary board or a two tier board following the model in some northern European countries. She also argued for a change to directors’ duties, by implication beyond those set out in Section 172 of the Companies Act requiring them to take account of all stakeholders, to require more focus on the long term.

Dan Labbard, CEO of the Crown Estate (an organisation whose roots go back to 1066 and William the Conqueror) addressed the question of whether a focus on purpose creates additional risk to the corporation. He argued that a focus on purpose equips the corporation to recognise and then organise to address risk, in contrast to a primary focus on profit. He build on this argument by encouraging organisations to proactively go out to their stakeholders with a purpose led strategy, rather than merely responding to stakeholders, and to look at risk through a stakeholder perspective.

Jim Snabe chairs two of Europe’s biggest corporations, Siemens and Maersk. He framed his concerns around the impact on companies of globalisation, technological change and the climate crisis. He argued for leadership anchored in corporate purpose, which describes as explaining why your organisation exists. Leading two companies with two tier boards, he is an enthusiast for this model, explain that the “management board drives the bus” while the supervisory board “sets the GPS”. He sees four roles for the supervisory board: ensuring the strategy is correct by asking the right questions; ensuring that the strategy is aligned with the United Nations strategic development goals; promoting the next generation of leadership; and defining success in terms of addressing the needs of all stakeholders.

Colin Mayer opened the responses to questions by observing that it is difficult, notwithstanding the variety of means that can be considered (different board structures, consultative bodies, citizen juries), to capture the views of stakeholders. (for the Escondido Framework perspective, visit the section of this site addressing governance and some of the relevant earlier posts).

How is business adopting purpose around the world?

The British Academy’s Future of the Corporation – Purpose Summit is an important contribution to developing our understanding of what business is about, and a subject at the heart of the Escondido Framework. Possibly as a result of the selection of speakers, this afternoon’s opening felt a bit like a vehicle for Colin Mayer’s view of the world, particularly for those in the audience who stayed on for Mayer to answer the questions posted during previous hour – (including his final response, in answer to the question that I had posted “Is purpose the answer to the questions “why does this business exist?” and “what do we do that creates value for customers, employees and suppliers?”, which was an emphatic “Yes”).

It was a pity that technical difficulties meant that it was impossible to hear the opening contributions from Mayer or from Stefan Oschmann, CEO of Merck, and that Ashley Grice, CEO of BrightHouse (a creative consultancy owned by the Boston Consulting Group, not to be confused with the bankrupt business that used to rent consumer durables to cash strapped households in the UK) had a false start and when she resumed once the technical problems had been addressed, spoke thirteen to the dozen presumably being anxious that she would run out of time.

Grice is her own worst enemy, or her delivery and articulation of the importance of corporation purpose risks undermining what I think is her core message. The technical problems today may have been part of the problem. However, her claim to have been part of a movement born in 2003 sounded a little bizarre, failing to recognise those who have been ploughing this furrow for many years, including people like Colin Mayer, and also Mark Goyder from Tomorrow’s Company whose name cropped up among the questioners in the chat box. No-one can doubt her passion, even if her references to the bionic company were puzzling. The most compelling part of her message was the value of purpose as something to engage the people in the company, because people need to find meaning in their work and their organisations, which (I am paraphrasing here) means they benefit from doing something worthwhile.

Alan Jope, CEO of Unilever, brought the session alive. He is a Unilever lifer, and comes across as a worthy successor to Paul Polman not only as a leader of the company but also as an advocate for a view that companies exist for a purpose rather than for profit, and that making profit serves the purpose of the company (in that without profit companies do not have investors or access to capital and, of course, if the chief executive fails to keep the investors happy they will be replaced as chief executive). He remarked that “companies without a purpose risk foundering on the rocks of moral bankruptcy” and told us that the purpose of Unilever reflected a founding mission “to make cleanliness commonplace and lessen the load on women” that had been updated to the 21^st century as “making sustainable living commonplace, improving livelihoods and respecting and protecting the environment”. Jope’s commitment to corporate purpose is expressed in three beliefs: that brands with purpose grow; companies with purpose last; and people with purpose thrive. He concluded by observing that collectively we have two big problems to address: inequality in all its forms and climate change, and that business has to play its part in addressing these.

The final speaker was the shadow chancellor of the exchequer, Annaliese Dodds. Following Alan Jope, with his clearly articulated and well structured case for corporate purpose, was a hard act, but she made a competent fist of the challenge. However, she did not manage to display the clarity of vision of what the corporation is about that Jope managed in his contribution or Colin Mayer provided when answering questions. In common with many others, she blurs boundaries and does not have a clear model in mind that allows her to express why governments have a role to play in regulating and on occasion supporting private businesses. I hope she did not intend to convey the impression that hitherto different industries were of different social worth (with ones that make or grow stuff at the top) and she had only come to recognise the importance of business such as logistics, retailing and social care as a consequence of the Covid-19 crisis. As someone who has worked in distribution and retailing, now works in an industry adjacent to social care, I know that the organisations that I worked in had purpose and that we created value for society!

The session ended with a short Q&A, in response to questions posted in a chat box. It was depressing to see how many questioners struggle with idea that purpose and profit have a symbiotic relationship. However, it is that very lack of understanding that justifies the efforts of those who are trying to deepen the popular understanding of the way that businesses actually work. I was disappointed by Colin Mayer’s response to a question about charities in which he failed to recognise how much charities have in common with businesses that trade for profit, in the equivalence between the way that charities have to satisfy their funders and the need of “for profit” businesses to satisfy their investors. But, as mentioned earlier, he rescued himself with a clear articulation of purpose in the answer to the question planted by this commentator.

Black Lives Matter: Three Currencies at work

The Black Lives Matter campaign, given the most enormous boost by the killing of George Floyd, provides a powerful example of the “three currencies” at work.

The roots of the movement illustrate the three currencies: in the cash employing commerce of the Triangular Trade of the late seventeenth and eighteenth centuries and the slavery plantations of the Caribbean and the American South, the brute force employed by tribal chiefs and British slavers in West Africa and subsequently by slave masters, and in the cultural norms that facilitated the establishment of companies by royal charter and act of Parliament and, in the United States until the Civil War, tolerated and legitimated continuing enslavement of uprooted black people for two hundred years.

The current movement illustrates the three currencies too.

Policing, principally but not exclusively in the United States, that relies on physical (in the case of George Floyd deadly) force is an application of power where the application of persuasion and influence have failed. Many observers argue that the overuse of force (including, in the United States, widespread resort to guns by police) ultimately frustrates the objective of achieving peaceful civil society, but that is generally not the belief of the shooters at the time. It is impossible to get into the mind of Derek Chauvin, the police office filmed with knee on Floyd’s neck. However, unless he mounts a defence in court of diminished responsibility as a consequence of a mental health disorder, we can only assume that his defence was that he believed that anything short of the force that he and his colleagues applied was insufficient.

Correspondingly, demonstrators who become rioters and throw missiles or charge a police line (albeit a police line is an application force) are deploying physical force reflecting the belief that the political expression of the demonstration is insufficient to achieve their purpose. Of course, it is possible to argue that rioting and throwing missiles may frustrate the purpose of the demonstration in the eyes of other demonstrators and the wider audience, but that is not the belief of the rioters themselves.

The toppling of statues, particularly that of Edward Colston, is an interesting case in terms of where the line is drawn between the application of physical force as a currency and the application of influence. It is indisputably criminal damage and the equally indisputable that the removal of the statue involved physical force. But the removal of the statue was an exercise of political expression designed to further a shift in a political and cultural norm in pursuit of a wider objective.

The expression of the mass demonstrations, particularly in the context of restrictions on public gathering as a result of the Covid-19 pandemic, has clearly been a very powerful application of power to influence an outcome through political means. There was already disgust felt widely across the world and within the American establishment without the demonstrations, but they have helped keep the story in the deadlines, have elicited positive responses from people in power (even if not from Donald Trump), and have generated accounts across mass media channels that probably both reflect a shift in public mood and reinforce it.

But what about Black Lives Matter as an expression of the third currency, cash? Just look at the way that corporate America has responded. What little I know of some of the corporate leaders who have spoken up to express their disgust at the conduct that result in the killing of George Floyd and others before him, satisfies me that most if not all of them instinctively oppose racism. However, most have spoken as clearly as they have in the knowledge that this will be good for their businesses. The messages coming out from the board room are not dog whistle statements designed to appeal to a “woke” audience without turning off an audience that is hostile to Black Lives Matter. Opposing racism is good for their businesses. Similarly, as a merchandise director with the UK’s largest retailer of stationery, in the 1980s I justified developing environmentally friendly (or at least environmentally less harmful) not just because I wanted to do my bit to help the save the planet, but because I was confident that it was going to be good for business – helping grow our sales and market share, enhance the standing of our brand, and attract the best and brightest young people to work for us. It hasn’t required a threat by the black community to boycott these US corporations, but the knowledge that wide swathes of the American population, black and white, will be influenced positively by the corporation taking a stand.

Lessons from a Warzone, by Louai Al Roumani

My NHS Trust has an annual “Lessons Learned” conference, for sharing the lessons that teams have drawn out from incidents that have taken place in the previous twelve months. Don’t waste a crisis by failing to learn from the experience. This book is about lessons learned from a crisis, but is much more than just another business book.

Louai Al Roumani was the fairly newly appointed CFO of the leading retail bank in Syria when the Arab Spring turned into the Syrian civil war. Most of his family fled to the safety of Kuwait as conditions turned nasty (ironically, they had been living in Kuwait when Saddam Hussein invaded in 1990, but missed the occupation because they were on vacation in what was then a very safe Damascus), but Al Roumani chose to remain, loyal to his home city and his company.

“Lessons from a Warzone: How to Be a Resilient Leader in Times of Crisis” recounts the lessons learned by Al Roumani over the next five years. In this time, despite mortar bombs falling in Damascus and ISIS reaching the outskirts, his bank, BBFS, didn’t just survive but thrived. It did this by doing things that when explained by Al Roumani, and you should already have realised if only you thought about them for moment, make lots of sense even if they fly in the face of what many less insightful managers and directors might do (and, indeed, was evidence by departure of the two directors appointed the one of the major investors).

The lessons include going the extra mile to look after customers (airlifting safe deposit boxes out of a local branch as ISIS overran a provincial town), providing them with reassurance (displaying piles of cash when they queued up to withdraw their deposits and not restricting the amount they could withdraw), looking after staff and avoiding redundancies and cost-cutting around workplace hygiene factors ,and robust systems testing and disaster planning.

He draws on his heritage as a Syrian, living in a city that claims to have been longest continuously inhabited community in the world (a claim of Damascus that Aleppo contests), but also sharing the nomadic transitions of hospitality and reciprocity of Arabi culture. There are great insights relating to thinking about the long term health of the company, informed in part by a different “concept of time” from the one that he had been exposed to during his Harvard MBA. He argues that you should not treat profitability as a critical success factor but that if you see your objective the long term wealth of your shareholders you will from time to time have to sacrifice short term profitability. Although his bank was a creation only of the 1990s, he argues for playing “the long game as a third generation family business does.” He tells a charming anecdote of a large purchase from a shop in the Damascus souq where, in contrast the lady ahead of him who haggled hard and secured no discount, the old gentleman who been silently observing the young man serving Al Roumani gave the instruction that Al Roumani should receive a discount to reward him for not haggling. The account provided by Al Roumani explains why BBFS displayed such resilience through the Syrian civil war that it both maintained sustainable positions in relation to the marketplaces it deals with and also built the corporate and social capital inside the organisation not just to survive but the thrive.

Don’t read this book just for the business lessons. It is a powerful tale of the resilience of a man and a society in the face of enormous threat and massive upheaval. You will learn about the experience of a slice of Syrian society during the last decade and about the cultural hinterland that supports it. It is also a human tale, which keeps resurfacing through the book and continues right through to the acknowledgements at the back – just for once, make the effort to read these as the book keeps on giving right up to the final page.

Lockdown – through the Escondido lens

We are in lockdown with Covid-19. Large parts of the economy are in suspended animation. Other businesses are operating on a hugely reduced scale. Others have recognised that their sales have dried up but have redeployed that assets and staff to help address the pandemic. The Chancellor of the Exchequer has become the “employer of last resort”, funding 80% of staff wages as an inducement for companies to keep people on their payrolls.

How should we interpret the reshaping of businesses through the lens of the Escondido Framework? In particular, what does it do those market interfaces that define the firm as visualised in a simple form by the Reuleaux Tetrahedron?

Are companies in the same business now that they were last month, before lockdown? In some cases, it easy to say that, at least temporarily, they are: the Lymington sail maker who has turned over his computer fabric cutting capability to turning out fabric pieces for others to sew up as scrubs for NHS front line staff and the university engineering departments that have deployed their 3D printers to make components for surgical masks. These companies have moved from one market into completely different one. Their staff, capital, and suppliers are relatively unchanged, but they have exchanged the customer market with which they usually interface with a completely different one.

Others have been transformed into agents of the state: temporary distributors of transfers by a government that has banned their businesses (particularly those in consumer services: retail, hospitality, entertainment) from operating. In their cases, the regulatory interface (not displayed in the 4 market interfaces of the Reuleaux Tetrahedron that describes the simplest companies, but has to be imagined in a multi-dimensional context) has moved inwards to the degree that the company is no longer creating value other than as a channel for transfer payments.

Another way of looking at the interpretation is that the company exists only in a shadow form, some ghost of what the company could become once again. I suspect there is a quantum analogy here – the locked down company with furloughed staff as Schodinger’s Cat. Certainly, the physical assets remain present, the staff remain employed, the wiring of the corporate structure remains in place, and the Dark Matter of the soft things such as relationships, corporate memory, social glue, shared assumptions, implicit operational and communication protocols continue – albeit that they may be vulnerable the longer that the lockdown continues. Zoom and its competitors keep some of the Dark Matter alive. The efforts that the investor, directors, and managers make in supporting and communicating with their staff will help, but the longer the uncertainty remains, or if the companies scrimp on their effort and investment in maintain this soft stuff, the greater the risk that the Dark Matter will leak away.

Markets, State and People by Diane Coyle

Rousseau observed that “Man is born free but everywhere is in chains”. Many people in business, politics and media talk about markets in a similar way, as though “free markets” are the natural state and desirable order and any intervention by an agency of the state or collective popular action is represents an undesirable fettering of enterprise.

Economists since Adam Smith have recognised that markets can fail and may need to be subject to intervention. Even figures as inspiring to simplistic supporters of free markets as Milton Friedman recognise that there are proper roles for the state where markets fail.

Diane Coyle starts in much the same place as other economists who look at limits of markets and the place of government intervention in markets. She starts with conventional analysis of market failures, listing seven instances of failure in the conditions required for free markets to be efficient. She returns these seven types of failure throughout her examination of the relationship between markets, the state and people, and description of the appropriateness of state intervention or collective action to address.

In cataloguing the failures and the responses to them, Coyle assists the reader, from the economics or politics undergraduate or MBA student getting their first exposure to welfare economics and public policy, through to the general reader seeking a better understanding of how the world works. She draws on and explains clearly the work of people like Coase, Ostrom and Thaler who have broadened and deepened our understanding of how people both cause and respond to the seven types of failure she describes. The book is furthered enriched, and the lessons consequently rendered more accessible, by a peppering of case studies illustrating the core arguments.

Coyle also tackles government failure, highlighting the shortcomings in bureaucracies (or among public servants) and as a consequence of political failures (or failures of politicians) that result in the application of the wrong policies to address the market failures. The text seems to peter out in the final chapter where she addresses what she appears to hope is the solution to the problems of government failure, which is the application of evidence to economic policy. In this chapter that she reveals the limitations of her experience as a career academic and regulator, with a rather slight addressing of the use of statistics and cost benefit analysis. This doesn’t detract from the power (or readability) of the previous nine chapters, but point to the opportunity for someone else to write something of similar tone and quality to fill the gap on how to test public policy initiatives to address market failure.