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Joe Zammit-Lucia
Joe Zammit-Lucia is a RADIX Co-Founder and board member. He is an entrepreneur and commentator on business and political issues writing in outlets in the UK, US, Germany and the Netherlands. His particular interest is the relationship between business and politics.
“I felt I was moving among two groups – comparable in intelligence … who in intellectual, moral and psychological climate had so little in common that instead of going from Burlington House or South Kensington to Chelsea, one might have crossed an ocean … They have a curious distorted image of each other. Their attitudes are so different that, even at the level of emotion, they can’t find much common ground.”
The great CP Snow spoke the above words in his 1959 Rede Lecture The Two Cultures to describe the differences in understanding and world views between the sciences and the humanities (Snow himself was both a scientist and a novelist). He argued that the developing gulf between the two represented a major issue in our collective ability to solve, or at least ameliorate, the world’s problems.
Today, the gulf more often talked about is between business and politics. Business leaders complain that, despite lots of consultation activity and endless policy suggestions, very little seems to happen. Some politicians complain about the endless demands from business that come across as narrowly self-interested and not in tune with political reality. That many supposed policy ‘solutions’ suggested are nothing more than wishful thinking.
As with Snow’s argument, the gulf between business and politics represents a major issue in our collective ability to ameliorate the world’s problems.
Why the gulf?
It is as well to accept that the different ways of thinking between the two groups should not come as any surprise. While both groups understand the benefits of closer alignment and cooperation, they each live in a different world – or a different bubble if you prefer. Their way of thinking about what issues need to be addressed, and how, are fundamentally different. That is both to be expected and desirable.
The way of business
Business operates in what we might call an engineering mindset. The corporation is seen in large part as a giant machine where all the cogs and wheels are designed to deliver clear outcomes in the most efficient way possible. Efficiency and optimisation in delivering to narrow objectives is the overarching aim.
This approach is maybe best understood through the Taylorism lens. Frederick Winslow Taylor was an engineer. Taylorism was all about maximising efficiency through workflow optimisation. Though the world has changed as has the meaning of ‘the corporation,’ the optimisation mindset remains prevalent. The search for efficiency continues (aided and abetted by some strands of economic thinking) even as we continue to see the trade-offs between efficiency and resilience.
The search for optimisation is one reason why a focus on shareholder value as measured by total shareholder returns is an appealing framework. It represents a single, measurable outcome that makes it possible to optimise. It is much more difficult to optimise anything if one is working towards multiple outcomes each of which pulls in a different direction (more on that later).
The way of politics
Democratic politics has little or nothing in common with the above way of thinking.
Democratic politics is, first of all, about a much bigger question: what kind of society do we wish to live in? On that there will be endless opinions, all strongly and viscerally held. The job of successful politicians is to define a vision of society that can get the support of a sufficiently large coalition of citizens to win democratic legitimacy.
When it comes to putting together the policies to try to move towards such a vision, once again governance finds itself in the position where every citizen demands something different. Where every decision creates winners and losers. Where what might be good for the country in the long term cannot possibly be delivered within the electoral cycle. Where government is trying to balance multiple objectives all of which pull in different directions.
In such an environment, all government actions will necessarily be the result of difficult compromises between different interest groups. All policy approaches will necessarily be highly imperfect and highly inefficient. That is an embedded feature of any democratic system. But, hopefully, they will retain the support of a large enough coalition of the citizenry to give them democratic legitimacy.
Further, policy initiatives can achieve no more that setting a framework. Their success or otherwise depends on how citizens react to and behave in response to that framework. One thing we do know for sure it that any policy initiative will generate a whole industry the objective of which is to frustrate the achievement of its intended objectives (take the huge ‘tax optimisation’ industry as one example).
And government is not in the position to fire those citizens who choose not to comply. Or, for that matter, silencing or getting rid of those politicians, even in one’s own party, who disagree with the political direction.
A few years ago, a friend of mine, a successful businessman, tried to address his frustration with politics by trying to set up his own political party. He was determined that it would be run like a business with business discipline. I remember asking him how he was going to handle the different opinions within his own party and those who disagreed with whatever his chosen direction happened to be on any particular issue. “I’ll fire them” was his response – which is what he had done in his successful businesses. Needless to say, his project never got off the ground. Politics is not a business.
Where to from here?
This piece is not intended to sow despair. A better way of working is possible. But it requires changes in mindset – and maybe more so on the side of business.
First, we need to accept that business and politics necessarily operate with different mentalities. That will not change and attempts to change it are both undesirable and doomed to failure. We need to accept the reality and find ways of making it work better. The desire expressed by some to take the politics out of politics is dangerous nonsense.
As I have outlined in a previous article, we also need to accept that the ‘problem-solution’ mindset common in an engineering mindset is highly inappropriate for evaluating the actions of government (which is why politicians using the engineering analogy of 'pulling levers' are inevitably disappointed when they find that nothing happens when those supposed 'levers' are pulled). Governments do not solve problems, and it’s about time everyone accepted that – citizens, businesses, politicians themselves – especially those enamoured with all-pervasive statism. Their role is to create the conditions under which progress has some chance of happening - assuming we can, as a society, find some manner of broad agreement as to what constitutes ‘progress’ – in itself difficult.
Politicians presenting themselves as technocrats focused on effective and efficient ‘delivery’, a stance that borrows from the engineering mindset, inevitably fail as political leaders. As Peter Drucker pointed out:
“Eisenhower, the President, did not really become effective until he had lost Sherman Adams and John Foster Dulles, his two ‘theater commanders’ or ‘general managers’. Their loss forced him to become a political leader instead of the non-political administrator he had tried to be.”
As the world changes, business leaders will find it increasingly difficult to maintain the engineering mindset in how they run their own businesses. Business is becoming more political in the sense that how business performance is judged continues to broaden. While it was never really the case that business optimised for one single outcome, the imperative to balance multiple conflicting objectives is ever increasing. And many of these relatively new demands on business are what we would consider political issues in that they have an impact on the kind of society in which we live. Some have chosen the moniker ‘stakeholder capitalism’ as a descriptor. I prefer the New Political Capitalism.
Be they questions about environmental impact, wage levels, practices that might be considered discriminatory, national security implications of business activity, the political weaponisation of trade, employee activism on which corporate activities they consider ‘acceptable’ and which not, and endless other issues. All of this has been drowned in an alphabet soup of acronyms: ESG, CSR, DEI………………. which, in typical managerial style, has degraded their meaning into empty acts of technical measurement and compliance rather than what they all really mean. What they do mean is that business is a political actor in that the actions of business have an impact on the sort of society in which we live.
As these pressures grow and multiply, as they inevitably will, business leaders will need to move on from only focusing on the traditional framing of evaluating ‘political risk’ to developing better political skills themselves. The skills of preserving and enhancing their legitimacy by how they achieve an effective balance between multiple conflicting objectives. How they communicate to a pluralistic audience (not just financial market professionals) where everyone has a different view, demands different business behaviours, and, as in politics, is able to create much disruption and aggravation if they are not satisfied.
The ecosystem
If we are to move forward, we first need a degree of humility.
The political class need to accept that neither is it their job nor is it within their power to ‘solve problems.’ Business leaders need to stop encouraging them to do so by imposing business ways of thinking onto the political and policy sphere and deluding themselves that it will work (subtext: if it wasn’t for those incompetent politicians).
What we need to be aiming for is to develop a government-industry ecosystem that encourages progress within the kind of society in which we wish to live. Of course, ecosystems seem messy to the sort of human mind that seeks order and efficiency. Ecosystems are far from efficient (they have endless redundancy) but they work. They are incredibly resilient absent destructive human interference. Nobody manages an ecosystem; it develops its own way of being and flourishing where conditions are right for it to do so. Human attempts at trying to manage ecosystems in nature are almost inevitably disastrous.
What such an ecosystem looks like and how to put the pieces in place to let it flourish needs to be a subject of much discussion and fresh thinking given the world we live in today. A world where recycling obsolete ideas about how we should think about ‘industrial strategy’ are doomed to fail. We must abandon the absurd idea that emasculating politics in favour of technocratic managerialism is the answer and recall the words of Ludwig Erhardt, West German Chancellor who presided over what some have come to call the post-war German economic miracle:
“What has taken place in Germany . . . is anything but a miracle. It is the result of the honest efforts of a whole people who, in keeping with the principles of liberty, were given the opportunity of using personal initiative and human energy.”
Creating those opportunities should be the overarching objective of the ecosystem.
This blog was originally posted on Joe's newsletter on LinkedIn.