Steven Pearlstein, business columnist for the Washington Post, wrote a column on the lack of leadership that led to the current financial mess - Just One Real Leader, and We Could Have Avoided This Mess - and thus commits one of the fundamental fallacies of business reporting: the leadership fallacy.
And that’s where leadership comes in. Because real business leaders don’t just sit there and accept a competitive dynamic, let alone a dysfunctional one that is likely to result in a bad outcome for everyone. They figure out a way to change that dynamic.
There are two reasons why this idea is wrong. The first is based on an argument made by Robert Reich in Supercapitalism: The Transformation of Business, Democracy, and Everyday Life. Reich argues, quite convincingly, that the era of ‘business leadership’ Pearlstein pines for has disappeared into the dustbin of history. From after World War 2 to the 1970s American business, government, and culture lived under a kind of social contract that granted many businesses monopolies in return for their support of unions and middle-class wages. Since 1970 this contract has been diminished by deregulation and technology, both of which have made businesses responsible to the overriding drive for profit. There is no room in business any more for the responsible statesman Pearlstein dreams of. Every CEO must fight for capital in a chaotic world and rocking the financial boat is rarely a successful move.
The second problem is one that I’ve been beating my head against a wall on for at least the past three years. In the fall of 2005 I sat in a discussion section for one of my first classes as a master’s student at Michigan, the conversation turned to the topic of CEO power and the ability of a single individual to control the fate of a company. I tried to argue that the power of a CEO was overrated but ultimately failed. Since then I’ve tried to make the same case in discussions at Socrate’s Cafe or elsewhere, especially when the conversation feels like it is too focused on the politics of the situation and ignoring all the other institutional dynamics involved in our daily lives. For some reason people want to talk about actions by people in Washington D.C. much more than they want to discuss the actions of their boss or the company they work for every day. The faraway and glamorous trumps the everyday and local.
Ultimately my second argument is about complexity. Business and the economy are much more complex than the basic economics we learn in school or imbibe from the pundits on television. Everyday life is more full of biases, coincidence, and chance than the hagiographic lives of CEOs presented by the business press ever imagine.