The Bregman Leadership Podcast
Episode 229

Roger L. Martin

When More Is Not Better

What is the future of democratic capitalism? Roger Martin is a professor emeritus at the Rotman School of management at the University of Toronto, Thinkers50 #1 management thinker in 2017, and most recently the author of When More is Not Better. Discover the price of “running systems hot,” why the way we measure efficiency is a problem, and false trade-offs.

About

Get the book, When More Is Not Better from Amazon here:

Learn more

Website: Rogerlmartin.com
Bio: Professor Roger Martin is a writer, strategy advisor and in 2017 was named the #1 management thinker in world. He is also former Dean and Institute Director of the Martin Prosperity Institute at the Rotman School of Management at the University of Toronto in Canada.

Video

https://youtu.be/LttoqT-nXtQ

Transcript

This transcript is unedited.

Peter:

We are fortunate today with us is professor Roger Martin. He and I met at the thinkers 50 forum. In-Person we were trying to figure that out in person last year. And he’s a writer, a strategy advisor and in 2017, and this is a lot of responsibility and weight on his shoulders. He was named the number one management thinker in the world. So, you know, it’s, it’s, it’s both a blessing, but also probably something to live up to, but you’ll hear why in, in our conversation today, he’s the former Dean and Institute director of the Martin prosperity Institute at the Rotman school of management at the university of Toronto in Canada. And he has written most recently a terrific book called when more is not better overcoming America’s obsession with economic efficiency. Roger, welcome to the Bregman leadership podcast.

Roger:

Hey, it’s great to be here. Thank you for having me on, and that’s great to see you again.

Peter:

Nice to see you too. So what let’s just ground ourselves in, in a couple of foundational ideas of the book first, what’s the problem that has driven you to write this book?

Roger:

The problem is the stagnation of the middle class in America. So the median income has been too flat for too long and the nice American combination of democracy and capitalism only works. I believe when the median family is moving forward because they get this lovely combination of democracy and capitalism, you need to have 51% or more of the populace saying I support this system. And I’m fearful that if the median families and families around there no longer feels like it’s working for them, they won’t support the system anymore. And that was the inspiration for this study that I that I started in 2013, that resulted in the book.

Peter:

Okay. So I want to talk about the study in a second, but let’s talk about some terms, what is democratic capitalism?

Roger:

It would be the combination of democratically elected governments pursuing an economic strategy that involves mainly the private ownership of productive assets regulated of, of course as opposed to the ownership of, of assets and state central planning. So it would be that combination of of two things. And I think it’s been the most successful form of, of management of, of economies and one that I, I happen to love.

Peter:

I can’t remember who said, but capitalism is the worst system, except for all the others. And that was Winston. That was Winston Churchill. It sounded like Winston Churchill.

Roger:

It does doesn’t that? He said, he said some some wonderful things, including America always gets it right, but only after exhausting all other alternatives.

Peter:

That’s great. Tell us about the Martin prosperity project.

Roger:

Sure. So when I stepped down as Dean, I was Dean of the Rotman school, as you mentioned for 15 years, from 1998 to 2013, I went to take over something called the Martin prosperity Institute, which the wonderful benefactor of the Rodman school Joe Rotman gave to to honor me and said, go and do whatever you want. And so I went to the Martin prosperity Institute and started it in 2013, a project on the future of democratic capitalism, because in 2013, I was, I was having these concerns about the stagnation of, of middle incomes in America and the explosion of incomes of the top 1%. I just said, that’s, that’s not good. That’s not how I think we wanted that to work. Right.

Peter:

Let me ask you a question I want to, I want to, I don’t want to distract us from the project, but I do have a question when you say that, would you have been as disturbed if the middle-class continued as it was right, but the top 1% wasn’t earning so much,

Roger:

That would have been well, depends what you mean by the middle class and doing what it was. I I think it’s just super problematic not to have the middle income families growing, so benefiting from, from that, but it just exacerbates it the problem when, when there is real economic growth, but it is going disproportionate. The fruits of it are going disproportionately to the, the top 1%, right? Is that, that contrast dramatically to what happened in the great depression and the great depression. It was a terrible situation where we had a decline in, in in incomes per person of like 33% over four year periods, just terrible, terrible downturn. But in that period, the top 1% actually failed more than the median family, right? So at least Americans could say, man, this sucks, but at least we’re all in it together. That’s, that’s, that’s

Peter:

What I’m curious about. I’m curious whether this is a psychological issue or an economic issue. Cause when I think of the psychology of sort of comparative incomes, and I think, you know, that, that, that research that says, I’m sure I’m going to get the numbers not precisely, right. But I would rather make a, you know, a hundred thousand dollars knowing that you’re making $50,000 than make $150,000, knowing that you’re making $200,000, meaning I would rather make less money as long as I’m making more than you. And that’s, I think a psychological issue more than an economic issue. So I want to sort of parse out whether this distinction is psychological or economic.

Roger:

I think it’s both. So I, and I, first of all, I agree entirely with you, right. That there’s a huge psychological component to it. I mean, in some sense, democracy is a big psychological thing. Yeah. I guess that’s interesting. Right. You know, it’s like I and my fellow citizens get to elect who governs us. So I think that’s partially a psychological issue, but, but I, I, I do agree. I think, I think it’s partially a psychological, it’s like we’re working hard and we’re not moving ahead and they are, and they are right. The fact that we’re not moving ahead is economic. And the fact they are, is psychological. I would, I would I would say. And so it, it is, it’s the interplay of those two and the interplay, I don’t think produces a very positive picture. Got it. In contrast to the great, great depression. I think there was a sort of a collective will to, to overcome, to come out of it and, and you know, lots of political changes the new deal and everything in order to, in order to get out of the mess that America was in end and the rest of the world, but America to a great extent. Right.

Peter:

Okay. So thank you. Let’s continue with like what the research was of the Martin prosperity.

Roger:

Well, I just wanted to understand what was the future of democratic capitalism. We’re where we destined to have this continuation of, of flat, very flat median incomes and everything going to the top 1%. What had changed in the economy had something fundamentally changed. I did not know at the time whether something has fundamentally changed, so we could just expect more of this. Was this a blip? Why was this happening? And most importantly, because I’m a pragmatic man, what could you do about it if you didn’t like it? Right.

Peter:

And I, and I liked that so much of this book is devoted because a lot of political books, especially are devoted, you know, much more to, to let me identify the problem. Then the solution, you identify the problem in a thorough way, but you spend the majority of the book on the solution, which I liked. Okay. So you short, long story short, you discovered that there’s actually a problem in the system.

Roger:

Yes. Yes. I think there’s a fundamental problem. And that is that we have, we have pushed the bounds of the, a good concept. So efficiency, the pursuit of efficiency. Is that a good thing? Just like, you know, whatever eating a chocolate moose is a good thing. But if you, if after dinner you had 25 chocolate mousses every, every night after you

Peter:

Described my challenge

Roger:

To that chocolate mousse. Well, I do too dark chocolate. So more too much of a good thing becomes a bad thing. And what, what I believe has happened is that we pursued efficiency to such an extreme and in, and in flawed ways that we’ve created inadvertently an outcome that we never expected. So that, that to me, that is the fundamental finding which in 2013, I, I did not appreciate or understand. So that was, that was new news. To me –

Peter:

Did you originate this idea of efficiency and resilience?

Roger:

I don’t know somebody else, somebody else may was may well, have it.

Peter:

The reason I’m asking, I’ll tell you the reason I’m not to put you on the spot and I’m sorry if it does, but that’s not the reason I’m asking. The reason I’m asking is because the way I first became acquainted with it was Michael pollen, an article that I read by Michael Pollan talking about our food system and the fact that, you know, it has become so efficient that during coronavirus, when 5% of the meat processing plant, you know, that when, when one meat processing plant shuts down, that’s 5% of our system and that we’ve been overrun, you know, we’ve, we focus too much on efficiency in our food supply and not enough in resilience in terms of local farms and things like that. And so then when I read your book, I was like, Oh, that’s where Michael got it from. And I love the idea. I found, you know, like the, that wasn’t what the whole article was about, but that was the, the piece of the article that I was my big aha. And like this idea of efficiency versus resilience is so profound and so clear and so difficult to overcome in my view, like, I think this is really hard. So that’s just why I was asking if it, wasn’t wanting to thank you for coming up with the idea, but at least thank you for like, you know, thinking about the idea.

Roger:

Yes. I don’t, to be honest, I’m not sure there are often many things. I, I think about that, that I find out later to somebody else as well, essentially like it, I, I will, I will give credit, you know, to, to a fellow named Chris cliff Saunders. So I was working in the mid eighties with a a high-tech company and doing training on strategy with them and the guy who is managing the work. There’s the bright Brit named cliff Saunders whose father worked with Turing back. He was British. And he and his father worked at with tourists on computers, way back in in, during the world war II and was part of the Bletchley park. Codebreakers so, anyway, cliff cliff used to, we would just used to have dinner while we were when we were doing these oxides.

Roger:

And, and he, he talked to me a lot about how systems when they are essentially running hot, how bad things happen that you just can’t predict, you don’t know what bad thing will happen, but when you take away all of the, all of the Slack in a system that something will happen. And after the fact, you’ll say, Oh, maybe we should have thought of that. But cliff would always say, no, you could, because you just don’t know that’s the price of running systems hot. And so often in my work work, there are things that stay in my mind for 20 years, 30 years, and then they sort of they’re in the background and they come to the four Brock, a ground at some point. And I think all those dinners with cliff when we talked about that actually had an impact as when I started to see something. I said, well, cliff talked about, talked about this, you know, 30 years ago, and he’s a smart guy.

Peter:

It’s great. I really, I think it’s so critical. And this idea that if you’re running a system hot means that you’ve taken all the Slack out of the system. And so it’s as efficient as it possibly can be. Which, you know, from, from our case, from a, an economy perspective, it means, you know, I can get organic greens at a cheaper price than I can get it otherwise. In fact, I’m often surprised when I go to a farm stand and I’m just using food as an example. Cause I’ve been thinking about it in these terms, I go to a farm stand and I’m thinking, why does it, is it more expensive for me to go to a farm stand when they’ve cut out all these middle people than it is when I go, even to whole foods, you know, where they’ve got a big organization around it, but it’s still more expensive. And the reason is because there’s such an efficient major system, but then when e-coli bleeds from a cattle farm into the, into the green farm, and we realize that the farm that supplies, those greens shows up in every single processing plant, and then you have to shut down the whole food supply because while it’s efficient and cheaper, it’s, you know, when the system run hots, if anything goes wrong, then it kills the entire system. I think

Roger:

Correctly, you are, you are. And, and that’s, and, and people who study, study this talk, talk, talk about, you know, tightly connected systems. So one way to make a system more efficient in that way is to more tightly connect pieces of it. But once you’ve Taipei connected, it you get all sorts of you get all sorts of other problems. So you’re interested in that topic. There’s, there’s these great guys Andras tilt chick and Chris Clearfield have written a great book recently called meltdown that that you might want to explore, because it talks about the, the, you know, the really terrible downsides of tightly coupled systems.

Peter:

So one of the challenges that we’re facing is we have been taught and driven. I mean, I know in my lifetime, certainly to make everything more efficient to, you know, you know, like you’re on a, this is on a global economic scale, like you’ve got Amazon, right. Which is, you know, a great example of a massive organization. I think there’s some crazy number. I don’t know what it is, but it’s, it’s like 70% or 80% of all. Maybe it’s even more than that. Of all internet purchases go through Amazon of all online shopping goes through Amazon. So that’s, that’s an example of a very various efficient system with, in some ways, very low resilience, unless they create resilience in their system. And, and, and so like in the large corporate level, you have that, which companies which are driven to expand and to grow year after year after year, it’s involved, you know, it’s, it’s driven by shareholder and analyst pressures.

Peter:

And it’s driven by our natural desire to like grow and get better. And then it’s also in these little levels, like, okay, here’s the seven minute workout. You just need to exercise your body for seven minutes in exactly this way. And that’s all. And then, and, and I, so I, so once I started seeing it through this lens, I see it everywhere. Like everything that we do is driven towards efficiency. And, and again, like, I think we’re talking about what you were saying before. I had an economic problem, as well as the psychological problem. How do we break the, and we’re going to talk about the economic piece in a second. How do you break the psychological drive? Like, that’s a, how do we tell people, you know, what better for you not to grow so big, better for you to not be so efficient, better for you to waste time? I mean, I’m seeing a lot of books about the Sabbath and, you know, take a day off, take, you know take a month off from social media. Like how do we build that Slack? Because the only thing I’ve seen in my lifetime is every single open minute in our day is taken up by something. I think it’s not gonna be

Roger:

Easy. So I think you’ve raised a really, really good question because we are habit driven people. This is brain science has figured this out in the last 10 or 15 years. Just how habit driven we are. So we’re, we have established all sorts of habits that have driven out Slack out of our, out of our, so I think it’ll take a while to break them entirely, but I think just reflecting on how it makes you feel, like how, how does it make you feel when you have to race from one meeting to the next, or for example, how does it, how does it feel? I just had this back and forth with my EA who booked me for a call, like a call like this, and then at time X and another one with somebody else entirely starting at time X. Right. And, and, and I said, I will be terrible in the second call. You got to understand, yes. They, they ask you to start that at whatever it was two o’clock when my, my other one ended up at two o’clock. I know they asked and I know we want to be, we want to be as, as good with people as possible, but I will say

Peter:

As long as I get your first call, that’s okay. That’s okay.

Roger:

That’s right. And so, so I, I just, I think people just have to have to reflect on, on themselves. How, how does this really work for me? Because what I find is we, we get into this sort of theoretical mode that says, that says, basically, well, I could do that. But we don’t get into our heads and say, no, no, no, no, practically, how will I experienced that? And will I be good at that?

Peter:

I don’t think we notice it by the way. I think we notice it when we go to bed at night and go, Oh my God, I’m exhausted, but I don’t think we notice it in the time. I think we’re running on some kind of a system. And there’s even some probably joy that we get from being so efficient and going, wow, I got this call and I’m so productive. I’ve done this and I’ve done this. And so I don’t think in the moment, it’s like, you know, running sprints in the moment, I don’t realize how exhausted it makes me, but afterwards, maybe that’s when I notice. And I think some of the psychological challenges specifically that we don’t notice it when we’re going from call to call as much, we just sort of noticed this vague sense that we put on ourselves as not being strong enough or not being, you know, capable as everybody else of booking our days like that. And then we go to bed at night, exhausted and wake up in the morning, exhausted.

Roger:

And I also think if we spent a little more time talking to our customers, it would make a difference. And in this, in this case, I’m using it sort of metaphorically. Like if, if, if you, if you talk to your life partner and said, well, you know, how did you experience that? And he, or she says, it says to you, well, you look tired and distracted. Right, right. That’s helpful feedback. Or, or if it’s an actual, you know customer, but what I think, I think we just take it for granted that the efficiency is good and there are no downsides. And, and it’s, as a matter of understanding, most of the pluses and minuses, which is again, why I say efficiency, isn’t bad. It’s just too much of it is

Peter:

No, not a good thing. Yeah. And I actually realized for myself, so I’ve been slowing down over the past couple of months, very deliberately. And what I’ve noticed is I’m more playful. I’m funnier. I enjoy people more. So it’s like these, like, there’s a way in which our single unit measurement, you know, like if we’re just measuring how productive we are, which is like, really, it’s like a very reductionist view of life, but we’ve sort of drawn ourselves to, to prioritize that over everything else. Or many of us have that one, many businesses have at that point, we don’t necessarily know what we’ve missed until we see, you know, like an alcoholic. Doesn’t, can’t really figure out why they’re drinking while they’re drinking. Like they have to stop drinking to see what else is there. And so I think that’s true also because two are like productive, holic, productive Hallock, I’m gonna make up a word, but you know, like we don’t really realize the impact on us until we slow it down a little bit and see what else is there.

Roger:

Yes. And, and you, and you touched on something really important. I just want to go back to Peter. You said measurement and that is a real key. The, and reductionist, you said two things, measurement and reductionist, and those are very, very critical pieces of it. It’s, it’s not necessarily just efficiency. It’s the way we start to measure efficiency and we measure it in highly reductionist ways. So yes, you may say, Oh, my reductionist way of measuring my efficiency this day was how many meetings did I jam in? Right. Right. That’s a proxy because efficiency is, is sort of it very vague, esoteric kind of abstract word. And so you need to anchor it in something and say, okay, efficiency means number of meetings I had in the day and more is better. That’s a very reductionist view. That’s using a proxy number of meetings for efficiency.

Roger:

And that’s one of the things that I found is that we’re, we’re doing that all over the place. So companies will, will say, well, being efficient in labor costs means having the lowest possible average wage level is, is, is that really efficient? If your workers, aren’t making a living wage and they’re dragging themselves to work at a shift where they haven’t had enough rest and they can barely get their job done. And if a customer let’s say it’s a retailer, because that’s where lots of low wages are a customer comes and says, Hey, could you help me? You’re like the, you know, no, I don’t have any time at any time. All of those things actually go into efficient labor costs, but they, they are often ignored entirely. And it’s just a simple proxy. Did we minimize the number of labor hours on the store floor?

Roger:

Because we had X number of guests and each guest should have, you know, you know, a 10th of a labor hour or, or, or something that our staffing algorithm get us close to that level. Is that really kind of efficient is that efficient in producing the best customer experience that gets more than come in and to buy more things, because they can find more things because they got help to find the things they, they wanted. Those are all part of a more complicated and sophisticated view of, of efficiency. So you put your finger on something very important

Peter:

And, and your, and, and, and the conversation that you’re having is part of, or conscious capitalism might be part of this conversation. But as part of this larger conversation of, you know, who are our stakeholders, like, are, are your stakeholders, just your shareholders, which is what sort of, you know, typical capitalism assumes in some ways, or, you know, it kind of goes to the owner, or is it your customers and your employees and the environment. And like, when you, you talk about a system out of balance. So, you know, when you prioritize just one stakeholder, then the system gets out of balance. But if you sort of have this broader view of who your stakeholders are as leaders of businesses, you could, it, it becomes psychologically easier to make decisions that might, might deep prioritize one in order to balance out the others.

Roger:

Absolutely. And I think that an important thing to understand too, is, is if you look at the history of, of that, that broader view of the stakeholders has been around in American democratic capitalism for a hell of a long time. It’s only been since 1976, that we’ve had this, this is increasing belief that it’s shareholder value city. It actually started, started with an article in 1976, a very influential article. And, and so it’s not, this is again, people who have a shorter term kind of view things, think that this has been around forever. It hasn’t in my view, it’s a perversion of the system. I, I am a big fan of Robert Wood Johnson, right? The founder of Johnson and Johnson. He took Johnson and Johnson public in 1948 and had a credo that’s that’s engraved in granted in their headquarters. And it says I’m paraphrasing a little customers, which she called patients because they were made healthcare patients come.

Roger:

First employees come second, the communities in which we work come third and last, he didn’t say fourth either. He said, and last come the shareholders. However, if we do a good job on the first three, shareholders will earn a fair return. Right now that’s a company that’s now worth about 300 billion. I’m sure it was worth a half a billion or less when it went, when it went public in 1948. So Robert Wood Johnson has. Right. Right. And, and I mean, Aristotle is a favorite philosopher of mine. Aristotle said way back when, you know, 2,500 years ago, or 2,400 years ago, he S he said if a man, and he was, they all talked to him about men at that time, if a man sets out to be happy, he’s unlikely to end up happy. If a man sets out to live a good life by which he meant a life of servitude to his community, he will probably end up happy.

Roger:

And I think the same about shareholder value. I think Robert Wood Johnson did his shareholders a huge favor, a huge, huge favor by telling his company, those people come last, you would’ve thought he was disparaging them. He was saying terrible things about, about them. No, he was giving them the best deal they could get, which is they were thought about last, so that all the employees worked on patients and employees and communities, and then good things happen for the shareholders. So I, I believe that absolutely about, about business. So this whole notion that, well, if you think about stakeholders, rather than shareholders, you won’t have any discipline. And, but,

Peter:

So here’s one of the challenges. The most powerful people in this country are not looking for resilience. And it’s an essential problem that the most powerful companies are not really looking for resilience. And so we’re asking people to do things that conceptually are in everybody’s best interest. And, but certainly in the short term, and maybe even in the longterm, not in their own individual interest. So what you’ve just said about Robert Wood Johnson is true, and there’s a leap of faith to it that says if I deal, and by the way, there’s also a sense of the most powerful people in this country and the most powerful companies in this country, aren’t looking for a fair return. They’re looking for a more than fair return. They’re looking for the best, the greatest return that they can possibly get. And, and so the question is like, and now I’m kind of moving to solutions, but how do we, like what kind of solutions do we find when, when we’re looking to other people who have to make decisions and those people, it’s not necessarily in their individual interests. So there’s a way in which saying, when you have that much money, maybe you can take some more of those risks and say, we need to build resilience, or, but I’m sort of curious to get your perspective on that. And I’m specifically, most people who listen to this podcast are business leaders and kind of in business. I wanted to sort of focus in that, in that arena. Sure. Well, I,

Roger:

I, I think in truth they’re imagining a false trade-off, so I’m actually not asking business leaders to sacrifice anything. I mean, I’d be, I’d be totally happy if they’d decided to, but it is smarter, right? This is back to Aristotle, but it is, it is smarter. You’re not going to end up with lots of shareholder value maximization. If you attempt to maximize shareholder value, you think you are right, but you won’t have motivated your customers. You want to motivate your employees and you will be aiming for something that you cannot directly do. Shareholder value is a thing that happens down the line after other things take place. So saying, Oh, I want lots of shareholder value. It does not make it, make it happen. So Robert Wood Johnson actually created one of the most valuable companies from a shareholder value standpoint on the face of the planet, by not doing that.

Roger:

Similarly on wages, Costco pays what any other retailer would say are ridiculous wages, right? At a time when average retail wages are in the 13, $14 level, the middle minimum that anybody makes in the entire year, Costco $120 billion company is, is around $23 an hour. So it’s not a little more it’s you could say insanely more, right? But they’re massively successful because people love to shop at Costco because it’s such, such an appealing place where everybody who’s working there is happy, will happy, happily help you. And of course, of course, they’re there, they’re a club, they’re a discount a retailer trying to hit low price points. You know, similarly, like, you know, what’s the highest customer satisfaction and employee satisfaction airline in America, you know, Southwest and people say, yeah, Southwest Southwest is a low cost carrier because they’re non-union and they pay their employees less completely false, completely false.

Roger:

They are as unionized as, as all the other airlines, but they pay the highest wages. Oh, how on earth can you pay the highest wages, unionized, highest wages and be the low cost carrier? Well, it’s because you have happy employees who have the kind of flexibility to do the kinds of things that, that, that are needed and they couldn’t be happier. And the airline does does great. So I I’m, I’m just, I’m more asking business executives to, to stop doing things that they’ve come to believe are productive when they just plain aren’t, there’s a bunch of corporate myths there that say reductionism is a positive thing, splitting it up and saying, okay, you’re in charge of operations. And, and you’re in charge of, of customer service and you’re in charge of marketing and you’re in charge of human resources. You don’t have to talk to one another, just optimize efficient

Peter:

In my, in my executive coaching work, probably the number one thing that I do that triples a stock price is when I get the leadership team to think of themselves, not in their individual leadership roles of particular functions, but as an executive team running the business. And when they’re able to make those trade-offs that triples the stock price.

Roger:

Yeah. Well, so Peter, you’re making your argument.

Peter:

I agree with you. And, but it’s hard to do because they have to, they ha they have to let go of their belief. I think you’re, you’ve described it beautifully. Like they have to let go of their belief that if they make a trade off in their particular function, in order to support the, the larger business, that, that won’t hurt them individually, but that they will continue to grow. And there is a leap of faith in that, like they, they have to, and they have to sort of shift their belief.

Roger:

You really need leadership for it. I mean, you’re, you’re absolutely right. But, but as, as you say, a beater, it is not a trade-off that we’re asking them to make. We’re asking them to go to just a better level that we’re, everything is, everything is better, right?

Peter:

You, right. To achieve the overall balance, we need to pursue three individual balances. And this encapsulated things really beautifully, the first between the pursuit of pressure and the application of productive friction. I love that idea of productive friction. Second, you didn’t write that part. I’m saying that part, I’m second between the desire for perfection and the drive for improvement and third, between the March toward connectedness and the enforcement of separation. Can you briefly talk about each one of those three things? Cause it feels very central and important.

Roger:

Sure, sure. Yeah. Thank you for pointing that out. That that is central to the book. So, so efficiency tends to mean applying more and more pressure on, on a system. But the more pressure you apply the you know, kind of less Slack you have. And so I say friction is a good thing, right? So we put friction into various systems. We put governors on motors, that’s friction, so that they, they don’t go as fast on in NASCAR if you like that. If you’re not masker, which, which now that they’ve banned the Confederate flag, that that is is is a good thing on that steeply bank tracks, right? They put restrictor plates on, on the carburetor so that they can’t go too fast. So they, they, they had driver’s lives are, are not lost. So it’s just putting some friction into, into systems. Antitrust enforcement is friction, right? If you just have the pressure to merge and merge and get better, and you let companies merge because they can be more efficient if they get rid of their, their, their competitors and have one supplying it, antitrust is friction in my view, productive friction that makes sure there’s competition so that the customers don’t get lost. So that would be, that would be it. I’m not saying no pressure. I’m just saying balance it with with friction.

Peter:

One of the challenges to that I think is that we’re facing people who are much more short-term focused as leaders, that leaders are often not trying to build a company for a hundred years. They can build a company with excellent returns for 10 or 15 years, and then they move on to the next thing. So they’ve created something really great. And there’s so many examples. I even know very good leaders who have built amazing returns for some period of time. And then they leave. And I don’t know if it’s because of the way they’ve built the returns or because of their focus, but then the returns plummet after that. And they leave and they go to the next thing and leaving any problems in the system for someone else to deal with. So arguably some of the leaders that we’re talking about are long-term focused. But also you look at some of the leaders like Jeff Bezos, who’s longterm focus, but he’s also building one of the, the biggest monopolies that exist.

Roger:

This is another interesting topic. In fact, I’ve just written an article that’s coming out next year on this. I, I think that we’re seeing the, the coming end of the widely, widely held publicly traded company as the dominant form of economic organization in part for exactly what you just put your finger on which is, which is the structure of that just does not create the incentives that make the company or give the company the chance to be as valuable as it could be. I think we’re going to see many more private companies. And I think we’re going to see as a, as the emerging dominant form to give you a preview of the article, the emerging dominant form is the combination of ownership between a pension fund and an Aesop and employee stock ownership plan, because employees are, it’s becoming more and more clear that having employees that feel a central part of the company is critical and 50% of investors now in, in the U S capital markets. So us investors in the us capital markets are retirement investors. And so, so having a combination of, of vehicle rather than, rather than this short term oriented publicly traded structure is, is what we need

Peter:

Would that help to show? I mean, that we’re living at a time right now when the disparity, not only between the rich and poor, but between what’s happening in our economy and what’s happening in the stock market is as like disconnected as I’ve ever seen it in my lifetime. And, and I, and it’s like, it’s a little bit hard to understand. And it, you know, except except unless you understand it as a bubble, but it’s, but it’s also this sort of like, you know, possibly the Perri Pereno distribution that you talk about, which is, you know, 1% or very, very small percentage of the people are investing in the stock market while everybody else is, is not. But but but subject more to the pain of, of the economic times that we’re in. And at some point there’s a reckoning to that. Like at some point

Roger:

I agree now a couple of things. One is, I think, I think those views of individual ownership of stock a little bit overstate the case, right? So, so the fact that people have their pension, their pension plans and their 401ks invested is helpful. Aesop, is that on steroids? Right. So, and it turns out as I’ve gotten to know the Aesop world a little bit, I’m no expert yet in it, but I’ve gotten ever more interested is that lots of owners who really who’ve owned a company, private, private company for a long time, they were a hundred percent owner or dominant owner and come to a point of their, you know, they would need a Pat, you know, pass it on sell off to private equity. But if they kind of knew and understood, they’d be willing to sell to their employees into an Aesop and it just isn’t as common enough so that, so that people don’t think of it, but when presented with the, with the opportunity, many of them say, wow, you mean, I can, I can share the wealth with my employees in this highly organized and, and tax efficient way.

Roger:

So, so I think we’re going to see more and more of of, of that as, as employees. Yeah. Do say, you know, yes, boss or owner. I like the fact that you’ve created this company that I work for, but I just, I just don’t think that you should get a hundred percent of the, of the, of the benefits of our, of our labor. So I hope, I hope that Mark’s is right and wrong that we’re workers will do a greater extent end up owning the means of production but not through violent revolution, but through devices like E like Aesop’s and intelligent pension funds, who will say, that’s take that company, private we’ll own 50% of it managing it for the long haul because pension fund obligations are 10, 20, 30, 40 years out. And the other 50% owned by an Aesop. And, and we’ll just, we’ll just run it for, for the benefit of long-term investors and the and the employees as investors,

Peter:

In some ways, that’s a that’s connected to this idea of a March towards connectedness and the enforcement of separation that, that, you know, it’s like, we’re the, the workers and the owners shouldn’t be separated. Like we’re, we’re actually one, one unit. We have to find the places in which we’re connected with things that we otherwise think we’re separated from an act in the best interest of the whole. And then that ends up producing for the whole,

Roger:

See, you give better answers than I do.

Peter:

Now. I’m just reflecting back what I’m hearing from you. Roger, it has been such a pleasure speaking with you. There’s so much more we could speak about it. We’re already over the normal time that I do for these podcasts, but it’s just too much fun to speak to you. Roger Martin has written most recently the book, when more is not better overcoming America’s obsession with economic efficiency, I would argue that it’s not just economic efficiency, but we’ve talked about a lot of different ways in which we prioritize efficiency over other elements of what makes us rich in, in the world, both as individuals and as organizations, Roger, it is such a tremendous pleasure talking to you. Thank you so much for being on the Bregman leadership podcast.

Roger:

Thank you, Peter. This is such an enjoyable interview. I, I, man, I really appreciate it.

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