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Making the business world all about the common good

Roger Martin is an unlikely revolutionary: The dean of the Rotman School of Management at the University of Toronto also sits on blue-chip corporate boards and has worked as a consultant for big traditional companies such as P&G and GM. All in all, very much the c.v. of a pillar of the corporate establishment. (Disclosure alert: I am a member of the Rotman School's advisory board.)

But this month, he has published a book whose gentle tone belies its seditious content. Here's what is radical about Fixing the Game: Bubbles, Crashes and What Capitalism Can Learn from the NFL - instead of asking how businesses can organize themselves to be more effective and more profitable for their shareholders, he wants to figure out how society should organize business to be more effective for all of us.

The corporate intelligentsia - business school professors, management consultants, many in the business press - focuses nearly all of its attention on the first question, a perfectly worthy subject. The huge and continuing improvements in business productivity over the past 200 years, since the Industrial Revolution, have made more of us richer and healthier than people in the previous two millennia could have imagined.

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That's why there is such an avid audience for thinking about how to better run your business - whether it is a listed company, a startup, or your own career. This type of work has the further virtue, for both its practitioners and its users, of not really threatening anyone. Even the harder edge of business journalists, the muckrakers for example, operate largely within this paradigm. The questions they usually ask are about whether laws were broken or investors were deceived.

The business world, however, also presents an entirely different set of issues: how well the existing rules are working for the common good. This is a deeply political question and it is a central preoccupation of politicians and policy makers. But inside the business community - not so much. That is more than a shame: It is dangerous, because surely the lesson of 2008 is that the U.S. version of capitalism contains some pretty serious systemic flaws.

The power of Mr. Martin's book is that he steps outside our existing paradigm to ask whether the rules of the game are working for the system as a whole. This is a departure for him; his previous writing and consulting work was mostly from the more traditional perspective of how to make your company work better within the existing order.

The central insight of his new book is that the rules of capitalism aren't about God-given rights à la Hayek, Ayn Rand or the Tea Party. They are a social construct and it is the right - indeed the duty - of society to ensure that they are working for the common good.

Mr. Martin's unifying metaphor is a comparison with the NFL. The league's commissioners, he argues, are constantly tweaking the rules of the game to ensure the right collective outcome. When a brilliant coach or player devises a technique to strengthen defence, for example, the commissioners alter the rules to offset that advantage. Capitalism's rule makers, he believes, must be likewise perpetually alert to these sorts of business innovations - the kind of thing lionized in the traditional business advice bestseller - and change the rules of the game to neutralize their impact.

Notwithstanding his jabs at a few business titans (notably GE's Jack Welch and hedge fund giant Steve Cohen), Mr. Martin adopts an ultimately sunny, can-do tone. "[W] can restore the core of business and capitalism. We can fix the game - until the next time we need to tweak it!" he concludes with a jaunty exclamation point.

Those of a more skeptical bent should follow his book by reading an essay by Tyler Cowen, the provocative libertarian economist, published earlier this year. His theme is income inequality and he concludes with the scary thought that the rise of the knowledge economy, and of superstar salaries for its gladiators, may mean that the players will permanently outfox those charged with tweaking the rules to keep them in check.

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Mr. Cowen notes that there is a naive way of thinking about our modern, wealthy economy: "Smart people have greater reach than ever before, and nothing really can go so wrong for them. As a broad-based portrait of the new world, that sounds pretty good, and usually it is. Just keep in mind that every now and then those smart people will be making - collectively - some pretty big mistakes."

Good luck mustering the political will to keep them in check.



Read excerpts from Fixing The Game by Roger Martin

  • The next financial crisis could be right around the corner
  • How an economic theory changed the way CEOs get paid
  • What capitalism can learn from the NFL
  • Why are CEOs compensated differently than quarterbacks?
  • Flawed theories are destroying American capitalism
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