Our economic and business landscape is changing, and faster than we think, say Swedish best-selling business authors Jonas Ridderstråle and Kjell Nordstrom. Their predictions are contained in their latest book, Karaoke Capitalism, which will hit New Zealand bookstands this month. Their previous book, Funky Business: talent makes capital dance, was runaway best seller.
Based at the Stockholm School of Economics, Ridderstråle and Nordstrom both hold PhDs in international business and run the school’s Advanced Management Program, five-week top-management programme that attracts the elite of Scandinavian business leaders.
The authors have an uncompromising, imaginative and fresh take on contemporary business life that places them at the forefront of the new generation of European-based business gurus. They talked to Stuart Crainer for Management magazine about what the economic and business changes ahead of us might look like.
What are the dominant forces now shaping society?
Jonas Ridderstråle: As the power of the church and the state dwindles, market forces have become the most powerful faith of our time. Individual choice is the holy grail of the market. In this new world order, the ultimate market weapon is the freedom to choose. In the world of karaoke capitalism, individual choice reigns supreme.
But freedom of choice isn’t available to everyone. Who possesses this all-important freedom?
Kjell Nordstrom: The first entry route is the old-fashioned one of money. Individuals with money have the freedom to choose. In world of choice money talks. In fact, money shouts more loudly than ever. Cash shapes our lives. The freedom available to someone like (currency trader) George Soros, or CNN-founder Ted Turner, or pop-star Justin Timberlake is far greater than the freedom available to poor, single, immigrant parent with six kids living in the decaying suburbs of one of our great global cities.
The possession of the right skills is second entry route. Our lives are increasingly shaped by competence, or the absence of it. Competents, people with the most skills, and the most marketable skills, rule. An investment in knowledge pays the highest interest rates. Just look at the gap between the median weekly earnings of high school and college graduates. It has increased from 28 percent to 43 percent in the past 20 years.
JR: unique talent grants you global passport. These people, call them knowledge nomads, are free to know, go, do and be exactly whomever they want to be. As the sociologist Manuel Castells puts it: “Elites are cosmopolitan – people are local.” We used to have aristocrats, then bureaucrats. Now we have what the Economist’s John Micklethwait and Adrian Wooldridge call the cosmocrats – the new elite possessing both cash and competence.
Is this shift in economic power to individuals with the freedom to choose, good thing?
JR: While unfettered individualism increases the possibilities for people to grow, it also leads to more widespread loneliness. Karaoke capitalism at best results in liberty and opportunity. At worst, the by-product of increasing individuality is selfishness and solitude. The end result is not necessarily fairer, gentler, better world. Indeed, the opposite appears to be the case. We are witnessing the rise of double economy – place with luxury for some and low-cost stuff for the rest; labour of love and increased working hours in range of McJobs, depending on who you are.
KN: You can see this in the increasing differences between executive compensation and the salaries of traditional workers: More than 400:1 in the US and 46:1 in Sweden.
The rich have become richer. Some 85 percent of the value of the stock-market gains made during the 1990s went to the wealthiest 10 percent of Americans. In fact 40 percent of the value of the stock-market gains went to the wealthiest one percent of the US population.
JR: Increased freedom opens up the potential for excesses. Egos can run disastrously riot. Moral meltdowns along the lines of Enron or Tyco under Dennis Kozlowski are here to stay. It is “welcome to the egoconomy”.
The US market model has been very successful. Are you suggesting that it is not necessarily the best economic model for the 21st century?
JR: The US economy is the powerhouse of the global economy and the egoconomy. Just compare the US with other major industrial countries in terms of GDP per capita. In 1970 the US led the pack by an average 31 percent. The figure dipped briefly to 10 percent in 1989, but by 1999 the US had increased its lead to more than 22 percent.
In the past few years many people have been amazed by China’s enormous growth figures. But remember that in 1998, when the growth in jobs in China’s largest cities was 4.1 percent, jobs in Las Vegas grew by 8.5 percent.
The US brings unique combo to the table: spotlight on technological development and entrepreneurship; fluid and flexible markets for labour and capital; weak trade unions, central government and low taxes with limited progressiveness; strong focus on individualism; and clear, committing and communicated story – the American dream. Put these things together and you have national business model that the US has improved, perfected and implemented throughout its relatively short history.
KN: And it’s clear that the genuine market model, with no or minor adaptations, is the dominant design in many other parts of the world. The world is becoming gigantic market square.
Surely the free-market model has its flaws?
KN: American author Robert Heilbroner is right when he says: “If socialism failed, it was for political, more than economic reasons; and if capitalism is to succeed it will be because it finds the political will and means to tame its economic forces.” If the last 100 years of human history taught us anything, it’s that states need markets. But markets also need states – not necessarily nation states though. deregulated knowledge-society still needs forceful and democratically elected bodies.
Equally, to produce long-lasting value, capitalism needs values. Modern monarchs, markets and morality must act in symbiosis. The regulations of yesterday need to be replaced by something more than raw self-interest.
JR: sustainable society must achieve balance between the town square, the temple, and the tower. The town square ensures efficiency. The temple guarantees empathy. The contemporary tower, depending on who’s the tenant, ideally provides an environment of egalitarianism and/or entrepreneurship. The past teaches us that terrible things happen when one of these systems becomes too dominant – the Vatican in the middle ages, the communist party in the Soviet Union.
The new elite – the cosmocrats of capital and competence – should feel the heavy hand of history on their shoulders. Deregulation can result in degeneration. Capitalism without character is dangerous. Societies which are incapable of combining efficiency, equal opportunity and empathy tend to erode over time, both economically and emotionally.
So, capitalism, like communism, comes at cost. Without empathy to complement efficiency, the invisible hand quickly turns into fist coming down on those who lack competence and cash. Global market capitalism is not political ideology – not right or wrong, good or evil as such. It is machine – not perfect, but the least imperfect one that we have invented. But, machine does not have soul. We have to develop the character of capitalism as we go. Otherwise, we may very well wake up one morning and realise that although we went to bed with beauty, we woke up beside beast.
So capitalism, US style at least, is not necessarily the answer for the future?
JR: The opportunities for leading richer life, creating organisations that are inspiring to work for, and societies in which more people have genuine chance of realising their dreams, have probably never been g
