Sunday, January 08, 2017


Jonathan Haidt is a social psychologist and Thomas Cooley professor of ethical leadership at the NYU-Stern School of Business writing on EVONOMICS HERE 
“The CEO of Sears Fails His Company by Believing in Ayn Rand and the Invisible Hand”
Why promoting only individual competition is disastrous”
“Lampert runs Sears like a hedge fund portfolio, with dozens of autonomous businesses competing for his attention and money. An outspoken advocate of free-market economics and fan of the novelist Ayn Rand, he created the model because he expected the invisible hand of the market to drive better results. If the company’s leaders were told to act selfishly, he argued, they would run their divisions in a rational manner, boosting overall performance.”
The results have been disastrous, in part because Lampert was ideologically committed to the metaphor of the invisible hand and the associated idea that people are purely selfish. Ideology is a lens – it makes some things more visible, others less so. Lampert’s ideology prevented him from seeing that he was destroying the invisible band – the bond that forms around groups that can trust each other and work together toward shared goals. Evolution is a different lens – one that we believe brings unparalleled focus and resolution when examining complex human systems. A brief look through the evolutionary lens would have made it obvious how dysfunctional Lampert’s reorganization was likely to be. …
… This is the point that Lampert seems not to have grasped: cooperation and trust generate extraordinary value, yet they are fragile and easily undermined by competition at the next-lower level. It’s as though there’s an invisible band, which ties all the members together and motivates them to work for the common good. But if you tell everyone to be selfish and then you reward selfishness, the band dissolves and you lose the benefits of cooperation and division of labor.
Kimes describes how the culture of Sears changed in response to Lampert’s reorganization:
“The divisions turned against each other—and Sears and Kmart, the overarching brands, suffered. Interviews with more than 40 former executives, many of whom sat at the highest levels of the company, paint a picture of a business that’s ravaged by infighting as its divisions battle over fewer resources….  [one former executive said it created a] “warring tribes” culture. “If you were in a different business unit, we were in two competing companies,” he says. “Cooperation and collaboration aren’t there.”
For example, no division was willing to lose revenue to create loss-leaders, which would drive traffic into the store, thereby helping all divisions. Another example: the appliance division found it could make more profit from selling Samsung appliances than from selling Sears’ Kenmore brand, so they gave more and better floor space to Samsung.
So the next time someone suggests changing the organizational chart, incentives, or culture of your company to “align incentives” or appeal to selfish interests, ask them if they have thought about the full range of motives evolution has bequeathed to our complex species.  People are not just selfish. It might make Ayn Rand roll over in her grave to put it this way, but corporations and capitalism depend on the invisible band, as well as the invisible hand.
Writing plausibly does not make you plausible. The options include not carrying Samsung at all and relying on Kenmore exclusively. The dilemma is removed at the expense of no income from Samsung (or any other competing brand). 
The competitive option it to avoid own brand products altogether without prominence given to own brand displays, unless it is the brand leader. If its not the brand leader, enquire why.

‘Selfish’ behaviour has nothing to do with Adam Smith and his use of the metaphor of “an invisible hand”. That bit was added by Paul Samuelson in 1948 and in the 18 other editions of his famous textbook, “Economics” and passed into folklore. 
Meanwhile, the existence of an actual  ‘invisible hand’ is a myth.


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