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The Book of the Week is “The Lords of Strategy, The Secret Intellectual History of the New Corporate World” by Walter Kiechel III, published in 2010. This wordy, redundant volume showed how: times have changed; capitalism has become leaner and meaner; and in one way, American society has stayed the same since the Era after WWII.
In the 1950’s, the major reasons American companies began to acquire other companies included:
- Dividends paid by public companies were highly taxed, so instead of paying dividends to shareholders, a growing company that was sitting on a pile of cash would reinvest it by acquiring other companies.
- There were antitrust laws prohibiting companies from acquiring others in their same industry, so the companies bought others in industries unrelated to their core competencies, or snapped up companies in their supply chain.
By the end of the 1960’s, companies were going bust because, blinded by greed and ego, the stupid corporate executives had no experience in industries unrelated to their own.
In the early 1970’s, management-consultants began to counsel their clients (who mostly manufactured physical products) on strategy. Also, Boston Consulting Group began to advise their consumer-goods clients to engage in deficit financing to grow their businesses. Corporate executives began to adopt an even more greedy mentality. Maximizing shareholder value became their main goal.
The author listed four game-changers of recent decades:
- deregulation;
- new technologies including computers, the internet, the maximization of computing power and simultaneous minimization of costs in connection therewith;
- the way target-companies wised up after the hostile takeover-mania of the 1980’s; and
- globalization.
As America has switched to a service-oriented economy in the last fifty years or so, the the consultants have been forced to pivot to advise clients on human-resources, public-relations and technology. In the early 1980’s, a Harvard Business School professor did a study of senior executives at major U.S. corporations, and found that their game-changing stemmed not from bossing people around or speechifying, but rather, from infinite interactions with their social networks whose relationships they’d been developing over the course of years.
The author commented that when internet use was becoming widespread, there was a brief flirtation with socialistic entities arising from the open-source movement, including but not limited to: the Linux operating system, wikis, BitTorrent, and Napster. But the inclination of the American powers-that-be, to monetize everything, has largely put the kibosh on those.
Generation X and the Millennials have picked up the cudgel of capitalism and it remains to be seen how Gen Z is going to make a living. Having evolved rapidly in the last thirty years, the internet is currently plagued by creative destruction. But not to worry. There will be jobs in national healthcare, geriatrics, building charging-stations for hybrid vehicles, and harnessing renewable energy. Lying politicians (a redundant phrase) will say they “created” those jobs. Don’t vote for those politicians.
On the other hand, it’s deja vu all over again in American society. Nowadays, AI software is replacing consultants because: American management-consultants were mostly elitist, sexist, racist alpha-males in the “old boy network,” and AI software is created mostly by elitist, sexist, racist greedy alpha-males, still in the “old boy network” (but that network is slowly shrinking).
And the stereotypes about the consultants (and now AI software creators) are still true: They’re like seagulls– the fly in, leave a mess, and fly out; they show their clients a line graph that looks like a hockey-stick– that represents how their services will do financial miracles for the clients’ business, but the line graph has no correlation with reality.
Read the book to learn the details.