The Entrepreneurial Society

The March 14th issue of The Economist included a special report on entrepreneurship.  The special report defines entrepreneurship as something that applies not only to new or small companies.  It uses the word in a more focused, narrower sense “to mean somebody who offers an innovative solution to a (frequently unrecognised) problem.  The defining characteristic of entrepreneurship, then, is not the size of the company but the act of innovation.”

There is so much talk out there about entrepreneurship and innovation that it is easy to forget that it is only recently, perhaps in the last decade or so, that entrepreneurialism has become cool, primarily driven by the profound technological changes all around us.  This is not only true in the US, which still leads the world in innovative new start-up companies, but in countries around the world, from giant India and China which are creating millions of new entrepreneurs, to small countries like Israel, Denmark and Singapore, each of which thrives in its own way.

I am particularly intrigued by the special report’s overall conclusion:  “The rise of the entrepreneur, which has been gathering speed over the past 30 years, is not just about economics. It also reflects profound changes in attitudes to everything from individual careers to the social contract. It signals the birth of an entrepreneurial society.”

To help us better understand what the entrepreneurial society is all about, let’s examine some of the profound changes that have taken place in both companies and individual careers over the last 30 years or so.

The report contrasts the entrepreneurial capitalism which it sees rising around the world, with the managed capitalism of the past.  It defines managed capitalism not as a socialist, state directed economy, but as a kind of corporate capitalism where big business and big government work together to provide orderly prosperity.  Corporate capitalism reached its height in the US in the period following WW2, especially the 1950s, about which it wrote:

“One of the most chilling chapters in William Whyte’s “The Organisation Man” (1956), a study of corporate America at the height of managed capitalism, was entitled “The Fight Against Genius”.  The thinking at the time was that well-rounded team players would be more valuable than brilliant men, ‘and a very brilliant man would probably be disruptive.’”

The fifties, the period stretching roughly from 1946-1963, have a special place in American history.  The sense of uniformity, conformity and traditional roles that pervaded the fifties is perhaps most famous as the breeding ground for the explosive social revolution that followed, starting in the mid 1960s.

Could it be that corporate capitalism, seen as the business counterpart of the fifties culture, played an equally important role as the breeding ground for the entrepreneurial culture that started to take hold in the US in the 1970s, and is now leading to the global entrepreneurial societies that The Economist writes about?  To help me address this question, I decided to dig a little deeper into The Organization Man, its portrayal of corporations in the 1950s, and its author - William Whyte.   

As I was doing my research, I came across a new 2002 edition of the book, available in print as well as on-line, which also includes an excellent new foreword by Joe Nocera, one of my favorite business columnist and writers.

William Whyte was a renowned sociologist and journalist.  He was an editor at Fortune magazine when he wrote The Organization Man.  The book went on to become a best seller, and is regarded as one of the most important sociological and business studies of the last fifty years.  He left Fortune in 1958, and then went on to a successful career in urban planning.

William Whyte was alarmed by the shift he saw all around him in the fifties, from individual creativity and economic dynamism toward the complacency and uniformity then advocated by business, government and American society in general.  Following the pain and chaos of the Depression and World War II, people were hungry for stability, and the corporate culture promised to provide “a blissful answer to postwar life with the marketing of new technologies - television, affordable cars, space travel, fast food - and lifestyles, such as carefully planned suburban communities centered around the nuclear family.”  He saw this quest for stability in return for the sublimation of individuality as a dangerous Faustian bargain for everyone involved. 

Whyte was very concerned with the insidious consequences of corporate capitalism.  He felt that the quality of getting along was valued above all others, and wrote that: “It produces a sort of permanent prematurity, and this is true not only of the child being taught life adjustments but of the organization man being taught well-roundedness.”  All around him he saw the triumph of mediocrity and wrote that “In group doctrine the strong personality is viewed with overwhelming suspicion”.  Of group-think, which he felt corporations glorified, he wrote that “People rarely think in groups; they talk together, they exchange information, they adjudicate, they make compromises.  But they do not think; they do not create.”   He worried that “the growth of bureaucracy . . . the desire for lifelong security, the foolish belief that raw talent was no longer particularly necessary, and the way the ‘system’ was stamping out individual thought.”

In his foreword, Nocera observes that unlike other social critics, Whyte was not against large corporations per se.  “But he wanted them to function effectively, and he wanted people to be able to function effectively within them.  Whyte thought that the emphasis on eliminating the messiness of human interaction had it exactly backward.”  He felt that the denial that there is an inherent conflict between the individual and the organization was bad not only for the individual, but also for the organization, because of the loss of innovation and creativity that ensued.

There is no question that the relationship between corporations and the individuals they employ has radically changed since The Organization Man was originally published.  First of all, the stable society of the ‘50s came apart with the cultural changes that took place in America and other advanced economies in the ‘60s and ‘70s, as the baby boomer generation rebelled against the world of their parents.  The Vietnam War, Watergate, the civil rights movement, the feminist revolution and a number of other factors caused the country to lose trust in the government and large institutions in general.

Joe Nocera points out another major cause for the radical changes that subsequently took place in corporations.  As Whyte had predicted, the lack of innovation and individual creativity in the companies he wrote about in the ‘50s would eventually come back to haunt them.  Writing about the IBM of that period, Nocera sees  “a company so enamored of corporate conformity that it mandated that its entire male staff wear white shirts.  Suddenly under assault from smaller, nimbler, less bureaucratic companies, IBM’s leadership - all organization men, who had come up through the ranks - were paralyzed.”

While I may describe the IBM I joined in 1970, as well as its near-death experience twenty years later somewhat differently, I totally agree with Nocera’s basic points, and in particular, the fact that IBM had to transform itself because its old ways nearly caused it to go out of business.

The whole relationship between individuals and corporations started to change around twenty years ago because the old ways no longer worked.  Innovation and creativity are now needed more than ever in order to keep up with a continuing stream of technology and market changes.  Enterprises have had to become much more flexible and dynamic in order to survive the intense competition they started to face from companies around the world, large and small.  To do so, they have had to embrace a lot of the innovative entrepreneurship culture pioneered by VC’s and start-ups. 

Similarly, individuals can no longer assume that just being loyal to a company will translate into a stable, orderly, life-long employment.  They are responsible for their own careers, and have to look out for their own opportunities. No matter how great a business they work for, they can no longer just rely on the company to take care of them.  Such a culture has much more in common with an entrepreneurial form of capitalism than with the corporate capitalism William Whyte wrote about.

In the end, our economies need to keep evolving.  As we are learning, extreme market economies by themselves can get us all in trouble.  While we do not want to go back to a managed form of capitalism, we need to balance the interests of individuals and companies, with the interests of communities and the larger interests of society.  This is a role we expect elected officials and government in general to fulfill. 

America’s lack of a proper safety net is no longer adequate given the more dynamic nature of our workforce, where on the average, people will have considerably more jobs through their careers than was the case in the past.  Telling workers that in an entrepreneurial society they should assume greater responsibility for their individual careers does not mean that corporations and governments do not bear responsibilities to help them do so.  The Scandinavian countries have managed to combine both an entrepreneurial business culture with far better safety nets.  The US must find its own way to do so as well.

Becoming a more entrepreneurial society feels right for our times.  But we cannot underestimate the huge challenges involved in doing so.  The transition to this brave new world will itself require all the innovation and creativity we can muster, and then some.  We are in for some very exciting times.   
  

    

Comments

[dblwyo]

IWB - as usual an interesting and thought-provoking post. A couple of points I disagree with and a couple that ring strongly. Drucker defined the whole purpose of business as innovation and marketing, that is as creating value (especially new value) and explaining it to people. His most comprehensive treat is in his 1973 book Management:Tasks, Responsibilities and Practices. In which book he also sounded the tocsin for the death/dearth of management innovation. It seems to me that we froze in the late '70s in the bulk of the economy, been coasting ever since and now the ground on which we stood is proven unstable. Instead of letting our enterprises and organizations succumb to organosclerosis, where a focus on internal politics swamps a focus on external value, how do we return to that more innovative future ? An emphasis on protecting one's rice bowl is no longer sufficient - too many are broken and discarded. Now that would be a worthy question to explore given your usual thorough thoughtfulness.

[sfan]

Thank you for another very thoughtful article. I thought perhaps you might continue your line of argument to venture into the territory of how corporate-conformism and groupthink played an important contributing role creating the current financial crisis.

Entrepreneurship is a creative economic force that displaces or changes the status quo with worthy added value. When this happens it is destructive to incumbent companies/industries but rewarding to innovators and customers. Over the long term this is of course very healthy for the economy. In contrast, corporate capitalism, driven by public markets, is motivated to support the status quo and add short-term value in ways that do not risk the corporate interest in the short to medium time-frame. This generally means suppressing entrepreneurship or, at best, consuming it.

[Martijn Boermans]

MAB: I appreciate your review on The Economist's special report and expresisng the notion that entrepreneurship and "big business" are non-contradicatory. Large US companies are currently very innovative and work together in global networks with SMEs.

The shift from scientific management towards entrpreneurship perfectly fits with globalization.
Organization have become more flexible, so have the employees. As you noted: "Telling workers that in an entrepreneurial society they should assume greater responsibility for their individual careers does not mean that corporations and governments do not bear responsibilities to help them do so."

In Huxley's brave new world people lifed in a society ruled by innovation and technology, yet at the end it turns out how unhappy these truely free and self-responsible persons became... I sometimes wonder why the downsides of "entrepreneurial capitalism" are so easily ruled out, but not in the brave new world sense, yet more closely linked to the current global recession...