Tono-Bungay enterprise

Today, as in the days of HG Wells, the dilemma that society faces is one of the need for aggressive entrepreneurs, but not entrepreneurs who undertake spiralling risks, unfettered by ethics or nous.

From my IBM 360 software training days, I recall Brooks Law, attributed to Fred Brooks of IBM. It stated that just deploying more engineers at software development may not get the work done any faster. The remark became more colourful with time —Russian economist Grigory Yavlinsky’s statement, for example, that you cannot put nine pregnant women in a room and expect the babies in one month! Brooks Law is true for building and nurturing SHE (sustainable, honest, enlightened) enterprise as well. Enterprise is essential for human progress. Yet, society is deeply suspicious, especially of quick-fix enterprise. What may be the remedy?

An article in Strategy+Business magazine revived memories of HG Wells’ satirical novel, Tono-Bungay, written in 1908 when the robber barons were being denounced in Teddy Roosevelt’s America while Victorian England was booming. It is a mordant satire on a greedy uncle-nephew duo that launched a fraudulent elixir branded Tono-Bungay. In those days, they did not intellectualise whether it was a con or bad management! After dramatic early success, sense dawned that the product was a con, indeed harmful.

The world always had, and will continue to have “entrepreneur lions, who devour everything greedily and quickly”. However, in due course, the ageing lion dies miserably, just like get-rich-quick entrepreneurs and leaders. There are two lessons from Tono-Bungay: First, that success in entrepreneurship produces unexpected side effects, and second, sans integrity, entrepreneurship is doomed. Today, as in the days of HG Wells, the dilemma is that society needs aggressive entrepreneurs, but not entrepreneurs who undertake spiralling risks, unfettered by ethics or nous. The authors of Lessons from the Titans draw well-known and general lessons about what causes the downfall of company managements (complacency, arrogance, complexity) and the decline of company leaders (not listening, obsessed with publicity, personal ego, lack of compassion). Among many factors, complexity and cronyism promote fraud.

The book describes the dramatic rise of GE up to the late 1990s, and its precipitous decline in the 2000s. It is riddled with saucy and memorable anecdotes: How the CEO in recent decades would fly in one company jet, while a second jet flew in tow, as a back-up; and how an assistant flew in advance to the hotel to set up the personal gymnasium equipment of the CEO. Currently, an ongoing Deutsche Bank probe into mis-selling of risky foreign exchange derivatives shows that some bank staff acted with bad intent and disingenuously. Customers were taken in by the sales pitch for an incomprehensible instrument. Trusting customers perhaps ignored the sage advice —if you don’t understand something, don’t engage.

Complexity is the enemy of long-term success. Although GE’s financial doings in the early 2000s were incomprehensible, nobody dared to criticise the mighty GE. Whether in India or abroad, mighty firms respond to criticism with aggression. If what a company is doing is incomprehensible to reasonably skilled professionals, then it is a signal for caution, if not alarm. Reflect on FTX, Enron, Theranos, 1Mdb, and the Robert Maxwell empire, among overseas companies; think of IL&FS, ABG Shipyard, NSE colocation, and some contemporary Indian cases.

Cronyism is nurtured by the unholy union of political power and entrepreneurial greed, like the battle that Teddy Roosevelt fought over a century ago. We still encounter cronyism, as exemplified by the much-chronicled stories of Eike Batista in Brazil, Yevgeny Prigozhin in Russia, and several in India from the 1950s LIC-Haridas Mundhra matter right into modern times.

Leaders in all domains are prone to such frailties. Former US President Barack Obama had said that political leadership has too often become about being more aggressive (https://obamawhitehouse.archives.gov).  “Much of what is trotted out as leadership today is just old-style beating your chest and being louder and more self-centered,” he said. Chest beating is common among gorillas which seek to communicate their size to scare off competitors.

Psychologically secure and great leaders fight lonely battles against opponents, for example, Mahatma Gandhi, Nelson Mandela, and Abraham Lincoln. Such leaders fight their battles by talking to their opponents, perhaps even embracing them, but not by boasting that they fight alone.

How can leaders reduce the probability of aberrant behaviour? Traditional Indian wisdom may offer a solution — good business is accomplished through four leadership actions: Develop self-awareness, protect the resources that enable business, serve others, and display compassion towards stakeholders. All the principles of ESG, climate action, SDG, and humanism are captured by vasudeiva kutumbakam.  Humanistic management is a people-oriented management that seeks profits for human ends. People are not seen as mere resources to serve a profit goal. Genuine humanism embraces: (i) wholeness, (ii) comprehensive knowledge, (iii) human dignity, (iv) development, (v) common good, (vi) transcendence, and (vii) stewardship-sustainability.

At a Yuva Parivartan event at Mumbai in February Nobel awardee Kailash Satyarthi passionately exhorted the audience to elevate vasudaiva kutumbakam from an Indian slogan to be the basis for a movement to “globalise compassion.” It is an intriguing concept that needs further development. Indian enterprises can be the beacons of a new form of enlightened capitalism, first within India, and thereafter, in the world. This is a worthwhile idea.

The writer is an author and a business commentator. www.themindworks.me;  rgopal@themindworks.me