Adam Smith and the American corporation

Adam_smith That brilliant Scottish idea, the one that accomplished something like an intellectual miracle, and stripped away all things the rest of the world, and the whole of the world, took for granted. 

It said all of the sociality that is present to the creation of any social moment, the existence of prior understandings and connections and an assignment of status according to who owns what to whom as established by kinship, clan or hierarchy, or some other social overlay–all of this we can set aside. 

For this thing called a market, we need only posit two parties, as unattached atoms, engaged only by their interest, and only for the duration of this exchange of value.  That’s all.  They will have social connections, they will be something to someone for some purposes, and they will be this over time and space, but in this thing called a market, they are atoms with interest transacting.  C’est, as the French say, tout.  (Sorry. I was in Montreal all day.)

It was a simplifying idea, and a liberational one.  It released the world from cultural constructs and social elites, and it made the world responsive to what people wanted in spite of social assigned standing, status and desire.  It enabled a world that was responsive, not to what people were supposed to want, but what, for better or worse, and often worse, they did want.  (I will tell you in confidence that I am the only anthropologist on the face of the earth prepared to make this argument.  Where I see liberation and transparency,  they see alienation and anomie.  To which I say, freedom is grueling difficult and only people with tenure think otherwise.) 

And as bad as this ever was (this uncontrolled wanting), there was now at least a certain transparency.  This world was not a reflection of the interest of elites or the imaginings of culture.  It reflected, in an unsentimental, unmediated way, what people were actually willing to pay for.  In a marketplace society, the truth will out.  Elites and received wisdom, these get the Sicilian salute.  (A mental picture of which, please insert here.)

My point and I do have one.  I just finished a round of ethnographic interviews in a large and influential corporation.  The question was how to bring the corporation into a better alignment with the world out there.  (Sorry, I can’t be more specific and honor my oath of confidentiality.)  (It went well, I think.  I was impressed with how well I did.  It turns out I  make a very good ferret.  If your organization needs to take another look at some aspect of the how the corporation works relative to the world out there, call me.)  The thing that impresses me as a result of this research is the possibility that the Scottish idea might be for some corporate purposes ill advised. 

Take for instance the churn in the c-suite.  [C-suite means the offices occupied by the CEO (chief operating officer), the CIO (chief information officer), the CMO (chief marketing officer), the CSO (chief strategic officer), and so on.]  People are now in place on average about 20 months.  And this is the reason that more and more CMOs , for instance, come with "their people" attached.  They do not meekly accept the agency with which the corporation is dealing.  No, they have a standing relationship with an agency of their own, and they bring this with them.  After all, they only have 20 months to make a difference.  The clock is ticking.  Getting to know the incumbent agency will cost them 6 months of their precious allottment.

Ok, so what if we take c-suite churn seriously.  I wonder if it says that the real center of gravity has moved from the corporation to the C-suiters as they move from gig to gig.  If indeed the corporation responds to change by streaming c-suiters through upper management, what is the unit of analysis, where is the real seat of decision making, what is the real locus of continuity?  It isn’t, or might not be, the corporation. This is now streaming with change.  It’s a box of bees.  It is no longer the Romain outpost of order. 

The real locus of governance and continuity is the c-suiter, that itinerant man or woman, traveling from corporation to corporation.  And this means that agencies and consultants and all of the rest of the traveling retinue on which the corporation depends, should establish its first loyalty to the CMO and only then to the corporation.  I don’t know.  It’s a thought only.  But my notion and I do have one, is that as the corporation responds to dynamism it is going to change shape and form, and the locus of some things is going to shift. 

Just to return to the Scottish idea.  It says that corporation will transact episodically and fitfully, as and when it discover the best clients and partners.  (This is a fiction of course, but a deeply useful fiction.  For most purposes, the corporation is economic corporation to corporation and for some purposes, supra-economic within the corporation.)  And these connections between corporate agents will become more and more instantaneous and less and less enduring. Certain continuities will be impossible to sustain.  If they are to exist, and its a fair question whether they must exist, they will have to exist outside the corporation.  Continuity will have to live in networked relationships between players who are in a sense in constant transit, migratory and in motion, and more actual for some purposes, between engagements than within them.

It may be that the corporation is obliged to decide that to be fully responsive to dynamism, it can’t afford certain continuities and is then obliged to farm these out and make them resident in professional communities that exist in orbit outside itself.  Ok, you can see I’m struggling.  When people start repeated themselves, they are looking for the thread, and clearly I haven’t found mine.  But something is shifting, and the corporation, for so long the great "city states" of capitalism, enduring and magnificent, perhaps they will in respond to the market place by seconding some of their essentials to the world out there.

This would be another way of saying that networks so dominant in personal matters may be poised to transform even the institutional world. 

A last point

Just a note on a national difference.  I am on the train from Montreal to Toronto as I file this post.  (There is something completely thrilling about being able to get a wireless connection on a train.  I can’t say why.  There just is.)  And at 4 hours the trip is roughly like the one from New York City to Boston.  But here’s the difference. On the American trip, the wait staff feed you alcohol as if it were a  medical responsibility and a matter of some urgency.  Triage!  (In point of fact, they are softening you up for their tip.  So it is not so much as social gesture, as an economic thing.  And this is fair…and of course the reason the Acela is perpetually in the read.) 

On this trip to Toronto, however, they are much more abstemious, as if there is a good chance that any given passenger might be called upon in an emergency to operate the train and, well, it’s probably better if each of us has a clear head.  And this refusal to lead the wine flow with Dionisian (sp?) generosity is a bad thing because I believe there are few things so charming as being intoxicated on a train that is traveling at speed.  I can’t say why.  This is an enduring truth.  It’s there in Aristotle somewhere.  You can look it up.   So I am as I write this suffer a small degree of alcohol deprivation and I am sure it shows in my prose.  But hey, it could change.  The stewart might bring more wine.  And just as I wrote this last sentence, I swear to God, the steward came by and told me that he would be back with more wine.  I am, I guess, jonesing pretty bad and, ok, most visibly. 

6 thoughts on “Adam Smith and the American corporation”

  1. “The real locus of governance and continuity is the c-suiter, that itinerant man or woman, traveling from corporation to corporation”

    Grant, I think that is bang on-the-money.

    One of the implications in this c-churn is the division it creates between the senior level staffers (the managers just beneath the C-Suite) who typically have been, and hope to be, at the corporation for the long-term, and their new c-suiter bosses who have the 20 month horizon.

    This manifests itself in many ways but most particularly the need for the C-Suite to introduce *change* (corporations rarely hire a new C-* with a brief to maintain the status quo), which can be at odds with the imperatives that the staffers see.

    I think that the corporate environment is now such that amongst the staffers – a different set skills are now selected for, and are necessary to succeed. For instance: skills do to with ability to swiftly buy into ‘new’ ideas, even if sometimes they may seem strangely familiar (C-Suiters don’t have time to understand what happened before)

    We are at war with Eurasia..we have always been at war with Eurasia…

  2. sorry, grant, could not read it all carefully.

    quick response to this one here:

    “The thing that impresses me as a result of this research is the possibility that the Scottish idea might be for some corporate purposes ill advised.”

    not for ‘corporate purposes’ in the narrow sense – but for ‘market purposes’ i.o.w. ‘consumer purposes’ i.o.w. ‘experience’

    consumers are sick and tired of the anonymity of markets and the sad merchandise bureaucrats can produce. – adam smith and f.w. taylor are the enemy of the affluent consumer – and therefore – to a good and painful extend they are becoming the enemy of the 21st century corporation. – it is the enemy within. – hard to fight, i wish you good luck.

  3. The problem here is the assumption that the corporation is a mutable “box of bees” relative to a “stable” C-suite. That doesn’t seem right–the inertial properties of large organizations are cliched for a reason. (Much of that inertia is a good thing, by the way, depending on circumstances.)

    If the observations Grant is making are accurate and generalizable, then the model we should look at is one of relatively stable modules (corporations, business units, C-suite teams along with their external networks) being recombined. Each recombination causes these modules to be altered to a greater or lesser degree as they absorb experiences, knowledge, traumas, etc. from one another. Then a new recombination occurs and the altered modules hook up with new partners, and the process repeats.

    So CMO Jill brings her retinue to XYZ Corp., tries to implement changes at XYZ and has some impact (some of it possibly unintended). As a result of wrestling with XYZ and its problems, Jill learns some things (some of it perhaps erroneous) and perhaps adds or subtracts from her personal network. (There may also be some transfer of knowledge/connections/beliefs between the CMO-module and the other C-suite modules.) Then the two modules detach and reattach with new partners, and the cycle starts again.

    Has a kind of wildlife documentary feel to it. There’s hooking up of heterogeneous organisms, as with sexual reproduction, but there is no child. Instead, we get the equivalent of horizontal gene transfer, as with bacteria. So this story is a bit of a hybrid with respect to biological analogies.

  4. Don’t remember who told me this story, but it seems appropriate: The outgoing CEO meets the new CEO and tells her: “In your desk drawer there are three envelopes. Each time you hit a crisis, open one envelope and do what it says”. Within three months she hits a major crisis. And opens the first envelope. It says “Blame your predecessor”. She does and gets through the crisis. A year passes and another crisis hits. Envelope number 2 says “Reorganize”. She does and puts another crisis behind her. Approaching 2 years another big crisis hits. The third envelope starts off “Get three envelopes……”

  5. One thing worth remembering is that the corporation fits poorly within Smith’s view of the world. It basically didn’t exist when he wrote, and he would, I think, have seen the corporation as a bureaucratic institution designed to undercut market forces through rent-seeking behavior. So the failure of the corporation to act like a Smithian agent would come as no surprise to him, or to those of us who have read a lot of what he wrote.

    Having said that, I think Grant has nailed some very important things. And Bruce Fryer’s three envelopes encapsulate a large chunk of corporate behavior.

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