Why competition is good

I would be an even bigger fan of Michelle Meagher’s provocative book if she had stuck with the subtitle – How Big Business is Harming Our Society and What to Do About It – and not gone for the title ‘Competition is Killing Us’. Because it’s the absence of competition that’s killing us – as indeed this very accessible and well-argued book goes on to explain. There is a footnote on page 2 referring to a glossary explaining that ‘competition’ as used here doesn’t mean, well, competition, or rivalry between firms contesting with each other for customers. Here it is used to mean big businesses eating up more and more market share, lobbying to get the rules of the market economy shaped to their own advantage, and generally subtracting value from society rather than adding it.

This is a shame. It means the book adds to the general confusion on this point, as I think quite a lot of people hear ‘business’ when they see ‘competition’. When economists talk about competition, though, this does not mean arranging things in the interests of business. Far from it. Economists love competition (on my definition) while businesses hate it. I particularly love competition, having spend 8 years as a member of the Competition Commission and recently having been a member of the Furman Review panel.

Other than this – quite a major point, and one which I failed to persuade Michelle about before the book was published – this is a great book and well worth  a read. It’s of the moment too. Our own Competition and Markets Authority is gearing up to tackle the market power of the digital giants, as is the European Commission with its greater impact, and even – perhaps – the US with the publication of a pretty fierce House Judiciary committee report this week. It does feel like we are seeing the tide turning away from big companies and in favour of fewer mergers, tighter corporate governance rules, and a far, far greater emphasis on the need for business to serve society rather than profiting at society’s expense.

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Burning platforms

In 2011 the CEO of Nokia, Stephen Elop sent a memo to staff comparing the business to a burning platform from which it was essential to jump in order to change course. He was referring to the disruption of Nokia’s revenues and profitability by Apple and Android smartphones, and he was right. Rebecca Henderson’s Reimagining Capitalism in a World on Fire is essentially arguing that most of the world’s businesses are on burning platforms, if only they knew it. Either the disruption of climate change consequences, or of social insurrection due to inequality – or, as it turns out, the effect of a global pandemic, though the book predates this – will destroy capitalism. Unless businesses across the board change their ways.

I got the book as it was one of the FT Business Book award shortlist titles I hadn’t yet read (I don’t fancy the ones on Netflix or Instagram, but have read & enjoyed all of Deaths of Despair, If/Then and The World Without Work). Henderson clearly has vast experience of engaging with businesses of different kinds, and much of the book is about the success stories – those that have re-engineered themselves to become oriented toward purpose rather than profit. The examples include Unilever and Aetna, described in some detail, as well as old chestnuts like the worker-owned John Lewis and Mondragon, and a range of smaller companies, and industry initiatives like the move to purchase sustainable palm oil.

The book has a good term for what’s needed to make the kinds of changes described in these examples: architectural disruption. As Henderson acknowledges, many more businesses are still oriented toward short term profit and share price rather than long-term social purpose – even though the purpose-driven businesses ultimately do far better in conventional terms. She identifies some key barriers, among them the necessary big internal re-organisation and culture change. Becoming a purpose-driven and high productivity business requires a high level of trust within the firm, and many managers are unwilling and able to embark on this programme.

There are external barriers too: the short-termism of some investors, the difficulties of getting co-operation among businesses, and the political and regulatory context. So reforms to corporate governance and finance (including proper risk-measurement and accounting), and to the political climate of ideas will be needed in addition. List all that’s needed and it can seem daunting. But we’re all on a burning platform. My guess is that several forces will converge to bring about change – millenial employees demanding better, political upheaval given the state of the world, and un-ignorable consequences of the damage to nature. Whether the change will happen fast enough is another matter.

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From book burning to memory guardians

Richard Ovenden’s Burning the Books: A History of Knowledge Under Attack is really interesting. The author is the librarian of the Bodleian Library at Oxford University, which was the first big, scholarly library I used after my local lending library in the Lancashire mill town of my girlhood. I love libraries and have alsways loved the joke that humans are the means by which libraries reproduce.

Burning the Books is fundamentally a warning about present vulnerabilities to the loss of knowledge. It is roughly historical, from the ancient loss of the Library of Alexandria to the fate of the archives in Iraq and Sudan recently. On the way, of course, the Reformation, other wars, and the Nazi book burning. Record keeping started as an administrative matter of course, and the requirements of states to measure, assess and record grew over the centuries; but over time too came the idea of records as a public good and vehicle for accountability. There are stories of loss but also of rescues, painting a picture of the importance of archives and libraries as vehicles of historical memory and cultural identity.

The book ends with a sober chapter about the difficulty of archiving in these digital times, both because of the volume and the ephemeral nature of digital records. And also, importantly, because the historical record has been privatised and outsourced to the big tech companies. So the author ends with two excellent proposals: that tech companies should be required to ensure public bodies charged with the responsibility have access to all the data records – this shouldn’t be a matter of serendipitous web scraping; and that a tax on the tech giants should pay for these important memory guardians.

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Keynes as you’ve never read him

When Emma Barnes, the author of Mr Keynes’ Revolution, got in touch to tell me about her new novel about an episode in the life of Keynes, I was a little sceptical although always happy to read a new book. Because it isn’t as if people haven’t tried to turn economics into fiction before. There are the very jolly Marshall Jevons crime novels, and Russ Roberts’ The Price of Everything and The Invisible Heart. However, these examples use fiction to teach readers economic concepts. Barnes’ novel is different: it’s a novel about a remarkable character in turbulent times. And a very good novel too, one I thoroughly enjoyed reading.

The book starts with Keynes storming out of the Versailles Treaty discussions in despair at the shape of the settlement, his arguments about the need not to make it impossible for Germany to recover, and writing The Economic Consequences of the Peace. It ends with his similar failure to win the argument about not returning Britain to the Gold Standard. In between, he meets ballerina Lydia Lopokova and eventually marries her. We are served some (Keynesian) economics, with a light touch. Ms Barnes is a Cambridge economics graduate; she makes Keynes’s arguments seem like common sense, and manages to drop hints about how The General Theory, published a decade later, took shape in Keynes’ mind.

But there is nothing of the worthy wholemeal about the economic thread in the novel. If you want the ins and outs there is no shortage of books about Keynes, from Skidelsky’s magisterial biography (in one volume or three) to more recent examples such as Richard Davenport’s Universal Man or Backhouse and Bateman’s Capitalist Revolutionary. The point of Mr Keynes’ Revolution is the story – the Bloomsbury background (they all emerge as dreadful people), and above all the unlikely romance. As I read, I thought the book would make a terrific film or TV series, and the afterword admits it was first conceived as a film script. It also promises a sequel. I look forward to it!

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If/then

Earlier this year I read Jill Lepore’s These Truths, which made me eager to read her new book, If Then: How One Data Company Invented the Future, as soon as possible. It didn’t disappoint – although I had a couple of reservations about it. More on that later.

The book is the story of a company, Simulmatics, formed by a PR man, Ed Greenfield, and an MIT political scientists, Ithiel De Sola Pool. It aimed to apply computers to the prediction of human behaviour: feed the machine enough data and it would be possible to predict election outcomes, among other social phenomena, and more importantly manipulate them. The convergence of data, computational power and Mad Men behaviourist techniques seemed inevitable and unconquerable. The parallel with the same again this time round but more so is striking, and the book ends with the comparison.

Along the way, Lepore tells a rattling good story about American politics in the late 1950s through to the Vietnam War and Nixon, about the first application of computers to social issues (and Madison Avenue was onto the opportunities early), and also about gender politics. Right from the start, there was a culture of computer bros, hostile to women: “Women’s knowledge was not knowledge.” The cast of characters is fantastic. Many of them I’d never heard of – Eugene Burdick, the best-selling author of thrillers and leading political scientist, anyone? Lepore also writes like a novelist, and an excellent one at that.

That is in fact one of my reservations. Among the notes I was taking were notes on craft – this is genuinely a page turner. And yet ….. when the text gets into the interior lives of the wives of the men, I wonder how she knows? Are there really enough letters and diaries, or is this indeed embroidery?

The other is that I hungered for more context about the impact of behaviourism and of cybernetics, and the broader environment of computerised social engineering. For example, Stafford Beer had his own US consultancy applying cybernetics, going to Chile in the early 1970s to assist with Project Cybersyn (the subject of Eden Medina’s wonderful book Cybernetics Revolutionaries). If Then does acknowledge the early use of computers in advertising but Norbert Wiener gets but a passing reference. And even though Simulmatics failed – so many of its projects turning out disastrously – there is surprisingly little scepticism about whether computers can in fact predict and manipulate humans,  whether Simulmatics or their modern day equivalents in Facebook and Cambridge Analytica.

Having said that, If Then is a wonderful book, highly recommended. Lepore was interviewed by David Runciman in a great episode of Talking Politics for those who’d like another taster – it focuses mainly on those disturbing modern parallels.

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