#15 The Enlightened Capitalists - Exploring Virtuous Leadership in Business with James O'Toole

Can business ethics and profitability coexist in harmony? Join us for a thought-provoking conversation with Professor James O'Toole, author of 17 books and a renowned expert in business ethics and leadership, as we explore the intricate relationship between principled leadership and financial success. Drawing from his acclaimed book, "The Enlightened Capitalists," Professor O'Toole shares stories of influential leaders like Jim Burke of Johnson & Johnson and Bill Gore of Gore-Tex, who have successfully navigated the challenges of merging ethical practices with business acumen. These leaders, often viewed as mavericks, demonstrate that strong ethical principles can indeed be a foundation for enduring success.

We tackle the pressing challenges facing Enlightened Capitalism today, delving into the enduring legacy of early pioneers and the modern rise of the B Corporation movement. As companies strive to balance profit with broader stakeholder accountability, Jim brings to light the cyclical nature of corporate social responsibility and the factors that complicate these endeavors. With insightful stories and reflections, we examine the optimism surrounding sustainable business models while acknowledging the relentless pressures from investors and the political climate that can stifle socially responsible initiatives.

Join us as we unpack the key principles of successful business leadership, drawing on historical shifts from socially conscious strategies to the profit-driven ideologies of the late 20th century. Through engaging narratives and practical examples, like the Mars Corporation's commitment to sustainability, we spotlight the qualities that define values-driven leadership. Learn from the authentic wisdom of diverse figures, including a conservative minister and an Irish Catholic, whose writings offer succinct, impactful guidance on integrating values into leadership—a lesson as relevant today as ever.

More inspiration from James O'Toole:
Link to his book: The Enlightened Capitalists. Cautionary Tales of Business Pioneers Who Tried to Do Well by Doing Good. 
Website: http://jamesotoole.com/author.html

Please visit our website, www.businessandsociety.net, for more inspiration.

Chapters

• 1:49 One of the important management thinkers of our time
• 2:46 Who are the Enlightened Capitalists?
• 6:34 What are their motivations?
• 9:20 Stories of enlightened capitalists
• 22:12 Do publicly traded companies eventually lose sight of their values?
• 24:05 Are businesses that benefit both shareholders and society sustainable?
• 32:27 On Management education
• 34:42 Recommended traits for business leaders
• 42:34 Book recommendation

Transcript

Senthil

00:07

Businesses made some of our society's greatest achievements possible, such as the cell phones we use or the cars we drive. However, businesses also commit some of the gravest atrocities in the pursuit of profit. One extreme example is the British East India Company. If you peel the layer and see what lies underneath each business, it's people. Business owners wield tremendous power in our societies, so their drive for profit, virtue and everything in between has implications. 

00:43

Joining me today is a distinguished academician who has spent most of his career enlightening the world about business ethics and leadership Professor James O'Toole. Jim is the author of 17 books, including the Enlightened Capitalist. Professor Emeritus at the University of Southern California's Marshall School of Business, Jim was the founding director of the Neely Centre for Ethical Leadership. From his early years under Elliot Richardson in the Nixon administration, he has had a long and distinguished career in leadership, business ethics, corporate culture and philosophy. I sat with Jim to discuss some of the ideas from the Enlightened Capitalist, where he analyses the complicated history of business people who tried to marry the pursuit of profits with virtuous organizational practices From British industrialist Robert Owen to American retailer John Cash Penney and jeans maker Levi Strauss, to such modern-day entrepreneurs Anita Roddick and Tom Chappell. 

01:49

A very warm welcome to the podcast, Jim. Delighted to have you with us today. 

Jim

Well, thank you for having me Awesome. 

Senthil

I got to know about your work very recently, but after I read your work, particularly your latest book, the Enlightened Capitalist, I realized that you are one of the most important management thinkers of our time. Do you see yourself that way? 

Jim

02:25

Not at all but thank you very much for the compliment. I’ve been professor almost all of my life, with the exception of the time that I spent at the Aspen Institute running the seminar programs there. But even that part of my career I was really a teacher, and I did something like 65 seminars for corporate executives at Aspen and around the world. So, I think to the extent that I have a legacy, it is through my teaching and through my writing. 

Senthil

02:46

Excellent, and your work is at the intersection of so many important disciplines philosophy, ethics, business, leadership. I have to do quite a bit of reading in preparing for this interview, so I'm trying to narrow down our conversation to one of your fascinating works, which is, I think, your latest book the Enlightened Capitalist. Who are these capitalists and why did you feel a need to tell their stories to the world, particularly now? 

Jim

03:13

Let me tell you a little bit about how I started to study these rather unusual people. It was way back in 1970, so you get a rough idea of how old I am by giving you that date when I started doing this research. I had had a grant from the federal government to look at the world of work in America, and I focused in on a group of companies that were doing two rather unusual things. One, they were involving their workers in decision-making, that is, the decisions that affected their own work, and second of all, they were sharing with those workers gains from the workers' efforts through profit sharing, gain sharing and employee stock ownership. The more I studied those companies, I discovered that they were unusual in other ways as well. Most of those companies not all of them, but a large number of them had a great record in terms of how they treated their customers, how they served their customers, how they dealt with suppliers, how they dealt with dealers, very responsible to their host communities. They were led by people who had very strong ethical principles. 

04:34

So, I started expanding what I was doing and not looking merely at the workplace but at the entire philosophy of management and leadership in these companies, and what they all had in common is that the leaders of them all chose to swim upstream. They started to do things that were quite different from what their peers were doing. Like their peers, they all were interested in making a profit, and all the companies that I studied were profitable, and most of them were significantly profitable. But in addition to making a profit, they attempted to meet the needs of all their constituencies, that is, their employees, customers, host communities and the like. 

05:20

And their leaders all seemed to be people who had a very strong ethical basis, particularly with regard to the, I think, the most important ethical principle, which is respect for people, and they all shared a belief in the kind of the enlightenment goal of human development. So, they felt that they had a responsibility, particularly to their employees, not just to pay them well, but for them to fulfil their potential as human beings, their full potential, in the Aristotelian sense, of the highest good. What is remarkable about these people, for everything that they did, is that most of them were rather unpopular. That these efforts were not met with praise in most cases, particularly by people, managers who work with them, their shareholders, even members of their own family and family-owned businesses. Very few of them got a lot of support in that regard, and so, among everything else about them, they were mavericks and very, very unusual people and I guess I was just taken by them as human beings for their moral courage. 

Senthil

06:34

That's fascinating. What was the motivation behind these people you noticed about? Were they trying to find meaning and satisfaction, or was doing good as a tool to differentiate themselves, to maximize profits? 

Jim

06:50

I think with some it was yes, in some people it was just good business. They felt that if they treated their employees well and if they gave their customers a fair deal, that they would probably prosper. And there were really a number of individuals who I mentioned. I think it was just as simple as that. But in many other cases it was a lot more complicated. There were other motivations. For a number of them it was religious. 

07:20

Some of the people who I describe in the book, Max De Pree, for example, was basically a preacher in the Dutch Reformed Church and he felt that it was incumbent upon him as a Christian, as he interpreted it to behave ethically and morally and to treat people with respect. And so, he was driven entirely through religious motivation. And he wasn't the only one in that regard. And then there were people who were atheists, who had a philosophical point of view really stemming from the Enlightenment, people like Robert Owen, for example, who I guess we'll talk about maybe a little bit later. And then it was just personal with some people Anita Roddick who is the founder of Body Shop, had had a really impoverished background. It was a really rags to riches... you see basically during World War II you know was an impoverished individual and I think she just didn’t want anybody who worked for her to have to live the way that she had lived, and so it was just a very personal kind of thing with her. 

08:28

And then for some people, it was political. They felt that creating these enlightened corporations was an alternative to communism and General Robert Wood Johnson, who was one of the most important leaders in the history of J&J, Johnson & Johnson healthcare products really felt that way right after World War II. And John Mackey, who was the founder of Whole Foods and who just actually left the leadership of that company recently, is a very right-wing individual who believes that capitalism is the best system, and he was out to prove it, and he decided that that was the best way to do so. So, there's really, if you think about all that, that's a pretty broad spectrum, a pretty diverse group of people. 

Senthil

09:20

Interesting For our listeners to understand, could you simply explain what is the meaning of enlightened capitalists? And I want to ask you, among all the stories you have presented in the book, who is your favourite and why?

Jim

10:06

You know I think that is little bit like asking a parent who is your favourite child, I really liked them all. There were a couple of them who really were difficult individuals, and I was actually lucky enough to have been able to… to at least to have met but to have interviewed, in some cases worked with about 8 or 9 of these people and there was one of them who was probably an unpleasant person not just to me but to everybody but most of them were very nice people. 

But I think that there were two who really sort of stand out to me in this regard. One was Jim Burke, who was the head of Johnson & Johnson at the time of the Tylenol crisis, and Burke put the principles that I talked about in terms of the responsibility that these companies have to their various stakeholders, their various constituencies. He put that into play and he adhered to those principles and in doing so he saved the company, and at the time, people were saying that it was going to cost the company hundreds of millions of dollars, and at that time, in the 70s, hundreds of millions of dollars was real money and so they thought that he was going to bankrupt the company by doing the right thing, which had mean basically pulling off all their product off the shelves around the world. But he proved right in the end, and he was a person of incredible integrity, and so I think he's one of my favourites because of that. And another reason why I think I can favor him is that it's just so well documented what he did. It's documented in films, it's documented in books, articles, and so there's sort of no doubt about what his motivations were why he acted the way he acted, and I think it's really it should be a template for managers moving forward at all times, because we know so clearly why he did what he did. 

11:34

Another person who I would mention is Bill Gore, the founder of the company Gore and Associates, which is the makers of Gore-Tex, which are these clothing that is used in mountain climbing and athletics, but, more importantly now it deals with artificial plastic parts that are used in surgery, and so it's all spins out of very advanced forms of chemistry forms of chemistry, and Gore was a man who not only had a very, very clear vision of the kind of company that he wanted to create, which was based upon the kind of company where he would want to work himself, but he was also concerned that the company would last, and, to his credit, I think they're now on the fourth CEO of the company, who is the grandson of Gore, and there was a woman in between who was not a relative, but they have stayed true to his principles. 

12:33

So, in terms of the sustainability of this kind of organization, I think what Bill Gore did really deserves to be studied, because most of these companies, the sad part, is that they don't last, beyond the founder or the founder's successor. Very few ever make it to the third generation of leadership, but Gores has, and it shows every sign of being able to continue to be a sustainable organization. 

Senthil

13:01

My favourite in the book is Robert Owen of the New Lanark Mills, not only because he improved working conditions and pioneered initiatives against child labour, but also because of his downfall, which seems to have stemmed from his rigid thinking and unwillingness to accept compromises or different views. What is your take on his life? Was he like all the others you featured, or were there any crucial differences? 

Jim

13:31

Well, Robert Owen faced the harshest environment for doing what he did. This is in the days of the dark, satanic mills, the very worst of Dickensian slums in industrial England, and there's incredible odds against him succeeding in what he tried to do, which was basically to create a model organization, one that met the needs of the workers but also directly addressed the ills of the early industrial revolution. He created clean, safe factories, paid fair pay, decent hours. He took young children out of the workplace. He built a school for these young people, very progressive school. He provided continuing education, adult education for his workers. He created pensions, healthcare, a decent housing, provided them with good food, and this is in an era when none of this was even thought of or imagined possible. 

14:46

Karl Marx couldn't believe it, you know, when he was studying it, because he wasn't behaving like a capitalist was supposed to behave and he was succeeding at that. But of course, as you mentioned, the story didn't end happily, and I think that's probably what makes the story quite as interesting as it is and also why it's so similar to many of the other stories in my book that I documented. He was really detested by his fellow capitalists. He believed when he showed them that they could make a profit by treating their employees well and by treating their customers well in addition, he thought that they would follow his lead, but no one did. Instead, they attacked him, and I think he may have gone a little bit crazy as a result of this, because he knew he was right and he tried to appeal to them through reason and he said it's an experiment and I show you that it works. I show you that it's profitable. He said, show me the flaws of what I've done. Instead of that, they attacked him personally and they said he was using magic and that he was cooking the books and doing all sorts of other things that had nothing at all to do with the secret to his success. 

16:08

In a peak, he turned to the government and he tried to get the government to the British government, to enact laws that would force the industrialists to follow his example, and that was a step too far for the British political system and for British society at that time, and basically he was forced to sell his company and he sold it completely, got out of it entirely and he moved to the US a beaten man. It's really a very, very sad story and in the end, he did return to Britain and had a hand in creating the labour union movement, trade union movement in Britain, and also starting the cooperative systems in Britain. But at that stage in his life, he was pretty well both intellectually and emotionally spent and he felt that he was a failure. When he was asked by a great philosopher at the time, you know who were his followers and he said there were none. No one ever followed my example. Fortunately, he was wrong. People did eventually follow his example, but none of his peers at the time. 

Senthil

17:29

Among the business owners of our time. Would you call anybody an enlightened capitalist? 

Jim

17:36

Well, you do mention Yvon Chouinard, the head of Patagonia, who is really about the only person I can think of who is running a really large, successful company who really adheres to all of these principles that I've been talking about. Most of the others will fall short in one way or another, but that doesn't mean that there aren't any. It's just that they're in small organizations. And what has happened? The most encouraging thing that has happened over, I would say, the last dozen years is the growth of the B Corporation movement, which is an effort to charter corporations so that their first responsibility is not to meet the needs of their shareholders but to meet the needs of all of their other stakeholders, including their efforts to create a clean environment and to deal with climate change and to make sure that their products are safe and healthy and to take care of their employees. There are now hundreds of these companies, not only in the US but around the world, and I'm pretty sure that there's also a big corporation movement in Australia as well. These companies are in almost every possible kind of industry that you can imagine. The one thing they all have in common, besides buying into this B Corp philosophy, is that they're small, and what remains to be seen is will any of these companies be able to grow? Far and away, the largest is Patagonia right now, but there are some others that are growing and if you talk to the leaders of the big corporation movement, they're rather confident that you know in five to ten years that there will be some not only midsize but relatively large big corporations around the world. That remains to be seen but it is nonetheless the case that there are hundreds of young business people who are attempting to follow in the footsteps of our friend Robert Owen, 200 plus years later. So, I take that as the most encouraging thing that's going on today. 

20:09

Otherwise, I would say that the broader movement which people have called corporate social responsibility and a lot of other names, is in bad shape right now, particularly in the US. Corporations large corporations, publicly held, publicly traded corporations are all running away from any taint of doing anything that is not profit maximization right now, and so the times are really rather bad for the kinds of people who I studied in those large corporations. But that's not unusual really. What has happened is that we've gone through cycles in which, for example, in the 1970s, there were quite a few of these companies that were publicly traded, that were run by enlightened principles. Then, when we lost them during the 80s and they came back again, there was some interest around the year 2000. Now we've lost that interest again. 

21:10

But there always seems to be some people who are interested in this, some people who are interested in going to business, but what we have to recognize is that the majority it's never been a majority of business people who are interested in doing anything other than make a profit, and I don't think that that is ever going to change. But I believe that there are always going to be some who are the children and grandchildren and great-grandchildren of Robert Owen, who are going to make the try and who really believe in it, and they can succeed. I hope what the B Corporation promises is that they can succeed in creating sustainable type of organizations, ones that won't, after one or two generations of leadership, revert back to just business as usual, but would be able to continue to sustain and maintain those broader ethical principles. 

22:09

Senthil

22:12

That's very encouraging, Jim. You talked about B Corporation, and I think the essence of that argument is who a company is accountable to. Is it shareholders or customers or employees? And there's ample examples out there in your book, and you noted that investor-owned companies have been generally inhospitable to virtuous leaders. I'm keen to hear your thoughts on this. Does this mean a company that's publicly traded in the market may not be having a strong soul or create an enlightened corporation? 

Jim

23:01

I cannot cite a single publicly, publicly large, publicly traded corporation that has sustained these kinds of principles for more than three generations of successions of leadership. There are dozens of examples of companies who have tried it, you know, and some of them have sustained it maybe for as long as 20, 30 years. Probably the best example is not an American company but is Unilever. These principles have been there and they've never really died, even though there have been leaders at a time who've never really fully bought into the notions of enlightened capitalism has never completely died inside the company, and so from time to time it has been reborn and there are still always elements of it that are present, even if, at one time or another, the leaders appear just to be engaging in profit maximization. But outside of Unilever, I have a very hard time citing another company that has a continuing record. That is a large, publicly traded company. 

Senthil

24:05

I'm trying to understand are businesses that benefit both shareholders and society sustainable. You yourself wrote in a book it's a very tricky and a deliberate act between greed and virtue. So, is it even possible to maintain that delicate balance in long-term? 

Jim

24:23

Well, we know for sure it's very hard. Okay, you know, I mean that individuals have turned the trick, individual leaders have, and certain companies have turned the trick, and they've turned the trick, you know, in many cases for as long as you know 20 to 40 years, but none much longer than that, and most of the time for much shorter periods of time. I think it's theoretically possible, but the problem is the pressures from the investors. People do not invest in large publicly traded companies in order to do good, even when you have pension funds, labour union pension funds. When labour unions invest in those funds in the stock market, they often invest in companies that are hostile to labour. All right, because what they figure they have to do is they have to maximize the returns so that their pensioners have enough money to live when they retire. And universities is the same way, in the US, some of the largest holders of stock in publicly traded corporations are American universities. Harvard and Yale are among the largest shareholders in the country. But what are they trying to do? Well, it ends up that they're trying to profit maximize, and so even organizations like this who you would think would have a broader range of interest or broader mandate or broader and more ethical concerns… when push comes to shove, they vote their money and they invest in the companies that are producing short-term profits, and so those pressures are there all the time and they're constantly. 

26:23

I've talked to many business leaders, and they said that they understood what would happen once they were founders of their companies and once they went public, that their values would be lost. They understood that that would be the cost of them going public, and Chouinard said this quite explicitly. He said there's no way in which, if my company goes public and it's investor-owned, he said, that the values that I have instilled in this company will be maintained. It just won't happen. And I cite several instances of this in the book, the most prominent of which is Levi Strauss Corporation, the makers of jeans and they went public. Then they went private and went public again, and the same damn thing happened twice when they did it, and it's very clear that they could not sustain their values as a publicly traded corporation. 

Senthil

27:26

Why is that? 

Jim

27:28

It's simple… Money. You have to make money, and if you're not making money, managers, even if the CEO of the corporation says that the reason why we're not successful right now is not because we're treating our employees well, it's because of changes in the competitive environment, the people around that person will say no, it's not. We are engaging in activities that are taking our eye off the ball. We need to be 100% focused on profit maximization and, to the extent that we're also worried about social concerns, we are an economic financial organization. We're not a social organization, we're not a social welfare organization, and so we make a mistake to the extent that we try to do both things. It's hard enough just to do one, but trying to do two is nearly impossible, and so the pressures are constantly there to abandon these efforts, and you can see what happened in the US very recently. There is this group called the Business Roundtable, and the Business Roundtable is composed of the CEOs of the largest publicly traded corporations in this country. There may also be some others who are not in the US as well about that now, but I believe it's mainly in the US. About 10 years ago, they signed on to a statement that from now on, all right, we are not just profit maximizing organizations, all right, we're going to pay attention to the needs of all of our shareholders, and particularly to questions having to do with the environment, and also we're going to make sure that our own internal governance of our organizations is clean and so that people can trust the financial reporting. So, all of a sudden, here they are. They've all sworn allegiance to this. 

29:50

Ten years later, they've all walked away from it, every one of them, including the organizer of it, the guy who wrote the statement and convinced the rest of them to sign it. Now it has no interest in this whatsoever. No, we're not doing that anymore. I'm not surprised that they walked away from it. What I was surprised of more of it was that they signed it in the first place, because a lot of those people who signed it had never done any of those things in their organizations and, seemed to me, never had any intention to do it. But they felt at the time it was a good thing to do. It made them feel good and they got some good publicity for a while. But now that that's not popular, that's fallen out of favour on Wall Street, they walked away from it as cavalierly as they signed the document. 

Senthil

30:38

Is there anything to do with the political landscape, Jim? 

Jim

30:42

In this country. It does. Yes, yeah, it really does. Right now, I'm just looking forward. 

30:49

We've just had an election here, and the kind of efforts that enlightened capitalists are making are probably not going to be looked upon with great favour over the next four years, to say the very least. You know… and so I think everybody right now is trying to figure out, you know, what do the next four years pretend? But it's pretty clear that if people were going to be out of step ideologically, we're going to have to keep their heads down. So, I don't imagine that you're going to get courageous people, you know, stepping forward who are running large corporations and being willing to again swim upstream. 

31:27

Right now, I think everybody's going to just sort of go with the flow, and you can see already there are corporate executives who four years ago, after January 6th, had walked away from the MAGA movement are suddenly now backtracking and saying I guess everything's okay. And so, I think the political environment does very much affect this, and particularly affects one aspect of it, which is the willingness of corporate executives to take a position on social issues, public issues, and I think right now I don't think any of them are going to be willing to do that again. The CEO of Apple Corporation had, over the last four years and beyond that, had often spoken out on broader social issues, but my guess is that he, and whoever his successor will be, probably will not do so right now, so they're going to be silent on these things. 

Senthil

32:27

It seems to be challenging times ahead. Jim, I know we have very little time left. I'll ask you one last question before we move to the final segment. What are your thoughts on the management education? You wrote about this in your work. You saw that there are some period in your career where, like so many courses on ethics, philosophy, values-based leadership, et cetera, then it disappeared from the management education. Where do you see the trend is now? 

Jim

32:55

Well, it's going to be interesting to see, because almost all of the business schools were in step with the business roundtable in terms of moving in that direction, moving their curriculum in a way to try to encourage MBA students and business students in general to embrace some of these values having to do with enlightened capitalism. They were introducing courses and in many cases making these things required, providing internships at places like B Corporations and things of that nature, making sure that there would be some exposure during their educational careers. But my guess is that they'll back off that now too, because they backed off it before. We went through a cycle before, in the 70s, 

33:45

you know, when all the business schools embraced the line capitalism in one form or another. Only in the 80s to abandon it in favour of everybody became a disciple of Milton Friedman. The purpose of a corporation is to maximize profits. That was what we were taught in the 80s and into the 90s. That was what was happening in business schools Then around 2000, No, Milton Friedman's out, enlightened capitalism's in. Right now, it looks like enlightened capitalism's out, Milton Friedman's back in. It's been cyclical. It doesn't make me feel any better about it, but I just try to be realistic about it and I don't give up hope. During the times when these things aren't in vogue, I just keep my fingers crossed that they'll come back into prominence quickly. 

Senthil

34:42

Jim, let's move to the last segment how I Did it, where we ask our guests a few personal questions to draw lessons from their life and career. In your experience, what are one or two essential skills required for business leaders? Let's keep enlightened capitalists aside. If you ask one or two qualities which you want business leaders to develop, what would it be? 

Jim

35:06

Well, I like the way you're asking it. What sort of qualities or traits, which I think is different from skills, but the things that I have tried to teach my students over the years have to do, probably, with three traits or values. The first one is generosity. Generous people are giving people, and they not only in terms of generosity we think in terms of money, but I think of generosity in a much broader sense of that. You know, in giving your time, giving your ear, giving advice, being open to helping other people by helping him to get the resources that they need to do their jobs well. I think that the great leaders are generous leaders. It's not all about them, it's really about the broader principles of the organization and the people in that organization. So, I think that giving leaders are… I can't just claim that they're going to be more successful, but they certainly will create organizations that I think are more ethical and more healthy. 

36:29

The second one, and one I've already alluded to, is what I believe the fundamental principle of ethics, which is respect for people. You respect people in ways by, first of all, paying them fairly, giving them chances to grow, making sure that you are sensitive to their differences and the different needs that they have. People who listen to people that's probably the most important sign of respect. It's not just people saying I hear you, but you actually do hear them, you listen to them, and you try to understand where they're coming from and what they need and what they want and why they're saying what they're saying. And I find that trait in leaders to be one that has also a practical value. That practical value is that when you are respected by people, you respect that leader in return. That's also the case with generosity, too. When people are generous to you, you will tend to be generous to them as well. So, these, I think, leaders who are generous and who do respect their people, win over their people without using force. They don't have to threaten people, they don't have to bribe people to do things. People will do things willingly because they understand that the leader is taking them to places that are good for them to go. And so, it's that aspect of leadership, that type of leadership that I've tried to encourage my students to follow. And then the other one is really a much more practical aspect, and that is to adapt a long-term perspective. 

38:09

I think that one of the biggest problems in capitalism particularly back to shareholder capitalism is a very short-term perspective that we're trying to profit maximize in this quarter term perspective, that we're trying to profit maximize in this quarter. I think that that is not only doesn't it work, even in the short term. In the long term it's disastrous for organizations, and I think this has been the Achilles heel of American companies and when I say American companies, I talk about companies in what I would call the Anglo-American tradition, and I think most Australian companies are part of that tradition as well. It is that what we find is that companies that are owned by a single person or by a family or are employee-owned in the US and in Britain, tend to take a much longer-term view of things. I look at the Mars Corporation, makers of candies. They have a big business in Australia as well. The company has been entirely owned by the family, very closely owned by the family, and only recently was it enlarged, when Warren Buffett took a part of it as well. But it's basically owned by a handful of people, Warren Buffett being one of them. Over the years, when they have made business decisions, the decisions are, is this business going to be profitable 20 years from now? Right, and we'll wait it out. And I've been fortunate enough to be able to talk to managers who grew up in the system of the Mars Corporation. 

39:57

And I talked to one fellow who was called in by the Mars Brothers and they said, and this was, oh God, 40 years ago, something like that this was when the Soviet Union just opened up to business with the West. And they said well, you know, let's go see if we can have some business in the Soviet Union. And he said what do you have in mind? He said we don't know. They said why don't you go to Russia, look around and see what can happen? And so, he went over and came back after many, many months of study and he said you know, I think our best opportunity there is with dog food of all things. And they said well, why? And so he explained what he thought and they said how much is it going to cost? And he said well, you know, it's going to cost, you know, a million dollars this year and two million next year, and then 10 million the third year and that. And they said, well, here's the money. And they never asked him when are we going to get the payback? Right, they got that payback, they got it. They got it actually within about five years they started getting it, but there was no pressure on him. 

41:09

Yet I talked to executives and corporations who have been sent to foreign countries, and they have said you've got to turn a profit within three years. You have to turn a profit in three years or we're not going to do it. In many cases you cannot start a business, a real business, a meaningful business, and expect to turn a profit in three years. But that's what Americans try to do, because it's all short-term and this is self-defeating, to say the very least. But short-termism, I think, is really the fatal flaw of the American way of life. 

41:46

I think that a lot of what happened in the recent election has to do with short-termism. People thinking you know, I want to get what's good for me tomorrow, right now, right, and rather what's good for the nation in the long term. And we do the same thing in business. We say you know how can we make a quick buck? All right, that's a quick buck. That's the American way of life Instead of how do I create a business that's going to last, that's going to be an institution, that's going to be good for people, you know, that's going to produce safe goods that people need? No, how can I make a quick buck? 

42:23

And I don't think that that's the way to create a healthy company or a healthy society in the long term. 

Senthil

42:28

Finally, Jim, would you recommend a book or two for our listeners? 

Jim

Well, I'm going to recommend two and it is very slightly self-serving. Only very slightly. It is because I wrote the preface to both of them. One of them you might not even be able to find the edition of it that I wrote the preface to, but that one is Robert Townsend's Up the Organization. I write about him. He's the man who made Avis We try harder. Up the Organization is just a compilation of common sense by a CEO who had a great sense of humour and a great sense of humanity. And the book is… It changed my way of thinking. 

43:13

I was working for McKinsey at the time when the book came out and I bought the book and brought it back to my office. I was very unhappy at McKinsey, and I read the book through the easy book to read through in a couple of hours and I said this is the way businesses should be run and it's not what we're advising people to do at McKinsey. So, I walked into the managing partner's office, and I quit, and I said I'm going to go and try to work doing corporations like this and I got in the elevator and, as it was on the 52nd floor in San Francisco, I went down that elevator and I never went back. Right. So it changed my life and it's just, it's it, but it's, it's marvellous book and um, I didn't know him at the time but later on, much later in my life, I became very, very close friends with the author and after he died I wrote a preface to an edition that was a posthumous edition of the book, but it's easily available in paperback anywhere, Up the organization. The other book is Max De Pree's Leadership as an Art, which is one that you have referred to a couple of times in passing, and it is a book of profound wisdom. And it is again… It's a very, very easy book to read. It's also the profundity of it is easy to dismiss if you're a cynical person, but it is the opposite of cynicism. 

44:51

The author was one of the most genuine human beings I've ever met. The two of us were complete opposites in our backgrounds and in our beliefs. He was a conservative minister in the Dutch Reformed Church. He was a teetotaller who lived a kind of ascetic life. That was for me. I'm an Irish Catholic from San Francisco, California. You know I'm just the opposite in terms of my background and everything we had, but I've never respected a man more than this man, because he was genuine and he was the closest thing I ever met to a saint and he wrote from his heart what it really meant to lead an organization in which he could practice, as he felt, his Christian values. Now, I'm not a Christian, but I think those values are pretty good values and he really did it and he really practiced what he preached. That's what makes this book so real. 

45:53

This is not just somebody offering advice. Here's somebody who says this is what I did, this is what I really believe, and it's done in a way that is humble but at the same time, very practical. He says some very, very practical things in the book and there are lessons there that almost all of us can apply, not only at work but in our lives. So those two little books, I think, have had the greatest impact on me in terms of my own thinking over the years and the advantage of it. Unlike my book, which is very, very long and I apologize for that both of these books are very short and they're marvelous reads in their own way, completely different ways, but I recommend them wholeheartedly. 

Senthil

46:41

Lovely. Thank you so much, Jim, for joining me today and sharing all these pieces of profound wisdom. It's an honour talking to you today. Thank you very much for having me. 

Jim

46:52

Great to have met you. 

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