The clamour for compassionate capitalism
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When I was entering the corporate world, my father gave me a copy of the Tao Te Ching, translated by R. L. Wing, called The Tao of Power. I was far too young to make any sense of it at the time, but plowed my way through the tome, understanding very little, and retaining even less.
This now yellowing book, which has also taken on that pleasant olfactory character that only old books can, is still on my bookshelf. I pull it down from time to time, and read snatches of it—an act which always results in giving me something to ponder upon. Many of the passages have taken on new meaning for me in the decades that have passed since I was first given the book. This past weekend, I pulled it off the shelf again and opened it to a page at random. Call it stichomancy if you will, but out popped this passage:
The Tao in Nature, Reduces the excessive and supplements the insufficient.
The Tao in Man is not so; He reduces the insufficient, Because he serves the excessive.
Who then can use excess to serve the world?
Those who possess the Tao (of Nature).
Therefore, Evolved Individuals, Act without expectation,
Succeed without taking credit, And have no desire to display their excellence.
Indeed. As Wing (whose identity is shrouded in mystery, but who legend has it, is a woman) points out in her annotations on this passage: “On the social plateau, individuals who attempt to dominate others trigger a natural psychological response from their society: a collective urge to neutralize the effect of the excessive members.
The complement of this response, in group psychology, is to direct help toward individuals who have insufficient means. Because evolved individuals understand this pattern of energy in the universe, they are able to use it to protect their position while they bring progress to their world. So that energy will flow in their direction, they reduce their position by maintaining an atmosphere of moderation and humility in their relationships with others. They then use this energy to alter reality through the focus of their attitudes and convictions”.
It appears as if the recent clamour for “compassionate capitalism” comes from urges such as these, and on the face of it, is rooted in the well-intentioned tendency of people to speak up for justice and equity. But those calling for compassionate capitalism need to be aware that such statements can come off as nugatory, or worse yet, can rebound. Let me explain with a real-life example from the technology industry:
The media is rife with news of Yahoo’s shareholders’ vote on Thursday, 8 June. Electing to approve Yahoo’s sale to Verizon will make them richer by billions of dollars, while also enriching Marissa Mayer, the current chief executive officer of Yahoo, by almost $264 million. Considering that Mayer has been at the erstwhile internet giant for about five years, this would mean that she earned almost $1 million for each week she has been at the company.
One could argue that Mayer’s windfall has very little to do with her work at Yahoo, since the firm failed on many fronts when compared to its arch-rival Google, and is instead due to the investment performance of two bets placed years ago by Jerry Yang, one of Yahoo’s founders, in two Asian internet giants—the Alibaba group in China and Yahoo Japan. Nonetheless, Yahoo’s stock has more than trebled in value during Mayer’s tenure, going up from around $16 to about $50 a share on 7 June. And since most of Mayer’s pay was in stock and stock options, she now stands to benefit handsomely.
My question is this: who is expected to be compassionate with the thousands of Yahoo staff who lost their jobs during Mayer’s watch? Mayer or the shareholders? After all, Mayer was acting to benefit the shareholders of the company, who are the true capitalists. It is they who provided their capital by buying ownership stakes in Yahoo. Mayer is just one of the many lucky managers who have made fortunes simply by sticking around due to the stock option based compensation structures that are de rigueur in today’s corporations, made possible in part by the seminal work linking stock options and executive compensation done at my alma mater, the University of Rochester, by its professors Michael Jensen, William Meckling and Kevin Murphy.
True compassionate capitalism would mean that the shareholders of Yahoo are willing to forgo some of the profits they stand to make from the deal to benefit the axed employees. Mayer was just their agent. And it is so with many Indian technology firms, whether late-stage start-ups or long established bellwethers, which are now increasingly managed by professionals while the promoter group, or other investors, have taken a back seat.
If they want to be paragons of compassionate capitalism, the natural next step would be for these investors to share their current dividends and future profits from their stock holdings with the lower level workers at these firms, who are now presumably cannon fodder in a relentless world which encourages survival of the fittest.
To be fair, it is these very workers who were until recently accustomed to treating their employers shabbily by disloyally changing employers for small raises in remuneration. These workers were just as much “capitalists” who chose to maximize their returns. Capitalism, like loyalty, is a reciprocal arrangement.
I would advise caution before we use terms like compassionate capitalism. The natural curveball effect of terms such as these mean they will come back home to roost. For after all, as Lao Tzu says, “what is curved becomes whole”.
Siddharth Pai is a world-renowned technology consultant who has personally led over $20 billion in complex, first-of-a-kind outsourcing transactions.