The Darwin Economy: Liberty, Competition, and the Common Good

Robert H. Frank is an economics professor at Cornell University’s Johnson Graduate School of Management. He is the author of three other popular books, author or co-author of two economics text books, and a regular “Economics View” columnist for The New York Times.

The premise of capitalism is that individuals, operating in their own best interests, are guided by “an invisible hand” to create value for the common good. But Frank makes the case that, even with perfect information and rules to assure competitiveness, the common good is not always served by individuals doing what is in their own best interests. One problem is that performance is graded on a curve. And a second follows from this: Without collective action, there may be a disadvantage to even doing what is in my own best interests because of the costs associated with making this choice.

One of his illustrations brings this home in a profound way. Evidence was gathered on the safety benefits of helmets for hockey players the National Hockey League. In spite of the research, individual players did not wear the helmets out of fear that they would lose a slight competitive advantage by wearing a one when others didn’t. But when put to a vote, the players voted overwhelmingly to adopt a rule requiring they be worn by all. This is the only way they could gain safety without losing competitive advantage.

Individual choice tends to move toward the relative advantage at the moment. This forces choices against the good of the individual, and against the common good. In this sense, capitalism operates more like Darwinian evolution, where individual choice for the survivor may work against the best interests of the species. The cover photo to two elk clashing over the right to pass on their genes to the next generation has led to elk with huge antlers. These same huge antlers work against the species making them vulnerable to prey as they pass through dense foliage.

Frank often draws on his work in behavioral economics to explain how people really make decisions rather than how they might make decisions if they were fully rational.

The book is delightfully written with many illustrations and thoughtful arguments. He takes on the libertarian position, not be disagreeing with libertarian assumptions, but by using those assumptions to show the breakdown of the common good. One particularly fascinating section is his libertarian argument for a progressive tax system (p. 126).

I doubt that the case Frank makes in this book will be ultimately persuasive to those who see the world through a different lens. But even those who disagree with him should enjoy the carefully crafted, fun, arguments, and the insightful illustrations. I highly recommend this book.

Reviewed by Al Erisman

The Filter Bubble: What the Internet Is Hiding from You

Eli Pariser is the board president and former executive director of the liberal website MoveOn.org, which at five million members is one of the largest citizens’ organizations in American politics. He has written op-eds for The Washington Post and The Wall Street Journal and has appeared on The Colbert Report, Good Morning America, Fresh Air, and World News Tonight.

Personalization is an algorithm that filters knowledge about you to adapt your view of the information on the Internet. Amazon uses knowledge about the books you purchase to suggest other books that may interest you. YouTube and Netflix do something similar with videos. In fact, personalization is a core strategy of every major website.

Pariser’s goal in researching his book was to answer some important questions about personalization: How does it work? What is driving it? Where is it headed? What will it do to us? And how will it change our lives? What he discovered is the filter bubble.

The amount of information on the Internet is overwhelming. Many users model the Internet as either a large department store or a huge reference library, and personalized filters make it manageable. Most of us like not having to laboriously sort through all the content ourselves.

Of course there is another side to personalization: advertising. By collecting information about demographics, preferences, purchase history, and clicks, companies can target their ads directly to likely buyers. To most users, that seems a reasonable trade-off. But every click becomes a commodity. Highly profitable personal data companies have accumulated an average of 1,500 pieces of data on 96 percent of Americans to auction to the highest bidder. Among the data is the names of your family members, your current and past addresses, your politics and religion, how often you pay your credit card bills, whether you own a dog or cat, whether you are right-handed or left-handed, and what kinds of medication you use.

What concerns Pariser is that when personalization based on such comprehensive data is used to filter your searches you get a biased window on information. He asked two friends to Google for “BP” soon after the Deepwater Horizon oil spill in the Gulf of Mexico. They were presented fundamentally different results — one with news about the spill, the other with investor data about the company. Personalization has created a bubble using its knowledge of you that you can neither control nor easily escape.

Pariser examines the extent of the filter bubble with many examples. He extrapolates the effect of the bubble extending to news sites that show you only the news that appeals to you, filtering out something you really might want to read. He’s concerned about how personalization can influence your political thought by filtering out discourse with those of differing views — a fundamental tenant of democracy. And, unchecked, he sees an increase in discrimination and a decrease in well-informed people. Pariser says, “Your identity shapes your media, and your media then shapes what you believe and what you care about.” He calls this a you loop, being influenced extensively by your own ideas. His Ted Talk provides a quick and accessible summary of his ideas.

Pariser attempts to propose solutions to the problems he sees, ranging from individuals regularly erasing their browser history and cookies, to self-regulating companies, to government regulation.

Eli Pariser’s research is well done and his interpretation and conclusions are reasonable, although he glosses over the implications of this data mining for privacy. The book is engaging and thought provoking. I recommend it to anyone interested in the future and ethics of technology, He is planning a sequel, due in April, The Filter Bubble: How the New Personalized Web Is Changing What We Read and How We Think.

Reviewed by Scott Bradley

That Used to Be Us: How America Fell Behind in the World It Invented and How We Can Come Back

Thomas Friedman is a three-time Pulitzer-prize winning New York Times columnist, and the author of five best-selling books. Michael Mandelbaum is professor and director of American Foreign Policy at The Johns Hopkins University School of Advanced International Studies, and author or coauthor of 12 books.

The thesis of this book is that the United States created a climate of education, innovation, and opportunity that made it the world leader that is was through much of the 20th century. But by falling behind in education and losing its optimistic stance, America is rapidly losing that lead and must make some dramatic changes to regain it.

There is hope, however, both because of opportunity (through world changes driven by technology) and problems facing the world (climate change) where America could step up in a bold way. To do this would require America to address policy changes that would put more emphasis on education, address infrastructure issues, and face climate change realistically. Individuals also need to step up to recognize what it takes to succeed in this new 21st century world. They must take responsibility for their careers in a new way and not be distracted by successes of the past. The challenge of getting a good education, particularly in math and science, amidst the distraction of our media age, must be faced family by family, person by person.

Readers familiar with Friedman’s other books will immediately recognize both his style (enthusiastic, fast paced, lots of personal illustrations, wordy) and the content. There are lengthy summaries of his previous works on how technology is reshaping the world (from The World Is Flat) and the impact and opportunities of climate change (from Hot, Flat, and Crowded). Like the other books (particularly The Lexus and the Olive Tree) we also go with Friedman on his jaunts around the world, meeting people from all over the globe.

What Mandelbaum seems to bring to this book is more focused thought on what all of this has to do with policy issues, both foreign and domestic.
The authors have found a way to handle joint authorship combined with lots of personal anecdotes (mostly from Friedman it seemed, though I didn’t count them) by giving the anecdotes in the third person (“When Tom was in Bangalore he …”). I found this very readable and effective.

This book is easy to criticize. Some won’t like the political orientation of the authors (probably slightly left of center), the wordiness of the book, or the repetition with previous books. But I found this to be an important challenge particularly for those who are early in their careers, to think about their own need for continuous learning and change. The final chapter was sobering. The authors were asked if the book has a good ending, and they basically concluded it is up to us to write that ending.

I recommend this book.

Reviewed by Al Erisman

Daniel Kahneman is the emeritus Eugene Higgens professor of psychology and the emeritus professor of psychology and public affairs at the Woodrow Wilson School of Public Affairs, both at Princeton University. He is author or coauthor of six other books, and the winner of the Nobel Prize in Economics (with Amos Tversky) for work in decision theory.

The major premise of the book is that the human brain operates as if (because this is the way the brain behaves, not the way it is structured) it had two systems. The first (he calls system 1) responds quickly, intuitively, doing pattern matching. The second (called system 2), is the rational part of our brain that responds more slowly and carefully, sometimes referred to as the rational response. It is the relationship between these two systems, the subject of numerous experiments throughout the book, that may be surprising to most of us who think we are rational. System 2 is “lazy” and allows system 1 to make most of our decisions for us. When called upon, it often develops a rational argument for the response of system 1, whether or not that response was correct.

The implications of this relationship are developed throughout the book and shows many ways we can go off track. Here are a few examples:

We are prone to gamble to avoid losses while choosing the sure thing for gain. We respond differently to choices depending on how they are presented, even though the options are logically equivalent. Here is an example:

1. Would you accept a gamble that offers a 10 percent chance to win $95 and a 90 percent chance to lose $5?
2. Would you pay $5 to participate in a lottery that offers a 10 percent chance to win $100 and a 90 percent chance to win nothing?

A much higher percent of people would agree with 2 but not with 1!

We are distracted by meaningless “facts” when we make decisions. Those who were asked if Ghandi reached 144 years old and then asked to estimate his age when he died guessed a substantially higher age than if they were first asked if he had reached age 35.

Judges were shown a die before sentencing criminals, and those sentenced after the judge saw a six consistently received longer sentences than after the judge saw a three.

Our mind wants to identify cause and effect for almost any situation, when often the facts can best be explained by random events. No football commentator can finish a game without “explaining” why one team lost or won, when it may be a matter of inches and luck. No stock analyst can see a drop without explaining it when the explanation may be completely bogus.

The experiments are endless, it seems, and mostly fun with a serious overtone.

The author even acknowledges that, despite studying this field for many years, he is not very good at identifying when he is jumping to an invalid conclusion, though he has gotten better in seeing this in others! In several places, he inadvertently illustrated this by trying to explain, for example, why one person would buy a stock that another person was selling. I marked several places where I thought he had leaped to a conclusion not supported, but after reading the whole of the book concluded I was less sure I was right!

In my favorite chapter (22) the author worked together with one of his critics to explore the way the context of each person’s work had led them to different conclusions, and they sought out the range of applicability of each theory.

When I concluded the book, it felt like finishing a long conversation with someone I had come to know and admire. Thinking, Fast and Slow is worthy of a slow and thoughtful read, and I highly recommend it.

Reviewed by Al Erisman

Michael Lewis is the best-selling author of The Big Short, The Blind Side, Liars Poker, A New New Thing, and eight other books.

Many books have been written on the causes of the great economic crisis of 2008, including the author’s own The Big Short. In Boomerang, Lewis looks at the financial crisis in Europe, which represents a part of the ripple effect flowing from the subprime crisis in the U.S. We tend to lump this into the European crisis, but Lewis explains it is a series of quite different crises, where each country had its own unique factors. To develop his story, he spent time in four different countries of Europe, doing research, meeting with leaders, and talking with people on the street trying to understand what went wrong.

The first major part of the book consists of a chapter each on Iceland, Greece, and Ireland. Iceland was plagued by young bankers who knew nothing of adversity, some of them trained in the U.S., some who put their fishing careers aside to become investment bankers. Their insolated, local banks and economy took a position in the world economic system through leveraged investments that dramatically collapsed when the downturn began. They speculated on the world. The Greeks invented math, but didn’t use it. They entered the European Union on the premise of fiscal responsibility that simply did not exist, nor did the culture support moving in that direction. The Irish speculated as well, but it was more internal than it was in Iceland. Buying real estate as if it always went up put their banks in a highly leveraged position and resulted in collapse when real estate values began to drop. Each of these chapters is presented with faces and names demonstrating different types of exuberance and naiveté.

The final two chapters take us to Germany and the U.S. Today, Germany represents the strongest economy in Europe. The impact of the financial crisis did not come from their own fiscal irresponsibility, but rather from a disciplined culture that assumes others also have a disciplined culture. Some of his descriptions are “slap stick” funny. In the U.S., Lewis moves beyond banks, real estate, and other financial institutions to see the impact of the crisis on state and local governments. As Lewis does so well, he takes us to the people of a real city, in this case Vallejo, California, to see how the economic crisis affects fire and police protection, and subsequently, individual lives. There is far less humor here.

Typical of Lewis, his writing is alive with real people, insight, and humor. But this is not a particularly hopeful book. He asks big questions, but is not even sure of the existence of answers to these questions. The subtitle of the book, “Travels in the New Third World” raises fundamental questions about the economic future.

Often Lewis is the master of the overstatement, and that may be the case here as well. But I would recommend the book to anyone who is asking fundamental financial questions.

Reviewed by Al Erisman

Image Credit: Polshek Partnership

I’ve been told that there are 75 museums in Washington D.C., alone. If you have ever traveled to the District of Columba, you know firsthand the dilemma of trying to decide what to see among so many wonderful possibilities. This past summer, Al Erisman and I had the opportunity to visit the Newseum, a fascinating museum covering the world of news and media.

The Newseum is a beautiful 250,000-square-foot museum that covers five centuries of news history through state-of-the-art technology and hands-on exhibits. It opened in its present location in 2008, moving from its previous location in Arlington, Virginia.

Al and I spent about 90 minutes in the Newseum, though you could easily spend an entire afternoon. The Newseum consists of a concourse level and six floors of exhibits. We started our journey on the lower levels and worked our way up. Many of the exhibits change, so be sure to visit the Newseum’s virtual tour for current information. Here are a few highlights from our visit:

Concourse level: Here you encounter eight complete sections of the Berlin Wall, as well as an East German guard tower. Also, on the concourse level is an FBI exhibit that features the Unabomber’s actual backwoods cabin.

Level 1: This is where you eat, check your coat, and visit the Newseum store. The Annenberg Theater is located on this floor, and features a wonderful 3-D film covering the history of news and media. The film is arresting, as is the exhibit next door that showcases a wide array of Pulitzer award-winning photos.

Level 2: Here you will find an interactive newsroom that is fun for kids. I had to pull Al away from playing anchorman. On this level, we also visited the interactive Ethics Center. Based on your answers to news-oriented ethics questions, the exhibit’s kiosks adjust their responses by playing archived video interviews of leading journalists in the field who offer commentary on your particular viewpoint. We found this to be a great way to wrestle with tough questions that don’t always have clear right and wrong answers.

Level 3: This floor covers the history of Internet, TV, and radio news, and tells the story of American journalist, Edward R. Murrow. There is also a poignant memorial honoring the lives of journalists who have died while covering their stories.

Level 4: Here you can step inside Tim Russert’s NBC bureau office, tour a First Amendment exhibit, or visit the 9/11 gallery. You can also watch a film called The President’s Photographer, which offers behind-the-scenes images of what it is like to live and work as the president of the United States.

Level 5: On this floor, there are galleries that cover 500 years of news history, as well as some of the greatest books ever written on political thought and action. The Magna Carta is featured, as are The Federalist Papers. Some of our most iconic newspaper headlines and front pages are also displayed on this floor.

Technology is King at D.C.'s Newseum

Level 6: With a panoramic view of the U.S. Capitol, the National Gallery of Art, the National Archives, and the Washington Monument, this floor plays host to current news and headlines. More than 80 newspapers worldwide are displayed daily, offering a real-time glimpse into our interconnected, yet culturally diverse, world.

If you are in the Metro D.C. area, be sure to pay the Newseum a visit. There is more than enough to interest the entire family. Walking through the exhibits will demonstrate in striking fashion how quickly the world of news media is changing. The experience will also pull on your heart strings as you relive significant days of your own past in which tragedies and triumphs that shaped our world were experienced though the news.

Review by John Terrill
Director, Center for Integrity in Business
Seattle Pacific University

David Brooks is an op-ed columnist for The New York Times, and is the author of two other books.

Amidst a growing volume of books on the brain, based on research both in psychology and brain science, David Brooks has taken a different approach. He builds the story of two people, one (Harold) from an upwardly mobile family, and one (Erica) from a single parent home in an impoverished part of town, and follows their paths from birth through meeting, marriage, careers, and ultimately death. He creates a “high level” story of their lives, and supplements this story with research from psychology and brain science to explain their actions and reactions as they confront issues throughout their lives. Business, career, and personal decisions all get “explained” through how the mind has taken in and responded to the situations it confronts.

A major theme of the book is that most of us think of ourselves as rational people. We wonder about others who don’t see things the way we do. This was the theme of the French Enlightenment. But as Brooks points out, “The British Enlightenment stressed that people are born with a social sense, which plays out beneath the level of awareness,” p. 234. The mind seems to interact with that social sense in a way that looks different from our notion or rationality, and in this sense we are seen as social animals. It is the British Enlightenment that better aligns with modern research on the mind.

There are many gems in the book, and here are two: He explains the short-term focus of our world through research that shows, “… people discount the future as we allow present satisfaction to blot out future prosperity,” p. 178. I loved the subtle self-reference on p. 335. At this point Harold was a policy writer for a think tank in Washington. D.C. “[Harold] spent those years writing his essays, peppering the world with his policy proposals. Not many people seemed to agree with him. There was a New York Times columnist whose views were remarkably similar to his own …”

There is a great deal to like about this book. Anyone familiar with David Brooks, a conservative columnist from an otherwise more liberal newspaper, knows that he is a talented and often witty writer, and this book shows off these capabilities.

When the story, or the explanations, get a bit tedious (and they do in a few places), it is easy to simply skim ahead and pick up the account. I found the storyline on Harold and Erica a bit weak; it was obviously a simple frame through which the author could discuss the research results from psychology and brain science. I also wondered in several places whether Brooks had the qualifications to apply the research in the ways that he did. I feel more comfortable and confident learning about such things from an expert, such as John Medina in Brain Rules.

These reservations aside, this is a delightful read, with a great deal of insight. Business leaders, after reading this book, will never see their staff or their customers the same way again. I recommend it.

Reviewed by Al Erisman

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Idea Man: A Memoir by the Cofounder of Microsoft By Paul Allen, New York: The Penguin Group, 2011.viii, 337 pp.

Paul Allen was the cofounder of Microsoft, a high school friend and colleague of the other cofounder, Bill Gates. He is founder of Vulcan Inc. and the owner of several professional sports teams.

The first 190 pages of this book chronicle the early days when Bill Gates and Paul Allen began to work together while in high school at Lakeside in Seattle, through the ideas for Microsoft and its eventual founding, leading to the time when Paul Allen eventually left Microsoft. This is a remarkable story from Allen’s perspective, identifying key choices that were made in the growth and development of one of the world’s most recognized brands.

This part of the book is insightful on many levels. For those of us who have been in computing since the 1970s, it is a fun trip down memory lane, featuring early computers, timesharing, the emergence of the PC, and the high risk adventure of a startup. Coding all night is a part of the adventure, and if you have done it, you know the exhilaration that comes from getting it done in spite of the odds.

At another level, it is very interesting to see how the story plays out from Allen’s point of view compared with Bill Gates’ version of this story. Allen saw himself as the “idea man” in the partnership. “I was the idea man, the one who’d conceive of things out of whole cloth. Bill listened and challenged me, and then homed in on my best ideas to help make them a reality,” p. 4. Later, he says, “I missed Bill’s laser focus on competition in the marketplace and his ability to execute my ideas and keep me from getting too far ahead of what was doable … I discovered how challenging it was to operate without a pragmatic partner and business maven,” p. 190.

Bill Gates, in The Road Ahead (1995), said, “Paul had lots of answers to things I was curious about … I was more of a math person than Paul, and I understood software better than anyone he knew. We were interactive resources for each other. We asked or answered questions, drew diagrams, or brought each other’s attention to related information. We liked to challenge and test each other,” p. 192.

My reading of the two is that Gates saw the relationship as an exchange between equals, and Allen saw that he was the idea person and Bill carried out his vision in a support role. It’s no wonder the two had a falling out.

Allen made numerous critical comments about Microsoft including its size, slowness, and lack of vision. He concludes that it might have been different if the “idea man” had remained a part of the company, saying “Neither of us have been quite as good alone as we were together,” p. 190. Apparently unknowingly, he has made the case for the disappointing performance of his later businesses that never seemed to make it in the marketplace.

The latter part of the book takes a very different flavor, looking chapter by chapter at his various ventures. Much of it seems hobby oriented, including his adventure travels, his rock music museum, his yacht Octopus (414 feet long with a crew of 50), and a failed cable company Charter. He describes a life of self-absorption apparently still trying to prove he is as good as Bill Gates. He made no comment on the Bill and Melinda Gates Foundation and its outward focus for the benefit of others. I found the second part of the book to be far less interesting than the first.

Paul Allen is an icon in the computing world. His work has made a huge impact, but his story has sad overtones. I felt it was worth the read, but I would not say it is for everyone.

Reviewed by Al Erisman

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Newseum

555 Pennsylvania Avenue, N.W. • Washington, D.C.

Image Credit: Polshek Partnership

I’ve been told that there are 75 museums in Washington D.C., alone. If you have ever traveled to the District of Columba, you know firsthand the dilemma of trying to decide what to see among so many wonderful possibilities. This past summer, Al Erisman and I had the opportunity to visit the Newseum, a fascinating museum covering the world of news and media.

The Newseum is a beautiful 250,000-square-foot museum that covers five centuries of news history through state-of-the-art technology and hands-on exhibits. It opened in its present location in 2008, moving from its previous location in Arlington, Virginia.

Al and I spent about 90 minutes in the Newseum, though you could easily spend an entire afternoon. The Newseum consists of a concourse level and six floors of exhibits. We started our journey on the lower levels and worked our way up. Many of the exhibits change, so be sure to visit the Newseum’s virtual tour for current information. Here are a few highlights from our visit:

Concourse level: Here you encounter eight complete sections of the Berlin Wall, as well as an East German guard tower. Also, on the concourse level is an FBI exhibit that features the Unabomber’s actual backwoods cabin.

Level 1: This is where you eat, check your coat, and visit the Newseum store. The Annenberg Theater is located on this floor, and features a wonderful 3-D film covering the history of news and media. The film is arresting, as is the exhibit next door that showcases a wide array of Pulitzer award-winning photos.

Level 2: Here you will find an interactive newsroom that is fun for kids. I had to pull Al away from playing anchorman. On this level, we also visited the interactive Ethics Center. Based on your answers to news-oriented ethics questions, the exhibit’s kiosks adjust their responses by playing archived video interviews of leading journalists in the field who offer commentary on your particular viewpoint. We found this to be a great way to wrestle with tough questions that don’t always have clear right and wrong answers.

Level 3: This floor covers the history of Internet, TV, and radio news, and tells the story of American journalist, Edward R. Murrow. There is also a poignant memorial honoring the lives of journalists who have died while covering their stories.

Level 4: Here you can step inside Tim Russert’s NBC bureau office, tour a First Amendment exhibit, or visit the 9/11 gallery. You can also watch a film called The President’s Photographer, which offers behind-the-scenes images of what it is like to live and work as the president of the United States.

Level 5: On this floor, there are galleries that cover 500 years of news history, as well as some of the greatest books ever written on political thought and action. The Magna Carta is featured, as are The Federalist Papers. Some of our most iconic newspaper headlines and front pages are also displayed on this floor.

Technology is King at D.C.'s Newseum

Level 6: With a panoramic view of the U.S. Capitol, the National Gallery of Art, the National Archives, and the Washington Monument, this floor plays host to current news and headlines. More than 80 newspapers worldwide are displayed daily, offering a real-time glimpse into our interconnected, yet culturally diverse, world.

If you are in the Metro D.C. area, be sure to pay the Newseum a visit. There is more than enough to interest the entire family. Walking through the exhibits will demonstrate in striking fashion how quickly the world of news media is changing. The experience will also pull on your heart strings as you relive significant days of your own past in which tragedies and triumphs that shaped our world were experienced though the news.

Review by John Terrill
Director, Center for Integrity in Business
Seattle Pacific University

Breaking the Fear Barrier: How Fear Destroys Companies From the Inside Out, and What to Do About It by Tom Rieger. New York: Gallup Press, 2011. 151 pp.

Tom Rieger is the leader and chief architect of Gallup’s worldwide consulting efforts to indentify and remove barriers.

The thesis of this little book is that fear drives much of the destructive behavior in organizations today. It starts with the fear of losing what an individual is entitled to: salary, corner office, perks, etc. This fear causes a person to carry out the “party line,” to violate his or her own values, and to do what it takes to maintain the position that has been achieved. This individual behavior builds into three kinds of organizational behavior.

• Parochialism is first. This is the creation of organizations that are so tied to the rules, so stifling in their structure, that nothing can go wrong, preserving the position of the boss. Of course, there is little creativity here, little innovation. This seemingly gives the boss protection from any disruptive thing that could upset the organization.
• Territorialism is second. This is the organization that puts itself before customers, company objectives, or anything that might interfere with its territory. It’s an organization that doesn’t share resources but hoards them. It creates a “low-grade siege mentality,” focusing more on what nurtures it rather than how the organization can serve.
• Empire building is the third organizational behavior. Rather than simply protecting its own resources, however, the goal of this organization is to grow at the expense of others. What is best for the company, what is best for a customer, is not a part of the thinking.

The three levels can build off of each other, all rooted in fear of loss, and all creating a toxic environment for the organization as a whole.

Rieger then looks at the costs of these behaviors and at strategies for overcoming them. The solutions are not complete, but the questions are all of the right questions.

I picked up this book at the local bookstore almost on a whim. I had never heard of it or of the author. But as I read it, the famous quote of C.S. Lewis came quickly to mind: “We read to know we are not alone.” The author’s arguments fit the reality of so many organizations I have been in. This would be a great book for discussion within a business, university, or nonprofit organization.

I highly recommend it.

Reviewed by Al Erisman

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Drucker’s Lost Art of Management: Peter Drucker’s Timeless Vision for Building Effective Organizations by Joseph A. Maciariello and Karen E. Linkletter. New York: McGraw Hill, 2011. viii, 456 pp.

Joseph Maciariello is the Horton Professor of Management and director of research and academic director, The Drucker Institute, Claremont University. He was a colleague of Peter Drucker for 26 years. Karen Linkletter, a historian, teaches American studies at California State University, Fullerton. She was the first archivist at the Drucker Institute.

Peter Drucker was a management guru. He taught business at Claremont and was an advisor to many companies. He wrote 30 books (which were translated into 50 languages), and numerous articles.

Maciariello and Linkletter went through his writings and drew on their conversations with him to create a picture on his view of the role of management. Is business more than a money-making machine? Is there more to management than meeting or exceeding the numbers? Is there a connection between managing a business and the liberal arts?

The authors found evidence in Drucker’s writings to answer all of these questions positively. In the development, we not only learn about Drucker’s philosophy of management, but we also learn a great deal about who Drucker was and the forces and people who shaped him. The authors paint a clear picture of a man trained in the liberal arts in the devastation of Nazi Germany, and the shaping influences these ideas and events had on his thinking. Drucker became a student of the organization of government, and draws on the tension between federal and local control in application to managing a business. Drucker tended to be private about his religious views, but the authors found that what he said strongly shaped his view of business. His views included the high nature and potential of mankind while also seeing clearly the tendencies for evil. These influences became a fundamental part of how Peter Drucker approached the art of management.

Several of Drucker’s writings hinted at management as a liberal art, but he never developed what he thought this meant. So this became the task of the authors, piecing together the story of what they believe he meant by this phrase.

I give the authors high marks for this thoughtful work. They drew on lots of material to create the case for management as a liberal art. The book is engaging, well illustrated with anecdotes and stories, and makes a powerful point that could transform the way business looks at management. It is worth the time to go through this carefully.

As might be expected from such an expansive work, the writing also raised some questions that might have been better resolved. For example, after discussing the importance of culture and valuing people as a manager, there is a section on management by objectives where Drucker is quoted as saying

“The Responsible Worker is not only a worker who is accountable for specific results, but also who has the authority to do whatever is necessary to produce these results, and who finally is committed to these results as a personal achievement.” p. 172

Unfortunately, it is at this very point that too many managers start to ignore the values and the people in order to achieve the results. Perhaps the authors are arguing that the values need to be incorporated into the specific targets, but it would be good to see some development of how this is done.

Small points aside, this is an excellent book, and I highly recommend it.

Reviewed by Al Erisman

Alleviating Poverty Through Profitable Partnerships: Globalization, Markets, and Economic Well-Being

Patricia Werhane is the widely published chair of business ethics at the Darden Graduate School of Business Administration at the University of Virginia. Werhane and co-authors Kelley and Hartman are colleagues at the Institute for Business and Professional Ethics at DePaul University. Dennis Moberg chairs business ethics at Santa Clara University.
Give a man a fish, and you feed him for a day. Teach a man to fish, and he’ll feed himself for a lifetime. So goes the old parable, but this book brings us into the globalized market economy of the 21st century with a new parable for prosperity — create a profitable business venture by “maximizing the yield of the fish pond and the distribution of the fish by truly forging partnerships with the poor,” and you will reduce, and perhaps even eradicate, poverty forever (p. 17). The central thesis of this book, repeated in every chapter, is that various forms of profitable partnerships between businesses, NGOs, governments and coalitions of the poor “can alleviate poverty by seizing market opportunities” (p. 125).

This is a well-written treatise on the social responsibility of business. The authors succeed in their aim to debunk the false old “caricature of greedy cigar-smoking robber barons helping meek, barefooted beggars” (p. 124). Of course this is an easy target. Perhaps there was a time when that idealized image of businesspeople made sense, but no more. Gone are the days when Milton Friedman’s litany — “the social responsibility of business is to make money” — held sway as a self-evident truth. We now live in a new “complex reality,” which demands us to “change our shared narratives about for-profit ventures and … recalibrate our mindsets regarding how poverty issues are most effectively addressed” (p. 17).

This “changing of narratives” and “recalibration of mindsets” has been Prof. Werhane’s main message for more than two decades. She has parlayed the idea of “moral imagination” into a fruitful stream of business-ethics publications. The basic idea is that we need to be open to new ideas, concepts, and mental maps in order to find innovative solutions to moral dilemmas. In the case of poverty, this means needing to let go of old notions like the “separation thesis” (p. 62), which views business profits and social issues as entirely independent pursuits. That falsehood has created the mistaken impression that charity is the only viable approach to fight poverty. Similarly, we must abandon the outmoded idea that those at the BoP (bottom of the pyramid) are capable only of receiving hand-outs, and see them instead as truly industrious and motivated workers, consumers and providers for their families.

One of the best features of the book is its ample use of personal, “worm’s-eye view” (p. 51) stories to elicit compassion and bring to life a new narrative of abundant hope in profitable partnerships that can alleviate poverty. Each chapter begins with a personal account of a true story that brings the book’s thesis to life. Additionally, many fresh case studies are used to illustrate the business principles, such as Ciudad Saludable, a thriving enterprise founded by micro-entrepreneurs who figured out how to rid the filthy streets of poor barrios in Lima, Peru, of garbage while producing organic fertilizer, creating jobs, and simultaneously earning a profit (pp. 97-98). The stories of personal transformation in these social ventures are inspiring. There is Strive Masiyiawa, for example, the founder of a telecommunications company in Zimbabwe who defied corrupt principalities and took a stand on his religious convictions: “I’m a born-again Christian, and that was a decision I took … [E]very day I must persuade myself that I am practicing my conviction” (p. 94).

One of the most useful insights is that the notion of CSR (corporate social responsibility) is in need of reform if its initiatives are to result in truly effective and sustainable efforts to eradicate poverty. Unless a poverty-fighting project emerge[s] from “the corporation’s raison d’être, it can neither maximize its effectiveness nor be said to be morally good” (p. 69). Businesses come into existence and succeed by virtue of bringing particular gifts of talent and skill to bear on meeting specific needs of specific customers. To neglect or underutilize these gifts, even for the sake of some ostensibly “good” act of philanthropy, would be to miss one’s true identity and fail to live into one’s calling with complete integrity. The authors therefore advocate new terminology — corporate moral responsibility (CMR) — to emphasize the link between a business’s strategy and moral duty, and thereby to avoid the mental trap of the “separation thesis” (pp. 70-73). While the central thesis of the book is ably argued and well supported through practical examples, its ethical reasoning and methodology come off sounding a bit simplistic at times. For example, there is the prescriptive advice to be imaginative and make decisions by “second-guessing possible outcomes” (p. 126). This habit of basing decisions upon the anticipated consequences of “positive and negative effects” (p. 126) runs throughout the book, and reveals a clearly utilitarian approach to ethics.

Those are minor shortcomings, however, in this timely and readable book. It will serve well as an academic text, with a detailed 17-page bibliography, useful index, and numerous practical examples. The new parable of abundant hope in social enterprise is well told, and deserves a wide reading.

Reviewed by Bruce D. Baker, Assistant Professor of Business Ethics, Seattle Pacific University

Bethany McLean is a writer for Vanity Fair, former writer for Fortune, and coauthor of The Smartest Guys in the Room, an analysis of what went wrong with Enron. Joe Nocera is a business columnist for The New York Times, former editor with Fortune, and a finalist for the Pulitzer Prize in 2006.

The goal of this book is to lay out the case for what went wrong in the worldwide financial crisis that began in 2007 but actually had its roots more than 30 years earlier. Step by step, the authors show how diverse and seemingly independent players (banks, mortgage lenders, appraisers, congress, regulators) each contributed a piece to the complex disaster that had its impact from Wall Street to Main Street to the world. Most importantly, the authors show how the pieces fit together — the independent players were not independent. Complexity played a part, but so did good old fashioned greed. This is a fascinating and ugly picture.

The book is filled with anecdotes and quotes gathered by the authors, making the book come alive with real people and real emotions. It is not just about structured investment vehicles, Wall Street transactions, and fraud. Under the authors’ well written prose, the story is made understandable with biases, ideologies, and backgrounds of the various players. After reading this book, it will be difficult to offer simplistic explanations based on just a small subset of the factors.

I have a couple of minor criticisms. The chapter titles are “cute” but not helpful when using the book as a reference. The content picks up one strand or another (bankers, regulators, etc.) but this is not obvious from the titles (“The Carnival Barker,” “The Wrap,” etc.). The “Hidden History” claim in the title is a bit misleading as well. Most of the pieces have been widely discussed, but it is the integration that makes the book.

I had hesitated to read the book only because I have read eight to 10 other books on the subject, and felt I understood the picture pretty well going in. In fact, in the first half of the book, I felt like I had read it all before. However, the last half of the book helps put the pieces together in a way that many of the other books had not, and I believe this is worth reading even for those who know quite a bit about the subject.

For those who have only listened to sound bites on CNN or Fox News, this is a must read.

Reviewed by Al Erisman