The New Economic Reality: Smoke and Mirrors as a Substitute for Substance

We are losing sight of the difference between presentation and reality, what we say we do and what we actually do. The ascendance of the Trumps has given rise to a society where branding trumps substance. There’s no better example than Ivanka Trump, who is touted as a savvy, Wharton-educated businesswoman, but who is in reality an heiress employed by her billionaire father. Her icy beauty is part of her brand dedicated to having it all—a loving family, a flourishing career and magazine-cover good looks. The truth is that she, like her father, are living off the proceeds of an inheritance while contributing precious little of lasting value to the greater world.

This sort of style over substance is everywhere in our culture right now.  As Carina Chocano discusses in the New York Times Magazine’s First Words column, “We are now expected to favor the story over reality, to accept that saying a thing makes it so.” For example, the Wells Fargo debacle had its roots in projecting a new image in banking that placed “storytelling” over promotion. This “story” resulted in employees being pressured to create millions of fake customer accounts in order to collect additional fees. No wonder this era is being described as a kleptocracy. This is far beyond false advertising—we are in a scam economy where advertising is used to cover up abusing customers and employees.

There is grave danger in letting this go unremarked. The scam economy is generating a groundswell of discontent and anger and an appetite for dystopian fiction that mirrors our own despair. People do not trust the establishment, the elite, or the capitalist system that props up this undeserved privilege. It’s time for business to take a stand and for companies to do an independent audit to reconcile that what they pontificate, promote and advertise conforms to reality. It’s fine to build your dreams in the clouds but no nation will last long built of smoke and mirrors.

Andrew Faas is the author of From Bully to Bull’s-Eye: Move Your Organization Out of the Line of Fire

The Majority of Organizational Leaders Don’t Care About Ethics

In his book, The Golden Passport: Harvard Business School, the Limits of Capitalism, and the Moral Failure of the MBA Elite (HarperBusiness; April 2017), Duff McDonald outlines how professors at the Harvard Business School sold their soul to Wall Street by abandoning a 75-year-old philosophy articulated in 1951 by John D. Rockefeller: “The job of management is to maintain an equitable and working balance among the claims of the various directly affected interest groups...stockholders, employees, customers, and the public at large.”

Harvard fell under the influence of former University of Rochester Professor Michael Jensen in the 1980s. Jensen wrote a paper that laid the groundwork a seismic shift in philosophy to the economic theory that shareholders must always be first, insisting that institutional investors and Wall Streeters be released from “the obligation of considering anything but their own narrow wants and needs” according to Newsweek article by McDonald. By 1985 Harvard invited Jensen to join their faculty.

In 2003, Harvard created its Leadership and Corporate Accountability course. McDonald doesn't buy it, I don't buy it, nor should you buy it. McDonald references a New York Times interview where Jensen responded to a question on ethics with, “But I admit, we scholars don't yet know the real answer on how to make this happen."

McDonald succinctly retorts, "That's called ethics, and Jensen is right: Harvard Business School doesn't know how to teach ethics as well as it knows how to teach financial engineering, and it never will."

The propagation of Harvard’s teachings has long tendrils. In my book From Bully to Bull’s-Eye: Move Your Organization Out of the Line of Fire. I point out, "Rarely a day goes by when there is not a story in the media about abuse of power, inappropriate behavior, corruption and greed on the part of leadership in every segment of our society, worldwide. Whether it is business, industry, government, education, sport, media, social services, military, police, entertainment, not-for-profit or religion, not one is immune.”

The effects of the Harvard Business School philosophy reach to the highest office in the land. In a recent Financial Times article, “Complacency will eat the heart out of Whole Foods,” writer Andrew Hill cites Donald Trump’s recent encounter with the Associated Press. "Is there anything from your business background that isn't applicable to the job of president?” the correspondent asks.

“Well, in business, you don't necessarily need heart, whereas here, almost everything affects people,” Trump says, then adds: “In fact, in business you’re actually better off without it."

And the hits keep coming. Last week, in a note to shareholders of American Airlines about the decision to give pay increases to pilots and flight attendants who were paid less than the industry standard, Citi analyst Kevin Crissey wrote, “This is frustrating. Labor is being paid first again. Shareholders get leftovers.”  This Wall Street idiot just reinforced the results of Harvard selling its soul with his disregard for all stakeholders other than the shareholder.

As I discussed yesterday, in a study conducted by Mental Health America sponsored by the Faas Foundation, an astounding 69 percent of more than 17,000 people surveyed admitted to speaking poorly about their organizations to others. Given what this legion of Harvard Business School graduates have done to capitalism, is any surprise?