Photograph by Josh van Gelder
She's also hoping to help shape the next generation of bankers. "I am shocked at how little reexamination is going on within traditional business schools," says Barnard president Spar. "It's scandalous." This fall, Hertz will jump-start that process as the new chair of globalization, sustainability, and finance at the Duisenberg School of Finance, a new advanced-degree school in Amsterdam that has put ethics and critical and long-term thinking at its core -- a radical departure for the dismal science. Holland's finance minister, Wouter Bos, has also recruited her to ensure that the Dutch government doesn't resort to quick fixes in dealing with the financial market. "All of us are living beyond our means," says Bos. "We're not managing our societies in a sustainable manner."
Hertz's optimism for co-op capitalism isn't blind. "There are lots of vested interests for whom retaining the status quo would be the best thing," she warns. Plus, she adds -- reiterating the certainty of uncertainty -- there's always the 9/11 scenario. "There could be a strike on Iran, dirty-bomb repercussion, everything could get thrown out." Then there is good old human inertia: "In Silicon Valley, we really only care about new technology and IPOs -- that's our psychosis," says Salesforce.com's Benioff. "The groundswell isn't going to happen as fast here."
Even some of Hertz's natural allies -- folks who have long been in the trenches, such as CSR International founder and CEO Wayne Visser -- say her ideas don't address systemic problems. "Financial markets are geared around the short-termism of shareholder-driven capitalism," he says. "How do you change that?"
By pointing to the costs that short-termism entails, Hertz answers. She offers the auto industry as an example: In the late '60s, she says, when the Clean Air Act was being deliberated in the United States, American carmakers spent millions lobbying against it, while Honda decided to develop more energy-efficient cars. "Honda's cost was on innovation and thinking about how the future might be, and making a product that might fit the future better," says Hertz. "The other companies were spending their money on stopping the future from happening. In that case, Honda won." Likewise in Holland, where, Hertz says, after the financial crash, "there was a huge flight of money from all the normal banks" into Triodos and Rabobank, both known for being ethical and sustainable. Those who resist, she says, will be left behind.
Every day now, Hertz sees bits of Gucci Capitalism falling away. She arrives breathless at her flat, hot pink BlackBerry in hand, just back from a meeting with a hedge-fund manager. She can't resist spilling -- vaguely -- about the confidential deal they just made. "This is somebody who thinks of himself as right wing economically -- on the right of economic capitalism," she gushes. "But what's incredible is that we're 100% on the same page. Then, at the end of the conversation, he says, 'The key question is -- and it all rests on this -- are you up for the fight?' " Hertz's girlish smile turns a shade sweeter as her mind returns to her very public brawl with the FT's Wolf, who'd attacked everything from her methodology to her author photo. In a couple of months, she and Wolf would speak at the same conference -- sharing equal billing. "Am I up for the fight?" she grins. "I love the fight."
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Recent Comments | 7 Total
October 26, 2009 at 9:36am by Aly-Khan Satchu
I commend you on this Piece. Very Few Folk have looked at the Landscape and Architecture of the c21st Holistically. Noreena Hertz has. We continue to pump the Patient Full of a Golden Flood of Liquidity but we will need to get off the Drugs. The Administration have failed to reform the Architecture and their Purchase on the Banks' Collars has been loosened.
Interestingly, I think the c21st Marks the Moment and the Tipping Point where Large Corporates can not function effectively without being more Democratic and inclusive. To exclude, to play a solo Hand, to think the Devil can take the hindmost is a very short sighted strategy.
Aly-Khan Satchu
www.rich.co.ke
Twitter alykhansatchu
October 26, 2009 at 9:59am by Jack Shipley
I own a simple coffee shop. The issue of sustainability is clear: If the people growing coffee are not satisfied with their work and lives they will, ultimately, pursue something else. We are, of course, all thus linked. Thank you for adding to my reading list.
October 26, 2009 at 11:02am by Mel Blitzer
"If the surge of corporate power was going to leave governments relatively impotent, Hertz argued, then those corporations themselves needed to fill the void. "
I have not read the book yet, but asking corporations to "fill the void" is like asking Tigers to become vegetarians. It is not in the nature of the beast to go beyond tokens of social responsibility, and then only in order to protect profit making from too much public scrutiny. Neither are corporations likely to become democratic and inclusive anytime soon. If governments are allowed (by us) to negate their responsibilities in managing capitalism then we are into the corporate, and feudalist, state where we are more dependent on the benevolence of the CEO's and their boards for the extent of our well being, economic and otherwise. Even shareholders have very little "democratic" leverage with corporate leadership when ownership is widely held.
Yes capitalism can be a mighty engine that drives economies, but recent events show that left unattended, capitalism can take the whole economic vehicle straight into the wall.
--
Mel Blitzer
October 26, 2009 at 1:53pm by Barry Dennis
Ms. Hertz is on to something
I think any economic observer and thinker can readily see that the effect of capitalism's present short-term focus on profit opportunity (as opposed to capitalism's past focus on long-term growth of capital through Return on Investment) has caused problems of significant magnitude.
Leveraged capital forces, and uses, ever riskier investment products, ventures, and even acquisition strategies, to drive the short term focus that drives current decision making.
Leverage drives risk; risk reaches into areas that prudent capitalists might not consider.
The liquidity of risk and capital markets has moved the thinking and planning processes of prudent long-term investing and risk management into the high-risk arena of outlandish leverage applied to almost each and every financial product and transaction; to the point that almost any "imbalance," any weak link, finds magnified negative consequences.
Hertz's progress in revisiting the consequences of feckless capitalism (www.1000opinions.blog.com -"Unfettered capitalism leads to Economic Anarchy.") offers hope that balance will be encouraged between capitalism's financial market "pioneers" (the guys face down in the mud with the arrows in their backs) and it's more rational elements ("Bad Leverage! Eat your Equity! Go to your vault!") to the benefit of those who believe that Human Capital-it's development and encouragement, is the best long term outcome to allow the world to develop.
There is a need for short term capital investment markets to be sure; financial products and services in this arena, however, may not be suited to the leverage employed by some, at the risk of the marketplace as a whole.
Historically, the marketplace has used the risk of loss of capital to challenge and change bad investment behavior. Government is interfering in this process, at the risk of not allowing markets to enforce their own discipline.
It's worth noting that if a more enlightened view of risk management through increasing equity and reducing leverage had been applied, the markets would have solved this problem and moved on.
It might not have even occurred, though some other investment bubble might have surfaced.
Congratulations to Ms. Hertz for beginning the process of redefining Capitalism, it's opportunities and obligations to societies that support free markets.
Capitalism may be a risk-based process, but I wonder if redefining the either or equation in favor for Human Capital would be more beneficial in the long run.
Certainly, revising the tax and regulatory systems with an eye towards incentives that promote prudent capital management seems necessary.
October 26, 2009 at 5:18pm by David Nicholson
All hail the role of the prophet. Anything left unchecked leads to corruption.
October 29, 2009 at 4:08am by Ralf Lippold
Dear Noreena, Good to hear that there are more people seeing the whole picture, the dynamics and who articulate their voice:-)
Such predictions as you make may seem threatening to managers, politicians and people in their current world. Time is changing quickly and we should not deny that it will.
Thanks for sharing and I am glad to read from another whole picture seer as myself:-)
Best regards
Ralf
PS.: My thoughts can be found on http://leanthinkers.blogspot.com
November 27, 2009 at 1:26pm by AL WROBLEWSKI
I believe Noreena Hertz is doing a great service in reframing major structural issues. I agree with her; the lackadaisical yawn we are getting from corporate leaders in the midst of the seismic shift we are experiencing in how we do business is disheartening, to say the least.
My own concern is not so much with leaders but with regards to the continuing erosion of political/economic consciousness among the masses. Without deeper awareness among the many along with a sense of collective ownership of society, the elites rule. And while they may, from time to time, demonstrate enlightened self-interest (looking beyond their immediate self-serving interests) or restraint, for the most part they seek preservation of privileges first and foremost. Only a truly conscious populous can hold rulers in check.
I am under no illusion. Consciousness raising is a slow, tedious, thankless undertaking. And, the process is always fraught with assorted political agendas of the organizers. Nevertheless, we must strive to energize the many to become much more involved so they can demand policies and practices that exclude no one. Only the presence of such a voice will cause those who control corporate culture to broaden their vision.