Book Review: “The New Capitalist Manifesto” by Umair Haque

On the lookout for some perspective on the future of free-market capitalism which can get us past the unsustainable Anglo-American laissez-faire capitalism, with its reliance on never-ending growth, desperate consumerism, externalizing of environmental and social destruction which cannot easily be monetized and its creation of extreme economic inequality, I seized upon this title.

The Foreword is written by Gary Hamel, who famously held out Enron as a model of outstanding management shortly before it’s infamous collapse. He also espouses the worn-out capitalist’s mantra, including the efficiency of markets in allocating scarce resources, and minimizing  the regulatory burden on business, all of which led me to be somewhat suspicious of what was to follow.

The Preface is full of the breathless hyperbole du-jour of paradigm shift, rebooting capitalism, transformative, enlightenment, shifting tectonic plates, and institutional innovation, to make me suspect that this book evolved from a marketing brochure for the author’s company, Bubblegeneration, an agenda-setting advisory boutique (boutique - a small outlet for elite and fashionable items). However, there were enough enticing hints to encourage me to read on.

In Chapter 1, “The Blueprint for a better Kind of Business”, the breathless hyperbole continues as Mr. Haque (and his research team .. wow) analyzes the shortcomings of current capitalism, and formulates the needed “institutional innovations”. He concludes (drum-roll) that there exists a “great imbalance”: “industrial era capitalism ... undercount[s] costs (ignoring many flavors of loss and damage) and over-count[s]  benefits ...” 

This is presented as a ground-breaking (breathless) discovery - the author seems (but can’t really be, can he?) unaware that many environmental and social organizations have been trying to make this point for decades. The polluting of rivers, groundwater reservoirs and entire oceans by ruthless mining and manufacturing corporations, the foisting of increased health costs resulting from the carelessly and uselessly processed foods upon an ignorant and duped public, are among issues which have been discussed for several decades. Economists have been complicit in perpetuating these problems by insisting that these costs could not be monetized (and thus must be “externalized) into their pretty little supply/demand models, which supposedly control the efficient allocation of resources.

These are issues which “green” groups and Greens (political parties) have been fighting for for several decades.

The next big “breakthrough” in Mr. Haque’s “research” is the notion of “thin value” versus “deep or thick value”. To help us poor ignorant non-economists visualize “thin value” as produced by today’s “industrial era” (= old/dumb) capitalism, he leads us through the calculations of a $3.00 hamburger which actually “costs” $30,00, and a $8.00 widget which is sold to the customer for $10.00. He then argues, that if the production of the widget depleted more than $2.00 worth of non-renewable resources, the value created is “unsustainable” (duh...), and if the buyer received less than $10.00 of “meaningful” (definition, please) value, he was cheated (double duh...).

Mr. Haque is big on “cornerstones” -- his “research” has identified five cornerstones, which “define” industrial-era capitalism and replaces them with five new cornerstones for “constructive capitalism”:

• Value chains  -->   Value cycles
• Value propositions -->  Value conversations
• Strategies  -->  Philosophies
• Protection  -->  Completion
• Goods  -->  Betters

The further I get into this book, the more it becomes obvious that this is a huge marketing exercise to improve the “image” of some companies by giving them the sheen of “sustainability” and social responsibility. And guess which companies Mr. Haque’s “research” has identified as “today’s revolutionaries ...[who are] rebooting capitalism”: Walmart, Nike, Google and Unilever are some of the most rapacious companies of the past, who could certainly do with a marketing make-over.

Chapter 2 discusses the first of the new “cornerstones”, value cycles, and Walmart is the prime example cited as an example of the “revolutionary ... rebooting capitalism” with value cycles. Now, values cycles are nothing more than a rebranding of numerous proposals over the past 20 to 30 years to use recycling as an approach to achieve sustainable economies. Since Saatchi & Saatchi, one of the premier marketing/branding companies in the world, was responsible for introducing Walmart to these concepts at a time when Walmart was under increasing pressure for being one of the most ruthless, rapacious companies in the world, it is fair to assume (and acknowledged by Saatchi’s CEO) that this was part of a marketing white-wash effort. The fact that some of these suggestions started making sense to Walmart (such as minimizing packaging to reduce transportation costs) as a way of improving their bottom-line, is fortunate and laudable, but does not make them a “revolutionary” for “constructive capitalism”.

If Walmart were truly on the forefront of a new socially responsible form of capitalism, they would not treat their employees like chattel, most of whom live below the poverty level and a third of whom are “part-time”, and thus not eligible for health insurance. On both of these counts Walmart is externalizing a huge proportion of its employee costs to society at large in the form of support payments for low income families and medical care for the uninsured. A socially conscious company could, for example, pay living wages (minimum wages have been kept artificially low precisely because of the lobbying power of companies like Walmart), or could sponsor health clinics for its employees who have no health insurance. 

Another company cited as being “revolutionary” in its acceptance of ecologically and socially responsible capitalism is Nike. They too may be discovering some benefits from recycling materials used in their shoes to improve their bottom-line. But that is a far cry from making this company a leader in a supposed revolution for “constructive capitalism”. Nike has a long history of moving its manufacturing sites from one slave labor country to another, and even in these countries it broke records of violations of what little worker protection exists there.

In Chapter 3 we are introduced to the second of the new cornerstones - “responsiveness” as an implementation of the concept of “value conversations”. The revolutionary company cited as an example is Threadless, a company that invites internet consumers to vote on new t-shirt designs (actually just decals). This is cited as a competitive advantage over companies like Tommy Hilfiger, The Gap, Banana Republic and Old Navy. That’s a pretty threadbare argument (pun intended). As if someone using the internet to duplicate the many tourist trap t-shirt shops, where you can have any inane decal plastered on an ugly, ill-fitting t-shirt can be said to “revolutionize capitalism”. 

To argue that today’s “industrial era” corporations make product decisions by blind, autocratic board-room decisions is ludicrous. Before (for example) Boeing or Airbus make e decision to launch a new airplane program, they most certainly do exhaustive research, including input from their customers, before committing the billions of dollars required. The notion that there are not many, many “conversations” which take place leading up to such decisions is just mind-boggling nonsense. Any secrecy (as opposed to the completely free and open association of Wikipedia, which is cited in this context) is a function of competition between Boeing and Airbus -- that can only be resolved if all our enterprises were to pursue the “open source” model pioneered by Linux and MySQL.

The example of “veto power” for the NGO’s supposedly involved in Walmart’s sustainability decisions are nothing more than marketing ploys to allow them to plaster meaningless “certifications” on their products. Already the Marine Stewardship Council is under attack for certifying certain fisheries (most likely after pressure from corporations like Walmart) which are anything but sustainable.

This whole chapter is further evidence of the breathless, hyperbole-filled nonsense emanating from the marketing bluster typical of this whole book.

And on we go to Chapter 4, about Resilience ... and Philosophy. I thought the gibberish could not get worse, but I stand corrected. 

The argument here takes off from a comparison between Google and Microsoft and the “open” versus “closed” environments, and that only the “open” environment of Google can produce truly superior, “resilient” products with “thick value”. And here I thought (as economists have argued vociferously since Adam Smith) that all of free-market capitalism, with its all-knowing, perfectly informed consumers, and its self-regulating supply/demand equilibrium models, would ensure the emergence and survival of superior products. 

I certainly agree with Mr. Haque that this is not the case, as “Marketing” is basically a hugely powerful tool for spreading dis-information and lies, and thus preventing a rationally optimal choice. I am not a big fan of Microsoft and many of its products, and I do use Google a lot (search and e-mail), but it is far from obvious that Google Mail and Docs, for example, are (or will ever be) superior to Microsoft Exchange and Word. The big difference for the “casual” user is that the Google products are FREE.

And that, in turn, is because Google sells information (about what people do on the Web), while Microsoft sells products, primarily for the PC. Thus, to offer as many free products through which Google can observe and track what we do on the Web enhances its ability to sell it’s REAL product, namely information about almost everything we do via the Web.

And make no mistake about it, Google’s core product, the search engine and how it collects its data about us, is anything but open for everyone to see the innards of and improve upon.

Mr. Haque then compares the wonderfully open Google “philosophy” to Big Food (the bad guy) because they use dictatorial “planned market” tactics to “stifle free and fair exchange”. Remember that in the previous chapters, Walmart (which derives almost 50% if its income from food distribution and dominates the Fig Food industry) was hailed by Mr. Haque as one of the “revolutionaries” of “constructive capitalism”.

If Big Food were in the business only of selling data about what, how, when and where we buy groceries, rather than supplying us with food itself (admittedly, much of it junk), then they could afford the luxury of allowing anyone to freely share (virtual) shelf space. As a matter of fact, then it would be in their profit-making interest to be “open”.

Mr. Haque’s hyperventilating about the marvels of the Google’s “philosophy” is all based on a basic misunderstanding about what Google’s “product” is versus what Microsoft and Big Food sell. Google sells INFORMATION, which it collects by giving away “stuff” for free (admittedly a lot of their free “stuff” is pretty cool), which is its instrumentation, or “spy-ware” to collect huge amounts of information about us (so is their “stuff” really “free”? i.e. we pay for the “stuff” with information about us), and this information about us, they sell, sometimes to our detriment.

One of Google’s cited “philosophies” is “You can make money without doing evil”. In Germany their Google Maps project was halted because it was discovered that their instrumented trucks were secretly recording wireless and cell phone traffic as they were collecting their “street-views”. I wonder what they were planing to do with that information?

To be clear, I would love to see corporations, big and small, stop using Marketing as a means of deceiving customers into buying inferior products or even worse, products with no value, let alone “meaningful” value (whatever that means). However, the evidence presented by Mr. Haque that “revolutionary” companies are moving in that direction out of an altruistic sense of ecological and social responsibility is, to paraphrase the name of another one of Mr. Haque’s revolutionary companies, a bit threadbare.

Chapter 5 describes the fourth cornerstone, “Completing” (rather than Protecting) a Marketplace, which is to be done via “Creativity”.

The implicit claim Mr. Haque makes is that, aside from “creative marketing”, free market capitalism has been devoid of creativity until he and his research team stumbled upon it. The first layer of horse manure has been spread.

This chapter is interesting because for the first time Mr. Haque attempts to define some of his breathlessly hyperbolic terms.

thin value:  products with diminishing returns for the already best-off.

thick value:  products which make the least well-off the most better-off.

socio-productivity:  creating ultra-high-need-ultra-low-cost markets, segments and industries.

That lays down two additional layers of horse pucky.

Mr. Haque pretends that he and his “research team” have discovered a new type of “creativity” in what Apple is currently doing with all of its products (but especially iPod, iPhone and iPad, which I agree are extremely innovative), which defines a new form of “constructive capitalism”. He completely ignores the fact that “creativity” in creating new products and new markets has been the hallmark of free-market capitalism since its inception, and that companies go through ups and downs in terms of their “creative” successes. He holds up Apple as a “uniquely creative” company, heralding in a new age of capitalism, ignoring the fact that just a few decades ago (still in the age of dumb industrial-era capitalism) Sony dominated the portable music market with its Walk-Man, which was then considered a uniquely “creative” product.

Mr. Haque correctly points out that laissez-faire capitalism creates increasing economic inequality, even though he frames this observation in the rather simplistic area of percent spent on transportation. The degree to which free-market capitalism creates inequalities is much more pervasive and much more insidious

. There is nothing, absolutely nothing, in what he defines as “socio-productivity” which will help to reverse this inequality in current free-market economies.

Having said that, I do applaud all of the efforts, such as micro-credit and cell-phones to jump start communication networks in under-developed countries, which will help these countries lift themselves out of their abject poverty. However, I don’t see anything in Apple’s “i” technologies or Nintendo’s Wii, or the ability to time-share an executive jet which would qualify these companies as representatives of a new breed of socially and environmentally responsible capitalism.

Let’s look at the “revolutionary Nano” by India’s Tata. Tata has used it creativity to design and build a car which matches the requirements of it’s particular market, as well as a potentially huge market in other developing countries. More power to them. But from a larger ecological perspective, it will only serve the increase the destructive influence of the automobile (pollution, congestion, destruction of arable land by suburbanization, etc.).

Apart from that, such “creativity”, however is as old as free-markets, or even not-so-free-markets. “Necessity is the mother of invention” has led to amazingly creative developments for a long, long time.  The Italian designed Isetta, built by BMW starting in 1957, helped that company fight its way back after near total destruction during the WW II and filled a huge demand for low cost automobiles in post-war Germany. Just as Italian/BMW creativity then was not the harbinger of a new socially-responsible form of free-market capitalism, but rather an exploitation of a potential market (something free-market capitalism is indeed very good at), so Tata’s Nano is nothing more or less than its exploitation of a perceived market segment.

Onward to Chapter 6, where we are introduced to “betters”, which are supposed to replace the “goods [and services]” produced by old-style capitalism. Isn’t that cute? Get it, “goods” to “betters”?

Again, this chapter, like the others, has snatches of sensible critique of free-market capitalism, in that it depends on ever more consumption of ever more crappy products and services, and that this blind focus on consuming (after meeting our “basic” needs for shelter, food, health) does very little to increase our “happiness”.

Beyond that, however, this chapter follows the pattern of all the previous chapters of hyperventilating with made-up, hyperbolic terminology, which is never defined (or only defined by reference to other hyperbolic nonsense terms used earlier in the book). The author seems to feel that by prefixing “socio” to terms such as “productivity” or “effectiveness” that he has defined a socially-responsible version of this economic terminology.

Here is a sampling of Mr. Haque’s definitions (I kid you not):

“Socio-effectiveness has to do not with the goodness of outputs, but the goodness of outcomes. It isn’t about doing things right or doing the right things. It is about righting the things we do -- ensuring that our products and services ultimately result in positive, tangible benefits and refraining from those that don’t, can’t, and won’t”  [emphasis in original text].

That’s as clear as mud. This goes on for several more paragraphs, which only serve to obfuscate more.

The “revolutionary” company which Mr. Haque extolls as exemplifying the production of “betters” is Nike because of its “Nike Plus” website, “its revolutionary online community. ...Nike Plus will, if you give it a chance, work furiously to make you a better runner”.

I’m not a runner, but I was intrigued, so I went to the site. The landing page is all about selling Nike products (shoes, watches, jackets, etc -- surprise!). Under “Quick Links” one can go to various Blogs with such scintillating topics as “Should you eat before of after you run” and “Learning to love 400m” -- possibly interesting, but certainly nothing “revolutionary”. There are many company-sponsored Websites, which try to foster “product loyalty” by providing “communities”.

Another example is Whole Foods, which has staked its fortune on people “infatuation” with “natural” and “organic” foods.  This is just another example of a company riding the wave of a current trend, which may or may not be long lasting and in the process perverting the teems “natural” and “organic” to suit their own needs. Most certainly the management attitude of Whole Foods is anything but socially and economically responsible (as pointed out by Mr. Haque himself), given the CEO’s vociferous opposition to healthcare reform and union representation.

Finally we come to Chapter 6, the “capstone” in the new set of “cornerstones”, describing “smart growth” versus “dumb growth”.

Here are some more Haque-style definitions:

“...smart growth by increasing returns to investment in the least well-off beats growth by diminishing returns to consumption from the most well-off”.

“.. ‘smart’ growth is the growth of thick, high-quality value”.

“Constructive strategy is the art of redrawing the boundaries of prosperity by turning dumb growth smart”.

Crystal clear, right?

In the final chapter Mr. Haque makes a number of “humble suggestions” (Mr. Haque’s marketing hyperbole is anything but “humble”) as to what “constructive capitalism” is:

“It’a time to replace [old-style capitalism] with a better kind of capitalism, that is intelligent, beautiful, just, virtuous -- and that does deliver the goods”.

“It is to profit more from less economic harm, instead of being trapped to profit only through more harm.”

Summary and Conclusion

The above “humble suggestions” are typical of the breathless, hyperbolic, meaningless, feel-good slogans which makes up the bulk of this book. Mr. Haque unleashes a flood of  undefined terminology (thick value vs. thin value, betters vs. goods, authentic economic value, meaningful value, socio-productivity, socio-efficiency, socio-effectiveness, and on and on), which he uses in circular definitions, one undefined term supposedly defining the next layer of undefined terms.

Mr. Haque correctly points to some of the most egregious failings of laissez-faire capitalism, such as the need for endless growth of consumption of shoddier and shoddier products and services, which does irreversible harm to the environment, concentrates wealth and power in a very small elite, and does little or nothing to increase well-being and “happiness”. 

However, the psycho-babble of his breathless marketing hype, and the inane examples he cites of companies which supposedly show an emergence of his “constructive capitalism”, only serves to reenforce the impression that Mr. Haque is a snake-oil salesman selling his companies’ (Havas Media Lab and Bugglegeneration) charter to consult with venture capitalists, start-ups and clients to find new ways of reaching consumers via digital channels, making this book almost entirely a marketing brochure.

Mr. Haque seems desperate to show that free-market capitalism, from its own sense of responsibility for the larger society and world within which it operates, can reform itself to be “intelligent, beautiful, just, virtuous”. However, capitalism is still capitalism, where “greed is good”, self-interested decision making is the rule, and everything that can be externalized will be externalized in the name of profit and stockholder value. To believe otherwise is to set yourself up for the kind of “ah-ha” moment “of shocked disbelief” which Mr. Greenspan admitted to during his infamous Senate testimony about the collapse of the financial industry.

Getting this kind of nonsense published and reviewed as a "revolutionary", "brilliant" road map to a brighter from of capitalism is sad enough (it shows how desperate the publishing industry is). What is however, even more disturbing is that this kind of nonsense is given additional credibility by the "Harvard Business Review", where Mr. Haque is a blogger.