In this podcast, Martin Reeves interviews Roger L. Martin about his book on the negative consequences of pursuing economic efficiency at all costs. They discuss the flawed measurement of efficiency, the link between income distribution and efficiency, the trade-off between efficiency and resilience during the coronavirus crisis, and the impact of the over obsession with efficiency on democracy and capitalism in America.
Treating the economy as a machine and focusing too much on efficiency contributes to growing inequality in American society.
Adopting a systems thinking approach to the economy, balancing multiple goals and considering interconnectedness, can mitigate the negative consequences of extreme efficiency.
Deep dives
The Obsession with Efficiency
The book explores the negative consequences of America's obsession with economic efficiency. While efficiency is generally seen as a good thing, the blind pursuit of efficiency, driven by imperfect proxies, has led to unintended negative outcomes for the economy and threatens democratic capitalism.
The Imbalance of Income Distribution
The book highlights the link between the pursuit of efficiency and the increasingly skewed income distribution in the US. The pressure to maximize efficiency has led to a Pareto distribution, where a small minority holds disproportionate wealth, while the majority struggles. This skewed income distribution undermines the prospects of a strong middle class and poses a threat to the stability of democratic capitalism.
The Need for a Balanced Approach
To address the issues caused by the obsession with efficiency, the book suggests adopting a systems thinking approach. Viewing the economy as a complex adaptive system, where balance is key, can help prevent the negative consequences of extreme efficiency. Examples of companies like Southwest Airlines, Four Seasons, and Costco demonstrate the success of managing with a systemic perspective, balancing multiple goals and considering the interconnectedness of various factors.
Roger L. Martin is Professor Emeritus of Strategic Management, at the University of Toronto's Rotman School of Management, where he served as Dean (1998–2013) and as Director of the Martin Prosperity Institute (2013–2019). In 2017 Thinkers50 named him the world's #1 management thinker.
In this podcast with Martin Reeves, Chairman of the BCG Henderson Institute, he discusses insights from his new book, When More is Not Better, which analyzes the growing inequality in American society as a threat to the democratic-capitalism underpinning its historical success. Martin posits that treating the economy as a machine and over-emphasizing efficiency drives this inequal distribution of the spoils of growth. The book advocates the alternative metaphor of the economy as a complex adaptive system that encourages a new set of behaviors from business executives, politicians, educators and citizens - which could sustain democratic capitalism.
***
About the BCG Henderson Institute
The BCG Henderson Institute is the Boston Consulting Group's think tank, dedicated to exploring and developing valuable new insights from business, technology, economics, and science by embracing the powerful technology of ideas. The Institute engages leaders in provocative discussion and experimentation to expand the boundaries of business theory and practice and to translate innovative ideas from within and beyond business. For more ideas and inspiration, sign up to receive BHI INSIGHTS, our monthly newsletter, and follow us on LinkedIn and Twitter.
Get the Snipd podcast app
Unlock the knowledge in podcasts with the podcast player of the future.
AI-powered podcast player
Listen to all your favourite podcasts with AI-powered features
Discover highlights
Listen to the best highlights from the podcasts you love and dive into the full episode
Save any moment
Hear something you like? Tap your headphones to save it with AI-generated key takeaways
Share & Export
Send highlights to Twitter, WhatsApp or export them to Notion, Readwise & more
AI-powered podcast player
Listen to all your favourite podcasts with AI-powered features
Discover highlights
Listen to the best highlights from the podcasts you love and dive into the full episode