Managing Leadership^®

A society with a liquid capitalist economy allocates resources to countless endeavors, most of which fail. Some earn an economic return, and are kept afloat, typically from the cash flow they generate from current operations. But the economy as a whole tends to cut off new investments in the many efforts that fail to meet that threshold, diverting them instead into growing the really superior performers, or funding yet newer, more promising ideas.

When we discuss the phenomenal creativity unleashed by capitalism, which has delivered such breathtaking reward for, quite literally, the whole world, we should recall that it comes at a cost. The numberless business failures that inevitably accompany the few sound ventures (and the still fewer blockbusters) are vivid episodes in real people’s lives. They are the sobering side of the insufficiently examined phrase, “creative destruction.” It is more properly viewed as an equation – one side of it ineluctably emanates from the other.

But a robustly capitalist society, for all its hard-hearted reputation, does not advance over the crushed forms of those whose endeavors don’t measure up. Rather, it helps them, as we have heard in another context recently, pick themselves up, dust themselves off, and start all over again. The culture of respect for the figure who dares to enter the arena, whatever the outcome of that trial, produces an important safety net of social, commercial, and legal support to help him or her do just that.

Do you do that? Does your organization institutionally demonstrate moral and substantial respect to those who offer initiatives that you back, but that, for whatever reason, don’t work out? Do you provide an environment that encourages them to continue to take personal risks for corporate rewards?

You can’t have the reward of continual creativity without the continually realized risk of destruction. You cannot support – or reward – one and suppress – or punish – the other. If you do, the equation will quickly reduce to its more dominant constituent. Guess which one that is.

Capitalist societies reward effort with respect, and with new opportunities to productively employ demonstrated energy. Capitalist economies reward success with further investment. At work, you should by all means do the latter. But to be sure you enjoy the occasion to do that, do the former as well.

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This post is a part of a series. You can learn about and link to the other articles here: Conceptualizing capitalism

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Today’s tips: There is, of course, a natural desire – individually, corporately, and societally – to decree positive outcomes and outlaw negative ones. Please see this WSJ opinion piece by Philip K. Howard about the unavoidably chilling effect such efforts have on freedom, power, and initiative.

Jeffrey Krames, whose book “Inside Drucker’s Brain” was recently reviewed here, has published an item at his site about the death of the imperial CEO. Please see, and consider in the context of today’s topic, what two roles are pointed out as the only ones proper to a truly effective CEO.

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