A Bold Future for Capitalism

With the demise of Communism in 1989, Capitalism has reigned supreme.

However, in the wake of its victory, capitalism has left many inequities that disturb many, especially the disenfranchised and the younger generations here in the United States and around the world.

It’s now time to challenge the future of capitalism by scrutinizing its effectiveness in creating both competitive advantage and economic security.

Collaborative Capitalism

The Hallmark of Capitalism’s success rests on two foundational powers:

Capitalism’s underlying strength comes from its ability, when operating in free markets, to create competitive advantage from the perspective of its customers. Competition is the grindstone that hones the razor sharp edge of advantage. Without strong competition, the weak and unworthy survive, which provides no value to customers.
Capitalism’s fundamental power is derived from “Creative Destruction” – the relentless replacement of the old with the new, the upgrading of efficiency, and the search for more competitive ways to produce and service. Creative Destruction demands constant upgrading of thinking, new innovation, performance improvements, outstanding leadership, precise management, and better business models. Yet Creative Destruction is inherently also capitalism’s blessing and curse – the blessing is that it engages in a continual cycle of revitalization; which is also its curse, causing a never-ending series of disruptions, unpredictable change, and complexity, which can drive social upheaval.

It is not a coincidence that capitalism has flourished best in modern democracies that have produced an educated, trustworthy workforce composed of citizens committed to building a strong social fabric of family and communities.

The emergence of modern democracies in the past 200 years has created a social contract with it citizens who abide by their particular nation-state’s Constitution and culture that:

    • explicitly guarantees Constitutional freedoms, and
    • implicitly promises economic security to anyone who desires to be educated and works hard.

This freedom guarantee and economic promise is the foundational premise which has enabled a prospering, educated middle class — the underlying support structure of any modern democracy.

Together this guarantee of freedom and promise of economic security are closely inter-connected.

In today’s global world, the sense of economic security is tenuous. Jobs flee when transactional capitalists spot lower labour costs overseas. Because the global economy is neither perceived as safe nor openly understood/controlled, the citizenry increasingly is becoming disgruntled and losing hope for the future.

Capitalism has emerged during the last two centuries taking three fundamental pathways.

    • Adversarial Capitalism has typically pitted company against company, labor against management, and supplier against customer. This has created great wealth for the winners, but destroyed wealth for those wounded on the battlefield of what has often been unethical competition.
    • Transactional Capitalism is the basis of most commercial exchange, seeking to buy low, sell high, bargaining, and differential perceived value between buyer and seller. People are seen as “replaceable parts” who can be swapped out for lower-cost alternatives, at will. Profit is maximized by ensuring lowest costs.
    • Collaborative Capitalism, which has emerged as one of the most highly competitive, ethical, and innovative forms of doing business. Consistently, trust-based leadership produces a culture of teamwork, collaborative innovation, and dynamic adaptability. Profitability is superior, and a workforce imbued with strong community values builds sustainable eco-systems.

The collaborative nature of this form of capitalism does not imply the loss of competitive spirit. On the contrary, by aligning the interests of all stakeholders for a common goal, collaborative capitalism creates greater flow and creation of value, as does a winning sports team working together to compete in a contest.

The better all the parts work together, the higher the chances of creating, adapting, learning, and, ultimately winning.

Collaborative Capitalism embraces using people’s minds to produce new innovations, including better processes for production and removal of non-value added work.

Most forms of collaborative capitalism reward workers with either a percentage of the profits or a portion of the equity ownership.

Capitalism is not a monolithic form of economics. There are actually three different competing capitalistic business models, each quite different, each founded on different beliefs and strategies:

Adversarial Capitalism, Transactional Capitalism, and Collaborative Capitalism

Each produces very different results. These three forms are ill-defined and not clearly differentiated in the minds of most business leaders, resulting in a fourth version: Muddled Capitalism

Untangling these three interwoven and often muddled forms of capitalism gives us keen insight on how each form operates and performs; each is as different as the primary colours. We refer to these three forms as the “Three Faces of Capitalism,” the theme of this strategic initiative.

The only sustainable capitalism of the future must continually produce better results than its preceding generations. And, just as importantly, it must be reasonably facile and agile to adapt dynamically to changing conditions.

The Institute’s Strategic Initiative will focus on consolidating the idea of Collaborative Capitalism, studying its impact, producing programs and books, and bringing more public attention to the fact that all stakeholders – investors, employees, management, suppliers, customers, and the community – can be potential winners in the collaborative capitalism game of business.
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