In the early1990s, I got a job at an organization called Business International. For those who are not readily familiar with the communist ethos, the name of the company was something of a pun — America’s answer to the Communist International, also known as Comintern, a confraternity of national communist parties set up by Lenin in 1919 to promote world revolution.
Headquartered originally on Dag Hammarskjold Plaza a block away from the United Nations building in New York City, Business International was founded with the idea of promoting world capitalism. Or, more precisely, its mission was to bring the heads of America’s multinational corporations face to face with political leaders, thinkers and theorists in Western Europe and Asia. It was, in effect, a forum in which Big Business could debate, contemplate and shape the world order.
A few years before me, Barack Obama had a short stint of employment there, after graduating from Columbia University with a degree in political science.
By the time I joined it, however, the previously successful firm was on its last legs. Its business model simply — and quite suddenly — stopped working. For some reason, top business executives discovered that they no longer had time on their hands to discuss the fate of the world. On the contrary, they had their hands full running their companies.
The reason was obvious: the emergence of intense international competition, which changed both the mindset and the daily routine of every corporate executive in America. It is the development that shaped the business world over the past three decades, but when it first emerged in the early 1980s it took everyone in corporate board rooms and on Wall Street by surprise.
Eclipse of the OldIn the early post-World War II decades, large American corporations had a near monopoly on their markets both at home and abroad. Or, at worst, they had their markets divvied up among similarly sprawling, placid conglomerates. Market share was stable, business activity was orderly and profit flows were steady and predictable. Out of those stable profits, the companies provided cradle-to-grave, well-paid employment to their unionized workers — who got their share of the overall pie — and paid out a steady stream of dividends to their shareholders. The 30 stocks that made up the Dow Jones Industrial Average, as well as shares of hundreds of other American corporations, looked more like bonds than equities as we now know them.
It was an environment in which companies felt little pressure to invest in their business, beyond the usual upkeep and some innovation. Excess cash was spent on acquiring businesses that often had little to do with the company’s profile. It is hard to imagine now, but Harvard Business School taught its students not to focus on core business — which was already doing quite well, thank you — but build far-flung conglomerates. Gulf & Western was a typical U.S. corporation of that era. Started as a metal stamping business in the 1930s, it began diversifying in the 1960s and at one point had holdings in film and television production, publishing, sports, clothing, tobacco, auto parts and sugar industries.
Then, all of a sudden, thousands of U.S. companies refocused on their core competencies. Their executives shelved their global ambition of shaping the outside world and began keeping their noses to the grindstone.
There has been much debate about what brought this transformation. Was it political climate, deregulation or the realization that the U.S. economy was starting to stagnate? While all three factors played a role, the clearest explanation is the emergence of the entrepreneur. Or, to put it more broadly, the return to America’s core individualistic values.
Over the past three decades, entrepreneurs not only have created hundreds of successful new companies, but built dozens of new global brands. As recently as in the 1970s, business school professors claimed that establishing a new global brand was almost impossible and would require massive investment of capital that only a global conglomerate could afford. They pointed out that such brands as Kellogg’s, Coca-Cola and Ford were all created in the early years of the 20th century or even before. Yet, in the past three decades, entrepreneurs toiling in their garages with nothing but a couple of credit cards to back them up were able to create truly global brands. Examples range from Apple and Microsoft in the late 1970s to more recent entrants such as Google and MySpace.