Ted Turner has learned his lesson from the collapse of the so-called new economy, but much of American business apparently hasn’t. The net result is that our real economy continues to be undermined by a relentless and destructive search for “innovative” and “revolutionary” shortcuts to success. Obsessed with newness, we have developed a blindness to what really works in business: the old, tested ideas that never change.
Unless we cure this blindness soon, we’re in for more hard times.
Consider four seemingly disparate items from the news: Chastened by the near decimation of his personal fortune, CNN pioneer Turner cashed in more than half of his chips from the dismal gamble called AOL Time Warner. No one need weep: He got $789 million by unloading 60 million shares -- shares that at one point were worth more than $6.6 billion.
As Turner bailed, Congress was debating the sufficiency of the $1.4-billion slap on the wrist applied to 10 of Wall Street’s miscreant investment firms by the Securities and Exchange Commission and New York state.
That same day, Associated Press reported that Merrill Lynch, one of the worst offenders in lying to investors and calling it “research,” paid its outgoing chairman and chief executive, David H. Komansky, $14 million last year.
This was Komansky’s punishment for having presided over a shop where collusion between investment bankers and researchers produced misleading investment advice and tarnished all of Wall Street.
Then, I received a promotional e-mail urging attendance at a June event featuring, among others, Gary Hamel. Hamel’s book, “Leading the Revolution” (Harvard Business School Press), shot to the top of the business book bestseller list in 2000. His thesis was that business was entering more than a new economy; it was beginning a “new era.”
With the benefit of hindsight, it may be enough to point out that Hamel’s leading example of the perfect new-era company was Enron, which he praised lavishly for its “genius for innovation.” But the flaws in Hamel’s thesis were more fundamental and widespread, representing the flaws of the entire era.
His point was that all the old rules in business had lapsed and everything had changed to favor newness -- that constant innovation conferred rapid success. History, of course, has proved Hamel dangerously wrong.
But who in America pays attention to history?
Unfortunately, as Stanford management expert and author Robert Sutton likes to point out, generally forgotten in our culture’s pursuit of newness is that “most old ideas are good and most new ideas are bad.” In the Darwinian environment of the marketplace, the ideas that manage to get old are the ones that work, while the attrition rate among new ideas is always high.
Relentlessly pursuing newness, we have become blind to a lot of old, tested concepts: the need for profit, the importance of cash management, the virtue of sound acquisitions as opposed to risky start-ups, the need to focus on customers.
But the most critical old idea that got buried in our rush to newness is the understanding that trust is the most essential component of human commerce.
England’s King John and his rebellious barons understood the economic importance of trust in 1215: They stuck a clause about standard weights and measures in the Magna Carta to reassure buyers and sellers about commercial transactions.
Commerce, of course, presupposes a community of buyers, sellers, employees, investors and suppliers, not a lot of isolated Enron-esque cowboys out for themselves. Unless the constituents in our commercial community trust one another to some extent, the economy falters and, ultimately, breaks down. If we are to repair our economy, this is the first rule we need to revive and respect.
Kirk Cheyfitz is the author of “Thinking Inside the Box: The 12 Timeless Rules for Managing a Successful Business” (Free Press, 2003).