Is private equity, the polite name for the spreading ecosystem that developed out of the corporate raiding and leveraged buyouts of the 1990s, the best thing since sliced bread – ‘a purer form of capitalism’, as some have argued? ‘Who can argue with a new model of enterprise that aligns the interests of owners and managers, improves efficiency and productivity, and unlocks hundreds of billions of dollars of shareholder value?’ enthused Michael Jensen in a 1989 HBR article. Or is it a monster, an evil mutant draining the life and livelihoods out of companies, communities, workers and customers?

Prompting the question is the transformation that has swept global capital markets since the Great Crash of 2008. Although the decade and a half of zero interest rates that has just ended did little to stimulate wage growth or productivity, it was viagra for financial assets.

And it wasn’t just public stock indices that soared. Less well appreciated is the explosive rise of the unregulated private markets – private equity, hedge funds, venture capital and the shadow lenders that fuel them with credit. In the US and UK, the number of publicly-listed companies has halved this century while money has surged into PE like an incoming spring tide. Global stock market capitalization still dwarfs private equity. But the latter is growing much faster: in the same timeframe PE has mushroomed more than sixfold, with assets under management now standing at $12.7tr, according to McKinsey. More firms are owned by PE than are quoted on the New York Stock Exchange, and PE-owned companies now employ 11 million Americans,  up by one-third on four years ago. Accounting for around 7 per cent of the mighty US economy, PE is now firmly mainstream.

Could the uncomfortable reason be that private equity is, in fact, the superior way of managing that boosters claim? Investors certainly have drunk the Kool Aid. With interest rates effectively at zero, the promise of yield, even at the cost of locking up an investment for the seven or 10 years of a fund’s life, has been catnip to investment managers. Following Harvard and others, university and other endowment and pension funds have poured cash into PE – including pension funds for whose members Jensen’s ‘improving efficiency’ frequently translates as reduced pay, worse conditions and lost jobs, nor only intentionally: PE-owned companies are 20 per cent more likely to fail than publicly-owned counterparts. 

This contradiction has been brushed aside during the apparently good times for investors – ‘apparently’, because lack of transparency makes the claimed superiority of PE’s returns over the long term moot. (Berkshire Hathaway’s Warren Buffett and the late Charlie Munger are/were notable sceptics.) But it is one that will get more glaring as today’s challenging conditions bring PE’s ugly side into full view. And ugly means repellent. Two recent books about private equity with tellingly similar titles (Plunder: PE’s Plan to Pillage America, by Brendan Ballou, and These Are The Plunderers: How Private Equity Runs – and Wrecks – America, by Gretchen Morgenstern and Joshua Rosner) spell it out without compromise. 

Over a wide spectrum of industries, they charge, PE firms have played out repeated variations on the same theme: debt-propelled acquisitions and restructurings that strip companies of their assets, load them with debt and prioritise profits over people. Workers and customers bear the brunt of operational cost-cutting as product and service quality plunges. Healthcare, a sector favoured by PE for its assured payments and the reluctance of customers to complain, has been particularly corrupted: the imposition of ‘surprise’ billings as different services – emergency rooms, for example – are hived off into separate ownership has become notorious, while the ‘carnage’ in US care-homes during the pandemic is put down to perfunctory or sometimess non-existent care in short-staffed and ill-equipped PE-owned units. Meanwhile, ‘activist’ hedge and PE funds have taken to targeting companies with extensive CSR programmes that can be repurposed into dividends and stock buybacks. Others have no hesitation in buying out orphaned fossil-fuel companies and running them at full tilt, while also investing in environmental clean-up specialists. 

Another tactic under fire is the PE ‘rollup’, an under-the-radar way canny funds create local or regional monopolies by buying up and merging dozens of standalone businesses in the same industry (funeral homes, hospitals, caravan parks, GP and veterinary practices, care homes, local press, even garage doors..). They then run through the monopolist’s playbook, hiking prices, reducing choice and imposinge drastic conditions on users. Not before time, rollups are now attracting the attention of regulators. The FTC is currently investigating a cluster of transactions and wants to reform antitrust laws to make it easier to challenge other anticompetitive mergers and acquisitions.

Of course, not all private equity is totally vile, just as public corporations aren’t exclusively run by saints. While PE’s record in the UK is by no means glorious (care homes, water companies…), as usual it is a pale shadow ot its counterpart in the US. But there’s no doubt that PE’s combination of disproportionate personal gain and lack of scrutiny has attracted individuals whose greed, lack of scruple and recklessness might make the original robber barons flinch. Thanks to the ‘insanity of 2&20’ (as Roger Martin described the infamous PE and hedge fund charging formula¹) private markets have become ‘flat out… the greatest wealth producer of our lifetime’. In the current Forbes 400 rich list, 69 are PE or hedge fund executives, with a combined net worth of an eye-popping $465.7bn. The seven highest-paid PE executives currently pocket (I can’t bring myself to use the word ‘earn’) more than $1bn a year under a ‘heads-I-win-tails-I-don’t-lose’ formula for a job that generates little or no net value for society at large.   

What do we make of all this? One conclusion might be, yes, PE is a purer form of capitalism – if ‘pure’ is relieved of any connotation of virtue and taken to mean business stripped back to the single-minded pursuit of profit without acknowlegement of the existence, let alone claim, of any other stakeholder, unrestrained by regulation or public scrutiny. This is management as Friedman’s ‘business of business is business’ on steroids, treating the company as an abstract ‘nexus of contracts’ and people as rational utility maximisers motivated only by self-interest, both of them vehicles for and instruments of the sole end of short-term financial gain. Greed rules, absolutely.

Cynics believe that PE’s share of the investment – and management – markets will continue to grow regardless – a chilling prospect. For now, though, interest rates at a 20-year high have put the funds on the back foot. Headlines calling ‘the end of an era’ and ‘a reckoning for PE’ are a daily occurrence in the financial press, as several things have become clear through the clouds of hype: many firms overpaid for targets, appetite for IPOs has dwwindled, and panicky investors are beginning to head for the exits, even at a discount. At the same time, refinancing debt in portfolio companies at vastly higher interest rates is driving managers to all manner of esoteric, not to say dubious and certainly riskier forms of financing. As noted, US regulators are hovering in the wings.

What might stir them into action is a crash triggered by defaults rippling out from the unregulated non-bank lenders where PE increasingly raises its money – many of them owned by those same PE outfits. That is a distinct possibility: currently no one knows the extent of the loans or how they are connected to the real economy. If that house of cards collapsed all bets would be off – indeed, it is currently the only realistic route to bringing the funds to heel. The cost of a PE-induced crunch would be high, and it’s a racing certainty that, as in the 2008 crisis, none of the real perpetrators would go to jail. But everyone else in the world would still have good cause to cheer.

1. The 2 of 2&20 is a fixed annual management fee of 2 per cent charged on the assets under management. The 20 is the 20 per cent share – known as ‘carried interest’ or just ‘the carry’ – levied on any profits made on the capital (a charge that is taxed at the lower rate of capital rather than income). ↩︎

It seems funny, until it isn’t. It was while reading a recent FT article about a bed, sorry, ‘sleep instrument’, costing $660,000 (yep), that I realised that the very rich don’t need a ticket on one of Elon Musk’s rockets to Mars – they are already living on a different planet. The feeling is swiftly confirmed by a glance at the same paper’s How To Spend It supplement, full of hideously expensive stuff that no one residing on planet earth would would give house room to, followed by a quick check on the internet of some of the other things that the seriously wealthy shell out for: at random, a £25,000-a-night hotel room, a bottle of Domaine de la Romanée-Conti 2019 at £23,939, a Chanel handbag £3,000, or a ticket for a 2024 Taylor Swift concert costing an astonishing $58,195. WTF? 

But addiction to bling in dubious taste is the least disturbing effect of extreme wealth. In a July New York Times  piece headed ‘The Rich are Crazier than You and Me’, economist Paul Krugman noted the growing propensity of Silicon Valley’s billionaire tech bros to disappear down weird internet rabbit holes of their own making. 

Take the sudden Valley enthusiasm for Robert Kennedy Jr as Democratic presidential candidate. Along with one or two vaguely progressive ideas (not all the suspects are far right, though many are), Kennedy harbours an impressive tally of public-health related conspiracy theories, including about Anthony Fauci and vaccines, HIV/Aids, the idea that gender dysphoria can be picked up from the water and that Prozac causes mass shootings. Jack Dorsey, founder of the app formerly known as Twitter, has endorsed him. Dorsey’s successor Musk has given him a platform on X, and others have hosted fund raisers in his name.

Another trend is what Krugman calls ‘recession and inflation trutherism’ – dogged assertion that even mildly positive news about the US economy is fake, invented to conceal the alternative reality of deepening recession. Dorsey (again) declared hyperinflationary disaster in 2021 and others, egged on by Musk, accuse the government of cooking jobs and other numbers and then quietly adjusting them downwards when no one is looking.

Where do these ideas come from? Anil Dash, himself a Silicon Valley entrepreneur and commentator, is in no doubt. ‘It’s impossible to overstate the degree to which many big tech CEOs and venture capitalists are being radicalized by living within their own cultural and social bubble’, he writes. ‘Their level of paranoia and contrived self-victimization is off the charts, and is getting worse now that they increasingly only consume media that they have funded, created by their own acolytes’.

Extreme wealth plays an essential, justificatory part in this radicalisation – and, counterintuitively, renders them as manipulable as the ordinary dudes they think they no longer are. ‘Because their entire careers have been predicated on the idea that they’re genius outliers who can see things others can’t, and that their wealth is a reward for that imagined merit,’ they push each other further and further into extreme contrarian ideas, says Dash. 

In this perspective, otherwise off-the-wall ideas such as the quest for immortality, Mark Zuckerberg’s metaverse, Musk’s space colonisation ambitions, Peter Thiel’s Seasteading Institute, transhumanism and other manifestations of techno-utopianism take on a kind of mad logic – one of exceptionalism, impatience with restrictions on freedom to move fast and smash things, and desire for a separate world over which they can exert absolute control. It also makes sense of some apparent contradictions. Instead of preaching free markets and small government, Thiel, who passes for the billionaires’ intellectual, sees monopoly as the entrepreneur’s just reward (‘Competition is for losers’), while freedom paradoxically requires an authoritarian Trump-type state to banish liberal wokery and other tiresome hindrances to thinking the unthinkable (‘I no longer believe that freedom and democracy are compatible’).

Dangerous in themselves, such beliefs have the side effect of rendering the holders liable to the ‘dictator’s dilemma’. Authoritarian regimes find it hard to generate reliable data. Like all targets-derived info, data that’s politically sensitive (ie livelihoods depend on it) will be reliably worthless (Goodhart’s Law). Censoring people, eg on social media, further obscures what’s really going on, leading to situations where accumulating discontents can erupt without warning (the Arab Spring or East Germany in 1989). As for an expression free-for-all, Musk’s X shitshow is proof that the last thing it produces is trustworthy information – and as we know from events at the Capitol on 6 January 2021, untrustworthy information in overexcitable hands is a potentially lethal weapon.

Jumpy authoritarians may be rubbing their hands at the prospect of using AI to sort the wheat from the chaff – and indeed, in combination with all-seeing surveillance, to concentrate information and power in one place in a way that dictators have always dreamed of. This is what AI pessimists like Yuval Harari believe the end of humanity looks like. Others argue strongly that that’s wrong – although their alternative outcome is not unequivocally a more positive one.

In a word, the issue is bias. AI’s ability to come up with roughly ‘right’ answers ultimately depends on having absorbed a foundation of ‘probably approximately correct knowledge’ – and that can only be produced by – yes – human beings working together in scientific or other trusted institutional endeavour. Unfortunately, rather than using curated data, large language models learn from information scraped from the entire internet, bots, trolls, fake news factories and all. Then, when people (dictators or not) start believing and acting on findings that are already unreliable, they inject a whole new level of uncertainty – ‘garbage in, garbage out’ becomes ‘garbage in, garbage out, garbage back in again’. Or, in the colourful words of activist author Cory Doctorow, ‘Algorithms are to bias what centrifuges are to radioactive ore: a way to turn minute amounts of bias into pluripotent, indestructible toxic waste’.

As the internet fills up with the resulting junk, approximately correct knowledge becomes an endangered species. In the torrents of manipulative fakery generated by the current surveillance capitalism regime, is it possible even to preserve the human capacity to create it? Political scientist Henry Farrell evokes a nightmare scenario in which, as software eats the world, it also consumes the structures that generate reliable human knowledge – excreting more toxic waste in its place.

If that turns out to be the case, don’t expect improvement in the terrible taste of the excessively rich any time soon. Or in their conspiracy theories and dangerous politics based on them. Or their plans for the rest of us, still living on planet earth.

One revealing way of looking at the UK is through the lens of its distorted labour market. Like a car with a Bentley body and a Ford Anglia engine, it struggles to keep up appearances as an advanced nation, with an economy that is permanently stuck in a low-wage, low-skills gear. The labour shortages that opened up in care homes, warehouses and other essential services during during the pandemic have gone on swelling ever since  – current vacancies stand at nearly 1.1m – initially in the Great Resignation as thousands deserted pittance-paid jobs in retail, hospitality and care; then in a wave of public-sector walkouts, stoked by inflation and a crippling cost of living crisis; and finally an epidemic of work-induced burn-out and long-term illness that has removed a stunning 2.5m, often the lower-paid, from the workforce altogether. In a deep political irony, it is this seized-up commodity labour market that is driving record immigration figures as farmers, restaurateurs and care homes wrestle with brutal post-Brexit realities. Thus do the UK’s dysfunctional employment patterns shape much of its social, economic and political life.

Low pay is a scourge and a national shame. It cripples lives and economies, leading to poverty, inequality and financial insecurity, and often poor physical and mental health. Low wages mean that despite the political rhetoric employment is no longer a sure route out of poverty, often necessitating taxpayer subsidies in the shape of supplementary state benefits. Across a range of sectors it feeds low productivity through poor work outcomes – for the blindingly obvious reason that it’s hard to concentrate on your job, particularly an unfulfilling and prospectless one, if you are depressed, out of breath or worried sick about whether you’ll make it to the end of the month financially. 

Senior executives generally give short shrift to complaints about low pay. ‘I’m running a public company, not a charity’, or, ‘Some jobs are too menial to justify higher pay’, are stock responses. But they betray a dispiriting lack of imagination. There is actually a straightforward way out of the UK’s low-pay bind: pay more. Unfortunately it requires something that we don’t currently have, at least in the necessary quantity, which is competent management. 

This is the message that emerges clearly from The Case for Good Jobs, a new book by academic-turned jobs activist Zeynep Ton. She demonstrates that low pay as practised particularly in the Anglosphere, is not an inevitability but a choice – a choice made by managers who don’t realise there is one, nor the consequences of poverty pay for their workers. She recalls the shock of a senior PayPal (she names names) executive who on a visit to a soup kitchen in a town where the company had a large call centre was told that a substantial proportion of the facility’s users were PayPal employees. As she records, such ingnorance is a far from uncommon phenomenon.

Yet the case for good jobs, she insists, rests not on HR wokery but strictly operational considerations. She sees low pay as both symptom and cause of what she calls the ‘bad jobs’ model, which is based on the plausible but blinkered assumption that the only way to compete on low prices is to minimize input costs, especially labour. ‘The playbook is simple,’ writes Ton. ‘Pay as little as you can, make the job as easy as you can, and hire anyone who is willing to work under those circumstances’. Companies using it accept the concomitant high employee turnover (up to 120 per cent a year), whose high cost is balanced by minimal expenditure on training and (less frequently acknowledged) management competence – which is one important reason why the model is so prevalent. 

Precisely because it is so simple, it can work, up to a point, and for a time – but only because most competitors are using the same bug-ridden cost-minimization model that, unseen by managers, drives a ‘vicious cycle’ of underachievement and poor customer service. Yet the hidden cost of low pay is extremely high. Most companies and managers have no idea how mediocre their operations are. A 2017 HBR article entitled ‘Why Do We Undervalue Competent Management?’ reports that of 12,000 companies surveyed across 30 countries, just one in 10 was excellent or good operationally, against nine in 10 that were mediocre or worse – figures reflected in other measures such as productivity, innovation and growth. Like drivers and poker players, interviewees consistently overestimated their strengths and underestimated their performance weaknesses.

Bluntly, low pay is incompatible with good management. As we should know by now from John Seddon’s work, managing cost drives costs up, not down. Ton shows that that’s particularly the case for labour, because, again unimaginably to most managers, the upside of investing in the front-line is so high. Ask Toyota and Buurtzorg, as well as US retailers such as Costco, Sam’s Club and others that Ton cites. Treating labour as a cost ignores this potential, banishing trust, learning and empowerment and condemning the labour contribution to the barest minimum.

The exceptions, then, operate the opposing front-line and customer-focused ‘good jobs’ model. This, as Ton insists, is a system, in which higher pay is just one element. It must also be front-line and customer-focused because that is the locus of the interactions that determine service quality and customer satisfaction, and dictate the other system elements: an offer that meets customer demands as economically as possible, and training that enables the workforce not only to fulfill but also improve it, thus justifying the higher pay and setting in motion a virtuous cycle to replace the vicious one.

Ton’s first convert was herself. Originally an academic researcher at MIT into operations analytics and science, she was far removed from any real workplace. But when she came to study how the latest management and scheduling software was working in practice, she discovered it was so disconnected from the often chaotic realities of the existing front line that instead of improving performance it made it worse. (Now where have we heard that before?) 

From that experience came her first book, The Good Jobs Strategy, in 2014, which triggered such corporate interest that in 2017 she left her tenured job to co-found the non-profit Good Jobs Institute Of course, Ton would be first to admit that what she is saying is not all new. Seddon, Pfeffer, Hamel, Gallup and indeed all really well managed companies would share her foundational principle that front-line employees ‘aren’t a drag on the bottom line – they are where the bottom line comes from’, and treat them accordingly.

But The Case for Good Jobs is a forceful and timely restatement of a management philosophy that, properly applied, can realistically promise to make companies simultaneously ‘more competitive, more resilient and more humane’. Its urgent relevance to the UK is obvious, for both hard-pressed companies and an economy that without London would be less well off than the US’s poorest state, Mississippi. As Ton has pointed out, a tight market with employees switching jobs for a few pounds extra a week is exactly the time to overhaul employment policies as a system – since you’ll probably have to pay more anyway, make it into a source of competitive advantage rather than reverse. And a push for good jobs policy at national level, starting with the benighted public sector, would be a practical starting point for tackling some of the UK’s deep-seated supply-side issues of productivity, innovation and awful citizen service, as well as serving to mitigate the mounting cost-of-living crisis and address those chronic labour shortages. As ever, if we’re talking supply side, it’s ****ing managment, stupid!

This is what it feels like to live through a change of the world order. Empty shelves and soaring prices in the shops, rage at work and mounting mortgage worries at one end of the scale; uncontrollable interest rates and skittish markets, extreme nature and vicious domestic and foreign politics at the other, all given a vigorous stir by conspiracy theories and fake news fanned by social and other media. There are words a-plenty, but from small boats to hospital waiting lists to war in Europe and a burning planet, seemingly no levers to pull on. Everything once taken for granted is now a source of friction, aggro and deep unease. 

Some of today’s crises are shared. The downsides of globalisation and financialisation were too long brushed aside, and the financial crisis and the faux boom of the following era of cheap money rubbed the noses of the casualties in it even more insultingly. It took Brexit, Trump and the fractures of the pandemic and subsequent Great Resignation, still playing out, to bring to the surface the depth of the disenchantment. At the same time the Russian invasion of Ukraine revealed the dangers of overdependence and the frightening fragility of many international supply chains. 

To which of course the UK has added its own grotesque missteps and failings. Brexit, obviously, is a unique case of wilful self-harm, a major economic and political fracture in its own right. But the current sense of hopelessness – the ‘impossibility of everyday life’, in the phrase of one commentator – has been much longer in the making. Cameron and Osborne’s brutal austerity is part of the story. Looming out of an even more distant past, Thatcher’s chickens are now coming to roost: the deliberate deindustrialisation that sucked the heart out of many industrial communities; the sell-off of social housing, never replaced, that is a big factor in today’s housing crisis; the privatisations whose failings have left these islands surrounded by sewage visible from space, a train service (some of it in companies nationalised by a Conservative government) that is an international joke and a supremely dysfunctional energy market; and crucially the hollowing out of the state, recently detailed by Mariana Mazzucato and Rosie Collington in The Big Con, with the thinking as well as operational capabilities outsourced to a small group of major consultancies incentivised to sell ministers precisely what they want to hear.

This process has left a vacuum where the heart of a government should beat, while politics, further destabilised by the antics of Johnson et al, has been reduced to a contest of broad narratives (growth, anti-woke, culture wars, small boats on one side, NHS, cost of living, levelling up on the other), neither of which, detached from reality as they are, can be delivered. Just when green technologies, overstretched supply chains and, less positively, military conflict, have launched a new industrial arms race with the potential to bring much needed investment, productivity and jobs to some of the UK’s most flattened areas – there is no strategic state to react creatively to the unlooked-for economic reset. As Diane Coyle recently remarked in the FT, the one player not bothering to play the industrial policy game is bound to lose. 

Nor, meanwhile, is there the organisational capacity to deliver, well, almost anything. Never mind the waffle about a ‘scientific superpower’: a more telling symbol of the state of the UK economy is the becalmed HS2, where eight years work has failed to produce a definitive plan for the Euston terminus or even what it is supposed to achieve, and to which trains from the north won’t now run until the 2040s; while the condition of our political democracy can be resumed in the endless indecision over what to do about the crumbling Houses of Parliament, estimates for the fixing of which are now up to £13bn and counting.

All this constitutes a mighty and daunting challenge for the next government. Yet to employ the habitual cliche (sorry) it also represents a huge opportunity, both to craft a new way of communicating with an alienated electorate and to begin to rebuild the capacity to actually do things. Think of it as a ‘modern supply side’ approach – taking in not just the public sector but also the machinery of government and (the elephant in the room) the private sector too. One of the biggest disappointments of the New Labour Blair-Brown regime was the timid capitulation to the City over the initial intention to reform company law to allott a bigger place to social purpose and the common good. Twenty-five years and multiple financial scandals and crises later, all caused by out-of-control financial greed, Will Hutton cautiously relaunched the idea in an important recent piece on the water companies in The Observer. 

Hutton’s broad point is that the task of UK infrastructure reconstruction is so colossal that it can’t be envisaged without the engagement of a vigorous and committed private sector. Water isn’t the only sector in dire need of investment: decarbonisation, levelling up and bringing schools, hospitals, transport and local services up to scratch will cost at least £2.5tr over the next decades. I’d put it the other way round: while Hutton isn’t wrong, the necessary outcomes can’t be achieved with a private sector that too often is actually at war with the common good. Think of water and care homes owned by private equity whose business model is to pile on debt and bleed every last penny from their acquisitions before selling on their hollowed-out shells, hedge firms that create no net value for society and have an interest in promoting the market volatility that they alone profit from, and more generally CEOs who cynically use the shareholder value credo to feed their own greed.

But the world really has changed. As these examples suggest, the externalities of our enslavement to shareholder value are now so obvious and extreme that the planet can no longer afford them. Change won’t be less contested than in 1997, and in some ways, given the dense ecosystem of vested interest that has accrued around it and the disturbing hard right rhetoric in the US equating ESG with communism or Nazis, may be even more so. But it’s now difficult to believe that the world can survive much longer when society’s interests and economic incentives are so wildly misaligned. It seems likely that the next UK government will be Labour. Whatever else, it should take up the meta-management challenge it flunked the last time and redeem itself by showing the world the way forward.

The possibility that AI will outsmart, and eventually outlive, humanity is real, if distant, and it is right to be thinking hard about it now. But media hooha over a speculative future should not deflect attention from the changes already surging through the world of work resulting from the introduction of the burgeoning array of first-generation generative AI apps.

BT recently announced that AI would soon replace 10,000 of its customer service jobs, while adland’s Sir Martin Sorrell went one further by calling time on the call centre, full stop. Wall Street is said to be using AI to rewire the business of finance, hiring as well as firing. The CEO of high-riding chipmaker Nvidia, Jensen Huang, sees the arrival of the new apps as the ‘tipping point of a new computer era… Everyone is a coder now. You just have to say something to the computer.’

Let’s step back a bit. 

Like any other technology, of itself AI is neither good nor bad. It can be used for both. But AI is also not like any other technology, for at least two reasons. One is its combination of potency and breakneck speed of uptake, the fastest  ever – and currently far outpacing the speed of regulatory thought. And the second is the juncture at which it arrives, marked by a technological and economic determinism that threatens to make the outcome overdetermined.

At its simplest, AI presents us with a choice. In the deceptively simple words of the distinguished MIT Prof Erik Brynjolfsson, a signatory of the most recent open statement of alarm over the direction AI is taking, will it be used to augment or automate human labour? 

For there is a vast and much overlooked difference between the two. While automation is often billed as the most important technological advance since the industrial era, it is actually augmentation that delivered the major productivity and market-creation gains of the past. A moment’s thought tells you why: humans plus technology are capable of vastly more than humans on their own. Think skyscrapers, modern medicine, air and space travel, the Toyota Production System. In combination they create new industries and markets, and crucially the benefits have traditionally been shared through jobs. A crane operator is more productive, more skilled and better paid than a bloke with a wheelbarrow, a radiographer than a barefoot doctor, a jet pilot than a carrier with a horse and cart.

But the reverse side of this coin is that, also counterintuitively, pursuing human-like AI as Holy Grail, as researchers and technologists have done and still do, is a trap. While ‘augmenting humans with technology opens an endless frontier of new abilities and opportunities’ (Brynjolfsson), the more AI mimics the human, the greater the temptation to use automation to carry out the tasks that people already do, only faster and (at best) more cheaply. 

That’s what is happening now, and it is doubly perverse. Getting technology to do things that humans have evolved to do easily – how long since we were promised driverless cars? – is both harder and less valuable than making it do the tough and boring stuff, such as instant complex calculations or holding unlimited numbers of things in memory at the same time, that deflect humans from using their ingenuity to make the counterintuitive leaps that trigger the most productive innovation.

Spare no tears for the call centre, a previous misbegotten attempt to use technology to solve customer problems that are better dealt with by people. But if BT simply automates unsatisfactory existing processes without rethinking them first – the classic digitisation investment mistake – it will compound the error, neither improving dismal customer service nor saving cost. 

This kind of automation creates little or no value for anyone except execs and shareholders. For employees, whose value resided in knowledge that is now codified and turned into capital, it is entirely negative. Not only that, the advent of AI, with its growing ability to monitor and micromanage work, effectively kills off the idea of the job as the primary distribution mechanism of the benefits of technology at work, throwing a whole system into crisis. An increasing number of companies no longer have any interest in humans as labour, only employing them as a last resort.  

This gets to the heart of the matter. Ironically, the driver of this kind of valueless automation – think self-service and contactless supermarket checkouts, digital-only services of all kinds – is the ultimate example of Brynjolfsson’s human-plus-technology augmentation: what we now call surveillance capitalism. The unholy alliance of internet, algorithms and advertising, surveillance capitalism deploys human-focused technology to bolster corporate and shareholder interests through tracking and targeted advertising. In the surveillance business model that has now captured almost all companies, humans remain their greatest asset: but as the source of raw material to be exploited and sold as information to others, not as workers.

Prevailing economic discourse around AI displays a kind of studied fatalism. ‘Of course, advancing technology means jobs will go. But in the long term it will create new types of better work that haven’t been imagined yet, as it has done in the past. If not, then government will need to provide.’ This is pure bad faith. Technology isn’t destiny. As Daron Acemoglu and Simon Johnson, as MIT professors hardly technophobes, spell out in their new book Power and Progress, there is nothing automatic about such outcomes. How technology plays out in the workplace has always depended on choices made in boardrooms and finance departments (or sometimes throne-rooms or lordly mansions), which in turn reflect power, material incentives and evolving social norms as embodied in legislation and regulation. Positive outcomes, they make clear, have to be fought for.

Realistically, it’s clear that AI, or machine learning as it is useful to call it from time to time, is a general purpose technology that will end up everywhere. There are dozens of apps available already, with multiple new ones coming to an app store near you every day. AI will eat many jobs and create some new ones, although probably fewer than we would wish.

Equally clear is that without intervention AI will do little to counter the major social problems we are currently struggling with – particularly the inequalities that fuel discontent, social and extreme populist politics – since it comes from the exact same parentage. Bryjolfsson argues that business, technologists and policymakers have all put too much emphasis on automating rather than augmenting labour, and the first imperative is to eliminate or reverse the tax and other incentives that favour it. Acemoglu and Johnson propose a range of other measures, ranging from breaking up Big Tech and removing its immunity to prosecution for the content it carries to boosting countervailing forces, abolishing patent proection for surveillance technologies and imposing a digital advertising tax.

If some of this had been enacted the first time round, particularly measures affecting advertising and surveillance, the new AI apps wouldn’t seem such a frightening prospect. But for once, wiser from experience, we have a second chance. Ths time we had better take it.

Last year Stuart Kirk upset his bosses and then quit his job as head of responsible investing at HSBC Asset Management after advising investors to stop fretting about climate change since human ingenuity would probably cope with it.

In a recent column in the FT he was at it again. Another thing investors didn’t need to pay much attention to, he suggested, was corporate performance. 

Eh? 

Well, he said, consider that in the US over the last century the average real rate of stockmarket returns has stayed subbornly at 6.7 per cent. Then add that profitability over the very term appears to revert to the mean; and finally – the killer – that since 1926 all net US stock exchange wealth has been created by just 4 per cent of quoted companies. That’s right: 96 per cent of companies generated none at all – and that in a period during the latter half of which managers were explicitly pursuing a policy of maximising value for shareholders. 

As Kirk indicates, that raises some interesting questions. Why, he asks, ‘are there so many poor-performing shares when 250,000 students are enrolled as masters of business administration each year? And what’s been gained from the almost trillion dollars per annum spent on consultancies worldwide?’ Or, we might add, from the multibillion-dollar global leadership industry, not to mention the undergraduate business degrees awarded to more students around the world than in any other subject?

It’s a good question. So, if overall they don’t do much for investors, are CEOs with MBAs good for business? As it happens, that’s the question the very serious MIT researchers Daron Acemoglu and collaborators sought to answer in a study looking at what happened when companies replaced a CEO without an MBA or business degree with one with such a qualification. The answer: not much. There was no evidence that business graduates increased sales, productivity, investment or exports. What they did do was reduce pay growth for the workforce and increase the take of shareholders and managers. This boosted the share price in the short term – but the authors speculate that over time it could damage profitability: there was no increase in investment allocations, and higher-skilled employees were more inclined to leave after their relative pay cut.

Meanwhile, more and more day-to-day management is being carried out by algorithms and AI rather than humans. For example, Uber now knows enough about individual habits and preferences to offer the same job at varying prices to different drivers according to the behaviours they want to evoke; or to ‘deactivate’ them, sometimes permanently, without human intervention (the company denies this). Companies routinely use technology to surveil and control their workers – chaplains, funeral directors and care workers as well as telephone agents and clerks and almost anyone working from home – much more closely than human managers ever did before. And with the arrival of ever more capable AI software – decision aids, for instance – the proportion of jobs it could credibly eat expands as fast as America’s waistlines.

You might see where this is leading. If CEOs as a group, whether qualified or not, are not very good at either benefiting the investors they are supposed to be acting for or boosting business performance; and if for this unstellar performance they are currently in the biggest US firms taking home 399 times as much as the average worker – and in the case of Amazon’s Andy Jassy’s staggering 2021 stipend of $213m, 6,472 times – isn’t there a case for at least thinking about letting software eat them too?

Some are already doing so. In 2015, Devin Fidler of the Institute of the Future described a rudimentary virtual ‘iCEO’ that had been programmed to automate complex management activities by breaking them into smaller chunks. Reporting ‘amazing’ initial results, he warned senior managers who assumed they were immune to substitution to think again: ‘It will not be possible to hide in the C-Suite for much longer. The same cost/benefit analyses performed by shareholders against line workers and office managers will soon be applied to executives and their generous salaries’, he predicted.

Eight years later, I can’t find a mention of ICEO on the IF’s current website. But lo and behold, Fidler’s prediction is coming to pass. Last year a Hong Kong firm, NetDragon Websoft, replaced its CEO not with an MBA but an AI-powered ‘virtual humanoid robot’ it named Tang Yu. No experimental startup, NetDragon Websoft is a $2bn, 3,300 person quoted firm in ‘massively multiplayer online gaming’ – which peresumably it a head, or brain, start with AI. And so far Ms Yu is doing a creditable job. As of March 2023 Netdragon was outperforming Hong Kong’s Hang Seng index by 18 per cent. 

Tantalisingly, we don’t know much more than that. And six months is clearly too soon for definitive conclusions. But some ideas suggest themselves. On the one hand, CEOs are unlikely go without a fight. On the other, given that most senior executives accept that their companies make bad decisions at least as often as good ones, and no amount of trying has yet established a correlation between CEO pay and corporate performance, activist and other primarily stock-market-driven investors may well start to take a dimmer view of the returns they are getting from the human CEO’s salary millions. What’s more, with the rapid advance of AI, Ms Yu 1.0 is liable to be succeeded by versions 2.0 and 3.0 in short order, and probably in a number of competing flavours: hardcore, B-Corp, and virtual Elon Musk, say. In other words, while NetDragon Websoft may be the first substantial firm to be managed by wire, it will almost certainly not be the last.

As for the rest of us, the implications aren’t entirely comforting. True, when I asked Bard, Google’s large language chatbot, if maximising shareholder value was a good corporate strategy, it replied cautiously that while it might be in some circumstances, strategy should also take into account the needs of other stakeholders. So far so good. But models ‘learn’, and if they learn as Acemoglu’s MBAs do, that leaves plenty of opportunity for the development of self-fulfilling prophecies resulting in less balanced outcomes. As Stanford’s Bob Sutton put it in an entertaining recent discussion with Rita McGrath, ‘[What my engineering colleagues] teach me is that AI algorithms are just a function of the human being who writes them. So maybe we just have to have fewer assholes writing algorithms’. Well, yes – but that hardly seems the stoutest defence against the robots now beginning to mass at the gate.

The suicide of head teacher Ruth Perry is a terrible reminder that there is even worse than burnout at work. Perry took her own life on learning that Ofsted, the schools regulator, was about to downgrade her Reading primary school from ‘outstanding’ to ‘inadequate’, potentially ending an exemplary 30-year career. 

In a grotesque irony, the one thing the happy and popular school was marked down on was safeguarding. No one would downplay the importance of keeping children safe, but doing so by endangering those who look after them is a contradiction that seems to have passed by the regulator, whose response to the ensuing outcry has been to plough on with its inspections exactly as before.

The episode is triply scandalous – a graphic example of everything that’s wrong with our system of regulation. 

The first is that, as with burnout, the brutality of the method fails the first test of the ‘no asshole rule’ famously defined by Stanford professor Bob Sutton: it’s plain wrong, and inexcusable even if it worked. ‘If performance is your only dependent variable, the human race is not in great shape,’ Sutton reflected recently on wholesale sackings by Big Tech. A place should be found for dignity, he added, ‘and sometimes it even helps’.

The second scandal is that it’s counterproductive, both for regulation’s own aims – improving lives by raising education and care standards for children – and the country’s wider economic objectives.

Like health workers, teachers, particularly heads, have had no let-up from the enormous pressures of the last three years, facing first Covid and now the need to make up for the life-affecting disruptions that have held back learning and development. Accepting the need to put children first, an expression of support somewhere in Ofted’s dry-as-dust statement of principle, values and strategies would have been a better reset than springing a new round of unannounced, even more stringent inspections on an exhausted workforce.

The Ofsted affair comes at a critical time for the profession. The UK is suffering a national shortage of teachers. Vacancies are running at twice pre-Covid levels; nearly half of current teachers, ground down by workloads that have already brought them out on strike, say they plan to quit in the next five years. To many, the inspection crisis is ‘the last straw’. A few years ago, at a routine check-up, my GP greeted me with the news that she had just resigned, a decade early, the day after a bruising inspection that had reduced her as head of the practice to tears and her husband to such rage that he had to be deterred from tracking the chief inspector to his office to punch him in the face. My doctor’s reaction was less extreme than Perry’s, but the result is the same: one professional the less to do an essential job for the community at a time of acute labour shortage – a stupid self-inflicted wound.

As for the economy as a whole, the chancellor’s recent autumn statement made much of the need to coax back to work as many as possible of the 700,000 workers over 55 who have vanished from the national workforce since the pandemic. Casting light on the missing elders, and underlining the previous point, LBS’s Lynda Gratton recently noted her research finding that reluctant returners split more or less evenly between the sick, carers for others and those who would rather retire early even on a lower income than go back to work that they detest. Piling fresh pressure on already stressful occupations is not an obvious way of persuading them to change their minds.

The third scandal is that after all that, regulation in its current form doesn’t work. If it did, we wouldn’t live on an island surrounded by sewage, where a substantial proportion of trains simply don’t turn up at the platform each day and in which almost the first action of every incoming government is to set up a ‘better regulation’ taskforce, with results that are always as disappointing as the last one. 

Politicians are right that regulation needs reform, but they have no idea how unfit for purpose it actually is. Current regulation doesn’t prevent scandals – witness the emerging horrors in the police and fire and rescue services, the dysfunctional energy market and the water and rail disasters mentioned above. Its interventions don’t have a good record of improving performance for the user, quite often the reverse. And nor does it satisfy the politicians supposedly in charge who are perplexed by the regularity with which supposedly ‘outstanding’ establishments are later revealed to be scandalously bad, and by the discovery that the figures the assessments are based on are hopelessly unreliable. 

This is because regulators make the cardinal error of mandating the how – methods and measures – rather than the what, desired outcomes relating to purpose. At a stroke, innovation is killed stone dead as managers learn that it’s not pleasing parents or patients that win them an ‘outstanding’ label but complying with the edicts of inspectors and regulators. Too often, they find themselves locked into practices and processes, often involving costly digital-first ‘solutions’, that reflect today’s faulty management assumptions instead of challenging them. The result is schools that are Gradgrind on steroids.

This needs to be reversed. A good head teacher’s job is to figure out how to create a happy, inclusive and caring school where teachers can carry out the job they joined the profession to do, not a joyless exam factory that boasts of checking all the safeguarding tick-boxes. Trial by ordeal has no place in government policy or on a list of acceptable management practices.

I realised with a shock of anger this week that four of the people closest to me are burning out.

Post-Covid, burnout, like brain fog, has become a nebulous and overused cliché. The shock is that it’s real, close to home, and hits perfectly normal people hard. In this case, the four involved (I’ll call them S, C, G and D) are all in the prime of working life. They are intelligent, conscientious and creative. They have a sense of humour and like and care about other people. In short, they are people any sensible organisation would want not only to employ but to hang on to for dear life.

Even now none of them makes a fuss, and might even deny the problem. Yet each is going through a crisis manifesting in physical illness, stress, exhaustion or just disgust (one said, ‘I just don’t care any more!’).

Route maps to burnout differ according to human psychology, material circumstance and other pressures, but they all end at the same overstressed, emotionally depleted destination. The culprit is also the same: today’s impersonal, hypocritical, numbers- and money-driven management.

There has always been poisonous, mealy-mouthed management. But now it’s endemic (try this, for example). Ir’s striking that brutal targets are a consistent component and symptom of its dehumanising dysfunction. Thus, S works in a job-centre in the suburbs of Paris. Her clients are youngsters, usually of immigrant families, who are (rightly) fatalistic about their job chances and more interested in scraping together a few euros in barely legal money-making ventures than attending job-centre interviews. S is enterprising and creative on their behalf and has scored some real successes. But like her colleagues she has no hope of reaching placement and activity targets set from outside with zero regard for context or the means at her disposal. Rather than thanks, the management pressure is remorseless, leaving her depressed, doubting of her worth, and finally ill. She won’t take time off, which just tightens the vicious circle.

G, in media, is a respected journalist whose reward for successfully attracting new subscribers is to have his target doubled the following year. He could of course boost his short-term numbers by printing tabloid-style speculation and gossip (of which he knows plenty) – but at the cost of destroying the trust that won him paying followers in the first place. He despises and rejects the targets, which have left him cynical of the management. Whatever, he has arguably exploited himself (he loves his job) by burning the candle at both ends over the past few months and now finds himself with nothing left in the tank during a family crisis.

Until recently, C worked for an environmental consultancy. A manager as well as an ecologist, this summer she came under intolerable pressure from above to make the numbers that would justify the price shareholders were expecting for the sale of the consultancy to another concern, pressure that wrecked teams, relationships and livelihoods. She finally snapped. She’s undertaken a new job on a work-to-rule basis, using it to clear her head before looking for something more permanent. It’s unlikely to be in the private sector.

For D, a senior maintenance technician in a food processing plant in outer Paris, cost reduction is the constant target. As an experienced and resourceful engineer, he is relied on by senior management to act as unofficial trainer to new often graduate recruits who generally don’t stay long and are freqently paid as much as he is. He doesn’t complain, but he has been working shifts, including nights, for 20 years – far longer than is acceptable practice for mental and physical health.

After the shock comes anger. First of all for the burned-out. I think and hope that with support they’ll come through the current experience, although at varying personal cost that none of them merited. Second for us collectively. There’s enough grief already without this utterly perverse and unnecessary man-made addition of brutality and bullshit. Imagine the total cost in misery, health and therefore also money, of scaling it up to population level. Here’s the explanation why S and D, like so many of the French, can’t wait to retire as early as possible, and are taking to the streets to defend their right to do so. And when work is so nakedly contingent as well as dismally badly paid, particularly in the public sector, why wouldn’t half the British workforce go on strike?

The third stab of anger is at management and the senior managers who perpetrate this travesty. Behind the fine words, the reality is that today’s management has grown an impermeable anti-human shell, better suited to managing a prison than 21st century knowledge work. Call me cynical, but it’s hard not to think of big tech’s copy-cat recourse to mass lay-offs, now totalling 150,000, sometimes conducted by email and accompanied by ghastly ‘rank and yank’ regimes for the remainder, as payback for employees’ resistance to returning to the office after Covid. Not so secretly many employers fear and resent the human unpredictability and sometimes unbiddability of their employees; and despise the customers whom they keep at arm’s length  – anything to minimise actual contact – with an inscrutable screen of technology, and track, target and influence 24 hours a day. Caulkin’s Law predicts that ChatGPT and new-on-the-block neurotech – brain-computer interfaces – will only make this exploitation worse.

It should be beyond obvious that burning up your human assets is as self-defeating as setting light to your house to keep warm. Yet that’s what too many managements are doing, squandering human capital, anaesthetising energy and initiative and making their organisations as brittle as a twig. Look at Twitter. Or the terrible warning of our crumbling NHS, which, with voluntary resignations and stress-related absences for burnout and PTSD running at record levels, looks more and like an organisation in the throes of suicide.

Toyota’s sustainable ambition is to build cars whose emissions are cleaner than the air that goes in. In the same way, the only management that is sustainable is one that works to better the human condition, not worsen it. As Roger Martin shows, management and organisations that go against the grain of humanity won’t survive in the long term – and we human beings will be the better for it.   

Just when you think it can’t get worse, it can, and does. On top of the ongoing wave of strikes across much of UK public sector, the energy shambles and a cost-of-living crisis, in one recent week we learned that: 1000 Met police officers were under investigation for violence or domestic abuse, with ‘two or three’ court cases a week expected as a result; 235 vulnerable migrant children had unaccountably ‘disappeared’ from Home Office designated hotels; the UK had tumbled to 18 on Transparency International’s corruption perception index, its lowest position ever; alone among developed countries, the UK economy would shrink in 2023; the British army no longer qualified as a top-level fighting force; and the chair of the Conservative Party, a former chancellor, became the third cabinet minister to be sacked for breaching the ministerial code in the first 100 days of Rishi Sunak’s premiership.

Even when people are nominally working, the UK isn’t. Everything is out of kilter. It’s as if the country and all its institutions are falling apart. Not only the centre cannot hold – none of the component parts fits, works with the others or is in the right place. It’s synergy in reverse. 

How do we make sense of this extraordinary collapse? 

One way to look at it is through the lens of culture. Culture – roughly speaking, the shared values and norms that shape how organisations behave – is a slippery beast. It can be strong or weak, loose or tight, positive or the reverse. One organisation can contain a multitude of cultures, subcultures and even microcultures – boardroom, shopfloor, middle managers, teams – and the management culture is something different again. On my bookshelf is a book called The Seven Cultures of Capitalism; C.P. Snow famously wrote about the ‘two cultures’ of the arts and science. A schools culture is different from a business culture, a team sport from an individual one. 

Intangible as it is, however, culture is a thing – sort of organisational dark matter – and one to be reckoned with. Culture management, says one respected management academic, ‘lies at the heart of contemporary analyses of managing’. The cost of misjudging it is disastrous. It’s hard not to conclude that it was the Downing Street culture, largely of his making and reflected in Partygate, ethical lapses and attempts to bypass parliament, that brought Boris Johnson down as prime minister (as it had done before). Its lingering taint, not helped by Truss’s detachment from everyday reality, may have fatally wounded Sunak’s administration from the outset. Or Cressida Dick: the culture of violent misogyny and racism haunting the Met wasn’t of her making, but revelations of its extent and her failure to root it out were enough to cause her downfall. A similar scandal, fortunately so far without the murders, is brewing in the fire and rescue service. And there are plenty more: The Home Office, Yorkshire cricket, Welsh football: the list is long.

The stakes are high in business, too. Researchers at MIT SMR/Glassdoor Culture 500, a research unit, note that companies with a ‘healthy’ corporate culture consistently outperform comparable firms financially. On the other hand, the human and financial costs of a ‘toxic’ culture (disrespectful, non-inclusive, unethical, cutthroat, and abusive) are ‘staggering’. I’ve quoted before Jeff Pfeffer’s excoriation of the toxicity of US workplaces and its extraordinary cost in terms of health and excess mortality.  A toxic culture is by far the strongest predictor of attrition in the Great Resignation. According to one estimate, job-hopping caused by toxic corporate culture was costing US companies $50bn a year even before the post-Covid rush for the exits. 

How does this relate to the UK meltdown? 

I’m not the first to suggest that a central operating principle of English, perhaps British, culture, in evidence at every level, is ‘muddling through’. You could also call it expediency, the line of least resistance or aversion to prioritising. Johnson’s smirking ‘cakeism’ is the quintessential illustration. We avoid big long-term decisions wherever possible. Since the second world war, only EU entry and possibly Thatcher’s privatisations match the Beveridge reforms in political importance – and look how those turned out. As for infrastructure, hello Channel tunnel, and not much else. Do we shy off big projects because the execution record is so bad, or the latter is the result of our reluctance to commit to large projects? Whatever, the consequence is the same: things are patched up until no one really understands how they work, witness the NHS. Seventy-five years after France, we haven’t even finished electrifying the railways, whose absurd prices and unreliability, like the sewage washing our shores, are a national disgrace. We treated the North Sea oil bonanza like an tipsy lottery winner and splurged rather than invested the windfall. You get the picture.

Muddling through sort of worked – not well, but such that people grumbled rather than rioted – until it was tested to destruction by the crash of 2008, Brexit, and Covid. The 2008 crash was followed by a decade of austerity, which with hindsight is not a policy, just another way of not making decisions. Fifteen years later, we are therefore in the same position only worse, with the chickens of cuts and long-term underinvestment in public services cackling home to roost. Brexit was the summation of cakeism, a ‘grand projet’ undertaken with nonchalant disregard for the consequences and the reality on the ground, as with the Northern Ireland protocol. Covid then struck as the equivalent of the Turkish earthquake, shaking to bits the cobbled-together public-service infrastructure and, even more dismaying, uncovering the hidden decay of the basic values of decency and probity that had traditionally underpinned UK public life and the country’s soft power abroad.

Sociologists say there are three modes of exercising power: coercion, calculation and culture. Calculation is in effect the market, with its impersonal and seemingly unappealable rules; and in the absence of cultural guide rails, it is to the markets that successive governments delegated most of their decision-making. But while the markets, as Charles Handy notes, tells us what things cost, it doesn’t tell us what we should do. And unfortunately – Truss and Kwarteng proved it yet again – the fiercest devotees of the market’s speed and power are the least qualified to deploy them. Rishi Sunak, currently at the wheel of the Tory party limousine, is a less reckless driver than they were; but as some of his appointments testify, he is only too aware of the gaggle of far-right Mr Toads behind him on the back seat shouting ‘faster! faster!’

That leaves coercion. Sure enough, through the dizzying policy zigzags, departmental rebrandings and ministerial musical chairs of the last few years there runs a consistent and threatening thread of authoritarianism and compulsion: the unprecedented curbs on protest brought in by last year’s Police, Crime, Sentencing and Courts Act and the current public order bill, and the new proposals for tightening restrictions on strikes, for example. Assaults on the judiciary and the proroguing of parliament are out of the same playbook, as is the ‘hostile environment’ for migrants, indeed all foreigners, institutionalised at the Home Office, and reflected in the Windrush scandal and Suella Braverman’s fevered dreams of watching 747-loads of cross-Channel migrants taking off for a barren new life in Rwanda. Charges of bullying, demeaning staff and creating a climate of fear at work against individual ministers such as Gavin Williamson, Priti Patel and Dominic Raab just reproduce the same values at individual level.

Disrespectful and abusive behaviour – or coercion – is, of course, a significant element in the toxic culture identified in the MIT/Glassdoor study that so undermines organisational performance. It’s a vicious circle that only leads to more of the same. Sunak’s threat to leave the European Convention on Human Rights to allow ever harsher crackdowns on migration, if it happens, will be one more step on the same slippery slope.

On 26 January a Ukrainian economist posted a thread on Twitter on the culture of corruption and how to combat it. Here is is, edited for length:

Tymofiy Mylovanov

Follow @Mylovanov

We’re not as bad as that. But procurement, oligarchs, lobbying, political finance should surely remind us of something. And we also suffer from a different corruption. Muddling through can easily become a shrug of ‘don’t care’, dissembling and – a speciality of recent governments – downright lying. In a recent poll, 65 per cent of voters said they believed that the Conservative party was institutionally corrupt. Whatever else, we need a cultural reset, and that takes above all the will to look the facts in the face and act on them. Values, as someone said, ‘are what you are willing to enforce’. We need to start doing so – now.

                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       

Taking stock, here are a few things we learned, or re-learned, about business and management in 2022 – and should take with us into 2023.

Many avowed capitalists aren’t very good at capitalism, and the least good are those who believe in it most fervently.

i) Liz Truss-Kwasi Kwarteng. From all the evidence, the Trussonomic two actually believe the sub-Ayn Rand propositions they set out in the preposterous Britannia Unchained – trickle-down economics, deregulation of anything that moves (except labour, where the opposite applies), extreme individual incentives, and poorhouse-style welfare – a purely ideological posture that is wrong in theory and unworkable in practice. Even now, they appear to believe that it was their methods that were wrong, not the substance – the telltale excuse of those who won’t recognise they are barking up the wrong tree. They have learned nothing, and given the chance would try the same thing again. Beware. 

ii) Elon Musk et al. 2022 was the year the tech bros (Zuckerberg, Bezos, Bankman-Fried, Musk) suddenly discovered what it was like to be an ex-master of the universe. According to Bloomberg’s Billionaire’s Index (yes, there is such a thing), between them the 500 richest lost a staggering $1.4 tr last year. Musk led the pack as the only person ever to lose $200 bn, having been of course one of only a tiny number ever to have made that amount in the first place. As noteworthy as the totals is that while the polycrisis did no one any favours, the titans – Musk, Zuckerberg and Bankman-Fried in particular – needed no outside assistance: the losses were their own unaided work. 

Ironically, the governance arrangements the founders put in place to stop pesky investors from interfering with their freedom to move fast and break things offered no protection against them smashing up their own companies. Techies don’t walk on water, and some of their outsized gains are the result of dark arts and Silicon Valley connections rather than prowess or foresight – eg the access of Uber and Tesla, the latter boosted by numerous fake Twittter accounts, to fabulous quantities of cheap FOMO capital far beyond the reach of competitors (from which angle, incidentally, Musk’s Twitter purchase almost makes sense as vertical integration with the social media that he revels in). These are advantages that are now evaporating by the day.

Meanwhile, the wild rides of Meta, cryptocurrency exchange FTX, Twitter and Tesla should call time once and for all on the myth of the infallible tech entrepreneur, together with dual-class stock structures and buddy-style governance. 2023 should be the year lawmakers and regulators finally block the loopholes and privileges that permit  the giddy accumulation of financial, political and social power in the hands of a few individuals whose only qualification is that they are uber-rich.

iii) Investors and corporate directors, who, as they do once every generation, have forgotten that spreading wealth and narrowing inequalities isn’t bolshevism. It’s essential to making capitalism work. Jobs and wages are the transmission belt of wealth distribution and growth in our economies. To replace them with gig jobs and pay (Uberisation) or software for the sole benefit of shareholders and option-laden executives is self-defeating and unsustainable, and a major contributor to the current waves of social and labour unrest. As Larry Elliott wrote in The Guardian recently:

‘Three factors were behind the massive jump in productivity in the middle decades of the 20th century: ideas, investment and the struggle against inequality. Economies only really started to motor when new products were available to the masses through policies that encouraged full employment, collective bargaining and rising wages. Currently, there are plenty of ideas but the other two factors are missing. Until that changes, the global economy will be stuck in its low-growth rut’.

What goes around comes around – again

Remember that what goes up usually ends up coming down, my first editor, Bob Heller, used to say. He’d have repeated it again last year, when (along with tech, crypto and property stocks) war in Ukraine and the subsequent energy crisis abruptly sent into sharp reverse the cult of outsourcing- and  globalisation-led efficiency that gathered speed in the 1980s. There were obvious trade-offs even then, but they were increasingly shrugged off in a heady atmosphere of glasnost and end-of-history triumphalism that relegated resilience to the back burner. 

Now it is firmly at the front. By now outsourcing is so embedded that it is almost impossible to unscramble as supply chains morph into fluid ecosystems, blurring the boundaries of firms. Nonetheless, as companies – and countries – are realising in the wake of the pandemic and the war in Ukraine, there are financial costs to the hollowing out that offshoring and outsourcing have entailed, leaving some economies uncomfortably squeezed by pinchpoints in eg energy, microchips or even basic foodstuffs and PPE – or in the spectacularly unresilient case of the UK, all of the above. This, of course, is just one part of our most careless and damaging privatisation, the wholesale outsourcing of the functions and policy-making that are government’s job to the market. Hence the current regime’s lack of means or even ideas about what to do to bring to an end any one of today’s seemingly endless succession of crises. And don’t call austerity a policy: as the last decade has taught us, it is the absence of one, and it always leaves the presenting problems worse than before its application.

 The Great Reckoning. Finally, one I think I got right. The upheavals and shortages rolling through labour market aren’t going away – just, like Covid, breeding new variants. First the Great Resignation, then the Great Attrition, then ‘quiet quitting,’ and now the Great Walkout – angry strikes multiplying all over the US and UK. In fact, what we are witnessing is the consequence not of a labour shortage, but a shortage of jobs that people will consent do at current levels of pay. It’s the market, stupid! Anti-strike legislation, or refusing to negotiate, are ploys that come straight out of the King Canute playbook, with just as much chance of success. Leaving aside that in some areas such as health, the ‘minimum conditions’ the new law would require strikers to observe would be an improvement on today’s ‘normal’, simply ending the strikes will do nothing to address the underlying reality: the jobs just aren’t attractive enough. Until that changes, expect the New Year to be both cold and hot.