Author Talks: Roger Martin on the high price of efficiency

In his latest book, Roger Martin argues for a new view of the economy as a complex, adaptive system that balances efficiency with resilience.

In this inaugural edition of Author Talks, McKinsey Senior Editor Diane Brady chats with Roger Martin, professor emeritus and former dean of the Rotman School of Management at the University of Toronto, about his latest book, When More Is Not Better: Overcoming America’s Obsession with Economic Efficiency (Harvard Business Review Press, September 2020). The noted management thinker points to a short-term focus on maximizing shareholder returns as a root cause of inequality and economic instability. An edited version of the conversation follows.

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Roger Martin on the high price of efficiency

What problem are you trying to solve with this book?

Median incomes in the US are stagnating. People tend to focus on economic growth and GDP per capita, which is the mean or average growth.

What I was worried about was a divergence between the two as more and more of the new economic growth went into the pockets of the very rich. When they think of inequality, most people think, “Poor people are getting poorer.” That’s not actually the case. Though I care a whole lot about the poor and how poor they are, they aren’t getting poorer relative to the median. That’s stayed quite stable. What has been completely unstable and going in one direction is the median versus the top 1 percent and the top 10 percent. That was the motivator for the book. I was trying to figure out, “Why? What’s changed?”

What surprised you most about the book?

The thing that probably surprised me most was the result of the Persona Project, a project we did where we interviewed, in ethnographic detail, a bunch of Americans. And the disengagement was startling. The primary-school teacher saying, “Hey, I got a teacher’s degree. I thought that was what you’re supposed to do. And here I am, barely making ends meet.” It’s more cause to ask, “Is this system working?” One of the things that I think has been good for the country coming out of the pandemic is the notion of all these essential workers. They’re essential, but they don’t make a living wage. So how exactly does that work? It’s not sustainable for an entity to do business in a way that people who are essential to that business aren’t benefiting from it. Living paycheck to paycheck, below a living wage, and worrying about putting food on the table does not make for an employee who can give awesome service.

A take on tech

Is technology a tool for speed or is it creating more obstacles to resiliency?

I think it’s creating more obstacles probably. Aristotle, who created the scientific method, explained something really important that the world has ignored: if you’re going to use the scientific method, it involves crunching data to determine the cause of a given effect. Where’s all the data from? The past. We have no data on the future yet, because it hasn’t happened. And what he said is that crunching data is only good for that part of the world where things cannot be other than they are. Take this pen. I can drop it 1,000 times in the past and calculate that it’ll drop in the future because it’s part of the world where things cannot be other than they are. Now, the problem with using scientific analysis in that world—machine learning, AI [artificial intelligence], and so on—is it will convince you that the future will be what? Identical to the past.

Because that’s all science can do—the guy who invented science told us that.

What should a CEO with limited resources prioritize?

One is to prioritize multiple things. To prioritize one thing and say, “This is the one thing we’re about,” is a recipe for disaster. In a complex, adaptive system, that’s pulling one lever and imagining that you know what that one lever is going to do. Two, ask the sustainability question: “Who is necessary for this business system we’re trying to put together? Who’s necessary for this to prosper? What’s in it for them?” And make sure that it’s good for everybody else because, otherwise, it is not sustainable; because you’re counting on somebody who is not benefiting from the system you’ve put in place. And then just keep tweaking it and tweaking it. Don’t imagine you can put a system in place and it’ll run for any period of time, let alone forever.

To prioritize one thing and say, ‘This is the one thing we’re about,’ is a recipe for disaster. In a complex, adaptive system, that’s pulling one lever and imagining that you know what that one lever is going to do.

Diversity is key to resiliency

What’s the recipe for a mindset of resiliency?

I guess I would do an overlay. Philosophy feels to me as the most foundational discipline about how people work, and physics is how things work. You need to know how things and people interact to get ahead in life. I think the great philosophers were system-dynamics people, in essence. They were essentially saying, “We are going to explain to you how this thing called ‘people interacting together’ kind of works.” They were more holistic.

We are not taught how to take advantage of a diverse thought—diverse in the sense that your thought conflicts with mine—rather than saying, “I have an idea. Yours is different than mine. I must make sure mine triumphs,” which is generally what we’re taught to do, to advocate for our point of view.

We’re not going to get where we need to be on diversity until such time as we make the most of diverse voices instead of the least.

We’re not going to get where we need to be on diversity until such time as we make the most of diverse voices instead of the least. Right now, we make the least of them. And that’s often why if you have 20 people and there are two or three who are thinking differently, they’re likely to feel that they’re being squashed. We have been on a path of reductionism—and this idea that you can prove things.

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