By Adrian Wooldridge
For the past 60 or so years we have lived in an age of charismatic capitalists. The paragon of the species was Steve Jobs. I happened to be in Moscow when he died on October 5, 2011, and I remember watching as a giant poster of his face was unfurled on the side of a skyscraper and Russians gathered around in silence, holding candles and sometimes weeping.
But charismatics have thrived outside Silicon Valley. General Electric’s Jack Welch was treated as a demigod for supposedly reviving the conglomerate form. Michael Milken was revered (and reviled) for spinning junk bonds into gold. Enron‘s Jeffrey Skilling told a beguiling story of freeing natural gas from “the constraints of molecules and movement.” At Alibaba’s 18th birthday party the company founder, Jack Ma, dressed as Michael Jackson and danced to the song Billie Jean in front of 40,000 cheering employees.
In his new book, The Emergence of Charismatic Business Leadership, Richard Tedlow, a legendary professor at Harvard Business School who is now on the faculty of Apple University, argues that charismatic business leaders are more than just larger-than-life personalities. Sam Walton was deliberately folksy and self-effacing. Milken comes across as the class nerd.
What distinguishes them is a combination of personal magnetism and reality distortion. You want to follow them even against your better judgment: One of Milken’s employees opined that “someone like Mike comes along once every five hundred years.” And you are captured by their vision of the world: Guy “Bud” Tribble, a leading member of the team that designed the Mac, said that in Jobs’s presence “reality is malleable. He can convince anyone of practically anything … It was dangerous to get caught in Steve’s distortion field, but it was what led him to actually be able to change reality.”
These charismatic figures exploded on the business world after an era in which capitalism had degenerated into grey bureaucracy. The greatest manager of the era, Alfred P. Sloan, prided himself on turning General Motors into “an objective organisation, as distinguished from the type that gets lost in the subjectivity of personalities.”
The most telling book was William H. Whyte’s The Organisation Man, which includes the wonderful phrase lifted from a documentary film produced for Monsanto Chemical Company: “no geniuses here; just a bunch of average Americans working together.” This was the world of the corner office, the grey flannel suit and the annual upgrade of the same old product.
Charismatic capitalism was produced by the most powerful forces of the new capitalism unleashed by the Reagan-Thatcher revolution. Technological innovation allowed a few first-movers — geniuses rather than average Americans — to build world-spanning empires, just as Andrew Carnegie and John D. Rockefeller had done in the second half of the 19th century.
Deregulation forced established businesses to become more agile. The explosion of executive pay persuaded even run-of-the-mill CEOs that they were geniuses who deserved to be splashed on the cover of Forbes. Why else would the average CEO at the top 350 US firms ranked by sales have been paid 386 times their average worker’s pay in 2000, compared with 45 times in 1989. And changing mores allowed members of out-groups, most notably Oprah Winfrey, to turn charisma into towering fortunes.
Are we now witnessing the end of charismatic capitalism and a return to the politically correct version of Whyte’s “organisation man?” Elizabeth Holmes’ conviction has launched an armada of articles decrying Silicon Valley’s “fake it until you make it” culture. The Holmes story is particularly interesting because she started out not by faking her products but by faking the charismatic style of leadership — wearing a Steve Jobs-style black turtleneck, lowering her voice an octave to sound more like him and mastering the art of not blinking.
But in truth she is only the most recent example of charismatics gone bad. In 2019, Adam Neumann saw his dream of taking WeWork public collapse when IPO paperwork revealed both his unchecked power and numerous conflicts of interest. In 2017, Uber replaced Travis Kalanick, a controversy magnet and visionary, with Dara Khosrowshahi, whom few outside Silicon Valley had heard of. And in 2006, Jeffrey Skilling was imprisoned for 24 years when Enron turned out to be a gigantic scam. As for Jack Welch, his reputation has fallen faster than GE’s market capitalisation.
The best answer to the end-of-the-era question is the one given by an obsequious flunky to the charismatic press baron in Evelyn Waugh’s Scoop: “up to a point, Lord Copper.” The charismatic style is certainly being marginalised. Many of the great companies of the tech revolution are now run by today’s equivalent of men in grey flannel suits. Think of Sundar Pichai at Alphabet, Satya Nadella at Microsoft and Tim Cook at Apple.
Innovative leaders need to be able to dream the biggest dreams possible.
The Sarbanes-Oxley Act of 2002, introduced in the wake of the Enron scandal, has simultaneously increased the penalties for outrageous behaviour and boosted the demand for corporate bureaucrats. China has made clear to entrepreneurs that it has only room for one charismatic leader: Mr. Ma is now spending his time playing golf, reading Taoist texts and learning how to paint in oils rather than hobnobbing with world leaders.
Most Western CEOs are so terrified of seeing their careers destroyed by a politically incorrect remark that, if they speak at all rather than relying on their PR teams, they confine themselves to feel-good banalities about “embracing diversity in a fast-changing world.”
But charismatic capitalists will not disappear from the scene. The most obvious reason for this is that the tech revolution is continuing to gather pace and spread to new areas. Elon Musk, who not only founded the first successful American car company since Chrysler in 1925 but also is leading the urgent transition from the internal combustion engine to electricity, is routinely forgiven his bizarre behaviour and rule-testing outbursts because he is so spectacularly successful. We may well see Musk-like figures emerging in all sorts of areas of the old economy, from the military-industrial complex, which is surely ripe for disruption, to agriculture.
There is also a more subtle reason: In eras of disruption, leadership is more about making meaning than it is about getting the trains to run on time. Innovative leaders need to be able to dream the biggest dreams possible — inventing the metaverse or colonising Mars as a hedge against the destruction of the Earth. And they need to be able to tempt highly talented people to join them by creating an irresistible story — engaging in what Tribble called “reality distortion” and Samuel Taylor Coleridge dubbed “the willing suspension of disbelief.” “Charisma turns a market exchange — you work and I pay you — into a social exchange — follow me and you will be a more fulfilled human being,” as Tedlow puts it.
The charismatic style has many downsides, from producing outright frauds like Elizabeth Holmes to encouraging geniuses like Milken to ignore the distinction between rules that exist because of lack of imagination and laws that are vital to the successful functioning of a capitalist economy. But the upside is far greater: producing companies that can “change reality” and revolutionise not just productivity but the boundaries of the possible.
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