Capitalism's Next Revolution

As you shop for new classes this week, consider this: the pandemic of corporate narcissism, greed, rigidity and sheer cluelessness that you have been reading about all summer is a sign of the ripening conditions for economic revolution. We are facing a once-in-a-century opportunity for wholesale innovation and extreme creativity comparable to the rise of mass markets and mass production nearly 100 years ago. It is a time for a new generation—yours—to reinvent capitalism for our times. Your fresh insight and heart can ignite the next wave of wealth creation capable of carrying the global economy to new heights of prosperity and community. Here is why.

We are living in a period of “disruptive capitalism,” because we have changed more than the companies we depend on as consumers and employees. Today, we have all become history’s shock absorbers, struggling to reconcile our new needs with the demands of an exhausted business model. A chasm has developed between organizations and us. It is filled with our stress, outrage and frustration. Anxiety is widespread and most people feel that they are being forced to fight over an ever-shrinking pie. How did we get here?

On one side of this chasm are companies stuck in an inwardly-focused business logic that emphasizes concentration, command/control, cost and efficiency. It was invented a century ago to mass manufacture goods for mass consumers with very different needs from people today. This approach, known as “managerial capitalism,” was enormously successful for decades, raising the standard of living for many. But its very success produced a new “society of individuals,” people like you and me who experience themselves as unique actors and not as passive members of a mass audience.

We are the new individuals on the other side of this chasm—more educated, informed, experienced and connected than at any other time in history. There are hundreds of millions of us around the world. Above all, we seek psychological self-determination. We share an interest in taking our own lives into our own hands. We want to be the origins of our own meanings. We want our voices to be heard and to matter. We embrace connection but reject conformity.

All of this has explosive implications for our lives as economic citizens. We are tired of having to battle for our interests as consumers. We resent having to bend to antiquated rules of commerce. Instead, we want companies to bend to us. We seek advocacy, dignity, respect, honesty, trust and community. We want our time back. We want to eliminate stress and hassle.

As employees, we are tired of stuffing our complex new lives into the simplistic old career structures that still dominate most jobs—a phenomenon I call “career taxidermy.” We want a life. We want families. We want the flexibility to control our own time. In other words, as individual economic citizens, we want more than just goods and services, paychecks and promotions. We want a “support economy,” an economy in which we can live our ever-more complex lives as we choose. And in return, we are willing to give a great deal—cash, intelligence, creativity and commitment.

When we take our complex new lives to the door of business, we are typically met with adversarialism and indifference. Efficiency dictates that we get seven minutes with our doctors, even though we spend hours navigating automated phone trees and negotiating with call centers. Legitimate insurance claims are routinely rejected to keep costs down. Do you know anyone who looks forward to calling his or her telecom provider or bank to question a bill? Have you tried calling an airline lately? Managerial capitalism was great for making cars, but it has been a disaster when applied to services and is hopeless in the face of our new yearning for support.

At least while we wait on the phone, we can distract ourselves with news about secret pension trusts, corrupt stock analysts, accounting fraud and CEO paychecks. Or, we can read the U.S. News &World Report fat double issue, “A Consumer Survival Guide.” Think about it—more than two-thirds of the jobs in the U.S. economy depend upon consumer expenditure. Consumers—that means you and I—own this economy; our cash makes it run. Still, the best we are offered is advice on how to survive the onslaught of mistreatment we routinely face. All of this is an unprecedented expression of contempt for us, today’s new individuals, in our varied roles as consumers, employees, investors and shareholders.

As it turns out, the feeling is mutual. According to one recent U.S. survey, a whopping 96 percent of consumers say they do not trust their HMO, 93 percent do not trust their health insurer and 88 percent do not trust their telecom provider. Which industry has the lowest mistrust rating? Only 60 percent say they mistrust their supermarket.

When it comes to the employee side of our lives, the news is just as bad. Another recent U.S. survey shows that 96 percent of employees want more flexibility and control over their time through options such as telecommuting, job-sharing and flextime—although few encounter such possibilities. Seventy-three percent say they are willing to curtail their careers to make more time for their families, and 75 percent would like to change jobs within the coming year.

These survey results are ugly. They express the chasm between people and organizations. But the corporate response has been typical of institutions in crisis—they tend to produce the same old behaviors, only with more ferocity. Companies cut costs and lay people off and make consumers pay.

What’s been the response from business education? Most business schools are scrambling to lay on more ethics and leadership courses, but like ancient emperors oblivious to the pain they inflict, this amounts to little more than playing the fiddle while Rome burns. After all, my peers and I have spent the last quarter century educating a generation of managers to lead organizations that are mistrusted and resented by the majority of people who depend upon them. Where is our sense of urgency and accountability? We should be rethinking every assumption behind our purpose, message and methods. A century ago, managerial capitalism was the solution. Now it is the problem. The old inward focus has become pathological, leaving today’s capitalism badly out of touch with the very people it should be serving. It is time to admit that business is broken and cannot be fixed with today’s tools.

Okay, time for the good news. Capitalism is a book of many chapters. It has been successful in the past because it is immensely plastic and robust. Capitalism lends itself to reinvention every century or so through realignment with the new demands of new populations. In this way, the unmet needs that mark today’s chasm of rage and frustration can become the next great source of wealth creation. They represent wholly unrealized economic value capable of fueling economic growth for decades to come.

It is time for managerial capitalism to give way to a broader and more powerful new capitalism that leverages the individual uniqueness, social networks and distributed technologies of our times. Can we devise a new commerce whose very purpose is supporting individuals and their communities at a price we can afford—one that recognizes individuals as the source of economic value and puts them at the center of a new commercial solar system? Can we conceive a new economics in which support, advocacy, authenticity, trust, relationships and profit can occupy the same sentence without invoking disbelief and peals of laughter? In fact, these notions are no more radical than the once-revolutionary economics of mass production appeared to be a century ago; no more outlandish than farmers able to buy automobiles, thanks to the innovations of Henry Ford and his generation.

Recall that the business models associated with managerial capitalism were not handed down from Mount Sinai. Clever men—they were white; their women were at home—invented these models at a particular moment in history in order to meet the challenges created by mass consumption. It now falls to the women and men of your generation to reinvent capitalism in ways that meet the needs of today’s new individuals. Our era of disruptive capitalism will create opportunities for outsiders, mavericks and visionaries. The time is ripe for leadership from a new generation willing to question the worn-out answers of its fathers. Your innovations will be the engines of wealth creation that fuel the global economy of the twenty-first century. If you are successful, it will be a more prosperous century than the last—as measured in cash as well as in the quality of the lives we live.

Shoshana Zuboff is the Charles Edward Wilson professor of business administration at the Harvard Business School and author of The Support Economy: Why Corporations are Failing Individuals and The Next Episode of Capitalism.